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OMB
APPROVAL
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OMB Number:
3235-0059
Expires:
January 31, 2008
Estimated
average
burden hours
per response 14
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act
of 1934 (Amendment No. )
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Filed by the
Registrant:
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X
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Filed by a
Party other than the Registrant:
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Check the
appropriate box:
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X
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Caterpillar
Inc.
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(Name of
Registrant as Specified In Its Charter)
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(Name of
Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of
Filing Fee (Check the appropriate box):
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X
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No fee
required.
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Fee computed
on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title of each
class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per unit price
or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total fee
paid:
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Fee paid
previously with preliminary materials.
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Check box if
any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form, Schedule
or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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SEC 1913
(04-05)
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Persons
who are to respond to the collection of information contained in this form
are not required to respond unless the form displays a currently valid OMB
control number.
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100 NE Adams
Street
Peoria,
Illinois 61629
Notice
of Annual Meeting of Stockholders
Wednesday,
June 9, 2010
1:30
p.m. — Central Daylight Time
Northern
Trust Building
50
South LaSalle Street
Chicago,
Illinois 60675
April 30,
2010
Dear fellow
stockholder:
On behalf of the
board of directors (Board), you are cordially invited to attend the 2010
Caterpillar Inc. annual meeting of stockholders (Annual Meeting)
to:
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Elect
directors;
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§
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Ratify our
Independent Registered Public Accounting
Firm;
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§
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Act on
Company proposals;
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§
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Act on
properly presented stockholder proposals;
and
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§
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Conduct any
other business properly brought before the
meeting.
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We have elected to
furnish proxy materials for the Annual Meeting to stockholders via the
Internet. We believe the use of the Securities and Exchange
Commission’s e-proxy rule will expedite stockholders’ receipt of the proxy
materials, lower the costs and reduce the environmental impact of our Annual
Meeting. On April 30, 2010, we mailed a notice to most stockholders
containing instructions on how to access the proxy materials and vote
online. All other stockholders were sent a copy of the proxy
materials by mail or e-mail. See page 4 of this proxy statement for
more information on e-proxy and instructions on how you can (i) receive a
paper copy of the proxy materials if you received a notice by mail, or
(ii) elect to receive your proxy materials over the Internet or by e-mail,
if you received them by mail this year.
You must have an
admission ticket to attend the Annual Meeting. Procedures for
requesting an admission ticket are detailed on page 74 of this proxy
statement. Attendance and voting is limited to stockholders of record
at the close of business on April 12, 2010.
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Sincerely
yours,
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James W.
Owens
Chairman
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Page 1
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Table
of Contents
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Page 2
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| Compensation Discussion and Anlaysis | |||
| Executive Compensation Tables | |||
| Potential Payments Upon Termination or Change in Control | |||
Page 3
| Internet Availability of Proxy Materials |
As permitted by
e-proxy rules adopted by the Securities and Exchange Commission (SEC),
Caterpillar Inc. (Caterpillar, the Company, we or us) is providing, in most
cases, the proxy materials for its Annual Meeting electronically via the
Internet or e-mail. On April 30, 2010, we initiated delivery of proxy
materials to our stockholders of record as of the close of business on April 12,
2010 in one of three ways: 1) a notice containing instructions on how to access
proxy materials via the Internet (Internet Notice), 2) a paper copy mailing
(Paper Mailing) or 3) an e-mail distribution. If you received an
Internet Notice, you will not receive a printed copy of the proxy materials in
the mail. Instead, the Internet Notice provides instructions on how
to access the proxy materials and vote online or by telephone. If you
received an Internet Notice and would like to receive a printed copy of the
proxy materials or elect to receive the materials via e-mail in the future,
please follow the instructions included in the Internet Notice. If
you received a Paper Mailing and would like to register to receive an Internet
Notice or an e-mail regarding availability of proxy materials in the future, you
can do so by any of the following methods:
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§
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Internet – Go to www.eproxyaccess.com/cat2010
and follow the registration
instructions.
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Telephone – From within
the United States or Canada, call us free of charge at
1-888-216-1363.
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E-mail – Send us an
e-mail at cat@eproxyaccess.com.
Include the control number from your Paper Mailing as the subject line,
and indicate whether you wish to receive a paper or e-mail copy of the
proxy materials and whether your request is for this meeting only or for
all future meetings.
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Q:
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Why
am I receiving these proxy materials?
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A:
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You have
received these proxy materials because you are a Caterpillar stockholder,
and Caterpillar’s Board is soliciting your authority or proxy to vote your
shares at the Annual Meeting. This proxy statement includes
information that we are required to provide to you under SEC rules and is
designed to assist you in voting your
shares.
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Q:
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What
is e-proxy and why did Caterpillar choose to use it this
year?
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A:
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SEC rules
allow companies to choose the method for delivery of proxy materials to
stockholders. For most stockholders, we have elected to send an
Internet Notice, rather than mailing a full set of proxy
materials. We believe that this method of delivery will
expedite your receipt of proxy materials and lower the costs and reduce
the environmental impact of our Annual
Meeting.
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Q:
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Why
didn’t I receive an “annual report” or sustainability report with my proxy
materials?
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A:
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Our 2009 “Year in Review” and 2009 “Sustainability
Report” are available exclusively online at www.CAT.com/investor. The online, interactive format of the
reports furthers our efforts to lower costs and reduce the environmental
impact of our communications. As
required by SEC rules, complete financial statements, financial statement
notes and management’s discussion and analysis for 2009 are included as
Appendix
D to the proxy
statement.
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Page 4
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Q:
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How
do I obtain an admission ticket to attend the Annual
Meeting?
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A:
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Anyone
wishing to attend the Annual Meeting must have an admission ticket issued
in his or her name. Admission is limited
to:
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§
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Stockholders
of record on April 12, 2010 and one immediate family member;
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An authorized
proxy holder of a stockholder of record on April 12, 2010; or
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§
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An authorized
representative of a stockholder of record who has been designated to
present a stockholder proposal.
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You must
provide evidence of your ownership of shares with your ticket request and
follow the requirements for obtaining an admission ticket specified in the
“Admission and Ticket Request Procedure” on page
74. Accredited members of the media and analysts
are also permitted to attend the Annual Meeting pursuant to the directions
provided in the “Admission and Ticket Request Procedure” on page
74.
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Q:
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What
is a stockholder of record?
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A:
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A stockholder
of record or registered stockholder is a stockholder whose ownership of
Caterpillar stock is reflected directly on the books and records of our
transfer agent, BNY Mellon Shareowner Services (Transfer
Agent). If you hold stock through a bank, broker or other
intermediary, you hold your shares in “street name” and are not a
stockholder of record. For shares held in street name, the stockholder of
record is your bank, broker or other intermediary. Caterpillar
only has access to ownership records for the stockholders of
record. So, if you are not a stockholder of record, the Company
needs additional documentation to evidence your stock ownership as of the
record date – such as a copy of your brokerage account statement, a letter
from your broker, bank or other nominee or a copy of your voting
instruction card.
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Q:
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When
is the record date and who is entitled to vote?
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A:
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The Board set
April 12, 2010 as the record date for the Annual
Meeting. Holders of Caterpillar common stock on that date are
entitled to one vote per share. As of April 12, 2010, there
were [ ] shares of
Caterpillar common stock outstanding.
A list of all
registered stockholders will be available for examination by stockholders
during normal business hours at 100 NE Adams Street, Peoria, Illinois
61629, at least ten days prior to the Annual Meeting and will also be
available for examination at the Annual
Meeting.
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Q:
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How
do I vote?
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A:
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You may vote
by any of the following methods:
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§
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In person – Stockholders
of record and stockholders with shares held in street name that obtain an
admission ticket and attend the Annual Meeting will receive a ballot for
voting. If you hold shares in street name, you must also obtain
a legal proxy from your broker to vote in person and submit the proxy
along with your ballot at the meeting.
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§
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By mail – Signing and
returning the proxy and/or voting instruction card provided.
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By phone or via the
Internet – Following the instructions on your Internet Notice,
proxy and/or voting instruction card or e-mail notice.
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If you vote by phone or the Internet, please have
your Internet Notice, proxy and/or
voting instruction card or e-mail notice available. The control
number appearing on your Internet Notice, proxy and/or voting instruction card or e-mail
notice is necessary to process your vote. A phone or Internet
vote authorizes the named proxies in the same manner as if you marked,
signed and returned the card by mail.
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Page 5
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Q:
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Why
is it so important that I vote my shares?
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A:
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We value your
input on questions facing the Company. Please note that if you hold your
shares through a broker in street name, beginning this year, New York Stock Exchange (NYSE) rules will
not permit your broker to vote your shares in the election of directors
without your instruction. Your failure to vote this year may require us to
incur additional solicitation costs. In addition, your voice can be heard
on important Company matters when you vote. Whether or not you plan to
attend the Annual Meeting, we encourage you to vote your shares promptly
so that we can avoid additional
costs.
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Q:
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What
are “broker non-votes” and why is it so important that I submit my voting
instructions for shares I hold in street name?
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A:
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Under the
rules of the NYSE, if a broker or other financial institution holds your
shares in its name and you do not provide your voting instructions to
them, that firm has discretion to vote your shares for certain routine
matters. For example, Company Proposal 2, the ratification of the
appointment of our independent registered public accounting firm, is a
routine matter.
On the other
hand, the broker or other financial institution that holds your shares in
its name does not have discretion to vote your shares for non-routine
matters, including stockholder proposals. When a broker votes a client’s
shares on some but not all of the proposals at the Annual Meeting, the
missing votes are referred to as “broker
non-votes.”
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Q:
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How
can I authorize someone else to attend the meeting or vote for
me?
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A:
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Stockholders
of record can authorize someone other than the individual(s) named on the
proxy and/or voting instruction card to vote on their behalf by crossing
out the individual(s) named on the card and inserting the name of the
individual being authorized or by providing a written authorization to the
individual being authorized to attend or vote.
Street name
holders can contact their broker to obtain documentation with
authorization to attend or vote at the meeting.
To obtain an
admission ticket for an authorized proxy representative, see the
requirements specified in the “Admission and Ticket Request Procedure” on
page 74.
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Q:
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How
can I change or revoke my vote?
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A:
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For
stockholders of record: You may change or revoke your vote by
submitting a written notice of revocation to Caterpillar Inc. c/o
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois 61629 or by
validly submitting another vote on or before June 9, 2010 (including a
vote via the Internet or by telephone). For all methods of
voting, the last vote cast will supersede all previous votes.
For holders
in street name: You may change or revoke your voting instructions
by following the specific directions provided to you by your bank or
broker.
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Q:
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Is
my vote confidential?
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A:
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Yes. Proxy
cards, ballots, Internet and telephone votes that identify stockholders
are kept confidential. There are exceptions for contested proxy
solicitations or when necessary to meet legal
requirements. Innisfree M&A Incorporated (Innisfree), the
independent proxy tabulator used by Caterpillar, counts the votes and acts
as the inspector of election for the Annual
Meeting.
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Page 6
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Q:
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What
is the quorum for the meeting?
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A:
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A quorum of
stockholders is necessary to hold a valid meeting. For
Caterpillar, at least one-third of all stockholders must be present in
person or by proxy at the Annual Meeting to constitute a
quorum. Abstentions and broker non-votes are counted as present
for establishing a quorum.
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Q:
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What
vote is necessary for action to be taken on proposals?
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A:
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Directors are
elected by a plurality vote of the shares present at the meeting, meaning
that director nominees with the most affirmative votes are elected to fill
the available seats. Company proposals to amend the Restated
Certificate of Incorporation and Bylaws require the affirmative vote of no
less than 75 percent of the outstanding shares. All other
actions presented for a vote of the stockholders at the Annual Meeting
require an affirmative vote of the majority of shares present or
represented at the meeting and entitled to vote. Abstentions
will have the effect of a vote against matters other than director
elections. Broker non-votes will not have an effect on any
proposals presented for your vote.
Votes
submitted by mail, telephone or Internet will be voted by the individuals
named on the card (or the individual properly authorized) in the manner
indicated. If you do not specify how you want your shares
voted, they will be voted in accordance with the Board’s
recommendations. If you hold shares in more than one account,
you must vote each proxy and/or voting instruction card you receive to
ensure that all shares you own are
voted.
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Q:
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When
are stockholder proposals due for the 2011 annual
meeting?
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A:
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To be
considered for inclusion in the Company’s 2011 proxy statement,
stockholder proposals must be received in writing no later than January 1,
2011. Stockholder proposals should be sent to Caterpillar Inc.
by mail c/o Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629. Additionally, we request that you also forward all
stockholder proposals via facsimile to the following facsimile
number: 309-494-1467.
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Q:
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What
does it mean if I receive more than one proxy card?
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A:
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Whenever
possible, registered shares and plan shares for multiple accounts with the
same registration will be combined into the same card. Shares
with different registrations cannot be combined and as a result, you may
receive more than one proxy card. For example, registered
shares held individually by John Smith will not be combined on the same
proxy card as registered shares held jointly by John Smith and his
wife.
Street shares
are not combined with registered or plan shares and may result in the
stockholder receiving more than one proxy card. For example,
street shares held by a broker for John Smith will not be combined with
registered shares for John Smith.
If you hold
shares in more than one account, you must vote for each notice, proxy
and/or voting instruction card or e-mail notification you receive that has
a unique control number to ensure that all shares you own are
voted.
If you
receive more than one card for accounts that you believe could be combined
because the registration is the same, contact our Transfer Agent (for
registered shares) or your broker (for street shares) to request that the
accounts be combined for future
mailings.
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Q:
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Who
pays for the solicitation of proxies?
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A:
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Caterpillar
pays the cost of soliciting proxies on behalf of the
Board. This solicitation is being made by mail, but also may be
made by telephone or in person. We have hired Innisfree to
assist in the solicitation. We will pay Innisfree a fee of
$15,000 for these services, and will reimburse their
out-of-pocket expenses. We will reimburse brokerage firms and
other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for sending proxy materials to stockholders and
obtaining their votes.
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Page 7
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Q:
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Are
there any matters to be voted on at the Annual Meeting that are not
included in this proxy statement?
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A:
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We do not
know of any matters to be voted on by stockholders at the meeting other
than those discussed in this proxy statement. If any other
matter is properly presented at the Annual Meeting, proxy holders will
vote on the matter in their discretion.
Under
Caterpillar’s Bylaws, a stockholder may bring a matter to vote at the
Annual Meeting by giving adequate notice to Caterpillar Inc. by mail c/o
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629. To qualify as adequate, the notice must contain the
information specified in our Bylaws and be received by us not less than 45
days nor more than 90 days prior to the Annual
Meeting. However, if less than 60 days’ notice of the Annual
Meeting date is given to stockholders, notice of a matter to be brought
before the Annual Meeting may be provided to us up to the 15th
day following the date the notice of the Annual Meeting was
provided.
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Q:
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Can
I submit a question in advance of the Annual Meeting?
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A:
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Stockholders wishing to submit a question for
consideration in advance of the Annual Meeting may do so by sending an
e-mail to the Corporate Secretary at Directors@CAT.com or by mail to Caterpillar Inc. c/o Corporate
Secretary at 100 NE Adams Street, Peoria, Illinois 61629. At
the Annual Meeting, the Chairman will alternate taking live questions with
questions submitted in advance, if
any.
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Corporate Governance Guidelines
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Our Board has adopted Guidelines on Corporate Governance
Issues (Corporate Governance Guidelines), which are available on our Internet
site at www.CAT.com/governance. The Corporate Governance Guidelines reflect
the Board’s commitment to oversee the effectiveness of policy and
decision-making both at the Board and management level, with a view to enhancing
stockholder value over the long term.
Structure
As of the date of
this proxy statement, our Board consists of 15 directors and is divided into
three classes for election purposes. One class is elected at each
annual meeting to serve for a three-year term.
In response to
prior stockholder proposals, the Board has decided to recommend Company Proposal
4 to declassify the Board. If at least 75 percent of the outstanding
shares of the Company are voted in favor of Company Proposal 4 to amend our
Restated Certificate of Incorporation and Bylaws to declassify the Board, each
director elected at the Annual Meeting will hold office until the 2011 annual
meeting. At the 2011 annual meeting, all of our currently serving
directors’ terms would automatically expire, and all directors would stand for
election at the 2011 annual meeting and on an annual basis
thereafter.
If fewer than 75 percent of the outstanding
shares of the Company are voted in favor of
Company Proposal 4, there will be no change to our directors’ terms of office or
to the class structure of the Board and directors elected at the Annual Meeting
will hold office for a three-year term expiring at the 2013 annual
meeting. Directors in the other two classes will continue in office
for the remainder of their terms.
If a nominee is
unavailable for election, proxy holders will vote for another nominee proposed
by the Board or, as an alternative, the Board may reduce the number of directors
to be elected at the Annual Meeting.
Page 8
At its June 9, 2010
meeting, the Board is expected to elect Douglas R. Oberhelman as a director of
the Company, effective on July 1, 2010. Mr. Oberhelman's election to
the Board is expected to occur in connection with his appointment as Chief
Executive Officer (CEO) of the Company. Mr. Oberhelman is not
expected to serve on any Board committees and will be a Class II
director. His business experience and recent directorships are
provided with his description as a Class II director below. When Mr.
Oberhelman is elected as a director, the Board will have 16
directors.
The Board has
determined that, with the exception of Mr. Owens, all directors are independent
as determined under NYSE listing standards and the standards described under
“Director Independence Determinations” on page 14.
The Company’s
Corporate Governance Guidelines require a director to tender his or her
resignation upon a significant change in business or personal
circumstances. Accordingly, on November 10, 2009, Gail D. Fosler
submitted a letter of resignation from her position as a director following her
resignation as president of The Conference Board. On November 19,
2009, John R. Brazil also submitted a letter of resignation from his position as
a director following his retirement as president of Trinity
University. On February 10, 2010, the Board accepted Ms. Fosler’s and
Mr. Brazil’s resignations, effective upon the expiration of their current terms
as Class I directors on the date of the Company’s annual meeting of stockholders
in 2011.
The current
composition of the Board classes is as follows:
Director
Biographies and Qualifications
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Class
I – Directors with terms expiring in 2011
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§
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W. FRANK BLOUNT, 71,
Chairman and CEO of JI Ventures, Inc. (venture capital) and former
Chairman and CEO of TTS, Inc. (private equity firm). Other
current directorships: Alcatel-Lucent S.A.; Entergy Corporation; and KBR,
Inc. Other directorships within the last five
years: Adtran Inc. and Hanson PLC. Mr. Blount has
been a director of the Company since
1995.
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The Board believes
that Mr. Blount’s international business experience allows him to provide
important insights for the Company’s management and execution of its strategic
plans. His experience as former Group President of AT&T, Inc. and
former CEO of Telstra, Inc. of Australia and as a director for other large,
publicly-traded multinational corporations enables him to provide meaningful
input and guidance to the Board and the Company.
Mr. Blount will
turn 72 this year and is expected to retire from the Board on or before December
31, 2010, pursuant to the mandatory director retirement age set forth in our
Corporate Governance Guidelines.
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§
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JOHN R. BRAZIL, 64,
former President of Trinity University (San Antonio,
Texas). Other current
directorships: none. Other directorships within the
last five years: none. Dr. Brazil has been a
director of the Company since 1998.
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The Board believes
that Dr. Brazil’s role as a thought leader in education and academia bring
important insights and diverse viewpoints to the Board. His
experience as a university president and prior service as a director of a large
utility corporation and several banks also enables him to provide meaningful
input and guidance to the Board and the Company.
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§
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EUGENE V. FIFE, 69,
Managing Principal of Vawter Capital LLC (private
investment). Mr. Fife served as the interim CEO and President
of Eclipsys Corporation (healthcare information services) from April to
November of 2005 and currently serves as the non-executive
Chairman. Other current directorships: Eclipsys
Corporation. Other directorships within the last five
years: none. Mr. Fife has been a director of the
Company since 2002.
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The Board believes
that Mr. Fife’s investment banking experience bolsters the expertise of the
Board and adds important insights for the Company’s growth
strategy. His financial expertise and experience are important
considerations for the Board. Additionally, his experiences as a
chief executive officer and director of large, publicly-traded multinational
corporations enables him to provide meaningful input and guidance to the Board
and the Company.
Page 9
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§
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GAIL D. FOSLER, 62,
Senior Advisor of The Conference Board (research and business
membership). Prior to her current position, Ms. Fosler has
served as President, Trustee, Executive Vice President, Senior Vice
President and Chief Economist of The Conference Board. Other
current directorships: Baxter International
Inc. Other directorships within the last five
years: DBS Group Holdings Ltd. and Unisys
Corporation. Ms. Fosler has been a director of the Company
since 2003.
|
The Board believes
that Ms. Fosler’s knowledge of corporate best practices and global view of
economic trends, especially her knowledge of emerging markets, is important to
the Company’s management and strategic plans. Her insight and
expertise as a leading economic forecaster and advisor provides the Board with
additional insight into long-term macro-economic planning. Her
financial expertise and experience as a director at other large, publicly-traded
multinational corporations enables her to provide meaningful input and guidance
to the Board and the Company.
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§
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PETER A. MAGOWAN, 68,
former President and Managing General Partner of the San Francisco Giants
(major league baseball team). Other current
directorships: none. Directorships within the last
five years: DaimlerChrysler AG, Safeway Inc. and Spring Group
plc. Mr. Magowan has been a director of the Company since
1993.
|
The Board believes
that Mr. Magowan’s business experience as a long-term chief executive officer of
Safeway Inc., a large, publicly-traded multinational corporation, is
particularly valuable to the Board. His experience in owning and
managing a professional baseball organization also provides a diverse viewpoint
on business matters. In addition, his experience as a director of
other large, publicly-traded multinational corporations enables him to provide
meaningful input and guidance to the Board and the Company.
|
Class
II – Directors with terms expiring in 2012
|
|
§
|
DANIEL M. DICKINSON, 48,
Managing Partner of Thayer | Hidden Creek (private equity
investment). Other current directorships: IESI-BFC
Ltd. and Mistras Group, Inc. Other directorships within the
last five years: none. Mr. Dickinson has been a
director of the Company since 2006.
|
The Board believes
that Mr. Dickinson’s experience in mergers and acquisitions, private equity
business and role as an investment banker provide important insight for the
Company’s growth strategy. His significant financial expertise and
experience, both in the U.S. and internationally, contributes to the Board’s
understanding and ability to analyze complex issues. His experience as a
director of large, publicly-traded multinational corporations enables him to
provide meaningful input and guidance to the Board and the Company.
|
§
|
DAVID R. GOODE, 69,
former Chairman, President and CEO of Norfolk Southern Corporation
(holding company engaged principally in surface
transportation). Other current directorships: Delta Air Lines,
Inc. and Texas Instruments Incorporated. Other directorships
within the last five years: Norfolk Southern Corporation and
Georgia-Pacific Corporation. Mr. Goode has been a director of
the Company since 1993.
|
The Board believes
that Mr. Goode’s experience in the transportation and railroad industry provide
valuable expertise to the Board. His extensive experience in a
capital-intensive industry enables him to make important contributions to the
Company’s growth strategy. In addition, his experience as a chief
executive officer and director of large, publicly-traded multinational
corporations enables him to provide meaningful input and guidance to the Board
and the Company.
|
§
|
DOUGLAS R.
OBERHELMAN
(effective July 1, 2010), 57, Vice Chairman and Chief Executive
Officer-Elect and Group President of Caterpillar Inc. (machinery, engines
and financial products). Mr. Oberhelman has been a Group
President since January 1, 2001. Prior to becoming Group
President, Mr. Oberhelman served as vice president with responsibility for
the Engine Products Division. Other current
directorships: Ameren Corporation and Eli Lilly and
Company. As previously announced, Mr. Oberhelman will not stand
for re-election to the Ameren board and will step down as a director
effective April 27, 2010. Other directorships within the last
five years: none.
|
The Board believes
that Mr. Oberhelman’s extensive experience and knowledge of the Company is
valuable to the Board. He has worked at the Company for over 30 years
and is familiar with its business and strategy. His knowledge of the
business and background in finance enables him to provide meaningful input and
guidance to the Board and the Company.
As previously
announced, Mr. Oberhelman will become CEO and a member of the Board effective
July 1, 2010.
Page 10
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§
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JAMES W. OWENS, 64,
Chairman and CEO of Caterpillar Inc. (machinery, engines and financial
products). Prior to his current position, Mr. Owens served as
Vice Chairman of Caterpillar. Other current
directorships: Alcoa Inc. and International Business Machines
Corporation. Other directorships within the last five
years: none. Mr. Owens has been a director of the
Company since 2004.
|
The Board believes
that Mr. Owens’ extensive experience and knowledge of the Company is valuable to
the Board. He has worked at the Company for over 35 years and is
familiar with its business and strategy. His knowledge of the
business and background in economics, coupled with his experience as a director
of large, publicly-traded multinational corporations enables him to provide
meaningful input and guidance to the Board and the Company.
Mr. Owens
previously announced that he expects to retire as Chairman of the Board
effective October 31, 2010.
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§
|
CHARLES D. POWELL, 68,
Chairman of Capital Generation Partners (asset and investment management),
LVMH Services Limited (luxury goods) and Magna Holdings (real estate
investment). Prior to his current positions, Lord Powell was
Chairman of Sagitta Asset Management Limited (asset
management). Other current directorships: LVMH
Moët-Hennessy Louis Vuitton and Textron Corporation. Other
directorships within the last five years: none. Lord
Powell has been a director of the Company since
2001.
|
The Board believes
that Lord Powell’s substantial knowledge of international affairs and business
expertise are important to the Board. His trade, public and
governmental affairs and international experience is also valued by the
Board. In addition, his role as a director of large, publicly-traded
multinational corporations enables him to provide meaningful input and guidance
to the Board and the Company.
|
§
|
JOSHUA I. SMITH, 69,
Chairman and Managing Partner of the Coaching Group, LLC (management
consulting). Other current directorships: Comprehensive Care
Corporation, FedEx Corporation and The Allstate
Corporation. Other directorships within the last five
years: CardioComm Solutions Inc. Mr. Smith has been
a director of the Company since
1993.
|
The Board believes
that Mr. Smith’s experience in management consulting and business leadership
provides important guidance to the Board. His experience as the
Chairman of the U.S. Commission on Minority Business Development, Maryland Small
Business Development Finance Authority and as a member of the board of directors
of the U.S. Chamber of Commerce provides valued insights on diversity
issues. In addition, his experience as the founder and chief
executive officer of his own business and role as a director of other large,
publicly-traded multinational corporations enables him to provide meaningful
input and guidance to the Board and the Company.
| Class III – Directors nominated for election at the Annual Meeting |
|
§
|
JOHN T. DILLON, 71, Senior Managing Director and former Vice
Chairman of Evercore Partners (advisory and investment
firm). Other current directorships: E. I. du
Pont de Nemours and Company and Kellogg
Co. Other directorships within the last five
years: Vertis Inc. Mr. Dillon has been a director of
the Company since 1997.
|
The Board believes
that Mr. Dillon’s prior experience as a chief executive officer of a large,
publicly-traded multinational corporation, knowledge of the forest products
industry and experience with trade-related issues is particularly valuable to
the Board. In addition, his financial expertise and experience as a
director of large, publicly-traded multinational corporations enables him to
provide meaningful input and guidance to the Board and the Company.
Mr. Dillon
will turn 72 this year and is expected to retire from the Board on or before
December 31, 2010, pursuant to the mandatory director retirement age set forth
in our Corporate Governance Guidelines.
|
§
|
JUAN GALLARDO, 62, Chairman and former CEO of Grupo
Embotelladoras Unidas S.A. de C.V. (bottling). Former Vice
Chairman of Home Mart de Mexico, S.A. de C.V. (retail trade), former
Chairman of Grupo Azucarero Mexico, S.A. de C.V. (sugar mills) and former
Chairman of Mexico Fund Inc. (mutual fund). Other current
directorships: Grupo Mexico, S.A. de C.V. and Lafarge SA. Other directorships
within the last five years: none. Mr. Gallardo has
been a director of the Company since
1998.
|
Page 11
The Board believes
that Mr. Gallardo’s international business experience, particularly in Latin
America and South America, are important for the Company’s growth
strategy. His extensive background in trade-related issues also
contributes to the Board’s expertise. In addition, his
experience as a chief executive officer and director of large, publicly-traded
multinational corporations enables him to provide meaningful input and guidance
to the Board and the Company.
|
§
|
WILLIAM A. OSBORN, 62,
retired Chairman and CEO of Northern Trust Corporation (multibank holding
company) and The Northern Trust Company (bank). Other current
directorships: Abbott Laboratories and General Dynamics. Other
directorships within the last five years: Nicor Inc., Tribune
Company and Northern Trust Corporation. Mr. Osborn has been a
director of the Company since 2000.
|
The Board believes
that Mr. Osborn’s financial expertise and experience is valuable to the
Board. His experience as a chairman and chief executive officer of a
large, publicly-traded multinational corporation is particularly important to
the Board. In addition, his experience as a director of other large,
publicly-traded corporations enables him to provide meaningful input and
guidance to the Board and the Company.
|
§
|
EDWARD B. RUST, JR.,
59, Chairman, CEO and
President of State Farm Mutual Automobile Insurance Company (insurance).
He is also President and CEO of State Farm Fire and Casualty Company,
State Farm Life Insurance Company and other principal State Farm
affiliates as well as Trustee and President of State Farm Mutual Fund
Trust and State Farm Variable Product Trust. Other current
directorships: Helmerich & Payne, Inc. and The McGraw-Hill
Companies, Inc. Other directorships within the last five
years: none. Mr. Rust has been a director of the
Company since 2003.
|
The Board believes
that Mr. Rust’s financial and business experience is valuable to the
Board. His role as a chief executive officer of a major national
corporation and experience as a director of large, publicly-traded multinational
corporations enables him to provide meaningful input and guidance to the Board
and the Company. In addition, his extensive involvement in education
improvement compliment the Company’s culture of social
responsibility.
|
§
|
SUSAN C. SCHWAB, 55,
Professor, University of Maryland School of Public
Policy. Prior to her current position, Ambassador Schwab held
various positions including United States Trade Representative (member of
the President’s cabinet), Deputy United States Trade Representative and
President and CEO of the University System of Maryland
Foundation. Other current directorships: FedEx
Corporation and The Boeing Company. Other directorships within
the last five years: Adams Express Company, Calpine Corporation
and Petroleum & Resources Corporation. Ambassador Schwab
has been a director of the Company since
2009.
|
The Board believes
that Ambassador Schwab brings extensive knowledge, insight and experience on
international trade issues to the Board. Her educational experience
and role as the U.S. Trade Representative provide important insights for the
Company’s global business model and long-standing support of open
trade. In addition, her experience as a director of large,
publicly-traded multinational corporations enables her to provide meaningful
input and guidance to the Board and the Company.
Caterpillar’s Board
adopted a written process governing the approval of related party transactions
for directors and certain officers in April 2007. Under the process,
all related party transactions are to be approved in advance by the Governance
Committee. Related parties include directors and executive officers
and their immediate family members. Caterpillar’s related party transaction
policy includes transactions which may not require disclosure under applicable
SEC rules.
Prior to entering
into such a transaction, the applicable director or officer must submit the
details of the proposed transaction to the Company’s general counsel, including
whether: (i) the aggregate amount involved will or may be expected to exceed
$120,000 in any calendar year; (ii) the Company is a party; and (iii) the
related person or his or her immediate family member has or will have a direct
or indirect interest (other than solely as a result of being a director or a
less than 10 percent beneficial owner of an entity involved in the
transaction). The general counsel will then evaluate, based on the
facts and circumstances of the transaction, whether the related person has a
direct or indirect material interest in the transaction. If so, the
general counsel will submit the matter to the Governance Committee for it to
consider the following:
|
|
§
|
The nature of
the related person’s interest in the
transaction.
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Page 12
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|
§
|
The material
terms of the transaction, including, without limitation, the amount and
type of transaction.
|
|
|
§
|
The
importance of the transaction to the related
person.
|
|
|
§
|
The
importance of the transaction to the
Company.
|
|
|
§
|
Whether the
transaction would impair the judgment of the director or executive officer
to act in the best interest of the
Company.
|
|
|
§
|
The
alternatives to entering into the
transaction.
|
|
|
§
|
Whether the
transaction is on terms comparable to those available to third parties or,
in the case of employment relationships, to employees
generally.
|
|
|
§
|
The potential
for the transaction to lead to an actual or apparent conflict of interest
and any safeguards imposed to prevent such actual or apparent
conflicts.
|
|
|
§
|
The overall
fairness of the transaction to the
Company.
|
In February 2010,
Susan C. Schwab requested consideration of an arrangement whereby Ms. Schwab
would provide consulting services to Mayer Brown LLP (Mayer Brown) on
international trade issues. The Committee discussed the request, including the
compensation she expected to receive from Mayer Brown, the fact that Mayer Brown
provides legal services to the Company and that Ms. Schwab would not provide any
services to Mayer Brown in connection with any of the Company’s legal
matters. After careful consideration, the Committee unanimously
approved the transaction under the Company’s related party transaction
policy.
The Governance
Committee also considered a matter reported by John T. Dillon under the
Company’s related party transaction approval process in February
2010. Mr. Dillon is Senior Managing Director of Evercore Partners, a
subsidiary of which has been appointed Independent Fiduciary and Independent
Monitor in connection with a litigation settlement involving
Caterpillar. After careful consideration, the Committee determined
that Mr. Dillon did not have a direct or indirect material interest in this
transaction.
In addition, the
Governance Committee considered long-term transactions and relationships between
the Company and The Conference Board, for which Ms. Fosler is currently a senior
advisor and was previously the president and trustee, and with LSV Asset
Management, for which Mr. Owens’ son is a partner. The Governance
Committee concluded that Ms. Fosler and Mr. Owens’ son do not have a direct or
indirect material interest in the applicable relationship or
transaction.
The Governance
Committee also considered the following matter:
In August 2007,
Caterpillar entered into an exclusive marketing agreement with Claycrete, Ltd.,
a Hong Kong chartered manufacturer of products designed to harden dirt
roads. Under this agreement, the Company agreed to market Claycrete’s
products to Caterpillar’s dealers in exchange for a marketing fee paid to
Caterpillar based on the revenues generated by the agreement. In
February 2008, Caterpillar also loaned $1 million to Claycrete for working
capital and other uses. Caterpillar expected the loan to be repaid from sales
generated under the marketing agreement.
Claycrete had been
initially introduced to Caterpillar by Mr. Joshua I. Smith, a member of our
Board. Mr. Smith had provided a variety of consulting services to Mr.
Jens Bogh, the Chief Executive Officer of Claycrete, including with respect to
matters such as agreements with large companies like Caterpillar. Mr.
Smith had an arrangement with Mr. Bogh whereby Mr. Smith would be paid for the
business coaching provided to Mr. Bogh based upon among other things,
sales by Claycrete of its products. Ultimately, no Claycrete products
were sold under the marketing agreement, and no marketing fees have been paid to
Caterpillar. For his services to Mr. Bogh and Claycrete, Mr. Smith
was paid approximately $37,000. Mr. Bogh is no longer the Chief
Executive Officer of Claycrete, and Mr. Smith’s interest in any transactions
between Caterpillar and Claycrete has concluded.
The Governance
Committee has reviewed the transactions involving Claycrete, Mr. Smith and
Caterpillar. The Governance Committee determined that Caterpillar’s
related party transaction approval process was not correctly followed in this
instance, but the Committee did not find that Mr. Smith intentionally or
willfully violated the policy. At the Board’s request, Mr. Smith certified to
the Board his commitment to comply with Caterpillar’s policies and procedures
and has undergone additional training focused on Caterpillar’s corporate
governance practices.
The Company’s
Corporate Governance Guidelines establish that no more than two non-independent
directors shall serve on the Board at any point in time. A director
is “independent” if he or she has no direct or indirect material relationship
with the Company or with senior management of the Company and their respective
affiliates. Annually, the Board makes an affirmative determination
regarding the independence of each director based upon the recommendation of the
Governance Committee. The Board makes its independence determinations
on a case-by-case basis, after consideration of all relevant facts and
circumstances. To assist in making its independence determinations,
the Board has adopted the following standards, which conform to the applicable
NYSE rules. Under these standards, a director is considered
independent if he or she:
|
(1)
|
Has no
material relationship with the Company, either directly or as a partner,
stockholder or officer of an organization that has a relationship with the
Company, and does not have any relationship that precludes independence
under the NYSE director independence
standards;
|
|
(2)
|
Is not
currently, or within the past three years, employed by the Company, or an
immediate family member is not currently, or for the past three years,
employed as an executive officer of the
Company;
|
|
(3)
|
Is not a
current employee, nor is an immediate family member a current executive
officer of, a company that has made payments to, or received payments
from, the Company for property or services in an amount which, in any of
the past three years, exceeds the greater of $1 million or 2 percent of
the consolidated gross revenues of that
company;
|
|
(4)
|
Has not
received, nor has an immediate family member received, during any twelve
month period within the last three years, direct remuneration in excess of
$120,000 from the Company other than director and committee fees and
pension or other forms of deferred compensation for prior
services;
|
|
(5)
|
(i) is not a
current partner or employee of a firm that is the Company’s internal or
external auditor; (ii) does not have an immediate family member who is a
current partner of such a firm; (iii) does not have an immediate family
member who is a current employee of such a firm and personally works on
the Company’s audit; or (iv) has not, nor has an immediate family member,
been a partner or employee of such a firm and personally worked on the
Company’s audit within the last three
years;
|
|
(6)
|
Is not part
of an “interlocking directorate,” whereby an executive officer of the
Company simultaneously served on the compensation committee of another
company that employed the director as an executive officer during the last
three years;
|
|
(7)
|
Is free of
any relationships with the Company that may impair, or appear to impair,
his or her ability to make independent judgments;
and
|
|
(8)
|
Is not
employed by a non-profit organization where a substantial portion of
funding for the past three years (exceeding the greater of $1 million or 2
percent of the organization’s annual consolidated gross revenues) comes
from the Company or the Caterpillar
Foundation.
|
Applying these
standards, on April 7, 2010 the Board determined that each of the following
directors met the independence standards: W. Frank Blount, John R. Brazil,
Daniel M. Dickinson, John T. Dillon, Eugene V. Fife, Gail D. Fosler, Juan
Gallardo, David R. Goode, Peter A. Magowan, William A. Osborn, Charles D.
Powell, Edward B. Rust, Jr., Susan C. Schwab and Joshua I. Smith. In
making its determination, the Board considered certain Company transactions,
relationships or arrangements, including the following, which the Board
determined did not affect the applicable director’s
independence:
|
§
|
The
Conference Board, for which Ms. Fosler was the president and a trustee in
2009 and is currently serving as a senior advisor, received payments from
the Company for research, subscriptions, conferences, webcasts,
etc. The Board determined that the amount of the payments made
by the Company was below the greater of $1 million or 2 percent of The
Conference Board’s consolidated gross revenues and that Ms. Fosler’s
independence was not affected by these
payments.
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Page 14
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§
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Christopher
Powell, brother of Charles D. Powell, is a member of the advisory board of
PricewaterhouseCoopers in the United Kingdom; however, he is not a partner
or employee of PricewaterhouseCoopers. PricewaterhouseCoopers
is employed by us as our independent registered public accounting
firm. The Board determined that Christopher Powell’s limited
role in providing advice to partners, business unit leaders and members of
the PricewaterhouseCoopers United Kingdom executive board on the
development of business for the firm does not affect Charles D. Powell's
independence.
|
|
§
|
Various
matching contributions made by the Caterpillar Foundation to non-profit
organizations where directors or immediate family members are employed
were also considered; however, none of the contributions were determined
to have affected the independence of any of the
directors.
|
In addition, the
Board determined that, as a current employee of the Company, Mr. Owens is not
independent based on the above standards.
The Governance
Committee solicits and receives recommendations and reviews the qualifications
of potential director candidates. After review, the Governance
Committee recommends to the full Board candidates for election at the annual
meeting of the Company’s stockholders and candidates to fill vacancies on the
Board. Potential director candidates may also be nominated by our
stockholders and are similarly reviewed by the Governance Committee, which makes
recommendations to the full Board. Additional information about the
process for nominating directors and stockholder nominations is described in the
“Governance Committee” section on page 21.
Our Chairman and
CEO and Governance Committee periodically review with the Board the particular
characteristics or attributes that would be most beneficial to the Company in
future Board members. These characteristics, which are set forth in
the Company’s Corporate Governance Guidelines, include, but are not limited to:
(i) integrity, honesty and accountability, with a willingness to express
independent thought; (ii) successful leadership experience and stature in an
individual’s primary field, with a background that demonstrates an understanding
of business affairs as well as the complexities of a large, publicly-held
company (with particular consideration being given to candidates with experience
as chief executive officers of successful capital-intensive businesses with
international operations); (iii) demonstrated ability to think strategically and
make decisions with a forward-looking focus, with the ability to assimilate
relevant information on a broad range of complex topics; (iv) be a team player
with a demonstrated willingness to ask tough questions in a constructive manner
that adds to the decision-making process of the Board; (v) independence and
absence of conflicts of interest; (vi) ability to devote necessary time to meet
director responsibilities; and (vii) ability to commit to the Company’s stock
ownership guidelines.
Consistent with
these criteria for potential director candidates and Caterpillar’s Worldwide
Code of Conduct, the Board values diversity of talents, skills, abilities and
experiences and believes that the diversity that exists on the Board provides
significant benefits to the Company. Although there is no specific
diversity policy, the Governance Committee may also consider the diversity of
its members and potential candidates in selecting new directors.
As set forth in the
Company’s Bylaws, the Chairman of our Board is also the CEO of the
Company. In addition, in 2007 the independent directors of the Board
unanimously elected a Presiding Director who is independent under the NYSE
standards. As part of the Board’s structure, all directors, other
than the Chairman, are independent under the NYSE standards, and all committees
of the Board are made up entirely of independent directors.
The Presiding
Director’s duties and responsibilities include: (i) presiding at all meetings of
the Board at which the Chairman is not present; (ii) serving as a liaison
between the Chairman and the independent directors; (iii) approving information
sent to the Board; (iv) approving meeting agendas for the Board;
(v) approving meeting schedules to assure that there is sufficient time for
discussion of all agenda items; (vi) authority to call meetings of the
independent directors; and (vii) if requested by major shareholders, ensuring
that he is available for consultation and direct communication.
Page 15
The Board has
determined that the combined role of Chairman and CEO is appropriate for the
Company as it promotes unified leadership and direction for the Company,
allowing for a single, clear focus for management to execute the Company’s
strategy and business plans. This structure also avoids the added
costs and inefficiencies that would result by mandating an independent
Chairman. The Board believes that the governance structure and role
of the Presiding Director allow the Board to effectively work with the combined
role of the Chairman and CEO.
In anticipation of
Mr. Owens’ upcoming retirement and the leadership transition to Mr. Oberhelman,
the Board has decided to allow Mr. Owens, the current Chairman and CEO, to
continue to serve as Chairman of the Board until he retires on October 31,
2010. Mr. Oberhelman is expected to become the new CEO on July 1,
2010 and is expected to assume the role of Chairman of the Board on November 1,
2010. The Board considers that this approach to succession will
provide stability and continuity to the Company during this
period.
|
Board’s
Role in Risk Oversight
|
The full Board
oversees enterprise risk as part of its role in reviewing and overseeing the
implementation of the Company’s strategic plans and objectives. The
risk oversight function is administered both in full Board discussions and in
individual committees that are tasked by the Board with oversight of specific
risks as more fully described in the summary of each committee
below.
On a regular basis,
the Board and its committees receive information and reports from management on
the status of the Company and the risks associated with the Company’s strategy
and business plans. In addition, the Audit Committee reviews the
Company’s risk assessment and risk management policies and procedures at least
annually, including its major financial risk exposures and steps taken to
monitor and control such exposures. The Chairman of the Audit Committee presents
this information to the full Board for review.
The Board believes
the combined role of Chairman and CEO is an effective structure for the
Board to understand the risks associated with the Company’s strategic plans and
objectives. Additionally, maintaining an independent Board with a
Presiding Director permits open discussion and assessment of the Company’s
ability to manage these risks.
In 2009, our full
Board met six times and regularly scheduled executive sessions, led by the
Presiding Director, were held without management present. In addition
to those meetings, directors attended meetings of individual Board
committees. Overall attendance for our directors at full Board and
committee meetings held in 2009 was 98.37 percent. For Board meetings
only, attendance was 98.78 percent in 2009. No director attended
fewer than 75 percent of the total meetings held in 2009. Company
policy, posted on our Internet site, states that absent unavoidable conflict,
all directors are expected to attend the Annual Meeting. All of our
directors attended the Annual Meeting in June 2009.
Our Board has four standing committees – Audit, Compensation, Governance
and Public
Policy. Each committee’s charter
is available on our Internet site at www.CAT.com/governance. Following is a description of each committee of the
Board. Current committee memberships are listed in the “Committee
Membership” table on page 17.
The Audit
Committee assists the Board in fulfilling its oversight responsibilities
with respect to the integrity of Caterpillar’s financial statements,
Caterpillar’s compliance with legal and regulatory requirements, the
qualifications and independence of Caterpillar’s Independent Registered Public
Accounting Firm (auditors), the performance of Caterpillar’s internal audit
function and the auditors, the effectiveness of Caterpillar’s internal controls
and the implementation and effectiveness of Caterpillar’s ethics and compliance
program. The Audit Committee performs this function by monitoring
Caterpillar’s financial reporting process and internal controls and by assessing
the audit efforts of the auditors and the internal auditing
department. The Audit Committee has ultimate authority and
responsibility to appoint, retain, compensate, evaluate and, where appropriate,
replace the auditors. The Audit Committee also reviews updates on
emerging accounting and auditing issues provided by the auditors and by
management to assess their potential impact on Caterpillar. During
2009, the Audit Committee met 12 times and overall attendance was 95.83
percent. Daniel M. Dickinson, John T. Dillon, Gail D. Fosler and
William A. Osborn, members of the Audit Committee, each meet the standards for
independence set forth in the NYSE listing standards and the financial literacy
standards adopted by the Board. Additionally, the Board has
determined that Mr. Dickinson, Mr. Dillon and Mr. Osborn each qualify as an
“audit committee financial expert” as defined under SEC rules.
Page 16
The Compensation
Committee assists the Board in fulfilling its responsibilities in
connection with the compensation of the Company’s directors, officers and
employees. It performs this function by establishing and overseeing the
Company’s compensation programs, recommending to the Board the compensation of
directors who are not officers of the Company, administering the Company’s
equity compensation plans, furnishing an annual Compensation Committee Report on
executive compensation and approving the Compensation Discussion and Analysis
section in the Company’s proxy statement, in accordance with applicable SEC
rules and regulations. All members of the
Compensation Committee meet the standards for independence set forth in the NYSE
listing standards. During 2009, the Compensation Committee met four
times and overall attendance was 100 percent.
The Governance
Committee assists the Board by making recommendations regarding the size
and composition of the Board and the criteria to be used for the selection of
candidates to serve on the Board. The Governance Committee discusses
and evaluates the qualifications of directors up for re-election and recommends
the slate of director candidates to be nominated for election at the Annual
Meeting. Stockholders who are interested in nominating a director
candidate can do so in accordance with the policy discussed in the “Governance
Committee” section on page 21. In addition, the Governance Committee
recommends candidates to the Board for election as officers of the
Company. The Governance Committee also oversees the Corporate
Governance Guidelines and leads the Board in its annual self-evaluation process
and shares the results thereof with the Board for discussion and
deliberation. All members of the Governance Committee meet the
standards for independence set forth in the NYSE listing
standards. During 2009, the Governance Committee met six times and
overall attendance was 100 percent.
The Public Policy
Committee assists the Board in its oversight of matters of national and
international public policy affecting the Company’s business, trade policy and
international trade negotiations impacting the Company, major global legislative
and regulatory developments both in the U.S. and internationally affecting the
Company, investor, consumer and community relations issues, employee relations,
implementation of policies promoting diversity within the Company, sustainable
development initiatives and charitable and political contributions by the
Company or by any committee or foundation affiliated with the
Company. All members of the Public Policy Committee meet the
standards for independence set forth in the NYSE listing
standards. During 2009, the Public Policy Committee met five times
and overall attendance was 100 percent.
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Committee
Membership
|
||||
|
Audit
|
Compensation
|
Governance
|
Public
Policy
|
|
|
W. Frank
Blount
|
Ö*
|
|||
|
John R.
Brazil
|
Ö
|
|||
|
Daniel M.
Dickinson
|
Ö
|
|||
|
John T.
Dillon
|
Ö*
|
|||
|
Eugene V.
Fife
|
Ö
|
|||
|
Gail D.
Fosler
|
Ö
|
|||
|
Juan
Gallardo
|
Ö
|
|||
|
David R.
Goode
|
Ö*
|
|||
|
Peter A.
Magowan
|
Ö
|
|||
|
William A.
Osborn
|
Ö
|
|||
|
James W.
Owens
|
||||
|
Charles D.
Powell
|
Ö*
|
|||
|
Edward B.
Rust, Jr.
|
Ö
|
|||
|
Susan C.
Schwab
|
Ö
|
|||
|
Joshua I.
Smith
|
Ö
|
|||
|
* Chairman of
committee
|
||||
You may communicate with any of our directors, our Board
as a group, our non-management directors as a group or any Board committee as a
group by sending an e-mail to a particular director, the Board or a committee at
Directors@CAT.com or by mail to Caterpillar Inc. c/o Corporate Secretary
at 100 NE Adams Street, Peoria, Illinois 61629. The Board has
delegated to the Corporate Secretary, or his designee, responsibility for
determining, in his discretion, whether the communication is appropriate for
consideration by the Presiding Director, an individual director, a committee, a
group or the full Board. According to the policy adopted by the
Board, the Corporate Secretary is required to direct all communications
regarding personal grievances, administrative matters, the conduct of the
Company’s ordinary business operations, billing issues, product or service
related inquiries, order requests and similar issues to the appropriate
individual within the Company. All other communications are to be
submitted to the Board as a group, to the particular director to whom it is
directed or, if appropriate, to the Presiding Director or committee the
Corporate Secretary believes to be the most appropriate recipient. If
a legitimate business concern is sent by e-mail or letter to the Presiding
Director, a specific director, the Board or a Board committee, you will receive
a written acknowledgement from the Corporate Secretary’s office confirming
receipt of your communication.
Caterpillar’s code of ethics is called Our Values in
Action (Code of Conduct). Integrity, Excellence, Teamwork and
Commitment are the core values identified in the Code of Conduct and are the
foundation for Caterpillar’s corporate strategy. The Code of Conduct
applies to all members of the Board and to management and employees
worldwide. It documents the high ethical standards that Caterpillar
has upheld since its formation in 1925. The Code of Conduct is
available on our Internet site at www.CAT.com/code.
The Audit Committee
has established a means for employees, suppliers, customers, stockholders and
other interested parties to submit confidential and anonymous reports (where
permitted by law) of suspected or actual violations of the Code of Conduct, our
enterprise policies or applicable laws, including those related to accounting
practices, internal controls or auditing matters and procedures; theft or fraud
of any amount; insider trading; performance and execution of contracts;
conflicts of interest; violation of securities and antitrust laws; and
violations of the Foreign Corrupt Practices Act.
Any employee,
stockholder or other interested party can submit a report via the following
methods:
|
|
§
|
Direct
Telephone: 309-494-4393 (English
only)
|
|
|
§
|
Call Collect
Helpline: 770-582-5275 (language translation
available)
|
|
|
§
|
Confidential
Fax: 309-494-4818
|
|
|
§
|
E-mail: BusinessPractices@CAT.com
|
|
|
§
|
Internet: www.CAT.com/obp
|
The Audit Committee is comprised entirely of independent
directors (as defined for members of an audit committee in the NYSE listing
standards) and operates under a written charter adopted by the Board, a copy of
which is available on our Internet site at www.CAT.com/governance. Management is responsible for the Company’s
internal controls and the financial reporting process. The auditors
are responsible for performing an independent audit of the Company’s
consolidated financial statements and internal controls over financial reporting
in accordance with standards established by the Public Company Accounting
Oversight Board in the United States (PCAOB) and issuing a report
thereon. The Audit Committee is responsible for monitoring these
processes. In this regard, the Audit Committee meets periodically
with management, the internal auditors and auditors. The Audit
Committee has the authority to conduct or authorize investigations into any
matters within the scope of its responsibilities and the authority to retain
outside counsel, experts and other advisors as it determines appropriate to
assist it in conducting any investigations. The Audit Committee is
responsible for selecting and, if appropriate, replacing the current auditors,
PricewaterhouseCoopers LLP.
Page 18
The Audit Committee
has discussed with the Company’s auditors the overall scope and execution of the
independent audit and has reviewed and discussed the audited financial
statements with management. Management represented to the Audit
Committee that the Company’s consolidated financial statements were prepared in
accordance with generally accepted accounting principles in the United
States. Discussions about the Company’s audited financial statements
included the auditors’ judgments about the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments and
the clarity of disclosures in the financial statements. The Audit
Committee also discussed with the auditors other matters required by Statement
on Auditing Standards No. 61 Communication with Audit
Committees, as amended by SAS No. 90 Audit Committee
Communications (as adopted by the PCAOB in Rule
3200T). Management, the internal auditors and the auditors also made
presentations to the Audit Committee throughout the year on specific topics of
interest, including: (i) management’s philosophy, asset allocation levels, risk
management and oversight of the Company’s benefit and pension
funds; (ii) accounting for the Company’s pension funding
obligations; (iii) the Company’s derivatives policy and usage
review; (iv) the 2009 joint audit plan; (v) updates on the
implementation of the internal audit plan for 2009; (vi) the
Company’s information technology systems and the controls in place within those
systems for compliance with the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley
Act); (vii) the applicability of new accounting releases; (viii) the
Company’s critical accounting policies; (ix) risk management initiatives and
controls for various business units within the Company; (x) updates on the
management of financial markets and liquidity risk; and (xi) the Company’s
compliance with the internal controls requirements under Section 404 of the
Sarbanes-Oxley Act.
The auditors
provided to the Audit Committee the written communications required by
applicable requirements of the PCAOB regarding the independent accountant’s
communications with the Audit Committee concerning independence, and the Audit
Committee discussed the auditors’ independence with management and the
auditors. The Audit Committee concluded that the auditors’
independence had not been impaired.
Based on: (i) the
Audit Committee’s discussions with management and the auditors; (ii) the Audit
Committee’s review of the representations of management; and (iii) the report of
the auditors to the Audit Committee, the Audit Committee recommended to the
Board that the audited consolidated financial statements be included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed
with the SEC on February 19, 2010.
|
By
the current members of the Audit
Committee consisting of:
|
|||||
|
John
T. Dillon (Chairman)
|
Gail
D. Fosler
|
||||
|
Daniel
M. Dickinson
|
William
A. Osborn
|
||||
Pre-Approval
Process
The Audit Committee
pre-approves all audit and non-audit services to be performed by the
auditors. It has policies and procedures in place to ensure that the
Company and its subsidiaries are in full compliance with the requirements for
pre-approval set forth in the Sarbanes-Oxley Act and the SEC rules regarding
auditor independence. These policies and procedures provide a
mechanism whereby management can request and secure pre-approval of audit and
non-audit services in an orderly manner with minimal disruption to normal
business operations. The policies and procedures are detailed as to
the particular service and do not delegate the Audit Committee’s responsibility
to management. These policies and procedures address any service
provided by the auditors and any audit or audit-related services to be provided
by any other audit service provider. The pre-approval process
includes an annual and interim component.
Annual
Pre-Approval Process
Annually, not later
than the Audit Committee meeting held in April of each year, management and the
auditors jointly submit a service matrix of the types of audit and non-audit
services that management may wish to have the auditors perform for the
year. The service matrix categorizes the types of services by audit,
audit-related, tax and all other services. Approval of a service is
merely an authorization that this type of service is permitted by the Audit
Committee, subject to pre-approval of specific services. Management
and the auditors jointly submit an annual pre-approval limits
request. The request lists individual project and aggregate
pre-approval limits by service category. The request also lists known
or anticipated services and associated fees. The Audit Committee
approves or rejects the pre-approval limits and each of the listed
services. For 2009, the pre-approval limits were as
follows:
Page 19
|
Type
of Service
|
Pre-Approval
Limits
(in
thousands)
|
|||||||
|
Per
Project
|
Aggregate
Limit
|
|||||||
|
Audit
Services
|
$
|
500
|
$
|
25,000
|
||||
|
Audit-Related
Services
|
$
|
500
|
$
|
10,000
|
||||
|
Tax
Services
|
$
|
500
|
$
|
15,000
|
||||
|
All
Other Services
|
$
|
500
|
$
|
1,000
|
||||
Interim
Pre-Approval Process
During the course
of the year, the Audit Committee chairman has the authority to pre-approve
requests for services that were not approved in the annual pre-approval
process. Committee approval is not required for individual projects
below the pre-approval project limits. However, all services,
regardless of fee amounts, are subject to restrictions on the services allowable
under the Sarbanes-Oxley Act and SEC rules regarding auditor
independence. In addition, all fees are subject to on-going
monitoring by the Audit Committee.
On-Going
Monitoring
At each Audit
Committee meeting subsequent to the Board meeting at which the service matrix
and annual pre-approval limits request are approved, the chairman reports any
interim pre-approvals since the last meeting. Also, at each of these
meetings, management and the auditor provide the Audit Committee with an update
of fees expected to be incurred for the year compared to amounts initially
pre-approved.
Independent
Registered Public Accounting Firm Fee Information
Fees for
professional services provided by our auditors included the following (in
millions):
|
2009
Actual
|
2008
Actual
|
||||||||
|
Audit
Fees 1
|
$
|
21.8
|
$
|
22.2
|
|||||
|
Audit-Related
Fees 2
|
2.1
|
5.5
|
|||||||
|
Tax
Compliance Fees 3
|
1.9
|
2.8
|
|||||||
|
Tax
Planning and Consulting Fees 4
|
1.9
|
2.3
|
|||||||
|
All
Other Fees 5
|
0.1
|
0.3
|
|||||||
|
TOTAL
|
$
|
27.8
|
$
|
33.1
|
|||||
|
1
|
“Audit Fees”
principally include audit and review of financial statements (including
internal control over financial reporting), statutory and subsidiary
audits, SEC registration statements, comfort letters and
consents.
|
||||||||
|
2
|
“Audit-Related
Fees” principally includes agreed upon procedures for securitizations,
attestation services requested by management, accounting consultations,
pre- or post- implementation reviews of processes or systems, financial
due diligence and audits of employee benefit plan financial
statements. Total fees paid directly by the benefit plans, and
not by the Company, were $0.6 in 2008 and 2009 and are not included in the
amounts shown above.
|
||||||||
|
3
|
“Tax
Compliance Fees” includes, among other things, statutory tax return
preparation and review and advising on the impact of changes in local tax
laws.
|
||||||||
|
4
|
“Tax Planning
and Consulting Fees” includes, among other things, tax planning and advice
and assistance with respect to transfer pricing issues.
|
||||||||
|
5
|
“All
Other Fees” principally includes subscriptions to knowledge tools and
attendance at training
classes/seminars.
|
||||||||
|
Governance Committee
|
The Governance Committee is comprised of three
directors, all of whom meet the independence requirements for nominating
committee members as defined in the NYSE listing standards and as determined by
the Board in its business judgment. The Governance Committee operates
under a written charter adopted by the Board, a copy of which is available on
our Internet site at www.CAT.com/governance. As part of its mandate, the Governance
Committee evaluates and makes recommendations regarding proposed candidates to
serve on the Board, including recommending the slate of nominees for election at
the Annual Meeting.
Page 20
Director
Resignation Policy
The Board has adopted a director resignation policy
(Resignation Policy), which can be found in the Corporate Governance
Guidelines. The Resignation Policy establishes that any director who
receives more “withheld” votes than “for” votes in an uncontested election shall
promptly tender his or her resignation. The independent
directors of the Board will then evaluate the relevant facts and circumstances
and make a decision, within 90 days after the election, on whether to accept the
tendered resignation. The Board will promptly publicly disclose its
decision and, if applicable, the reasons for rejecting the tendered resignation.
Process
for Nominating Directors
The Governance
Committee solicits and receives recommendations for potential director
candidates from directors, the Chairman and Caterpillar management and may also
utilize the services of a third party consultant to identify and evaluate
potential nominees. The Governance Committee also considers
unsolicited inquiries and nominees recommended by stockholders in accordance
with the following procedures and in compliance with the Company’s
Bylaws.
When considering a
candidate, the Governance Committee believes that certain characteristics are
essential. For example, candidates must be individuals of high
integrity, honesty and accountability, with a willingness to express independent
thought. Candidates must also have successful leadership experience
and stature in their primary fields, with a background that demonstrates an
understanding of business affairs as well as the complexities of a large,
publicly held company. Particular consideration will be given to
candidates with experience as a chief executive officer of successful,
capital-intensive businesses with international operations. In
addition, candidates must have a demonstrated ability to think strategically and
make decisions with a forward-looking focus and the ability to assimilate
relevant information on a broad range of complex topics.
The Governance
Committee also believes that certain characteristics are desirable, such as
being a team player with a demonstrated willingness to ask tough questions in a
constructive manner that adds to the decision-making process of the
Board. At the same time, candidates should be independent, with an
absence of conflicts of interests. Moreover, candidates should have
the ability to devote the time necessary to meet director responsibilities and
serve on no more than five public company boards in addition to the
Board. Candidates must also have the ability to commit to stock
ownership requirements according to the Company’s Corporate Governance
Guidelines.
Stockholder
Nominations
In accordance with
the Company’s Bylaws, stockholders may nominate a director candidate to serve on
the Board by providing advance written notice to Caterpillar Inc. c/o Corporate
Secretary at 100 NE Adams Street, Peoria, Illinois 61629. Written
notice of an intent to nominate a director candidate at an Annual Meeting must
be given either by personal delivery or by United States mail, postage prepaid,
to Caterpillar Inc. at the address previously provided no later than ninety (90)
days in advance of such meeting. The notice must state: (i) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the nominating
stockholder is a stockholder of record of the Company’s stock entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the SEC, had the nominee been nominated, or intended to be nominated, by the
Board; and (v) the consent of each nominee to serve as a director of the Company
if so elected. The presiding officer of the Annual Meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedure. You may request a copy of the Company’s Bylaws
by writing to the Corporate Secretary at 100 NE Adams Street, Peoria, Illinois
61629.
Page 21
|
PROPOSAL 1 — Election of Directors
|
The Board has nominated the following directors to stand
for election for a three-year term expiring at the Annual Meeting in
2012. The nominees were evaluated and recommended by the Governance
Committee in accordance with the process for nominating directors described on
page 21.
Directors are
elected by a plurality vote of the shares present or represented at the meeting
and entitled to vote, meaning that director nominees with the most affirmative
votes are elected to fill the available seats.
If at least 75
percent of the outstanding shares of the Company are voted in favor of Company
Proposal 4 to amend our Restated Certificate of Incorporation and Bylaws to
declassify the Board, each director elected at the 2010 annual meeting will hold
office until the 2011 annual meeting. At the 2011 annual meeting, all
of our directors’ terms would automatically expire, and all directors would
stand for election on an annual basis thereafter.
If at least 75 percent of the outstanding shares
of the Company are not voted in favor of Company
Proposal 4, there will be no change to our directors’ terms of office, or to the
class structure of the Board and directors elected at the Annual Meeting will
hold office for a three-year term expiring at the 2013 annual
meeting. Directors in the other two classes will continue in office
for the remainder of their terms.
|
Class
III – Directors nominated for election at the Annual
Meeting
|
|
§
|
JOHN T. DILLON, 71, Senior Managing Director and former Vice
Chairman of Evercore Partners (advisory and investment
firm). Other current directorships: E. I. du
Pont de Nemours and Company and Kellogg
Co. Other directorships within the last five
years: Vertis Inc. Mr. Dillon has been a director of
the Company since 1997.
|
The Board believes
that Mr. Dillon’s prior experience as a chief executive officer of a large,
publicly-traded multinational corporation, knowledge of the forest products
industry and experience with trade-related issues is particularly valuable to
the Board. In addition, his financial expertise and experience as a
director of large, publicly-traded multinational corporations enables him to
provide meaningful input and guidance to the Board and the Company.
Mr. Dillon will
turn 72 this year and is expected to retire from the Board on or before December
31, 2010, pursuant to our mandatory director retirement age set forth in our
Corporate Governance Guidelines.
|
§
|
JUAN GALLARDO, 62, Chairman and former CEO of Grupo
Embotelladoras Unidas S.A. de C.V. (bottling). Former Vice
Chairman of Home Mart de Mexico, S.A. de C.V. (retail trade), former
Chairman of Grupo Azucarero Mexico, S.A. de C.V. (sugar mills) and former
Chairman of Mexico Fund Inc. (mutual fund). Other current
directorships: Grupo Mexico, S.A. de C.V. and Lafarge SA. Other directorships
within the last five years: none. Mr. Gallardo has
been a director of the Company since
1998.
|
The Board believes
that Mr. Gallardo’s international business experience, particularly in Latin
America and South America, are important for the Company’s growth
strategy. His extensive background in trade-related issues also
contributes to the Board’s expertise. In addition, his
experience as a chief executive officer and director of large, publicly-traded
multinational corporations enables him to provide meaningful input and guidance
to the Board and the Company.
|
§
|
WILLIAM A. OSBORN, 62,
retired Chairman and CEO of Northern Trust Corporation (multibank holding
company) and The Northern Trust Company (bank). Other current
directorships: Abbott Laboratories and General Dynamics. Other
directorships within the last five years: Nicor Inc., Tribune
Company and Northern Trust Corporation. Mr. Osborn has been a
director of the Company since 2000.
|
Page 22
The Board believes
that Mr. Osborn’s financial expertise and experience is valuable to the
Board. His experience as a chairman and chief executive officer of a
large, publicly-traded multinational corporation is particularly important to
the Board. In addition, his experience as a director of other large,
publicly-traded corporations enables him to provide meaningful input and
guidance to the Board and the Company.
|
§
|
EDWARD B. RUST, JR.,
59, Chairman, CEO and
President of State Farm Mutual Automobile Insurance Company (insurance).
He is also President and CEO of State Farm Fire and Casualty Company,
State Farm Life Insurance Company and other principal State Farm
affiliates as well as Trustee and President of State Farm Mutual Fund
Trust and State Farm Variable Product Trust. Other current
directorships: Helmerich & Payne, Inc. and The McGraw-Hill
Companies, Inc. Other directorships within the last five
years: none. Mr. Rust has been a director of the
Company since 2003.
|
The Board believes
that Mr. Rust’s financial and business experience is valuable to the
Board. His role as a chief executive officer of a major national
corporation and experience as a director of large, publicly-traded multinational
corporations enables him to provide meaningful input and guidance to the Board
and the Company. In addition, his extensive involvement in education
improvement compliment the Company’s culture of social
responsibility.
|
§
|
SUSAN C. SCHWAB, 55,
Professor, University of Maryland School of Public
Policy. Prior to her current position, Ambassador Schwab held
various positions including United States Trade Representative (member of
the President’s cabinet), Deputy United States Trade Representative and
President and CEO of the University System of Maryland
Foundation. Other current directorships: FedEx
Corporation and The Boeing Company. Other directorships within
the last five years: Adams Express Company, Calpine Corporation
and Petroleum & Resources Corporation. Ambassador Schwab
has been a director of the Company since
2009.
|
The Board believes
that Ambassador Schwab brings extensive knowledge, insight and experience on
international trade issues to the Board. Her educational experience
and role as the U.S. Trade Representative provide important insights for the
Company’s global business model and long-standing support of open
trade. In addition, her experience as a director of large,
publicly-traded multinational corporations enables her to provide meaningful
input and guidance to the Board and the Company.
YOUR
BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” THE NOMINEES PRESENTED IN PROPOSAL
1.
The Board seeks an
indication from stockholders of their approval or disapproval of the Audit
Committee’s appointment of PricewaterhouseCoopers as auditors for
2010.
PricewaterhouseCoopers has been our auditors since
1925. For additional information regarding the Company’s relationship
with PricewaterhouseCoopers, please refer to the “Audit Committee Report” on
page 18 and the “Audit Fees and Approval
Process” disclosure on page 19.
If the appointment
of PricewaterhouseCoopers as auditors for 2010 is not approved by the
stockholders, the adverse vote will be considered a direction to the Audit
Committee to consider other auditors for next year. However, because
of the difficulty in making any substitution of auditors so long after the
beginning of the current year, the appointment for the year 2010 will stand,
unless the Audit Committee finds other good reason for making a
change.
Representatives of
PricewaterhouseCoopers will be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. The
representatives will also be available to respond to questions at the
meeting.
YOUR
BOARD OF DIRECTORS AND AUDIT COMMITTEE RECOMMEND VOTING “FOR” PROPOSAL
2.
Page 23
The Board has
adopted and recommends that you approve amendments to the Caterpillar Inc. 2006
Long-Term Incentive Plan (Plan) that would: (i) increase the number of shares
authorized for issuance under the Plan; (ii) increase the limitation on the
number of authorized shares that may be issued regarding restricted stock,
restricted stock units and performance shares; (iii) expressly prohibit the
exchange of underwater options and/or stock appreciation rights (SARs) for cash;
(iv) further restrict the Plan’s definition of change of control; (v) clarify
that shares withheld for the payment of taxes will not be made available for
additional grants; and (vi) make certain other clarifications to the provisions
of the Plan document. Under the current terms of the Plan, the
Company is authorized to issue a total of 37,600,000 shares, of which,
approximately 7,000,000 shares remain available for future grants. We
are asking that you approve an additional 20,000,000 shares for issuance under
the Plan. This proposed amendment would increase the shares available
for future grants under the Plan to approximately 27,000,000.
By increasing the
number of shares authorized under the Plan and increasing the limitation on the
number of authorized shares that may be issued regarding restricted stock,
restricted stock units and performance shares, the Company believes it will have
the flexibility to continue to provide equity incentives in amounts and forms
determined appropriate by the Compensation Committee (Committee) over the next
three to four years. The Company’s average annual burn rate for 2007
through 2009, which is the total number of net shares subject to equity awards
granted in a given year divided by the total number of shares of Caterpillar
stock outstanding, was 1.16 percent. If stockholders approve these amendments,
the total number of shares available for grants under the Plan, plus the number
of shares subject to outstanding awards under all the Company’s current and
prior equity plans as of March 31, 2010, would be approximately 101,320,000
shares. As of the record date, the total number of shares of Caterpillar stock
outstanding was approximately [ ].
The purpose of the
Plan is to further the Company’s compensation philosophy, as outlined in the
Compensation Discussion and Analysis. Specifically, the Plan allows
the Board to provide key present and future employees and members of the Board
with cash-based incentives, stock-based incentives and other equity interests in
the Company, thereby giving them a stake in the growth and prosperity of the
Company, aligning their interests with those of stockholders and encouraging the
continuance of their services with the Company and its
subsidiaries.
The Board desires
to ensure the Company’s continued ability to offer cash and equity based
compensation to its key employees. The Board believes this type of
compensation is critical to its ability to attract and retain highly qualified
individuals and otherwise attain the goals described
above. Recognizing the importance of the Company’s broad-based equity
compensation program and its effectiveness in meeting the Board’s goals, the
Committee and the Board approved these amendments to the Plan and hereby submit
them to the Company’s stockholders for approval.
Stockholder
approval of these amendments is required by NYSE rules. The affirmative vote of
holders of a majority of the Company’s common stock present or represented at
the Annual Meeting and entitled to vote is required to approve the Plan
amendments. If stockholders do not approve these amendments, the Plan
will remain in full force and effect through June 13, 2016, without giving
effect to the proposed amendments.
The following is a
summary of the principal features of the Plan, including the proposed
amendments. This summary is qualified in its entirety by reference to the
complete text of the amendments and restatement of the Plan with the proposed
changes highlighted (attached as Appendix A). Stockholders
are encouraged to read the text of the Plan in its entirety.
The amendments to
the Plan will become effective upon stockholder approval.
Approval of the
amendments to the Plan will also constitute re-approval, for purposes of Section
162(m) of the Internal Revenue Code (Code), of the performance goals included in
the Plan (described below) that are to be used in connection with awards under
the Plan that are intended to qualify as “performance-based” compensation for
purposes of Section 162(m).
Page 24
Administration
The Plan is
administered by the Committee, or by another committee appointed by the
Board. The Committee consists of at least two persons and Committee
members must be “non-employee directors,” as defined under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, and “outside directors” within the
meaning of Section 162(m) of the Code. The full Board performs the
functions of the Committee for purposes of granting awards to non-employee
directors.
The Committee also
has full authority to interpret the Plan and to establish rules for its
administration. Further, the Committee makes all other
determinations, that may be necessary or advisable for the administration of the
Plan. The Committee has the authority to select the employees,
prospective employees and directors who may participate in the Plan and to
determine the size and types of awards, the number of shares subject to awards
and the terms and conditions of these awards in accordance with the terms of the
Plan. Subject to certain limitations, the Committee may delegate its
authority under the Plan to one or more members of the Committee or one or more
officers or other designees of Caterpillar.
Shares Subject to the Plan
and Maximum Awards
As amended, the
Plan provides that the number of shares of Caterpillar stock that may be issued
will not exceed 40 million shares, subject to certain adjustments. In
addition, 17.6 million shares of Caterpillar stock that were authorized for the
Caterpillar Inc. 1996 Stock Option and Long-Term Incentive Plan (1996 Plan) but
that have not been issued and that were not subject to outstanding grants
pursuant to the 1996 Plan as of the date of adoption of the Plan were reserved
and available for grant under the Plan. Thus, if the amendment is
approved, the total number of shares that may be issued under the Plan will not
exceed 57,600,000.
The per share
closing price of Caterpillar stock on the NYSE on March 31, 2010 was
$62.85. Caterpillar will register the additional shares issuable
under the Plan under the Securities Act of 1933, as amended, after it receives
stockholder approval.
Of the shares
authorized for issuance under the Plan, the maximum aggregate number of shares
(including stock options, stock appreciation rights, restricted stock and
restricted stock units and performance shares to be paid out in shares) that may
be granted in any one fiscal year to a single participant is 800,000
shares. The maximum aggregate cash payout (including performance
units and performance shares paid out in cash but excluding cash-settled SARs)
with respect to awards granted in any one fiscal year that may be made to a
single participant is $5 million. As amended, the Plan also provides
that only 35 percent of the shares authorized under the Plan may be issued in
connection with awards of restricted stock, restricted stock units and
performance shares. Prior to the amendment, this limitation was 20
percent of the shares authorized under the Plan.
To the extent that
shares of Company stock subject to an outstanding award under the Plan are not
issued by reason of expiration, forfeiture or cancellation of such award, by
reason of the tendering or withholding of shares to pay all or a portion of the
exercise price or by reason of being settled in cash in lieu of shares, then
such shares will immediately again be available for issuance under the
Plan. Shares underlying awards granted in substitution for awards
previously granted by an entity acquired by Caterpillar will not be counted
against the Plan limit.
Shares of Company
stock issued with respect to awards may be authorized but unissued shares or
treasury shares. In the event there is a change in the capital
structure of the Company as a result of any stock dividend or split,
recapitalization, merger, consolidation or spin-off or other corporate change
affecting the shares, the number of shares of Company stock authorized for
issuance, available for issuance or covered by any outstanding award and the
price per share of any such award, and the various limitations described above,
will be proportionately adjusted. Fractional shares will not be
issued under the Plan.
The Plan limit is
reduced on a one-for-one basis based upon the number of shares of Company stock
for which an award is granted or denominated. An award of SARs
reduces the Plan limit on a one-for-one basis based upon the number of shares of
Company stock actually delivered pursuant to the SAR and any shares withheld for
the payment of taxes.
Page
25
Eligibility and
Participation
Any director, or
current or future employee (including officer) of Caterpillar or any of its
subsidiaries is eligible to receive an award under the Plan, except that
incentive stock options may only be granted to persons who are employed by the
Company or its subsidiaries and only if the recipient does not own more than 10
percent of Caterpillar’s stock. Caterpillar currently has
approximately 94,000 employees and 15
directors. The selection of participants and the nature and size of
the awards granted to participants is subject to the discretion of the
Committee.
Awards
The Plan provides
for awards of stock options to purchase shares of Company stock, stock
appreciation rights, restricted stock, restricted stock units, performance
shares and
performance units, the general terms and conditions of which are described in
more detail below.
Stock
Options. Stock options
may be nonqualified stock options or incentive stock options that comply with
Section 422 of the Code. Each stock option grant will be evidenced by
an award document. If the award document does not specify the time
the stock option will first become exercisable, the stock option will become
fully vested and exercisable by the participant on the third anniversary of the
grant date. Each stock option may be exercised in whole or in part,
from time to time, after the grant becomes exercisable. The Plan
limits the term of any stock option to ten years and prohibits repricing of
stock options without stockholder approval. As amended, the Plan
would also prohibit the exchange of underwater options for cash.
The exercise price
per share for all shares of Caterpillar stock issued pursuant to stock options
under the Plan will be determined by the Committee but may not be less than 100
percent of the fair market value of a share of Caterpillar stock on the grant
date. The exercise price of a stock option may be paid in cash, by
tendering previously acquired shares or through a cashless exercise
procedure.
Stock
Appreciation Rights (SARs). SARs entitle a
participant to receive an amount equal to the excess of the fair market value of
a share of Caterpillar stock on the date the SAR is exercised over the fair
market value of a share of Company stock on the date the SAR is granted,
multiplied by the number of shares to which the SAR is exercised. The
payment may be made in shares of Caterpillar stock having a fair market value on
the date of exercise equal to the amount due upon the exercise of the SAR, may
be paid in cash or a combination thereof.
The Committee may
grant SARs under the Plan alone or in tandem with stock options. SARs
that are granted alone must be granted with a per share exercise price not less
than 100 percent of the fair market value of a share of Company stock on the
date of grant. The grant price of tandem SARs will equal the option
price of the related stock option. The Plan limits the term of SARs
to 10 years from the grant date and prohibits repricing of SARs without
stockholder approval. The Plan also prohibits the exchange of
underwater SARs for cash.
SARs granted alone
may be exercised upon the terms and conditions the Committee, in its sole
discretion, imposes upon them in the award document. SARs granted in
tandem with stock options may be exercised for all or part of the shares subject
to the related stock option upon the surrender of the right to exercise the
equivalent portion of the related stock option. A tandem SAR may be
exercised only with respect to the shares for which its related stock option is
then exercisable. With respect to a tandem SAR granted in connection
with an incentive stock option: (i) the tandem SAR will expire no
later than the expiration of the underlying incentive stock option; (ii) the
value of the payout with respect to the tandem SAR may be for no more than 100
percent of the difference between the option price of the underlying incentive
stock option and the fair market value of the shares subject to the underlying
incentive stock option at the time the tandem SAR is exercised; and (iii) the
tandem SAR may be exercised only when the fair market value of the shares
subject to the incentive stock option exceeds the option price of the incentive
stock option.
Page 26
Restricted Stock
and Restricted Stock Units. An award of restricted
stock is a share of Company stock granted to the participant that may not be
sold or otherwise disposed of during a restricted period as determined by the
Committee in the award document. The Committee may impose such
conditions and/or restrictions on any shares of restricted stock granted
pursuant to the Plan as it may deem advisable including without limitation, a
requirement that shares will not be issued until the end of the applicable
period of restriction (i.e., a restricted stock
unit), restrictions based upon the achievement of specific performance goals
(company-wide, subsidiary-wide, divisional and/or individual), time-based
restrictions on vesting, which may or may not be following the attainment of the
performance goals, sales restrictions under applicable stockholder agreements or
similar agreements, a requirement that participants pay a stipulated purchase
price for each share of restricted stock and/or restrictions under applicable
federal or state securities laws.
Restriction periods
must be at least three years for time-based restrictions. However, a
maximum of 5 percent of the aggregate shares authorized for issuance of
restricted stock, restricted stock units or performance shares) may be issued as
restricted stock or restricted stock units with no minimum vesting
periods. If the period of restriction is not set forth in the award
document, the transfer and any other restrictions will lapse (i) to the extent
of one-third of the shares (rounded to the nearest whole) covered by the
restricted stock award on the third anniversary of the grant date, (ii) to the
extent of two-thirds of the shares (rounded to the nearest whole) covered by the
restricted stock award on the fourth anniversary of the grant date and (iii) to
the extent of 100 percent of the shares covered by the restricted stock award on
the fifth anniversary of the grant date.
For awards of
restricted stock (but not for restricted stock units), the participant may have
all rights as a holder of shares of Caterpillar stock except that the restricted
shares cannot be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of until the end of the restriction period established by the Committee
and specified in the award document, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the award document.
Performance
Shares and Performance Units. Performance shares and
performance units are awards of a fixed or variable number of shares or of
dollar-denominated units that are earned by achievement of performance goals
established by the Committee. Amounts earned under performance shares
and performance units may be paid in shares of Caterpillar stock, cash or a
combination thereof.
The terms and
conditions of the performance awards are determined by the Committee, and the
granting, vesting and/or exercisability of performance awards are conditioned on
the achievement in whole or in part of performance goals (as described below)
during a performance period as selected by the Committee. At the sole
discretion of the Committee, participants may be entitled to receive any
dividends declared with respect to shares that have been earned in connection
with grants of performance units and/or performance shares that have been
earned, but not yet distributed to participants.
Performance units
and/or performance shares may not be sold or transferred, other than by will or
by the laws of descent and distribution. Further, except as otherwise
provided in the award document, a participant’s rights under the Plan will be
exercisable during the participant’s lifetime only by the participant or the
participant’s legal representative.
Performance
Goals
Section 162(m) of
the Code limits publicly-held companies such as the Company to an annual
deduction for federal income tax purposes of $1 million for compensation paid to
each of their “covered employees.” Generally, “covered employees” are
the CEO and the three other most highly compensated officers, other than the
CFO, who are named in the summary compensation table of the Company’s proxy
statement each year. However, performance-based compensation is
excluded from this limitation. The Plan is designed to permit the
Committee to grant awards that qualify, to the extent possible, as
performance-based for purposes of satisfying the conditions of Section
162(m).
Under the Plan, the
Committee may condition the grant, vesting and/or exercisability of any award,
including, but not limited to, performance shares and performance units, upon
the attainment of performance targets related to one or more performance goals
over a performance period selected by the Committee. The Committee
may reduce any award below the maximum amount that could be paid based upon the
degree to which the performance targets related to such award were
attained. However, the Committee may not increase any award that is
intended to satisfy the exception for “qualified performance-based compensation”
set forth in Section 162(m) of the Code above the maximum amount that could be
paid based on the attainment of performance targets.
Page 27
For any awards that
are intended to satisfy the Section 162(m) exception for “qualified
performance-based compensation,” the awards will be subject to one or more, or
any combination, of the following performance goals which will be established by
the Committee in writing and stated in terms of the attainment of specified
levels of or percentage changes in any one or more of the following
measurements: (i) revenue; (ii) primary or fully-diluted earnings per share;
(iii) earnings before interest, taxes, depreciation, and/or amortization; (iv)
pretax income; (v) cash flow from operations; (vi) total cash flow; (vii) return
on equity; (viii) return on invested capital; (ix) return on assets; (x) net
operating profits after taxes; (xi) economic value added; (xii) total
stockholder return; (xiii) return on sales; or (xiv) any individual performance
objective which is measured solely in terms of quantifiable targets related to
the Company or the businesses of the Company; or any combination
thereof. In addition, such performance goals may be based in whole or
in part upon the performance of the Company, a subsidiary, division and/or other
operational unit under one or more of such measures. Further, for any
awards that are not intended to satisfy the Section 162(m) exception, the
Committee may establish performance targets based on other performance goals, as
it deems appropriate.
Award
Forfeitures
Unless otherwise
determined by the Committee, in the case of a forfeiture event, the following
forfeitures will result:
|
|
·
|
The
unexercised portion of any stock option, whether or not vested, and any
other award not then settled (except for an award that has not been
settled solely due to an elective deferral by the participant and
otherwise is not forfeitable in the event of any termination of service of
the participant) will be immediately forfeited and canceled upon the
occurrence of the forfeiture event;
and
|
|
|
·
|
The
participant will be obligated to repay to Caterpillar, in cash, within
five business days after demand is made by Caterpillar, the total amount
of award gain (as defined in the Plan) realized by the participant upon
each exercise of a stock option or settlement of an award (regardless of
any elective deferral) that occurred on or after (i) the date that is
six months before the occurrence of the forfeiture event, if the
forfeiture event occurred while the participant was employed by
Caterpillar or a subsidiary, or (ii) the date that is six months before
the date the participant’s employment by, or service as a director with
Caterpillar or a subsidiary terminated, if the forfeiture event occurred
after the participant ceased to be
employed.
|
Forfeiture
Events. The forfeiture of an award will be triggered upon
either (i) the violation by a participant of certain non-solicitation provisions
or (ii) the participant’s disclosure to any person or entity, or the
participant’s unauthorized use of any “confidential or proprietary information”
(as defined in the Plan) at any time during the participant’s employment or
service as a director with Caterpillar or a subsidiary or during the one-year
period following termination of such employment or service.
Waivers. The
Committee may, in its sole discretion, waive in whole or in part the Company’s
right to forfeiture. In addition, the Committee may impose additional
conditions on awards, by inclusion of appropriate provisions in the award
document.
Clawback
Any Plan
participant who is an officer of the Company and whose negligent, intentional or
gross misconduct contributes to the Company having to restate all or a portion
of its financial statements, will be required to forfeit awards granted under
the Plan and repay the Company the total amounts realized by the participant
upon the exercise of an option or settlement of an award.
Change of
Control
If any
participant’s (i.e., an
officer employee’s, a non-officer employee’s or director’s) employment or
service with the Company and/or any subsidiary terminates either without cause
or for good reason within the 12 month period following a change of control (as
defined in the Plan), unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governmental agencies or national
securities exchanges:
|
|
·
|
All stock
options and SARs granted will become immediately exercisable, and shall
remain exercisable throughout their entire
term;
|
|
|
·
|
Any period of
restriction and other restrictions imposed on restricted stock will
lapse;
|
|
|
·
|
All
restricted stock units will become fully vested;
and
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Page 28
|
|
·
|
Unless
otherwise specified in an award document, the maximum payout opportunities
attainable under all outstanding awards of performance units and
performance shares will be deemed to have been fully earned for the entire
performance period(s) as of the effective date of the change of
control. The vesting of all such awards will be accelerated as
of the effective date of the change of control, and in full settlement of
such awards, there shall be paid out in cash to participants within 30
days following the effective date of the change of control the maximum of
payout opportunities associated with such outstanding
awards.
|
Other
Provisions
The Committee may
provide that the receipt of payment of cash or the delivery of shares that would
otherwise be due to a participant under an award may be deferred at the election
of the participant pursuant to an applicable deferral plan established by the
Company or a subsidiary.
The Committee may
make awards on terms and conditions other than those described above or in the
Plan to comply with the laws and regulations of any foreign jurisdiction or to
make the award effective under such laws or regulations.
The Committee may,
at its discretion, accelerate the vesting of options, SARs, restricted stock and
restricted stock units, performance units and performance shares at any
time. The Committee may also, at its discretion, extend the period
during which an option or SAR is exercisable following a participant’s
termination of employment or services.
No award will be
construed as giving any participant a right to receive future awards or to
continued employment or service with the Company.
U.S. Federal
Income Tax Consequences
Incentive Stock
Options. The grant of an
incentive stock option will not be a taxable event for the participant or for
the Company. A participant will not recognize taxable income upon
exercise of an incentive stock option (except that the alternative minimum tax
may apply), and any gain realized upon a disposition of Caterpillar stock
received pursuant to the exercise of an incentive stock option will be taxed as
long-term capital gain if the participant holds the shares of Company stock for
at least two years after the date of grant and for one year after the date of
exercise (holding period requirement). The Company will not be
entitled to any income tax deduction with respect to the exercise of an
incentive stock option, except as discussed below.
For the exercise of
an incentive stock option to qualify for the foregoing tax treatment, the
participant generally must be an employee of the Company or an employee of a
Company subsidiary from the date the option is granted through a date within
three months before the date of exercise of the option. If all of the
foregoing requirements are met except the holding period requirement mentioned
above, the participant will recognize ordinary income upon the disposition of
the Company stock in an amount generally equal to the excess of the fair market
value of the Company stock at the time the option was exercised over the option
exercise price (but not in excess of the gain realized on the
sale). The balance of the realized gain, if any, will be capital
gain. The Company will be allowed an income tax deduction to the
extent the participant recognizes ordinary income, subject to the Company’s
compliance with Section 162(m) of the Code and to certain reporting
requirements.
Nonqualified
Stock Options. The grant of a
nonqualified stock option will not be a taxable event for the participant or the
Company. Upon exercising a nonqualified stock option, a participant
will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the Company stock on the date of
exercise. Upon a subsequent sale or exchange of shares acquired
pursuant to the exercise of a nonqualified stock option, the participant will
have taxable capital gain or loss, measured by the difference between the amount
realized on the disposition and the tax basis of the shares of Company stock
(generally, the amount paid for the shares plus the amount treated as ordinary
income at the time the option was exercised). If the Company complies
with applicable reporting requirements and with the restrictions of Section
162(m) of the Code, the Company generally will be entitled to an income tax
deduction in the same amount and generally at the same time as the participant
recognizes ordinary income.
Page 29
Restricted Stock
and Restricted Stock Units. A participant who is
awarded restricted stock will not recognize any taxable income for federal
income tax purposes in the year of the award, provided that the shares of
Company stock are subject to restrictions (that is, the restricted stock is
nontransferable and subject to a substantial risk of
forfeiture). However, if shares are issued at the time of grant, the
participant may elect under Section 83(b) of the Code to recognize compensation
income in the year of the award in an amount equal to the fair market value of
the Company stock on the date of the award (less the purchase price, if any),
determined without regard to the restrictions. If the participant
does not make such a Section 83(b) election, the fair market value of the
Company stock on the date the restrictions lapse (less the purchase price, if
any) will be treated as compensation income to the participant and will be
taxable in the year the restrictions lapse and dividends paid while the
Caterpillar stock is subject to restrictions will be treated as compensation
income and may be subject to withholding taxes. If, on the other
hand, shares are not issued until after the restriction period ends (i.e.,
restricted stock units), the participant is not eligible to make an election
under Section 83(b) of the Code. If the Company complies with
applicable reporting requirements and with the restrictions of Section 162(m) of
the Code, the Company generally will be entitled to an income tax deduction in
the same amount and generally at the same time as the participant recognizes
ordinary income.
Generally, there
are no immediate tax consequences of receiving an award of restricted stock
units under the Plan, provided the restricted stock units are subject to a
substantial risk of forfeiture. Upon vesting of the restricted stock
units, a participant will recognize ordinary income in an amount equal to the
value of the fair market value of Company stock on the date shares are
issued. If the Company complies with applicable reporting
requirements and, if applicable, with the restrictions of Section 162(m) of the
Code, the Company generally will be entitled to an income tax deduction in the
same amount and generally at the same time as the participant recognizes
ordinary income.
Stock-Settled
Stock Appreciation Rights. There are no immediate
tax consequences of receiving an award of stock-settled SARs under the
Plan. Upon exercising a stock appreciation right, a participant will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the Company stock on the date of
exercise. If the Company complies with applicable reporting
requirements and, if applicable, with the restrictions of Section 162(m) of the
Code, the Company generally will be entitled to an income tax deduction in the
same amount and generally at the same time as the participant recognizes
ordinary income.
Performance
Awards. The
award of a performance award will have no federal income tax consequences for
the Company or for the participant. The payment of the award is
taxable to a participant as ordinary income. If the Company complies
with applicable reporting requirements and, if applicable, with the restrictions
of Section 162(m) of the Code, the Company generally will be entitled to an
income tax deduction in the same amount and generally at the same time as the
participant recognizes ordinary income.
YOUR
BOARD OF DIRECTORS AND COMPENSATION COMMITTEE RECOMMEND VOTING “FOR” PROPOSAL
3.
Required
information relating to securities authorized for issuance under equity
compensation plans is included in the following table:
|
Equity
Compensation Plan Information
(as
of December 31, 2009)
|
||||||||||
|
(a)
|
(b)
|
(c)
|
||||||||
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options, warrants and
rights1
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
|
|||||||
|
Equity
compensation plans approved by security holders
|
68,021,668
|
$44.2440
|
16,229,601
|
|||||||
|
Equity
compensation plans not approved by security holders
|
N/A
|
N/A
|
N/A
|
|||||||
|
Total
|
68,021,668
|
$44.2440
|
16,229,601
|
|||||||
|
1
|
Excludes any
cash payments in-lieu-of
stock.
|
|||||||||
Page 30
| PROPOSAL 4 — Amend Restated Certificate of Incorporation and Bylaws to Provide for Annual Election of Directors |
The
Board proposes the annual election of directors.
The Company’s
Restated Certificate of Incorporation (Certificate of Incorporation) and Bylaws
currently provide that the Board is to be divided into three classes of
directors, with each class elected every three years. On the
recommendation of the Governance Committee, your Board has approved amendments
to the Company’s Certificate of Incorporation and Bylaws to provide for the
annual election of directors. Stockholder proposals seeking to
implement the annual election of directors were brought before stockholders in
2008 and 2009, and received the vote of more than 69 percent and
65 percent, respectively, of the votes cast at each annual meeting of
stockholders.
Each
director will stand for re-election annually beginning at the 2011 annual
meeting.
If approved, this
proposal would become effective upon the filing of an amended and restated
Certificate of Incorporation containing the proposed amendments with the
Secretary of State of Delaware, which the Company intends to do promptly after
the required stockholder approval is obtained. Upon filing, each
director elected at the 2010 Annual Meeting would hold office until the 2011
annual meeting. At the 2011 annual meeting, all of our current
directors’ terms would expire, and all directors would stand for election at the
2011 annual meeting and on an annual basis thereafter. For
example, directors elected in 2009 would serve until 2011 and stand for election
annually thereafter rather than for their originally elected three-year term
expiring in 2012. At all times, directors will serve until their
successors have been elected and qualified. This proposal would not change the
present number of directors, and it would not change the Board’s authority to
change that number and to fill any vacancies or newly created
directorships.
Subsections (b),
(c), (d) and (f) of the SIXTH provision of the Certificate of Incorporation and
subsections (b), (c) and (f) of Section 1, Election of Directors, of
Article III of the Bylaws contain the provisions that will be affected if this
proposal is adopted.
Vote
Required
The affirmative
vote of no less than 75 percent of the outstanding shares is needed to adopt
these amendments.
Background
of Proposal
This proposal is a
result of the Board’s ongoing review of corporate governance matters. The Board,
assisted by the Governance Committee, considered the benefits and disadvantages
of maintaining the classified board structure. The Board considered the view of
some stockholders who believe that classified boards (i) encourage management
entrenchment and self-dealing, (ii) have the effect of reducing the
accountability of directors to stockholders because stockholders are unable to
elect all directors on an annual basis and (iii) discourage possible bids to
purchase the Company because classified boards prevent a hostile bidder from
removing all directors at a single meeting.
The Board also
considered the benefits of retaining the classified board structure, which has a
long history in corporate law. Proponents of a classified structure believe it
(i) provides continuity and stability in the management of the business and
affairs of a company, (ii) enhances long-term planning and (iii) helps attract
and retain director candidates. Proponents also assert that
classified boards may enhance stockholder value by forcing an entity seeking
control of a target company to initiate arms-length discussions with the board
of that company. While the Board recognizes those potential benefits,
it also recognizes that even without a classified board, the Company has other
means that may allow it to compel a takeover bidder to negotiate with the Board,
including certain provisions in its Certificate of Incorporation and
Bylaws.
On the
recommendation of the Governance Committee and after due deliberation based on
the facts and data presented, your Board, subject to the approval of no less
than 75 percent of the outstanding shares of the Company, approved the proposed
amendments to the Certificate of Incorporation and Bylaws, and now recommends
that you approve them.
Page 31
The proposed
amendments to the Certificate of Incorporation and Bylaws to declassify the
Board are described in more detail below. Appendix B to this
proxy statement sets out the Certificate of Incorporation and Appendix C to this
proxy statement sets out the Bylaws, each including these proposed
amendments.
Certificate of
Incorporation
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·
|
SIXTH:
|
|
|
(b)
|
The
Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each director shall
serve At
each annual meeting of stockholders, directors shall be elected for
a term of
office to expire at the next annual meeting of stockholders, with each
director to ending
on the date of the third annual meeting of stockholders following the
annual meeting at which the director was elected, provided, however, that
each initial director in Class I shall hold office until the annual
meeting of stockholders in 1987; each initial director in Class II shall
hold office until the annual meeting of stockholders in 1988; and each
initial director in Class III shall hold office until the annual meeting
of stockholders in 1989. Notwithstanding the foregoing
provisions of this Article, each director shall serve until his
successor is duly elected and qualified or until his death, resignation or
removal.
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|
|
(c)
|
In
the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to maintain such classes as
nearly equal as possible. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of
any incumbent director.
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|
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(d)
|
Newly created
directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office
(and not by stockholders), even though less than a quorum of the Board of
Directors. Any director elected in accordance with the
preceding sentence shall hold office until
the next annual meeting of stockholders for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and
until such director's successor shall have been elected and
qualified.
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(f)
|
Notwithstanding
the foregoing, whenever the holders of any one or more classes or series
of stock issued by this corporation having a preference over the common
stock as to dividends or upon liquidation, shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of
vacancies, terms of removal and other features of such directorships shall
be governed by the terms of Article FOURTH and the resolution or
resolutions establishing such class or series adopted pursuant
thereto
and such directors so elected shall not be divided into classes pursuant
to this Article SIXTH unless expressly provided by such
terms.
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Bylaws
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·
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Article III
– Section 1. Election of Directors:
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(b)
|
Election
and Terms of Directors. Each
director shall serve for a term of office to expire at the next
annual meeting of stockholders, with each director
to Classes
of Directors. The board of directors shall be and is divided into three
classes: Class I, Class II and Class III, which shall be as nearly equal
in number as possible. Each director shall serve for a term ending on the
date of the third annual meeting of stockholders following the annual
meeting at which the director was elected; provided, however, that each
initial director in Class I shall hold office until the annual meeting of
stockholders in 1987; each initial director in Class II shall hold office
until the annual meeting of stockholders in 1988; and each initial
director in Class III shall hold office until the annual meeting of
stockholders in 1989. Notwithstanding the foregoing provisions of this
subsection (b), each director shall serve until his successor is
duly elected and qualified or until his death, resignation or
removal.
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Page 32
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(c)
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Newly Created
Directorships and Vacancies. In
the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the board of directors
among the three classes of directors so as to maintain such classes as
nearly equal in number as possible. No decrease in the number of
directors constituting the board of directors shall shorten the term of
any incumbent director. Newly created directorships resulting from any
increase in the number of directors and any vacancies on the board of
directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office (and not by stockholders), even though
less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office until
the next annual meeting of stockholders for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director’s successor shall have been elected and qualified.
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(f)
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Preferred
Stock Provisions. Notwithstanding the foregoing, whenever the holders of
any one or more classes or series of stock issued by this corporation
having a preference over the common stock as to dividends or upon
liquidation, shall have the right, voting separately by class or series,
to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies, nominations, terms of
removal and other features of such directorships shall be governed by the
terms of Article FOURTH of the certificate of incorporation and the
resolution or resolutions establishing such class or series adopted
pursuant thereto
and such directors so elected shall not be divided into classes pursuant
to Article SIXTH of the certificate of incorporation unless expressly
provided by such
terms.
|
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” PROPOSAL 4.
| PROPOSAL 5 — Amend Restated Certificate of Incorporation and Bylaws to Eliminate Supermajority Voting Requirements |
The
Board proposes replacing supermajority voting requirements with a simple
majority of outstanding shares requirement.
We are proposing
amendments to our Certificate of Incorporation and Bylaws that would remove any
requirements for a supermajority vote of at least 75 percent of the outstanding
stock of the Company.
The Company’s
Certificate of Incorporation and Bylaws currently require a supermajority vote
of at least 75 percent of the outstanding shares of the Company to alter, amend
or repeal provisions relating to (i) procedures and processes for the election
and removal of directors, (ii) special meetings and shareholder actions by
written consent, and (iii) policies and procedures relating to the annual
meeting. This proposed amendment would reduce the required
stockholder approval for these actions to a simple majority of outstanding
shares.
Vote
Required
The affirmative
vote of no less than 75 percent of the outstanding shares is needed to adopt
these amendments.
Background
of Proposal
Supermajority
voting provisions are intended to provide protection against self-interested
action by large stockholders and to encourage a person seeking control of a
company to negotiate with its board to reach terms that are fair and provide the
best results for all stockholders. However, as corporate governance standards
have evolved, many investors and commentators now view these provisions as
limiting a board’s accountability to stockholders and the ability of
stockholders to effectively participate in corporate governance.
Page 33
On the
recommendation of the Governance Committee and after due deliberation based on
the facts and data presented, your Board, subject to the approval of no less
than 75 percent of the outstanding shares of the Company, approved the proposed
amendments to the Certificate of Incorporation and Bylaws, and now recommends
that you approve them.
The proposed
amendments to the Certificate of Incorporation and Bylaws to eliminate these
supermajority provisions are described in more detail below. Appendix B to this
proxy statement sets out the Certificate of Incorporation and Appendix C to this
proxy statement sets out the Bylaws, each including these proposed
amendments.
Certificate of
Incorporation
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·
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Article Fifth
– Currently requires a supermajority vote to amend certain provisions in
the Bylaws relating to policies and
procedures relating to the annual meeting (Article II, Section
1(b)(ii)), special meetings (Article
II, Section 1(c)), stockholder action
by consent (Article II, Section 3(e))
and election of directors (Article III, Section
1):
|
“FIFTH:
In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors shall have
power to make, alter, amend and repeal the bylaws (except so far as the bylaws
adopted by the stockholders shall otherwise provide). Any bylaws made by the
Board of Directors under the powers conferred hereby may be altered, amended or
repealed by the Board of Directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Certificate of Incorporation to the
contrary, Sections 1(b)(ii), 1(c) and 3(e)(f)1
of Article II, and Section 1 of Article III of the bylaws shall not be altered,
amended or repealed, and no provisions inconsistent therewith shall be adopted,
without the affirmative vote of the holders of not less than a majority
seventy-five
percent (75%) of the outstanding stock of the corporation
entitled to vote generally in the election of directors, voting together as a
single class (it being understood that for the purposes of this Article FIFTH,
each share shall have one vote except as otherwise provided in accordance with
Article FOURTH).”
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·
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Article
Sixth, subsection (e) – Currently requires a supermajority vote to remove
a director without cause:
|
“(e) Any director
may be removed from office without cause but only by the affirmative vote of the
holders of not less than a majority
seventy-five
percent (75%) of the outstanding stock of the corporation entitled
to vote generally in the election of directors, voting together as a single
class (it being understood that for the purpose of this Article SIXTH, each
share shall have one vote except as otherwise provided in accordance with
Article FOURTH).”
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·
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Article
Eighth – Currently requires a supermajority vote to amend Articles Fifth,
Sixth, Seventh and Eighth:
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"EIGHTH: The corporation
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred on
stockholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the affirmative vote of
not less than a
majority seventy-five
percent (75%) of the total
voting power of all outstanding shares of stock in this corporation entitled to
vote generally in the election of directors voting together as a single class
(it being understood that for the purposes of this Article EIGHTH, each share
shall have one vote except as otherwise provided in accordance with Article
FOURTH) shall be required to alter, amend or repeal, or adopt any provisions
inconsistent with the provisions set forth in Articles FIFTH, SIXTH, SEVENTH,
and this Article EIGHTH."
Bylaws
|
|
·
|
Article III,
Section 1(e): Requires a supermajority vote to remove a
director without cause.
|
“(e) Removal. Any
director may be removed from office without cause but only by the affirmative
vote of the holders of not less than a majority
seventy-five
percent (75%) of the outstanding stock of the corporation entitled
to vote generally in the election of directors, voting together as a single
class.”
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” PROPOSAL 5.
Page 34
|
PROPOSAL 6 — Independent Chairman of the
Board
|
Pursuant to Rule
14a-8(l)(1) of the Securities Exchange Act of 1934, the Company will provide the
name, address and number of Company securities held by the proponent of this
stockholder proposal promptly upon receipt of a written or oral
request.
This proposal
requires an affirmative vote of the majority of shares present or represented at
the Annual Meeting and entitled to vote to
pass.
Supporting
Statement of Proponent
I
believe:
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·
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The role of
the CEO and management is to run the
company.
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·
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The role of
the Board of Directors is to provide independent oversight of the CEO and
management.
|
I believe that the
Chair of the Board of Directors should not be the CEO but should be a director
independent of management.
As Intel co-founder
and former chairman Andrew Grove put it, “The separation of the two jobs goes to
the heart of the conception of a corporation. Is a company a sandbox for the
CEO, or is the CEO an employee? If he’s an employee, he needs a boss, and that
boss is the board. The chairman runs the board. How can the CEO be his own
boss?”
In 2009, Yale
University’s Millstein Center for Corporate Governance and Performance published
a Policy Briefing paper “Chairing the Board,” arguing
the case for a separate, independent Board Chair. The report states that
chairing and overseeing the Board is a time intensive responsibility and that a
separate Chair leaves the CEO free to manage the company and build effective
business strategies.
A nonexecutive
Chair is the prevailing practice in the United Kingdom and many other countries.
More and more U. S. companies are separating the Chair and the CEO as a matter
of good corporate governance. Nearly 40% of the S&P 500 companies have
boards not chaired by their CEO.
I believe many U.
S. companies hold back in making this transition to an independent Chair out of
concern that such a move might be viewed as the demotion of the incumbent
Chair/CEO, suggesting perhaps a loss of confidence in him or her. In apparent
reflection of this, shareholder resolutions have been proposed in a number of
companies requesting that the Board adopt a policy of an independent Chair and
implementing that policy when the next CEO is chosen.
In October 2009,
Caterpillar announced that Douglas Oberhelman would succeed James Owens as CEO.
I am delighted that Caterpillar has been able to achieve CEO succession of
promoting from within someone whom the board knows well and who has a 35-year
successful career at Caterpillar. I have every confidence in Mr. Oberhelman’s
ability to run the company.
However, I feel now
is the time that Caterpillar should transition to an independent Chair. I
believe that, as a matter of good corporate governance, Mr. Oberhelman should
not chair the Board, but the Board should elect a director independent of
management as chair to lead it in its role of providing independent oversight of
the new CEO and his management team.
Resolution
Proposed by Stockholder
Resolved: The shareholders
request the Board of Directors to adopt as policy that, whenever possible, the
Chair of the Board of Directors not be the Chief Executive Officer or anyone
reporting, directly or indirectly, to the chief executive officer.
Page 35
Statement
in Opposition to Proposal
After careful
consideration, the Board recommends voting AGAINST this proposal for the
reasons provided below.
The
combined role of Chairman and CEO promotes unified leadership and a clear focus
for management as it executes our strategy and business plans.
The Board believes the combined role of Chairman and CEO
promotes unified leadership and direction for the Company, which allows for a
single, clear focus for management to execute our strategy and business plans.
The Board has adopted Guidelines on Corporate Governance Issues
(available at www.CAT.com/governance), consistent with our Bylaws, which state that the role
of the Chairman of the Board is to be filled by the Company’s CEO. This
leadership structure has fostered the continued success of the Company, which
has paid a cash dividend every year since its formation in 1925. Over the past
five years, our annual total cumulative stockholder return has consistently
outperformed the S&P 500 Index. Even in 2009, in the most challenging
economic environment since the Great Depression, we remained profitable,
improved our balance sheet and maintained our dividend rate and our “mid-A”
credit ratings. The Board believes that these results are, in part, the product
of the unified and focused leadership of our Chairman and CEO. The combined
structure also avoids the added costs and inefficiencies that would result by
mandating an independent Chairman.
You
have repeatedly rejected similar proposals in the past.
Our stockholders
rejected similar stockholder proposals in 2006, 2007 and 2009. The proposal
suggests that the Board cannot provide effective independent oversight of the
Company and its management team because an independent director does not hold
the office of Chairman. The Board believes that this assertion is without merit
and the majority of our stockholders have indicated that they agree. Indeed, the
majority of S&P 500 companies currently combine the positions of Chairman of
the Board and CEO.
The proposal
suggests that the succession of a new Chairman in 2010 is an opportunity to
transition to an independent Chairman of the Board. Rather than introduce
uncertainty and doubt regarding roles and responsibilities during the
succession, as suggested by the proposal, the Board has determined to amend the
Company’s Bylaws to allow the current Chairman and CEO to continue to serve as
Chairman of the Board during a transition period of no more than six months,
following which time the new CEO will assume the role of
Chairman. The Board considers that this approach to succession will
provide stability and continuity as we execute on our strategy and business
plans.
The
Board has already adopted measures, including establishing the role of an
independent Presiding Director, to assure its ability to provide independent
oversight of management.
The Board agrees
with the proponent that its role, among others, is to provide independent
oversight of the CEO and management and has adopted various policies to ensure
its independence. Each of the directors, with the exception of the Chairman, has
been determined to be independent as defined under NYSE regulations, and all
committees of the Board are made up entirely of independent directors. The Board
and Governance Committee have consistently selected strong, accomplished
individuals as directors, many of whom are currently or recently have been
leaders of major companies or institutions, and all of whom are independent
thinkers and have a wide range of relevant expertise and skills.
In addition, in
2007 the independent directors unanimously elected, from the ranks of the
independent directors, the Chairman of the Governance Committee as the Board’s
Presiding Director. The Presiding Director’s duties and responsibilities
include: (i) presiding at all meetings of the Board at which the Chairman is not
present; (ii) serving as a liaison between the Chairman and the independent
directors; (iii) approving information sent to the Board; (iv) approving meeting
agendas for the Board; (v) approving meeting schedules to assure that there is
sufficient time for discussion of all agenda items; (vi) authority to call
meetings of the independent directors; and (vii) if requested by major
shareholders, ensuring that he is available for consultation and direct
communication. Based on these duties and responsibilities, the Board believes
that the Presiding Director provides an effective “counter-balance” to the
combined role of CEO and Chairman.
Page 36
The Board regularly
meets in executive session without management. The Presiding Director chairs
these meetings and provides the Board’s guidance and feedback to the Chairman
and the Company’s management team. The Board has complete access to
the Company’s management team. On a regular basis, the Board and its committees
receive information and reports from management on the status of the Company and
the risks associated with the Company’s strategy and business
plans.
Given the strong
leadership of the Company’s Chairman and CEO, the counter-balancing role of the
Presiding Director and a Board comprised of strong and independent directors,
the Board continues to believe it is in the best long-term interests of the
Company and its stockholders to maintain the combined role of Chairman and
CEO.
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS VOTING “AGAINST” PROPOSAL
6.
Pursuant to Rule
14a-8(l)(1) of the Securities Exchange Act of 1934, the Company will provide the
name, address and number of Company securities held by the proponents of this
stockholder proposal promptly upon receipt of a written or oral
request.
This proposal
requires an affirmative vote of the majority of shares present or represented at
the Annual Meeting and entitled to vote to pass.
Supporting
Statement of Proponents
Caterpillar’s
current policy, the Worldwide
Code of Conduct, contains no references to existing international human
rights codes except for a corporate policy of non-discrimination, and
aspirational goals to maintain employee health and safety. It also does not
apply to company dealers whose activities can carry extensive reputational risks
for Caterpillar. We believe company policies should reflect more robust,
comprehensive understanding of human rights.
We recommend the
review include policies designed to protect human rights-civil, political,
social, environmental, cultural and economic-based on internationally recognized
human rights standards: i.e.; the Universal Declaration of Human Rights, the
Fourth Geneva Convention, the International Covenant on Civil and Political
Rights, core labor standards of the International Labor Organization, the
International Covenant on Economic, Cultural and Social Rights, and United
Nations resolutions and reports of UN special rapporteurs on countries where
Caterpillar does business.
This review and
report will assure shareholders that Caterpillar policies and practices reflect
or conform to human rights conventions and guidelines and international law.
While we are not recommending specific provisions of the above-named
international conventions, we believe significant commercial advantages may
accrue to our company by adopting a comprehensive human rights policy based on
the UN Human Rights Norms serving to enhance corporate reputation, improve
employee recruitment and retention, improve community and stakeholder relations
and reduce risk of adverse publicity, consumer boycotts, divestment campaigns
and lawsuits.
Resolution
Proposed by Stockholders
Whereas, Caterpillar, a global
corporation, faces increasingly complex problems as the international social and
cultural context within which Caterpillar operates changes.
Companies are faced
with ethical and legal challenges arising from diverse cultures and political
and economic contexts. Today, management must address issues that include human
rights, workers’ right to organize, non-discrimination in the workplace,
protection of environment and sustainable community development. Caterpillar
itself does business in countries with human rights challenges including China,
Colombia, Myanmar/Burma, Syria and Israel and the occupied Palestinian
territories.
Page 37
We believe global
companies must implement comprehensive codes of conduct, such as those found in
“Principles for Global Corporate Responsibility: Bench Marks for Measuring
Business Performance,” developed by an international group of religious
investors. (April, 2003, www.ben-marks.org) Companies must formulate policies to
reduce risk to reputation in the global marketplace. To address this situation,
some companies, such as Hewlett-Packard and Coca-Cola, are even extending
policies to include franchisees, licensees and agents that market, distribute or
sell their products.
In August 2003, the
United Nations Sub-Commission on the Promotion and Protection of Human Rights
took historic action by adopting “Norms on the Responsibilities of Transnational
Corporations and Other Business Enterprises with Regard to Human
Rights.”(www1.umn.edu/humanrts/links/NormsApril2003.html)
RESOLVED, the shareholders
request the Board of Directors to review and amend, where applicable,
Caterpillar’s policies related to human rights that guide international and U.S.
operations, extending policies to include franchisees, licensees and agents that
market, distribute or sell its products, to conform more fully with
international human rights and humanitarian standards, and that a summary of
this review be posted on Caterpillar’s website by October 2010.
Statement
in Opposition to Proposal
After careful
consideration, the Board recommends voting AGAINST this proposal for the
reasons provided below.
Our
Worldwide Code of Conduct (Code of Conduct) defines what we stand for and
believe in, documenting the uncompromisingly high ethical standards our Company
has upheld since its founding in 1925.
Our Code of
Conduct, first published in 1974, is readily available on the Company’s website
at www.CAT.com/code
and, as illustrated in the following excerpts, already embodies many of the
principles contained in the proponents’ proposal.
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We
Treat People Fairly and Prohibit
Discrimination
|
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·
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We build and
maintain a productive, motivated work force by treating all employees
fairly and equitably. We respect and recognize the contributions of
employees.
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·
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We will
select and place employees on the basis of their qualifications for the
work to be performed, considering accommodations as appropriate and needed
-- without regard to their race, religion, national origin, color, gender,
sexual orientation, age, and/or physical or mental
disability.
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·
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We support
and obey laws that prohibit discrimination everywhere we do
business.
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We
Select, Place and Evaluate Employees Based on their Qualifications and
Performance
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·
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Caterpillar
selects employees, and places them in positions, based on their personal
qualifications and skills for the job. We evaluate and reward employees
based on the quality of the work they do and the contributions they make
to Caterpillar.
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We
Foster an Inclusive Environment
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·
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We understand
and accept the uniqueness, and are non-judgmental regarding differences,
of individuals. We value the diversity of unique talents, skills,
abilities, and experiences that enable Caterpillar people to achieve
superior business and personal
results.
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We
Conduct Business Worldwide With Consistent Global
Standards
|
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|
·
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As a global
company, we understand that there are many differing economic and
political philosophies and forms of government throughout the world. We
acknowledge the wide diversity that exists among the social customs and
cultural traditions in the countries in which we operate. We respect such
differences, and to the extent that we can do so in keeping with the
principles of our Code of Conduct, we will maintain the flexibility to
adapt our business practices to
them.
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Page 38
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We
Protect the Health and Safety of Others and
Ourselves
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·
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As a company,
we strive to contribute toward a global environment in which all people
can work safely and live healthy, productive lives, now and in the future.
We actively promote the health and safety of employees with policies and
practical programs that help individuals safeguard themselves and their
co-workers.
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We
Support Environmental Responsibility Through Sustainable
Development
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·
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Our products
and services are intended to support sustainable development of global
resources and they will meet or exceed applicable regulations and
standards wherever they are initially sold. We establish and
adhere to environmentally sound policies and practices in product design,
engineering, and manufacturing. We educate and encourage our
customers to use the products they purchase from us in environmentally
responsible ways. We take effective steps to continually
increase the natural resources efficiency and cleanliness of our
facilities. We offer leadership and financial support to industry and
community initiatives that share our commitment to the
environment.
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We
Refuse to Make Improper Payments
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·
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In dealing
with public officials, other corporations, and private citizens, we firmly
adhere to ethical business practices. We will not seek to influence
others, either directly or indirectly, by paying bribes or kickbacks, or
by any other measure that is unethical or that will tarnish our reputation
for honesty and integrity. Even the appearance of such conduct must be
avoided.
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Living
By the Code
|
|
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·
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While we
conduct our business within the framework of applicable laws and
regulations, for us, mere compliance with the law is not enough. We strive
for more than that. Through our Code of Conduct, we envision a work
environment all can take pride in, a company others respect and admire,
and a world made better by our
actions.
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We
View Our Suppliers As Our Business
Allies
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·
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We look for
suppliers and business allies who demonstrate strong values and ethical
principles and who support our commitment to quality. We avoid those who
violate the law or fail to comply with the sound business practices we
promote.
|
At
Caterpillar, we are dedicated to promoting a healthy, productive and rewarding
work environment for our employees worldwide.
Our Code of Conduct
reflects our dedication to these issues. Your Board believes that the Code of Conduct effectively
articulates our long-standing support for, and continued commitment to, human
rights and does not believe that implementation of this proposal is
necessary or desirable as the concerns raised by the proponent are already being
addressed in a meaningful way. As these issues are already provided
for in our Code of Conduct, the Board further believes that this proposal would
add unnecessary cost to the Company and divert management’s attention from the
current processes in place to address these issues.
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS VOTING “AGAINST” PROPOSAL
7.
Page 39
Pursuant to Rule
14a-8(l)(1) of the Securities Exchange Act of 1934, the Company will provide the
name, address and number of Company securities held by the proponent of this
stockholder proposal promptly upon receipt of a written or oral
request.
This proposal
requires an affirmative vote of the majority of shares present or represented at
the Annual Meeting and entitled to vote to pass.
Supporting
Statement of Proponent
A special meeting
allows shareowners to vote on important matters, such as electing new directors,
that can arise between annual meetings. If shareowners cannot call a
special meeting investor returns may suffer. Shareowners should have
the ability to call a special meeting when a matter merits prompt
attention. This proposal does not impact our board’s current power to
call a special meeting.
This proposal topic
also won more than 60% support at these companies in 2009: CVS Caremark (CVS),
Sprint Nextel (S), Safeway (SWY), Motorola (MOT) and R.R. Donnelley
(RRD).
We gave more than
57%-support each to 2008 and 2009 shareholder proposals calling for one-year
terms for directors (declassification of the board). The Council of
Institutional Investors www.cii.org
recommends that management adopt shareholder proposals upon receiving their
50%-plus vote.
I believe that
shareholders like us, who repeatedly give more than 57%-support to one-year
terms for directors, will support a shareholder right to call a special meeting
by a majority vote.
Please encourage
our board to respond positively to this proposal regarding Special Shareowner
Meetings.
Resolution
Proposed by Stockholder
RESOLVED,
Shareowners ask our board to take the steps necessary to amend our bylaws and
each appropriate governing document to give holders of 10% of our outstanding
common stock (or the lowest percentage allowed by law above 10%) the power to
call a special shareowner meeting. This includes that a large number
of small shareowners can combine their holdings to equal the above 10% of
holders. This includes that such bylaw and/or charter text will not
have any exception or exclusion conditions (to the fullest extent permitted by
state law) that apply only to shareowners but not to management and/or the
board.
Statement
in Opposition to Proposal
After careful
consideration, the Board recommends voting AGAINST this proposal for the
reasons provided below.
Our Certificate
of Incorporation already provides a process for calling special meetings,
effectively safeguarding the broader interests of all
stockholders.
The Board has a
longstanding goal of providing effective governance of our business for the
long-term benefit of our stockholders. The Board is composed of independent,
active and effective directors. 14 of our 15 directors meet the independence
requirements of the NYSE, the SEC and the Board’s standards for determining
director independence. The primary responsibility of the Board is to promote the
best interests of Caterpillar and its stockholders by overseeing the management
of the Company’s business and affairs.
Page 40
Our Certificate of
Incorporation provides that a special meeting of stockholders may be called at
any time by a majority of the Board members. This provision is appropriate for a
public company the size of Caterpillar because it allows the Board members, in
accordance with their fiduciary duties, to exercise their business judgment to
determine when it is in the best interests of the Company and its stockholders
to convene a special meeting. These provisions effectively safeguard the broader
interests of the Company and all stockholders by entrusting such decisions to a
qualified and experienced group of directors elected by all stockholders who
have a fiduciary duty to act in the best interests of the Company and all
stockholders.
This proposal would
enable holders of only 10 percent of our outstanding shares to call special
stockholders’ meetings without any limitation on the number or frequency of such
meetings. Adoption of this proposal would mean that a small minority of
stockholders acting together would be able to call such a special
meeting. Thus, a very small group of stockholders could call special
meetings on topics that do not concern, or may be of little or no interest or
value to, the majority of stockholders.
A special
stockholders’ meeting would be an expensive and time-consuming event. Proxy
materials would have to be prepared, printed and distributed, requiring the
Company to incur significant costs. The Board and management of the Company
would be required to spend a significant amount of time preparing for the
meeting, diverting their attention from overseeing and managing the Company’s
business. As a result, the Board believes that a special stockholders’ meeting
should be convened when the Board members, exercising their fiduciary
obligations, determine that there is an extraordinary matter or significant
strategic concern that requires consideration by the Company’s stockholders
before the next annual meeting.
Our
corporate governance policies ensure that the Board is held accountable and
provide stockholders with access to the Board and ample opportunity to submit
items for approval at annual meetings.
The Board believes
that the Company’s existing corporate governance policies provide an appropriate
balance between ensuring that the Board is accountable to the stockholders and
enabling the Board to effectively oversee the Company’s business for the
long-term benefit of the stockholders. In particular, stockholders may
communicate directly with any director, any Board committee or the full Board;
propose director nominees to the Governance Committee; and submit proposals for
presentation at an annual meeting of the stockholders of the Company and for
inclusion in the Company’s proxy statement for that annual meeting.
In fact, the
Board’s governance practices and policies demonstrate its commitment to being
accountable to the Company’s stockholders, including the following:
|
|
·
|
In June 2005,
the Company terminated its shareholder rights plan, or “poison pill,”
early in response to stockholder
concerns.
|
|
|
·
|
Based on
shareholder votes in 2008 and 2009, the Board has approved a plan to
declassify the Board so that all of the Directors are elected
annually. We are seeking your approval for this plan set forth
in Company Proposal 4.
|
|
|
·
|
In response
to current trends in corporate governance, we are also seeking your
approval to eliminate certain supermajority voting requirements in our
Certificate of Incorporation and Bylaws. See Company Proposal
5.
|
These policies
provide stockholders with reasonable access to Board members and adequate
opportunities to bring matters before the stockholders on an annual
basis.
Our
stockholders already have the right to vote on certain significant corporate
transactions.
The suggestion that
stockholders need the right to call special meetings to protect their interests
in the case of extraordinary events involving the Company is simply misleading.
We are subject to rules governing Delaware corporations and companies listed on
the NYSE that already require us to submit certain significant matters to a
stockholder vote for approval. For example, amendments to the
Company’s Certificate of Incorporation, mergers, a sale of all or substantially
all of the Company’s assets, increases in the number of authorized shares and
the adoption of equity-based compensation plans all require a stockholder
vote.
Page 41
Our
stockholders expect us to make decisions based on facts – not
speculation.
Currently, over
half of the S&P 500 companies do not permit stockholders to call special
meetings. However, without providing any factual basis, the proponent
speculates that investor returns may suffer if stockholders are unable to call a
special meeting. The Board believes that speculation is an insufficient
justification to disrupt the Company’s operations and to incur the additional
costs that would certainly be required if a small minority of activist
stockholders were able to call special meetings.
FOR THESE
REASONS, YOUR BOARD OF DIRECTORS RECOMMENDS VOTING “AGAINST” PROPOSAL
8.
Persons Owning More than
Five Percent of Caterpillar Common Stock
Based on a review
of any Schedule 13G and any amendments to Schedule 13G filed with the SEC
through April 8, 2010, the following persons beneficially own more
than five percent of Caterpillar common stock.
|
Persons Owning More than Five Percent of Caterpillar
Common Stock(1)
(as
of December 31, 2009)
|
|
Voting
Authority
|
Dispositive
Authority
|
Total
Amount of Beneficial
|
Percent
of
|
||||
|
Name
and Address
|
Sole
|
Shared
|
Sole
|
Shared
|
Ownership
|
Class
|
|
|
BlackRock,
Inc.
40 East
52nd
Street
New York,
NY 10022
|
32,738,861
|
0
|
32,738,861
|
0
|
32,738,861
|
5.24
|
|
|
State Street
Corporation and various direct
and indirect subsidiaries (2)
State Street
Financial Center
One Lincoln
Street
Boston,
MA 02111
|
0
|
27,518,971
|
0
|
86,887,071
|
86,887,071
|
13.9
|
|
|
(1)
|
This
information is based upon Schedule 13Gs filed with the SEC for year end
December 31, 2009, except for Percent of Class adjusted
from percent reported in the Schedule 13Gs filed by BlackRock
and State Street to percentages calculated using Caterpillar’s actual
outstanding share amount of 624,722,719 at December 31,
2009.
|
||||||
|
(2)
|
State Street
Bank and Trust Company serves as investment manager for certain
Caterpillar defined benefit plans (17,711,047 shares) and defined
contribution plans (41,657,053
shares).
|
||||||
Page 42
Security Ownership of
Certain Beneficial Owners and Management
Security ownership
of management is included in the following table.
|
Caterpillar
Common Stock Owned by Executive Officers and
Directors
(as
of December 31, 2009)
|
|
Blount
|
73,033
|
1
|
Magowan
|
327,980
|
12
|
||
|
Brazil
|
39,803
|
2
|
Oberhelman
|
826,401
|
13
|
||
|
Burritt
|
168,797
|
3
|
Osborn
|
57,699
|
14
|
||
|
Dickinson
|
3,820
|
4
|
Owens
|
1,935,336
|
15
|
||
|
Dillon
|
78,429
|
5
|
Powell
|
53,387
|
16
|
||
|
Fife
|
53,000
|
6
|
Rapp
|
285,874
|
17
|
||
|
Fosler
|
31,515
|
7
|
Rust
|
35,933
|
18
|
||
|
Gallardo
|
267,756
|
8
|
Schwab
|
1,518
|
|||
|
Goode
|
98,800
|
9
|
Smith
|
43,352
|
19
|
||
|
Lavin
|
256,282
|
10
|
Vittecoq
|
611,987
|
20
|
||
|
Levenick
|
487,964
|
11
|
Wunning
|
536,423
|
21
|
||
|
All directors
and executive officers as a group
|
6,687,583
|
22
|
|||||
|
1
|
Blount -
Includes 55,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to the Directors’ Deferred Compensation Plan
(DDCP) representing an equivalent value as if such compensation had been
invested on December 31, 2009, in 1,659 shares of common
stock.
|
||||||
|
2
|
Brazil -
Includes 31,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 612 shares of
common stock.
|
||||||
|
3
|
Burritt -
Includes 148,200 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to the Supplemental Deferred Compensation Plan
(SDCP), Supplemental Employees’ Investment Plan (SEIP) and/or the Deferred
Employees’ Investment Plan (DEIP) representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 278 shares of
common stock.
|
||||||
|
4
|
Dickinson - In
addition to the shares listed above, a portion of compensation has been
deferred pursuant to DDCP representing an equivalent value as if such
compensation had been invested on December 31, 2009, in 7,537 shares of
common stock.
|
||||||
|
5
|
Dillon -
Includes 55,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 5,880 shares
of common stock.
|
||||||
|
6
|
Fife -
Includes 31,000 shares subject to stock options exercisable within 60
days.
|
||||||
|
7
|
Fosler -
Includes 23,000 shares subject to stock options exercisable within 60
days.
|
||||||
|
8
|
Gallardo -
Includes 55,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 9,363 shares
of common stock.
|
||||||
|
9
|
Goode -
Includes 47,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 45,868 shares
of common stock.
|
||||||
|
10
|
Lavin -
Includes 208,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 16,776 shares of common stock.
|
||||||
|
11
|
Levenick -
Includes 415,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 14,947 shares of common stock.
|
||||||
|
12
|
Magowan -
Includes 23,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 21,412 shares
of common stock.
|
||||||
|
13
|
Oberhelman -
Includes 745,399 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 41,747 shares of common stock.
|
||||||
|
14
|
Osborn -
Includes 31,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 176 shares of
common stock.
|
||||||
|
15
|
Owens -
Includes 1,590,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 8,137 shares of common stock.
|
||||||
|
16
|
Powell -
Includes 47,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 176 shares of
common stock.
|
||||||
|
17
|
Rapp -
Includes 246,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 20,036 shares of common stock.
|
||||||
|
18
|
Rust -
Includes 31,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 13,339 shares
of common stock.
|
||||||
|
19
|
Smith -
Includes 27,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to DDCP representing an equivalent value as if
such compensation had been invested on December 31, 2009, in 1,811 shares
of common stock.
|
||||||
|
20
|
Vittecoq -
Includes 507,000 shares subject to stock options exercisable within 60
days.
|
||||||
|
21
|
Wunning -
Includes 465,000 shares subject to stock options exercisable within 60
days. In addition to the shares listed above, a portion of compensation
has been deferred pursuant to SDCP, SEIP and/or DEIP representing an
equivalent value as if such compensation had been invested on December 31,
2009, in 21,729 shares of common stock.
|
||||||
|
22
|
This group
includes directors, named executive officers and five additional executive
officers subject to Section 16 filing requirements (group). Amount
includes 5,133,239 shares subject to stock options exercisable within 60
days and 478,653 shares for which voting and investment power is shared.
The group beneficially owns 1.07 percent of the Company’s outstanding
common stock. None of the shares held by the group have been
pledged.
|
||||||
At Caterpillar,
integrity is one of our core values. We believe in the power of
honesty and know the only way to build and strengthen our reputation is through
trust. We hold ourselves to the highest standard of integrity and
ethical behavior and strive for transparency. We welcome the
opportunity to share this Compensation Discussion and Analysis (CD&A) with
our stockholders.
We understand
investors have a vested interest in executive compensation. After
reading this CD&A, we hope you will recognize a few vital
points:
|
|
§
|
We have a
thorough compensation review
process
|
|
|
§
|
We have a
competitive compensation plan that aligns executive performance and
long-term stockholder interests
|
|
|
§
|
We believe
the best way to compensate our executives is to base their rewards on
performance
|
|
|
§
|
We have no
severance packages that apply solely to executives. Change in
Control provisions are found within existing compensation plans and apply
equally to all participants in those
plans.
|
|
|
§
|
We do not
backdate or re-price equity
grants
|
During fiscal year
2009, Caterpillar was organized into six groups, each led by a group
president. Because the six group presidents have comparable
responsibilities and are similarly compensated, we are including all six of the
group presidents as named executive officers (NEOs), in addition to the Chief
Executive Officer and Chief Financial Officer.
On October 22,
2009, we announced that James W. Owens, Chairman and CEO, would retire on
October 31, 2010. As Owens’ successor, Douglas R. Oberhelman became
Vice Chairman and CEO-Elect on January 1, 2010, and is expected to become CEO on
July 1, 2010 and Chairman on November 1, 2010.
This CD&A
describes the overall compensation practices at Caterpillar and specifically
describes the 2009 total compensation for the following NEOs:
|
|
§
|
James W.
Owens, Chairman and CEO
|
|
|
§
|
Douglas R.
Oberhelman, Vice Chairman, CEO-Elect and Group
President
|
|
|
§
|
Richard P.
Lavin, Group President
|
|
|
§
|
Stuart L.
Levenick, Group President
|
|
|
§
|
Edward J.
Rapp, Group President
|
|
|
§
|
Gerard R.
Vittecoq, Group President
|
|
|
§
|
Steven H.
Wunning, Group President
|
|
|
§
|
David B.
Burritt, Vice President and Chief Financial
Officer
|
We are fortunate to
have executives who are “career employees” with a strong commitment to the
long-term success of Caterpillar. In fact, the average tenure of our NEOs is 33
years. Our reputation is a reflection of our employees’ ethical
performance, and the values that guide Caterpillar have in turn rewarded our
employees and stockholders with a successful and profitable
Company.
Compensation
Philosophy and Objectives
Two primary
components define Caterpillar’s compensation philosophy: Pay for Performance and Pay at Risk.
As an employee’s
responsibility increases, so does the proportional amount of “at risk” pay. This
is especially true for our executives who have direct responsibility for overall
Company performance. A significant portion of executive pay depends on meeting
certain performance goals, which is fundamental to aligning executive pay with
long-term stockholder interests.
Page 44
The Compensation
Committee established three principles to drive this philosophy through the
Company’s compensation design.
|
|
1.
|
Base salary, as a percentage of
total direct compensation, should decrease as salary grade levels
increase. As employees move to higher levels of responsibility with
more direct influence over the Company’s performance, they have a higher
percentage of pay at risk.
|
|
|
2.
|
The ratio of long-term
incentive compensation to short-term incentive compensation should
increase as salary grade levels increase. Caterpillar expects
executives to focus on the Company’s long-term success. The compensation
program is designed to motivate executives to take actions that are best
for the Company’s long-term viability.
|
|
|
3.
|
Equity compensation should
increase as salary grade levels increase. Employees in positions
that most directly affect the Company’s performance should have profitable
growth for the Company as their main priority. Receiving part of their
compensation in the form of equity reinforces the link between their
actions and stockholders’ investment. Equity ownership encourages
executives to behave like owners and provides a clear link with
stockholders’ interests.
|
In following these
principles and by tying employee compensation to both individual performance and
the long-term performance of the Company, Caterpillar links the interests of
management and long-term stockholders. In addition, the compensation program is
designed to attract and retain high-caliber, talented employees who will guide
the Company in continuing to meet and exceed its performance goals.
Overview
of Compensation Practices
The Compensation
Committee is responsible for the compensation program design and decision-making
process for NEOs. The Compensation Committee regularly reviews
Caterpillar’s compensation practices, including the methodologies for setting
NEO total compensation, the goals of the compensation program and the underlying
compensation philosophies. The
Compensation Committee believes that by utilizing long-term cash and equity as
the predominant components of NEO total compensation, along with significant
stock ownership requirements, the NEO objectives are aligned with those of our
long-term stockholders.
The Compensation
Committee also uses benchmarking data, provided by its compensation consultant,
to track Caterpillar’s practices and compensation levels against comparable
companies within its industry and across multiple
industries. However, the Compensation Committee exercises its
independent judgment when establishing compensation policies, especially when
rewarding individual performance. The responsibilities of the Compensation
Committee are described more fully in its charter, which is available at www.CAT.com/governance.
How
Caterpillar Determines Total Compensation for Executives
Performance
Evaluation: CEO
The Board,
excluding the CEO, performs the CEO’s evaluation. The Board’s
evaluation includes both objective and subjective criteria of the CEO’s
performance, including:
|
|
§
|
Caterpillar’s
financial performance
|
|
|
§
|
The
accomplishment of Caterpillar’s long-term strategic
objectives
|
|
|
§
|
The
achievement of individual goals set at the beginning of each
year
|
|
|
§
|
The
development of Caterpillar’s top management
team
|
Prior to the
Board’s determination, the Compensation Committee evaluates CEO compensation
using benchmarking information (discussed on page 47) to set total
compensation. The Compensation Committee also performs its own
performance review and provides its recommendations to the Board.
Page 45
Performance
Evaluations: NEOs other than CEO
The Compensation
Committee, in conjunction with the CEO, performs the other NEOs’ evaluations,
excluding Mr. Burritt whose evaluation is performed by Mr. Rapp. Each
February, the CEO submits a performance assessment and compensation
recommendation to the Compensation Committee for each of the other
NEOs. The performance evaluation is based on factors such
as:
|
|
§
|
Achievement
of individual and Company
objectives
|
|
|
§
|
Contribution
to the Company’s performance
|
|
|
§
|
Leadership
accomplishments
|
The Compensation
Committee also reviews total compensation benchmark information, with respect to
the other NEOs, in determining whether to increase or decrease the CEO’s
compensation recommendation. The Compensation Committee makes the
final decision regarding the total compensation for the other NEOs.
Compensation
Consultant
For 2009, the
Compensation Committee retained John L. Anderson of Hewitt Associates LLC
(Hewitt) to provide ongoing advice and information regarding design and
implementation of Caterpillar’s executive compensation programs. Mr.
Anderson also provided information and updates to the Compensation Committee
about regulatory and other technical developments that may affect the Company’s
executive compensation programs. In addition, Mr. Anderson and a team at Hewitt
provided the Compensation Committee with competitive market information,
analyses and trends on executive base salary, short-term incentives, long-term
incentives, benefits and perquisites.
With the full
knowledge of the Compensation Committee, Caterpillar has retained a separate and
distinct unit of Hewitt to be the third-party administrator for Caterpillar’s
U.S. retirement plans, as well as Caterpillar’s U.S. Health & Welfare plans,
in 2009.
In 2010, Hewitt’s
executive compensation group separated from Hewitt and formed Meridian
Compensation Partners, LLC (Meridian). Mr. Anderson joined Meridian
and is no longer employed by Hewitt. For 2010, the Compensation
Committee hired Meridian solely as its consultant.
The Compensation
Committee believes that Mr. Anderson and, for 2009, a team working with him from
Hewitt, provided candid, direct and objective advice to the Compensation
Committee, which was not influenced by any other services provided by
Hewitt. To ensure independence:
|
|
§
|
The
Compensation Committee directly hired and has the authority to terminate
Mr. Anderson
|
|
|
§
|
Mr. Anderson
is engaged by and reports directly to the Compensation Committee and its
chairman
|
|
|
§
|
Mr. Anderson
meets regularly and as needed with the Compensation Committee in executive
sessions that are not attended by any personnel of the
Company
|
|
|
§
|
Mr. Anderson
has direct access to all members of the Compensation Committee during and
between meetings
|
|
|
§
|
Mr. Anderson
was not the Hewitt client relationship manager for
Caterpillar
|
|
|
§
|
Neither Mr.
Anderson nor any member of the team from Hewitt participated in any
activities related to the administration services provided to Caterpillar
by other Hewitt business units
|
|
|
§
|
Interactions
between Mr. Anderson and management generally are limited to discussions
on behalf of the Compensation Committee and information presented to the
Compensation Committee for approval
|
Annual Review of Consultant
Independence
The Compensation
Committee is responsible, without the influence or input of management, for
retaining and terminating compensation consultants and determining their terms
and conditions, including fees. Hewitt provided the Compensation
Committee an annual update on its services and related fees. The Compensation
Committee determined whether the compensation consultant’s services were
performed objectively and free from the influence of management. The
Compensation Committee also closely examined the safeguards and steps Hewitt
took to ensure that its executive compensation consulting services were
objective, for example:
|
|
§
|
Hewitt
separated its executive compensation consulting services into a single,
segregated business unit within
Hewitt
|
Page 46
|
|
§
|
Hewitt paid
its executive compensation consultants solely on their individual results
and the results of its executive compensation consulting
practice. In 2009, Mr. Anderson received no incentives based on
other services Hewitt provided to
Caterpillar.
|
|
|
§
|
Mr. Anderson
does own shares in Hewitt; however, he did not receive stock options or
other equity-related awards from
Hewitt
|
|
|
§
|
The total
amount of fees for executive compensation consulting services to the
Compensation Committee in 2009 was
$255,822
|
|
|
§
|
The total
amount of fees paid by Caterpillar to Hewitt in 2009 for all other
services, excluding Compensation Committee services, was $14,928,178. This
is compared to total Hewitt fiscal 2009 revenues of
$3,073,560,000.
|
|
|
§
|
Other
services were provided under a separate contractual arrangement and by a
separate business unit at Hewitt
|
For these reasons,
the Compensation Committee does not believe the services provided by Hewitt in
conjunction with administering Caterpillar’s benefit plans compromised Mr.
Anderson’s ability to provide the Compensation Committee with perspective and
advice that was objective.
|
Peer
Group Benchmarking
|
Caterpillar
uses a comparator
group to benchmark (compare) all components of compensation to
other companies within the group. Caterpillar targets the
executive total cash compensation package, as well as the long-term
incentive compensation components, at the size-adjusted median level of
the comparator group. The Compensation Committee believes that
targeting at the size-adjusted median level of the comparator group is
necessary to attract and retain high-caliber employees. This
ensures that Caterpillar remains competitive while maximizing its
resources for stockholders.
|
|
|
For 2009 peer
group benchmarking, Caterpillar continued to use the Caterpillar
Compensation Comparator Group (CCCG) for NEO compensation benchmarking,
which consisted of the 28 large public companies listed
below. Because we compete for executive talent from a variety
of industries, the 28 companies represent a cross section of industries,
not just heavy manufacturing companies. The peer group study
methodology is consistent each year, which makes it easier to isolate how
Caterpillar’s executive compensation program is changing in relation to
the market. The Compensation Committee monitors the CCCG to
ensure that it continues to provide a reasonable comparison basis for
executive compensation. There were no changes from 2008 to 2009
with respect to the companies included in the CCCG.
The CCCG’s
median annual revenue is less than Caterpillar’s. To account
for differences in the size of the companies in that group, the
compensation consultant conducts a regression analysis with each
comparison and presents the analysis to the Compensation
Committee. Regression analysis adjusts the compensation data
for differences in the companies’ revenue, allowing Caterpillar to compare
its compensation levels to similarly sized companies. The
following companies compose the CCCG:
|
||
 |
Page 47
|
Components
of Caterpillar’s Compensation Program
|
Total
compensation is a mix of total cash and long-term
incentives.
Executive
Short-Term Incentive Plan (ESTIP) and Short-Term
Incentive Plan (STIP) are annual incentive plans that deliver a
targeted percentage of base salary (excluding any variable base pay) based
on performance against predetermined enterprise goals. The
plans are designed to focus the NEOs on the shorter-term critical issues
that are indicative of improved year-over-year performance.
The Long-Term
Incentive Plan (LTIP) includes both equity and cash under the
Long-Term Cash Performance Plan (LTCPP). LTIP is designed to reward the Company’s
key employees for achieving and/or exceeding the Company’s long-term
goals, to drive stockholder return and to foster stock
ownership.
|
|
|
Total
compensation for all NEOs is a mix of annual total cash and long-term
incentives.
 |
||
|
Annual base
salary represents a relatively small portion of our NEOs’
compensation. In fact, on average, 73 percent of annual
compensation for our NEOs varies each year based on Caterpillar’s
performance. The following chart shows the 2009 total
compensation mix (based on targeted compensation).
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Page 48
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Total
Annual Cash Compensation
The
Compensation Committee’s review of 2009 market data showed total annual
cash compensation structures for all NEOs were in line with the
size-adjusted median level of the CCCG. The Compensation Committee made no
adjustments to the base salary compensation structures, or to the
short-term incentive target opportunities shown
below.
|
Total
cash includes base salary and the Executive Short-Term Incentive
Plan or Short-Term Incentive Plan.
|
|
 |
Base salary
increases are performance-driven. The Compensation Committee uses the
criteria described in the “Performance Evaluation” section to assess
performance, which are assigned no particular weighting. Base salary
increases, however, are dependent upon assessment of these
factors. Base salary structures for Caterpillar executives are
designed with a midpoint set at the size-adjusted median level of the
CCCG. For all employees, the minimum of the base salary structure is
80 percent of the midpoint of the salary structure and the maximum is 120
percent of the midpoint of the salary structure. Base salaries for
the NEOs are not increased above the midpoint of their respective structures
without meeting certain performance requirements. If NEOs reach the
midpoint of their salary structure, any amount awarded above the midpoint must
be re-earned annually and approved by the Compensation
Committee. This amount is called variable base pay and is paid in the
form of an annual lump sum cash award (disclosed in the “Bonus” column of the
Summary Compensation table on page 61). This reinforces the Pay for Performance component
of Caterpillar’s compensation program. Additionally, due to current
economic conditions, NEO base salary structures have been frozen and merit
increases have been eliminated for 2009 and 2010.
|
Executive Short-Term Incentive
Plan
The NEOs,
excluding Mr. Burritt, participated in the 2009 ESTIP. The CEO
was eligible for a target opportunity of 135 percent of base salary and
the group presidents were eligible for a target opportunity of 100 percent
of base salary.
In February
2009, the Compensation Committee reviewed and approved two
enterprise-focused measures for the 2009 ESTIP. As further
described below, these two measures link the compensation of the CEO and
group presidents directly to the overall performance of
Caterpillar. The measures and their relative weights in
determining ESTIP payouts are as follows:
§75% Corporate Return on
Assets
§25% Enterprise
Quality
Prior to any
ESTIP payout a “trigger” must be achieved, which is based on the Company’s
PPS. If the trigger is not achieved, there is no ESTIP
payout. The Compensation Committee approved a PPS trigger of
$2.50 for ESTIP because Caterpillar has a strategic goal of achieving a
PPS of at least $2.50 annually. Due to a PPS of $1.43 in 2009,
no payments were made under ESTIP.
|
Corporate
Return on Assets (ROA) is Machinery and Engines profit after tax
plus short-term incentive compensation expense (after tax) divided by
average monthly Machinery and Engines assets.
Enterprise
Quality is an average of the business unit quality performance
factors.
Profit Per
Share (PPS) is the portion of a company's profit allocated to each
outstanding share of common stock, diluted by the assumed exercise of
stock-based compensation awards. PPS serves as an indicator
of a company's profitability. This is also known as
Earnings Per Share.
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Page 49
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As with all
components of Caterpillar’s compensation program, ESTIP rewards
performance. For both measures listed above, the Compensation
Committee established the threshold, target and maximum performance
levels. If the threshold level is not achieved for a given
measure, there is no ESTIP payout on that measure. Increasingly
larger payouts are awarded for achievement of target and maximum
performance levels. The following
table outlines the payout factor range that applied to each performance
level. The payout factor for each measure does not exceed 200
percent.
 Return
On Assets
The
Compensation Committee approved ROA as the largest portion of 2009
ESTIP. The Compensation Committee selected ROA because it is a
good indicator of how efficiently the Company is using its assets to
generate earnings and driving value for our stockholders. The
Compensation Committee reviewed forecasted versus actual ROA results to
determine the appropriate target for the 2009 measure. The
corporate ROA slope ranged from a threshold of 4.40 percent to the maximum
of 12.40 percent, with a target of 7.10 percent. The following
table illustrates ROA performance levels:
 Enterprise
Quality
The
Compensation Committee approved enterprise quality as the other 2009 ESTIP
factor. The Compensation Committee selected enterprise quality
because Caterpillar must continue to place an increased emphasis on
quality across the entire organization to meet our long-term
goals. Enterprise quality was measured by the average of the
various business unit quality performance factors, which are Mean Dealer
Repair Frequency, Very Early Hour Reliability, Significant Part Numbers
and Cat Production System Assessment. Each business unit’s
quality performance factor or factors were weighted based on its
applicable 2009 net sales and transfers (inter-company
sales). The results were averaged to determine the enterprise
quality result.
The 2009
ESTIP results were as follows:
 Due to a PPS
of $1.43 in 2009, no payments were made under 2009 ESTIP and the
individual payout factors were not
applicable.
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|
Mean Dealer
Repair Frequency measures the dealer repair frequency for a
collection of products over a period of time approximately equal to their
first year of operation.
Very Early
Hour Reliability captures the number of dealer-performed repairs to
a product that occur from the pre-delivery inspection through the initial
hours of machine operation.
Significant
Part Numbers are part numbers that have had failures in the last
three years on products built in the last five years (unless the part is a
remanufactured part).
Cat
Production System (CPS) Assessment is the common Order-To-Delivery
process used to achieve our long-term safety, quality, velocity, earnings
and growth goals.
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Page 50
Short-Term Incentive
Plan
As a vice
president, our CFO, Mr. Burritt, participated in Caterpillar’s 2009
STIP. Mr. Burritt was eligible for a target opportunity of 90 percent
of base salary. The measures and their relative weights in
determining the 2009 STIP are as follows:
|
|
§
|
87.5% Corporate Return on
Assets
|
|
|
§
|
12.5% Enterprise
Quality
|
PPS of $2.50 was
also used as the “trigger” for payout under the 2009 STIP. The same
trigger methodology applies for STIP as described previously for
ESTIP.
Due to a PPS of
$1.43 in 2009, no payments were made under 2009 STIP and the individual payout
factors were not applicable.
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Long-Term
Incentive Plan
The
Compensation Committee annually analyzes market data on portfolio
approaches for long-term incentive plans. Based on advice from
the compensation consultant, portfolio approaches, where two or more
long-term incentive compensation awards are used in some combination, are
common practice. For example, SARs reward share appreciation; time-vested
restricted units strengthen and enhance retention; and cash performance
awards reinforce a long-term pay-for-results culture (see page 52 for
definition of SARs and restricted stock units).
Caterpillar
uses all three awards in its executive compensation
package. Instead of awarding all long-term compensation in the
form of equity, the Compensation Committee has decided to award a portion
in cash. The Compensation Committee sets the cash percent for
NEOs each year. The cash award is tied to long-term stockholder
performance due to the measures within the plan. This amount is
then removed from the total CCCG long-term market award
value. Providing a portion of long-term incentive in the form
of cash also allows Caterpillar the ability to manage its share run rate,
and preserve the available pool of shares authorized for issuance under
LTIP. The 2009 LTIP award mix is illustrated in the following
table:
 |
Run
rate measures the rate
at which companies grant equity. It is the number of shares
granted under LTIP in any one year divided by the number of common shares
outstanding.
An
equity award is a stock award representing ownership in the
Company. Equity for Caterpillar currently consists of
stock-settled Stock Appreciation Rights, Restricted Stock Units and
restricted stock.
The standard
equity award is the equity value determined each year by the
Compensation Committee. Each year, we benchmark against the
CCCG to determine our standard award level, which is set at the
size-adjusted median level of the comparator
group.
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Page 51
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Equity
Each year,
the Compensation Committee benchmarks against the CCCG to determine a
competitive equity award for each salary grade, including
NEOs. Our process benchmarks total equity value for all salary
grades. Consistent with the Company’s compensation philosophy,
individuals at higher levels receive a greater proportion of total pay in
the form of equity.
In February
2009, the Compensation Committee approved the 2009 equity design, which
consisted of a mix of SARs and RSUs. This equity design
supports our Pay for
Performance and Pay at Risk
philosophy. RSUs represent actual shares of stock and therefore
carry less risk than SARs.
The
Compensation Committee has the discretion to make positive or negative
adjustments to equity awards based on a subjective assessment of an
individual’s performance, provided these adjustments do not increase the
total number of awards issued to employees.
At the
February 2009 Compensation Committee meeting, Mr. Owens discussed his
recommendations with respect to standard equity award adjustments for all
NEOs, other than himself. Equity award adjustments were made
and were based upon individual performance (discussed in the “Other NEOs
Compensation Decisions” section of this CD&A). NEO equity
grants, other than Mr. Owens’, ranged from 71,176 to 166,252 SARs and
4,449 to 7,335 RSUs. At the February 2009 Board meeting, the
Chairman of the Compensation Committee, Mr. Goode, in consultation with
the Board and in accordance with the following “Annual Equity Grant
Timing” section, established the equity award for Mr. Owens based on
exceptional performance (discussed in “Compensation Decisions – Chairman
and CEO Compensation Decisions – Equity Grant for 2010” section of this
CD&A). Accordingly, for the 2009 equity grant, Mr. Owens
received 504,180 SARs and 20,152 RSUs.
|
A Stock
Appreciation
Right
(SAR) is a right to receive Caterpillar common shares based on the
appreciation in value of a set number of shares of Company stock between
the grant date and the exercise date. SARs were introduced in
2006 because they extend the life of the Caterpillar stock option pool and
minimize stockholder dilution.
A Restricted
Stock Unit (RSU) is a grant valued in terms of Company stock. At
the time of the grant, no Company stock is issued. The grant entitles the
recipient to receive Caterpillar common shares at the time of
vesting. RSUs were introduced in 2007 because they reduce the
share run rate and may be more tax efficient for equity-eligible employees
outside the United States.
The Chairman’s
Restricted Stock Award
Program is a tool that makes equity a part of the compensation
program to help attract and retain outstanding performers. Key
elements of the program are (i) selected
performance and retention-based grants can be made to officers and other
key employees, as well as prospective employees; (ii) restricted shares
have three to five year vesting schedules; and (iii) restricted shares are
forfeited if the grantee leaves Caterpillar prior to
vesting.
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|
|
The final
2009 SAR and RSU awards for the NEOs are disclosed in the Grants of
Plan-Based Awards in 2009 table on page 63.
Annual
Equity Grant Timing
At the
October 2008 Compensation Committee meeting, the Committee approved a
formal policy for setting the timing of the annual equity grant
date. As a result, beginning in 2009, the grant date for the
annual equity grant will be the first Monday in March.
Caterpillar
does not backdate, re-price or grant equity awards retroactively. The
Compensation Committee approved the valuation of the 2009 equity awards at
the February 10, 2009 meeting and delegated its authority to finalize the
individual grants on the grant date to the Compensation Committee chair.
The grant price ($22.17) was the closing price for Caterpillar stock as
reported on the NYSE on March 2, 2009 (grant date). All 2009
equity grants for the NEOs are disclosed in the Grants of Plan-Based
Awards in 2009 table on page
63.
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||
|
Chairman’s
Restricted Stock Award Program
The CEO may
submit restricted stock grant recommendations to the Compensation
Committee at any Compensation Committee meeting. The
Compensation Committee reviews the amount of the proposed grants as well
as the CEO’s reasoning and approves or rejects the requested restricted
stock grants. The Compensation Committee delegated the
authority to execute the Chairman’s Restricted Stock Award Program, in its
entirety, to the CEO. At the end of each year, the CEO will
report an annual summary of the program to the Compensation
Committee.
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Page 52
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Stock
Ownership Requirements
Equity
compensation encourages our executives to have an owner’s perspective in
managing the Company. Accordingly, the Compensation Committee
approved stock ownership requirements for all participants receiving
equity compensation.
Specifically,
NEOs are required to own shares equal to a minimum of 50 percent of the
average (based on number of shares) of the last five grants
received. Failure to meet these guidelines results in automatic
grant reductions, unless compelling personal circumstances prevent an
employee from meeting his or her targeted ownership
requirement.
Even though
Caterpillar targets all officers’ total compensation at the size-adjusted
median level of the CCCG, its stock ownership requirements are much higher
than the median level, reaching well into the upper quartile of
practices of the companies examined. At present, all NEOs
exceed stock ownership requirements.
|
|
Long-Term Cash Performance
Plan
The LTCPP is
a Pay at Risk plan
that delivers a targeted percentage of base salary to each participant
based on performance against the goals of the entire
Company. The LTCPP is offered to NEOs and other key
employees. A three-year performance cycle is established each
year for determining compensation under the LTCPP. The
Compensation Committee generally sets threshold, target and maximum levels
that make the relative difficulty of achieving the target level consistent
from year to year. The payout amount can vary greatly from one
year to the next. The objective is to have payouts under the
LTCPP be at target, on average, over a period of years.
Each year the
Compensation Committee specifies two measures and their payout factors,
such as relative PPS growth and ROA, both weighted 50 percent for the
LTCPP. The threshold performance levels must be met under both
measures before a payout is made under that particular measure; however,
there is no overall trigger as there is under ESTIP and
STIP. In other words, each measure triggers independently of
the other. Increasingly larger payments are awarded when the
target and maximum performance levels are achieved. The
following table outlines the payout factor range that applies to each
performance level.
 The
Compensation Committee selected the following Standard & Poor’s 500
companies (S&P Group) to compare Caterpillar’s performance against the
performance of our specific industry. This S&P Group is
used because market cycle fluctuations are minimized when compared to
similar companies. The S&P Group is used only for the
relative PPS growth measure, not for setting levels of compensation under
the LTCPP. There were no changes in the S&P Group from 2008
to 2009.
|
Relative
PPS growth is one of two measures in the LTCPP. It
measures Caterpillar’s PPS growth against those companies in the Standard
& Poor’s peer group.
Return
On Assets (ROA)
is a
profitability measure that reveals how much profit a company
generates with the assets of the company. This is one of
two measures in the 2007-2009
LTCPP.
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Page 53
The companies in
this S&P Group are:
The 2009 LTCPP
payout was based on a three-year performance cycle, which began in 2007 and
ended in 2009. The 2007-2009 cycle evaluated two
components: relative PPS growth, measured against the S&P Group,
and ROA, again each weighted 50 percent. At the February 2007
meeting, the Compensation Committee determined that the targets (shown in the
following table) were very challenging and that achieving the targets during
this performance cycle would put the Company far ahead of historical benchmark
levels at other companies, including the CCCG, the S&P Group and the S&P
500 overall.
The final 2009
LTCPP ROA was 8.6 percent, resulting in a payout factor of 66.41
percent. The relative PPS growth percentile rank was 19, resulting in
no payout for this performance measure. The resulting weighted payout
factors were added together to calculate the total cash payout factor of 33.21
percent, which resulted in a collective payout of $2.5 million for all of the
NEOs.
The Compensation
Committee has the discretion to reduce individual LTCPP awards based on
performance, but individual increases are not permitted. No
adjustments were made to the 2009 LTCPP payouts to the
NEOs. Individual payouts were capped at $5 million and are disclosed
in the “Non-Equity Incentive Plan Compensation” column of the Summary
Compensation table on page 61.
Similar to the
2007-2009 LTCPP cycle, the 2008-2010 and 2009-2011 LTCPP cycles include a
relative PPS Growth and ROA measure.
Compensation
Decisions
The Executive
Office (CEO and six group presidents) works as a team to drive our corporate
strategy and deliver the annual business plan. Our ESTIP is based on
corporate ROA and enterprise quality metrics and is the same for each executive
officer. Our LTIP is the same for each executive officer and is based
on corporate PPS growth relative to our peer group and ROA. Annual
merit pay adjustment and equity grants are based on the NEOs’ achievement of
their goals set at the beginning of the year. Both elements of
compensation are benchmarked with peer companies and therefore keep the total
compensation package competitive.
Page 54
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Chairman
and CEO Compensation Decisions
The CEO is
evaluated by the Board on Company and individual performance
metrics. In February of 2010, the Board reviewed the
Compensation Committee’s assessment of Mr. Owens’ individual goals (which
were created at the beginning of 2009) and his performance against those
goals. The most critical results for Mr. Owens for 2009 were as
follows:
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|
|
§
|
Despite the
most significant recessionary industry conditions since the 1930s,
Caterpillar delivered profitability for the year at $1.43 per share, or
$2.18 per share excluding redundancy costs
|
|
§
|
Further, in
the face of a $19 billion drop in top line sales and revenues, the Company
strengthened its balance sheet and maintained its credit rating and
dividend
|
|
§
|
Caterpillar
maintained positive employee communications throughout the financial
crisis – the employee survey, with 94 percent participation, achieved a
record 82 percent favorable response
|
|
§
|
Using the Cat
Production System, the Company maintained enterprise focus on process
discipline and execution through disruptive schedule fluctuations –
safety, product quality, and delivery performance all
improved
|
Equity Grant for
2010
On March 1, 2010,
the Compensation Committee, with approval from the Board, granted Mr. Owens an
equity award of 300,000 RSUs under the Company’s LTIP. This award
represents Mr. Owens’ total equity compensation for 2010. The RSUs
will vest on November 1, 2010; however, the Compensation Committee placed
transfer restrictions on the shares of common stock that will be issued upon the
vesting of the award. Pursuant to the restrictions, the shares may
not be assigned, transferred or pledged until three years after the March 1,
2010 grant date.
In making this
award, the Compensation Committee considered, among other things, Mr. Owens’
significant contributions in leading Caterpillar through the present economic
downturn and positioning it for future success.
The Compensation
Committee determined that instead of the usual mixture of SARs and RSUs, which
would vest soon after his retirement, a grant of RSUs, with a three-year
transfer restricted period, would better tie Mr. Owens’ final year compensation
more directly to the longer-term success or failure of the actions taken in his
final year as Chairman and CEO.
Other
NEOs Compensation Decisions
The CEO presents
each NEO’s performance evaluation to the Compensation Committee (excluding Mr.
Burritt’s performance evaluation). The focus of the evaluation for
other NEOs is based upon product and business unit metrics in their respective
areas of responsibility. The CEO presented the Compensation Committee
the following key points for Group Presidents in making compensation decisions
for 2009. Mr. Rapp conducted the performance evaluation for Mr.
Burritt.
Douglas
R. Oberhelman, Group President
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|
§
|
Formed Strategic Planning Committee and launched
update of the Company’s Vision 2020 after Board selection as Vice Chairman
in October 2009
|
|
|
§
|
Helped deliver a significant increase in 2009 cash
flow, through an intense focus on cost and inventory
reduction
|
|
|
§
|
Provided executive leadership for our Diversity
and Sustainability initiatives, maintaining important positive momentum
through the financial crisis
|
|
|
§
|
Improved product quality for commercial
reciprocating engines and safety for his direct report
divisions
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Page 55
Richard
P. Lavin, Group President
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|
§
|
Traveled extensively in Asia-Pacific region
effectively overseeing dealer development and capacity expansion in this
dynamic growth region
|
|
|
§
|
Established a new country manager for China in
2009 and leveraged this position to gain more traction with
governmental/public affairs in
China
|
|
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§
|
Cash flow for his divisions improved markedly from
2008 levels due to inventory reduction, lower capital expenditures and
strong cost management
|
|
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§
|
Significantly improved operational performance –
on time shipment dates and safety improved over 2008
levels
|
Stuart
L. Levenick, Group President
|
|
§
|
Provided executive leadership for the Enterprise
Alignment transition that was launched to reduce organizational
complexity, improve accountability, increase customer focus and streamline
costs
|
|
|
§
|
Successfully aligned manufacturing operations in
the Americas tri-sphere into one business unit – maintained Caterpillar
Production System deployment
momentum
|
|
|
§
|
Met aggressive inventory reduction goals and
managed CAPEX down in large construction equipment
business
|
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|
§
|
Worked closely on growth initiatives tied to
investments, acquisitions and/or joint ventures to expand mining and
tunnel boring product lines and
capacity
|
Edward
J. Rapp, Group President
|
|
§
|
Provided executive leadership for the enterprise
initiative to focus on cash flow and liquidity in order to maintain our
credit rating and dividends
|
|
|
§
|
Strongly supported restructure and cost reductions
in small machine business
division
|
|
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§
|
Provided leadership to our captive finance company
successfully navigating through very disruptive financial markets in
2009
|
|
|
§
|
Markedly improved quality on new product
introductions and reduced
inventory
|
Gerard
R. Vittecoq, Group President
|
|
§
|
Provided executive leadership to drive
manufacturing execution and supply chain efficiencies across the
corporation with the Cat Production
System
|
|
|
§
|
Markedly increased accountable cash flow from his
business units in 2009
|
|
|
§
|
Championed enterprise machine product quality
journey allowing us to achieve continuous improvement in
2009
|
|
|
§
|
Drove significant improvement in safety, compared
to 2008, in our European manufacturing
groups
|
Steven
H. Wunning, Group President
|
|
§
|
Effectively deployed a robust process to monitor
the financial viability of over 900
suppliers
|
|
|
§
|
Provided executive leadership for the corporate
Tier 4 emissions compliance
initiative
|
|
|
§
|
Markedly increased cash flow from his business
units in 2009 by reducing inventory and managing capital
expenditures
|
|
|
§
|
Drove enterprise simplification and logistics
initiatives which significantly reduced
costs
|
David
B. Burritt, Vice President and Chief Financial Officer
|
|
§
|
Supported corporate efforts to maintain
profitability with strong cash flow, hold mid-A credit rating and maintain
the dividend
|
|
|
§
|
Strengthened the balance sheet and reduced debt to
capital ratio
|
|
|
§
|
Demonstrated strong cost management for Global
Finance and Strategic Services, while also strengthening internal
controls
|
|
|
§
|
Provided clear and consistent communication during
a period of economic
turbulence
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Page 56
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Retirement
and Other Benefits
The defined
contribution and defined benefit plans available to the NEOs (excluding
Mr. Vittecoq for the reasons described below) are also available to many
U.S. Caterpillar salaried and management employees. All of the
NEOs (excluding Mr. Vittecoq) participate in all of the following U.S.
retirement plans.
Mr. Vittecoq
is not eligible for the U.S. benefit plans because he is on the Swiss
payroll and eligible for the Swiss benefit programs. He
participates in Caprevi, Prevoyance Caterpillar and the Swiss Employees’
Investment Plan. Both are Swiss retirement plans that are
available to all other Swiss management employees. Mr. Vittecoq is eligible under Caprevi, Prevoyance
Caterpillar for an early retirement benefit with no
reduction.
|
A defined
contribution savings plan is a retirement plan that provides for an
individual account for each participant and for benefits based solely upon
the amount contributed to the participant’s account, and any income,
expenses, gains and losses.
A defined
benefit pension plan is a retirement plan in which benefits must be
definitely determinable. Plan formulas are geared to retirement
benefits, not contributions. The plan is funded by
contributions to a trust account that are separate from the general assets
of the Company. The Pension Benefit Guaranty Corporation
insures certain benefits.
A qualified
retirement plan is afforded special tax treatment for meeting a
host of requirements of the Internal Revenue Code.
A nonqualified
plan is designed primarily to provide retirement income for
essential employees. There are no limits on benefits or
contributions, and there are no reporting requirements so long as it is
not funded.
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|
 |
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Pension
Plans
Caterpillar
Inc. Retirement Income Plan (RIP)
Many U.S. salaried
and management employees are eligible to participate in RIP. Benefit
amounts are not offset for any Social Security benefits. Plan
participants may choose among several payment options, such as a single life
annuity, term-certain or various joint and survivor annuity
benefits. Of the NEOs, Mr. Lavin, Mr. Levenick, Mr. Oberhelman, Mr.
Rapp, Mr. Wunning and Mr. Burritt are currently eligible for early retirement,
with a four percent benefit reduction, per year, from age 62. Mr.
Owens is currently eligible to retire with no reduction in
benefits.
Supplemental
Retirement Plan (SERP)
If an employee’s
annual compensation or retirement income benefit under RIP exceeds the Internal
Revenue Service tax code limitations, the excess benefits are paid from the
SERP. The formula used to calculate the benefit payable in SERP is
similar to the one used under RIP. The formula is described in detail
in the 2009 Pension Benefits table on page 66.
Page 57
Savings
Plans
Caterpillar
401(k) Plan
Most U.S. salaried
and management employees, including the U.S.-based NEOs, are eligible to
participate in the 401(k) plan.
|
|
§
|
Contributions
are made on a pre-tax basis
|
|
|
§
|
Participants
can contribute up to 70 percent of their base salary and STIP
awards
|
|
|
§
|
Contributions
are limited by the tax code
|
|
|
§
|
Company
matches 100 percent of the first six percent of pay contributed to the
savings plan
|
|
|
§
|
All
contributions vest immediately
|
Supplemental
Deferred Compensation Plan (SDCP)
In addition to the
401(k) plan, all U.S.-based NEOs are allowed to participate in SDCP, which
provides the opportunity to increase deferrals of base salary and to elect
deferrals of STIP and LTCPP awards.
|
|
§
|
The plan was
created in March 2007 with a retroactive effective date of January 1,
2005. It effectively replaces SEIP and DEIP (both defined
below). The change allows the Company to comply with Internal
Revenue Code Section 409A.
|
|
|
§
|
Contributions
are made on a pre-tax basis and are comprised of four possible
contribution types:
|
|
|
•
|
Supplemental
Base Pay Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Supplemental
STIP Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Supplemental
LTCPP Deferrals (maximum 70 percent deferral
election)
|
|
|
•
|
Excess Base
Pay Deferrals (flat six percent deferral
election)
|
|
|
§
|
Supplemental
Base Pay Deferrals earn matching contributions at a rate of six percent of
the deferred amount
|
|
|
§
|
Up to six
percent of Supplemental STIP Deferrals are matched
dollar-for-dollar
|
|
|
§
|
Supplemental
LTCPP Deferrals are not eligible for an employer matching
contribution
|
|
|
§
|
Excess Base
Pay Deferrals are matched 100 percent by the Company. This is
provided to restore the matching opportunity that is not available under
the qualified plan due to Internal Revenue Service tax code
limitations.
|
|
|
§
|
All
contributions vest immediately
|
Supplemental
Employees’ Investment Plan (SEIP) and Deferred Employees’ Investment Plan
(DEIP)
In addition to the
401(k) plan, all U.S.-based NEOs were previously allowed to participate in SEIP
and DEIP. These plans were frozen to new participants and new salary
deferrals in March of 2007. Pay deferred into SEIP and DEIP prior to
January 1, 2005 remains in SEIP and DEIP. Pay deferred on and after
January 1, 2005 was transferred to SDCP.
Perquisites
The Company
provides NEOs a very limited number of perquisites that it and the Compensation
Committee believe are reasonable and consistent with its overall compensation
program, and necessary to remain competitive. The Compensation
Committee annually reviews the levels of perquisites provided to the
NEOs. Costs associated with perquisites provided by the Company are
included in the 2009 All Other Compensation table on page 62. Descriptions of these
perquisites are provided below:
|
|
§
|
Home security
systems are provided to ensure the safety of our
NEOs
|
|
|
§
|
Mr. Owens
participates in the Director’s Charitable Award program, which is provided
to all directors of the Company, and is funded by life insurance
arrangements for which the Company pays the premiums. Mr. Owens
derives no direct financial benefit from the
program.
|
|
|
§
|
The
Director’s Charitable Award program was discontinued for new directors
after April 1, 2008. Directors as of that date were
grandfathered under the program.
|
|
|
§
|
Limited
personal use of the Company aircraft is permitted for security purposes
and to allow the NEOs to devote additional time to Caterpillar
business.
|
Page 58
Change
in Control
Except as required
by applicable law, Caterpillar has no special executive severance packages or
contracts. Mr. Vittecoq has an employment contract, which is required
under Swiss law. The change in control provisions are provided under
our long-term and short-term plans and are standard provisions for these types
of plans, which apply to all participants in those plans. Our change
in control provisions have no direct correlation with other compensation
decisions.
The change in
control provisions generally provide accelerated vesting and maximum payout
under the incentive plans. The change in control provisions impose a
“double-trigger,” whereby a change in control and termination of employment
without cause within 12 months of the change in control are needed to trigger
the change in control provisions. These provisions are intended to
allow executives to evaluate business opportunities with the best interests of
stockholders in mind, as opposed to maximizing their own personal
interests. The terms of the change in control provisions are
applicable to all employees covered by these plans and are not specific to the
NEOs. Additionally, no payments are made for voluntary separation,
resignation and termination for cause.
In the event of a
change in control, maximum payout factors are assumed for amounts payable under
the 1996 and 2006 Stock Option and LTIP.
|
|
§
|
LTIP allows
for the maximum performance level, 150 percent payout factor, to be paid
under each open plan cycle of the LTCPP. This is prorated based
on the time of active employment during the performance
cycle.
|
|
|
§
|
All unvested
stock options, SARs, restricted stock and restricted stock units vest
immediately
|
|
|
§
|
Stock options
and SARs remain exercisable over the normal life of the
grant
|
|
|
§
|
The ESTIP is
assumed to achieve the maximum payout factor, 200 percent, under a change
in control
|
Change in control
information is disclosed in the “Potential Payments Upon Termination or Change
in Control” section on page 68 of this
proxy statement.
Tax
and Accounting Implications
Deductibility
of Compensation
The goal of the
Compensation Committee is to comply with the requirements of Internal Revenue
Code Section 162(m), to the extent possible, with respect to long-term and
short-term incentive programs to avoid losing the deduction for compensation in
excess of $1 million paid to the chief executive officer and the three other
most highly compensated officers (other than the chief financial
officer). Caterpillar has generally structured performance-based
compensation plans with the objective that amounts paid under those plans will
be tax deductible and the plans must be approved by the Company’s
stockholders. However, the Compensation Committee may elect to
provide compensation outside those requirements when necessary to achieve its
compensation objectives.
Compensation
Recoupment Policy
If the Board learns
of any misconduct by an officer who contributed to the Company restating all or
a portion of its financial statements, it will do what is required to correct
the misconduct and prevent it from occurring again and, if appropriate, take
necessary remedial action.
Page 59
To determine the
corrective action, the Board will review the situation to identify whether the
restatement was the result of negligence, or intentional
misconduct. The Board will require reimbursement of any bonus or
incentive compensation awarded to an officer or cancel unvested restricted or
deferred stock awards previously granted to the executive officer if all of the
following apply:
|
|
§
|
The amount of
the bonus or incentive compensation was calculated based on the
achievement of certain financial results that were subsequently the
subject of a restatement
|
|
|
§
|
The officer
engaged in intentional misconduct that caused or partially caused the need
for the restatement
|
|
|
§
|
The amount of
the bonus or incentive compensation that would have been awarded to the
executive had the financial results been properly reported would have been
lower than the amount actually
awarded
|
Additionally, at
the Board’s discretion, it may dismiss the officer, authorize legal action for
breach of fiduciary duty or take other action to enforce the officer’s
obligations to the Company. In determining appropriate remedial
action, the Board may take into account penalties or punishments imposed by
third parties, such as law enforcement agencies, regulators or other
authorities. The Board’s power to determine the appropriate
punishment for the wrongdoer is in addition to, and not in replacement of, third
party actions.
The Compensation
Committee has reviewed and discussed the CD&A included in this proxy
statement with management. The Compensation Committee is satisfied
that the CD&A fairly and completely represents the philosophy, intent and
actions of the Compensation Committee with regard to executive
compensation. We recommend to the Board that the CD&A be included
in this proxy statement and the Company’s Annual Report on Form 10-K for filing
with the SEC.
|
By
the current members of the Compensation Committee consisting
of:
|
||||
|
David
R. Goode (Chairman)
|
||||
|
John
R. Brazil
|
||||
|
Edward
B. Rust, Jr.
|
||||
|
Joshua
I. Smith
|
Page 60
|
2009
Summary Compensation Table
|
||||||||||||||||||||||||||
|
Name
and
Principal
Position
|
Year
|
Salary
|
Bonus
2
|
Stock
Awards
3
|
Option
Awards
4
|
Non-Equity
Incentive Plan Compensation 5
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings 6
|
All
Other Compensation 7
|
Total
|
|||||||||||||||||
|
J.W.
Owens
|
2009
|
$
|
1,550,004
|
$
|
—
|
$
|
407,413
|
$
|
3,578,115
|
$
|
868,001
|
$
|
1,985,254
|
$
|
360,998
|
$
|
8,749,785
|
|||||||||
|
Chairman
|
2008
|
$
|
1,550,004
|
$
|
—
|
$
|
981,794
|
$
|
7,461,609
|
$
|
4,353,227
|
$
|
2,932,489
|
$
|
377,413
|
$
|
17,656,536
|
|||||||||
| & CEO |
2007
|
$
|
1,512,504
|
$
|
300,000
|
$
|
1,186,354
|
$
|
7,136,911
|
$
|
4,442,998
|
$
|
2,575,395
|
$
|
324,147
|
$
|
17,478,309
|
|||||||||
|
D.R.
Oberhelman
|
2009
|
$
|
729,996
|
$
|
—
|
$
|
148,292
|
$
|
1,179,874
|
$
|
266,635
|
$
|
505,259
|
$
|
164,719
|
$
|
2,994,775
|
|||||||||
|
Group
President
|
2008
|
$
|
729,996
|
$
|
60,000
|
$
|
284,238
|
$
|
2,577,707
|
$
|
1,495,186
|
$
|
619,845
|
$
|
124,812
|
$
|
5,891,784
|
|||||||||
|
|
2007
|
$
|
729,996
|
$
|
198,000
|
$
|
289,631
|
$
|
2,610,192
|
$
|
1,666,505
|
$
|
568,400
|
$
|
121,431
|
$
|
6,184,155
|
|||||||||
|
R.P. Lavin
1
|
2009
|
$
|
584,004
|
$
|
—
|
$
|
132,644
|
$
|
1,055,465
|
$
|
196,257
|
$
|
366,197
|
$
|
148,887
|
$
|
2,483,454
|
|||||||||
|
Group
President
|
2008
|
$
|
584,004
|
$
|
10,000
|
$
|
363,633
|
$
|
2,484,182
|
$
|
1,071,222
|
$
|
381,424
|
$
|
619,217
|
$
|
5,513,682
|
|||||||||
|
S.L.
Levenick
|
2009
|
$
|
729,996
|
$
|
—
|
$
|
132,644
|
$
|
1,055,465
|
$
|
264,505
|
$
|
621,419
|
$
|
144,239
|
$
|
2,948,268
|
|||||||||
|
Group
President
|
2008
|
$
|
729,996
|
$
|
10,000
|
$
|
284,238
|
$
|
2,577,707
|
$
|
1,457,336
|
$
|
699,119
|
$
|
212,908
|
$
|
5,971,304
|
|||||||||
|
2007
|
$
|
712,248
|
$
|
110,000
|
$
|
289,631
|
$
|
2,579,339
|
$
|
1,560,817
|
$
|
531,446
|
$
|
180,868
|
$
|
5,964,349
|
||||||||||
|
E.J. Rapp
1
|
2009
|
$
|
584,004
|
$
|
—
|
$
|
132,644
|
$
|
1,055,465
|
$
|
196,190
|
$
|
362,994
|
$
|
100,886
|
$
|
2,432,183
|
|||||||||
|
Group
President
|
2008
|
$
|
584,004
|
$
|
10,000
|
$
|
323,936
|
$
|
2,453,022
|
$
|
1,071,010
|
$
|
312,921
|
$
|
49,348
|
$
|
4,804,241
|
|||||||||
|
G.R. Vittecoq
8
|
2009
|
$
|
895,957
|
$
|
—
|
$
|
140,003
|
$
|
1,113,944
|
$
|
327,253
|
$
|
882,754
|
$
|
35,838
|
$
|
3,395,749
|
|||||||||
|
Group
President
|
2008
|
$
|
880,993
|
$
|
20,000
|
$
|
284,238
|
$
|
2,484,182
|
$
|
1,735,385
|
$
|
843,600
|
$
|
45,240
|
$
|
6,293,638
|
|||||||||
|
2007
|
$
|
826,177
|
$
|
82,618
|
$
|
422,801
|
$
|
2,270,803
|
$
|
1,896,463
|
$
|
1,228,584
|
$
|
43,047
|
$
|
6,770,493
|
||||||||||
|
S.H.
Wunning
|
2009
|
$
|
729,996
|
$
|
—
|
$
|
132,644
|
$
|
1,055,465
|
$
|
264,925
|
$
|
481,115
|
$
|
168,011
|
$
|
2,832,156
|
|||||||||
|
Group
President
|
2008
|
$
|
729,996
|
$
|
10,000
|
$
|
284,238
|
$
|
2,484,182
|
$
|
1,465,075
|
$
|
777,695
|
$
|
190,418
|
$
|
5,941,604
|
|||||||||
|
2007
|
$
|
715,746
|
$
|
24,000
|
$
|
289,631
|
$
|
2,585,518
|
$
|
1,581,445
|
$
|
708,727
|
$
|
160,698
|
$
|
6,065,765
|
||||||||||
|
D.B.
Burritt
|
2009
|
$
|
504,000
|
$
|
—
|
$
|
89,945
|
$
|
505,129
|
$
|
144,791
|
$
|
438,896
|
$
|
59,212
|
$
|
1,741,973
|
|||||||||
|
Vice
President
|
2008
|
$
|
494,751
|
$
|
25,000
|
$
|
169,478
|
$
|
1,024,730
|
$
|
858,879
|
$
|
436,890
|
$
|
88,269
|
$
|
3,097,997
|
|||||||||
| & CFO |
2007
|
$
|
454,503
|
$
|
—
|
$
|
155,485
|
$
|
981,632
|
$
|
930,660
|
$
|
352,648
|
$
|
102,032
|
$
|
2,976,960
|
|||||||||
|
1
|
Mr. Lavin and
Mr. Rapp were not NEOs in 2007.
|
|||||||||||||||||||||||||
|
2
|
There was no
Lump Sum Discretionary Cash Bonus awarded to NEOs for 2009
performance.
|
|||||||||||||||||||||||||
|
3
|
The following
Restricted Stock Units (RSUs) were granted to NEOs on March 2,
2009: Mr. Owens — 20,152; Mr. Oberhelman — 7,335; Mr. Lavin —
6,561; Mr. Levenick — 6,561; Mr. Rapp — 6,561; Mr. Vittecoq — 6,925; Mr.
Wunning — 6,561; and Mr. Burritt — 4,449. The amounts included
in this column represent the aggregate grant date fair market value for
RSUs and restricted stock granted in the years shown calculated in
accordance with Financial Accounting Standards Board Standards
Codification Topic 718, Compensation – Stock Compensation (FASB ASC Topic
718). In general, the aggregate grant date fair market value is
the amount of the total expense the Company expects to report in its
financial reporting over the equity award’s vesting
schedule. The amounts reported reflect the total accounting
expense and do not reflect the actual value that will be realized by the
NEO. Assumptions made in the calculation of these amounts are
included in Note 2 “Stock based compensation” to the Company’s
consolidated financial statements for the fiscal year ended December 31,
2009, included in the Company’s Annual Report on Form 10-K (Form 10-K)
filed with the SEC on February 19, 2010.
|
|||||||||||||||||||||||||
|
4
|
The following
SARs were granted to NEOs on March 2, 2009: Mr. Owens —
504,180; Mr. Oberhelman — 166,252; Mr. Lavin — 148,722; Mr. Levenick —
148,722; Mr. Rapp — 148,722; Mr. Vittecoq — 156,962; Mr. Wunning —
148,722; and Mr. Burritt — 71,176. The amounts included in this
column represent the aggregate grant date fair market value for SARs
granted in the years shown in accordance with FASB ASC Topic
718. In general, the aggregate grant date fair market value is
the amount of the total expense the Company expects to report in its
financial reporting over the equity award’s vesting
schedule. The amounts reported reflect the total accounting
expense and do not reflect the actual value that will be realized by the
NEO. Assumptions made in the calculation of these amounts are
included in Note 2 “Stock based compensation” to the Company’s
consolidated financial statements for the fiscal year ended December 31,
2009, included in the Company’s Form 10-K filed with the SEC on
February 19, 2010.
|
|||||||||||||||||||||||||
|
5
|
The amounts in
this column reflect the cash payments made to NEOs under
the LTCPP with respect to performance over a three-year plan
cycle from 2007 through 2009. The 2009 ESTIP or STIP did not
trigger a payout, as the performance metrics of the plan(s) were not
achieved.
|
|||||||||||||||||||||||||
|
6
|
Because NEOs
do not receive “preferred” or “above market” earning on compensation
deferred into SDCP, SEIP and/or DEIP, the amount shown represents only the
change between the actuarial present value of each officer’s total
accumulated pension benefit between December 31, 2008 and December 31,
2009. The amount assumes the pension benefit is payable
at each NEO’s earliest unreduced retirement age based upon the officer’s
current compensation.
|
|||||||||||||||||||||||||
|
7
|
All Other
Compensation for 2009 consists of the following items detailed in a
separate table appearing on page 62: Matching contributions to
the Company’s 401(k) plan; matching contributions to SDCP/EIP; corporate
aircraft usage; home security; life insurance premiums for Mr. Owens under
the Directors’ Charitable Award Program; and ISE
allowances.
|
|||||||||||||||||||||||||
|
8
|
All amounts
reported for Mr. Vittecoq were paid in Swiss Francs and have been
converted to U.S. dollars using the exchange rate in effect on December
31, 2009 (1 Swiss Franc = .96340 US Dollar). Mr. Vittecoq's
2009 Swiss Franc base salary has remained constant from 2008's level at
CHF 929,994. The conversion of Swiss Franc to the U.S. dollar
amount inflates Mr. Vittecoq's reported base salary, as the U.S. dollar
has depreciated against the Swiss
Franc.
|
|||||||||||||||||||||||||
Page 61
|
2009
All Other Compensation Table
|
|||||||||||||||||||||||||||||
|
Name
|
Year
|
Matching
Contributions
401(k)
|
Matching
Contributions SDCP/EIP
|
Financial
Counseling 2
|
Corporate
Aircraft 3
|
Tax
Gross-Up
on Corporate Aircraft 3
|
Home
Security 4
|
Director’s
Charitable Award Insurance Premiums 5
|
Other
6
|
Total
All Other Compensation
|
|||||||||||||||||||
|
J. W.
Owens
|
2009
|
$
|
14,700
|
$
|
189,494
|
$
|
—
|
$
|
116,523
|
$
|
—
|
$
|
5,201
|
$
|
32,560
|
$
|
2,520
|
$
|
360,998
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
213,780
|
$
|
13,530
|
$
|
89,044
|
$
|
9,936
|
$
|
1,952
|
$
|
32,851
|
$
|
2,520
|
$
|
377,413
|
|||||||||||
|
2007
|
$
|
13,500
|
$
|
168,672
|
$
|
4,545
|
$
|
102,840
|
$
|
3,660
|
$
|
919
|
$
|
30,011
|
$
|
—
|
$
|
324,147
|
|||||||||||
|
D. R.
|
2009
|
$
|
14,700
|
$
|
71,491
|
$
|
—
|
$
|
21,190
|
$
|
—
|
$
|
55,718
|
$
|
N/A
|
$
|
1,620
|
$
|
164,719
|
||||||||||
| Oberhelman |
2008
|
$
|
13,800
|
$
|
83,544
|
$
|
5,325
|
$
|
13,585
|
$
|
3,273
|
$
|
4,385
|
$
|
—
|
$
|
900
|
$
|
124,812
|
||||||||||
|
2007
|
$
|
13,500
|
$
|
72,726
|
$
|
4,975
|
$
|
21,000
|
$
|
4,795
|
$
|
4,435
|
$
|
—
|
$
|
—
|
$
|
121,431
|
|||||||||||
|
R. P.
Lavin
|
2009
|
$
|
14,700
|
$
|
51,974
|
$
|
—
|
$
|
520
|
$
|
—
|
$
|
950
|
$
|
N/A
|
$
|
80,743
|
$
|
148,887
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
50,972
|
$
|
8,000
|
$
|
—
|
$
|
98
|
$
|
1,520
|
$
|
—
|
$
|
544,827
|
$
|
619,217
|
|||||||||||
|
S. L.
Levenick
|
2009
|
$
|
14,700
|
$
|
68,491
|
$
|
—
|
$
|
58,500
|
$
|
—
|
$
|
928
|
$
|
N/A
|
$
|
1,620
|
$
|
144,239
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
35,280
|
$
|
8,000
|
$
|
51,376
|
$
|
2,572
|
$
|
1,094
|
$
|
—
|
$
|
100,786
|
$
|
212,908
|
|||||||||||
|
2007
|
$
|
13,500
|
$
|
62,265
|
$
|
8,000
|
$
|
95,720
|
$
|
464
|
$
|
919
|
$
|
—
|
$
|
—
|
$
|
180,868
|
|||||||||||
|
E. J.
Rapp
|
2009
|
$
|
14,700
|
$
|
51,974
|
$
|
—
|
$
|
32,587
|
$
|
—
|
$
|
725
|
$
|
N/A
|
$
|
900
|
$
|
100,886
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
21,240
|
$
|
8,000
|
$
|
3,458
|
$
|
1,047
|
$
|
903
|
$
|
—
|
$
|
900
|
$
|
49,348
|
|||||||||||
|
G. R.
Vittecoq
|
2009
|
$
|
N/A
|
1
|
$
|
35,838
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
N/A
|
$
|
$
|
35,838
|
||||||||||
|
2008
|
$
|
N/A
|
1
|
$
|
35,240
|
$
|
10,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
45,240
|
||||||||||
|
2007
|
$
|
N/A
|
1
|
$
|
33,047
|
$
|
10,000
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
43,047
|
||||||||||
|
S. H.
Wunning
|
2009
|
$
|
14,700
|
$
|
68,491
|
$
|
—
|
$
|
83,200
|
$
|
—
|
$
|
—
|
$
|
N/A
|
$
|
1,620
|
$
|
168,011
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
75,242
|
$
|
18,575
|
$
|
81,181
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,620
|
$
|
190,418
|
|||||||||||
|
2007
|
$
|
13,500
|
$
|
65,178
|
$
|
8,000
|
$
|
74,020
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
160,698
|
|||||||||||
|
D. B.
Burritt
|
2009
|
$
|
14,700
|
$
|
42,684
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
928
|
$
|
N/A
|
$
|
900
|
$
|
59,212
|
||||||||||
|
2008
|
$
|
13,800
|
$
|
44,390
|
$
|
6,600
|
$
|
20,254
|
$
|
1,423
|
$
|
902
|
$
|
—
|
$
|
900
|
$
|
88,269
|
|||||||||||
|
2007
|
$
|
13,500
|
$
|
39,647
|
$
|
7,500
|
$
|
38,880
|
$
|
1,586
|
$
|
919
|
$
|
—
|
$
|
—
|
$
|
102,032
|
|||||||||||
|
1
|
Mr. Vittecoq
participates in a non-U.S. Employee Investment Plan.
|
||||||||||||||||||||||||||||
|
2
|
The Officers
Financial Counseling Program was eliminated effective January 1,
2009.
|
||||||||||||||||||||||||||||
|
3
|
Several of our
NEOs serve as board members for other corporations at the request of the
Company, and the personal usage noted above primarily consists of NEO
flights to attend these outside board meetings. Under the rules of the
SEC, use of aircraft for this purpose is deemed to be personal, even
though Caterpillar considers these flights beneficial to the Company and
for a business purpose. Other personal usage is limited to the
NEOs, their spouses or other guests, and CEO approval is required for all
personal use. The value of personal aircraft usage reported above is based
on Caterpillar’s incremental cost per flight hour, including the weighted
average variable operating cost of fuel, oil, aircraft maintenance,
landing and parking fees, catering and other smaller variable
costs. Occasionally, a spouse or other guest may accompany the
NEO, and if the Company aircraft is already scheduled for business
purposes and can accommodate additional passengers, no additional variable
operating cost is incurred. Effective January 1, 2009, the tax
gross-up on spousal accompanied travel was eliminated. Company
aircraft is provided for security purposes and allows the NEOs to devote
additional time to Caterpillar business.
|
||||||||||||||||||||||||||||
|
4
|
Amounts
reported for Home Security represent the cost provided by an outside
security provider for hardware and monitoring service. The
incremental cost associated with the home security services is determined
based upon the amounts paid to the outside service
provider.
|
||||||||||||||||||||||||||||
|
5
|
Mr. Owens
received no direct compensation for serving on the Board, but is entitled
to participate in the Directors’ Charitable Award Program. The
amount reported includes Company paid life insurance premiums and
administrative fees for Mr. Owens’ participation in the
program.
|
||||||||||||||||||||||||||||
|
6
|
Mr. Lavin was
an International Service Employee (ISE) based in China until his return to
the U.S. in December of 2007. The amount shown includes foreign
service allowances typically paid by the Company on behalf of ISEs,
including allowances for Mr. Lavin’s foreign and U.S. taxes attributable
to his international service assignment. These allowances are
intended to ensure that our ISEs are in the same approximate financial
position as they would have been if they lived in the U.S. during the time
of their international service. The amount
shown also includes the premium cost of Company provided basic life
insurance under a Group Variable Universal Life policy. The
coverage amount is two times base salary, capped at
$500,000. The premium cost is as follows: Mr. Owens — $2,520; Mr. Oberhelman
—
$1,620; Mr. Lavin — $1,620; Mr. Levenick
— $1,620; Mr. Rapp
— $900; Mr. Wunning
— $1,620; and Mr.
Burritt —
$900. Mr. Vittecoq is not covered under a Company
sponsored life insurance
product.
|
||||||||||||||||||||||||||||
Page 62
|
Grants
of Plan-Based Awards in 2009
|
|||||||||||||||||||||
|
Name
|
Grant
Date
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards 1
|
All
Other
Stock
Awards: Number of
Shares
of
Stock
or
Units
2
|
All
Other Option Awards: Number of Securities Underlying Options 3
|
Exercise
or Base Price of Option Awards ($/share)
|
Grant
Date
Fair
Value
of
Stock and
Option
Awards ($) 4
|
|||||||||||||||
|
Threshold
|
Target
|
Maximum
|
|||||||||||||||||||
|
J.W.
Owens
|
LTCPP
|
$
|
1,317,503
|
$
|
2,635,007
|
$
|
3,952,510
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
627,752
|
$
|
2,092,505
|
$
|
4,000,000
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
20,152
|
—
|
$
|
—
|
$
|
407,413
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
504,180
|
$
|
22.17
|
$
|
3,578,115
|
|||||||||
|
D.R.
Oberhelman
|
LTCPP
|
$
|
626,117
|
$
|
1,252,234
|
$
|
1,878,351
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
218,999
|
$
|
729,996
|
$
|
1,459,992
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
7,335
|
—
|
$
|
—
|
$
|
148,292
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
166,252
|
$
|
22.17
|
$
|
1,179,874
|
|||||||||
|
R. P.
Lavin
|
LTCPP
|
$
|
321,202
|
$
|
642,404
|
$
|
963,607
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
175,201
|
$
|
584,004
|
$
|
1,168,008
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
6,561
|
—
|
$
|
—
|
$
|
132,644
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
148,722
|
$
|
22.17
|
$
|
1,055,465
|
|||||||||
|
S.L.
Levenick
|
LTCPP
|
$
|
401,498
|
$
|
802,996
|
$
|
1,204,493
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
218,999
|
$
|
729,996
|
$
|
1,459,992
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
6,561
|
—
|
$
|
—
|
$
|
132,644
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
148,722
|
$
|
22.17
|
$
|
1,055,465
|
|||||||||
|
E.J.
Rapp
|
LTCPP
|
$
|
321,202
|
$
|
642,404
|
$
|
963,607
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
175,201
|
$
|
584,004
|
$
|
1,168,008
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
6,561
|
—
|
$
|
—
|
$
|
132,644
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
148,722
|
$
|
22.17
|
$
|
1,055,465
|
|||||||||
|
G.R.
Vittecoq
|
LTCPP
|
$
|
492,776
|
$
|
985,552
|
$
|
1,478,328
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
268,787
|
$
|
895,956
|
$
|
1,791,912
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
6,925
|
—
|
$
|
—
|
$
|
140,003
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
156,962
|
$
|
22.17
|
$
|
1,113,944
|
|||||||||
|
S.H.
Wunning
|
LTCPP
|
$
|
401,498
|
$
|
802,996
|
$
|
1,204,493
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
ESTIP
|
$
|
218,999
|
$
|
729,996
|
$
|
1,459,992
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
6,561
|
—
|
$
|
—
|
$
|
132,644
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
148,722
|
$
|
22.17
|
$
|
1,055,465
|
|||||||||
|
D.B.
Burritt
|
LTCPP
|
$
|
226,800
|
$
|
453,600
|
$
|
680,400
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
STIP
|
$
|
133,583
|
$
|
445,276
|
$
|
890,552
|
—
|
—
|
$
|
—
|
$
|
—
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
4,449
|
—
|
$
|
—
|
$
|
89,945
|
|||||||||
|
03/02/2009
|
$
|
—
|
$
|
—
|
$
|
—
|
—
|
71,176
|
$
|
22.17
|
$
|
505,129
|
|||||||||
|
1
|
The amounts
reported in this column are estimated awards under the LTCPP, ESTIP and
STIP. The LTCPP estimates are based upon a predetermined
percentage of an executive’s base salary throughout the three-year cycle,
and Caterpillar’s achievement of specified performance levels (relative
PPS growth and return on assets) over the three-year
period. The threshold amount is earned if at least 50 percent
of the targeted performance level is achieved. The target
amount is earned if at least 100 percent of the targeted performance level
is achieved. The maximum award is earned at 150 percent or
greater of the targeted performance level. Base salary levels for 2009
were used to calculate the estimated dollar value of future payments for
the 2009 to 2011 performance cycle. The ESTIP estimates are
based upon the executive’s base salary for 2009, and the achievement of
specific performance metrics (75 percent Corporate Return on Assets and 25
percent Enterprise Quality). Prior to any ESTIP payout, a
profit per share of $2.50 must be achieved for a payout to
occur. The STIP estimate for Mr. Burritt was based upon
his base salary for 2009, and the achievement of specific performance
metrics (87.5 percent Corporate Return on Assets and 12.5 percent
Enterprise Quality). Prior to any STIP payout, a profit per
share of $2.50 must be achieved for a payout to occur. For the
2009 ESTIP and STIP, the threshold amount was earned if at least 30
percent of the targeted performance level was achieved. The
target amount was earned if at least 70 percent of the targeted
performance level was achieved. The maximum award was earned at
200 percent or greater of the targeted performance level, with a plan cap
set at $4,000,000. The 2009 ESTIP and STIP performance metrics
were not achieved, and there was no cash payout for the 2009 plan year to
report in the column “Non-Equity Incentive Plan Compensation” of the
Summary Compensation table.
|
||||||||||||||||||||
|
2
|
All RSUs are
granted to the NEOs under the LTIP and will vest three years from the
grant date. Plan provisions exist for accelerated vesting in
the event of termination due to long-service separation (age 55 with 10 or
more years of Company service), death, total disability or change in
control. The actual realizable value of the RSU will depend on
the fair market value of Caterpillar stock at the time of
vesting.
|
||||||||||||||||||||
|
3
|
Amounts
reported represent SARs granted under the LTIP. The base price
for all SARs granted to the NEOs is the closing price of Caterpillar stock
on the grant date. The grant price was based upon the closing
price ($22.17) for Caterpillar stock on the grant date of March 2,
2009. All SARs granted to the NEOs will vest three years from
the grant date. Plan provisions exist for accelerated vesting
in the event of termination due to long-service separation (age 55 with 10
or more years of Company service), death, total disability or change in
control. The actual realizable value of the SAR will depend on
the fair market value of Caterpillar stock at the time of
exercise.
|
||||||||||||||||||||
|
4
|
The amounts
shown do not reflect realized compensation by the NEO. The
amounts shown represent the value of the SAR and RSU awards granted to the
NEOs based upon the grant date value of the award as determined in
accordance with FASB ASC Topic
718.
|
||||||||||||||||||||
Page 63
|
Outstanding
Equity Awards at 2009 Fiscal Year-End
|
|||||||||||||
|
Name
|
Grant
Date
|
Vesting
Date
|
Option
Awards
|
Stock
Awards
|
|||||||||
|
Number
of Securities Underlying Unexercised SARs/Options
|
SAR
/ Option
Exercise
Price
|
SAR
/ Option
Expiration
Date
1
|
Number
of Shares
or
Units of Stock
That
Have
Not
Vested 2
|
Market
Value of
Shares
or Units of
Stock
That Have
Not
Vested 3
|
|||||||||
|
Exercisable
|
Unexercisable
|
||||||||||||
|
J.W.
Owens
|
06/12/2001
|
06/12/2004
|
108,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
122,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||||
|
06/10/2003
|
06/10/2006
|
140,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
460,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
460,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
300,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
344,198
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
334,288
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
03/02/2009
|
03/02/2012
|
—
|
504,180
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
48,583
|
4
|
$
|
2,768,745
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
11,664
|
5
|
$
|
664,731
|
|||
|
D.R.
Oberhelman
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/11/2002
|
06/11/2005
|
122,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||||
|
06/10/2003
|
06/10/2006
|
140,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
140,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
140,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
110,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
125,884
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
115,484
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
03/02/2009
|
03/02/2012
|
—
|
166,252
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
16,276
|
6
|
$
|
927,570
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
1,330
|
7
|
$
|
75,797
|
|||
|
R.P.
Lavin
|
06/10/2003
|
06/10/2006
|
20,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
70,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
70,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
48,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
47,580
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
03/02/2009
|
03/02/2012
|
—
|
148,722
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
13,264
|
8
|
$
|
755,915
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,332
|
9
|
$
|
132,901
|
|||
|
S.L.
Levenick
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
105,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
—
|
124,396
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
||||
|
03/03/2008
|
03/03/2011
|
—
|
115,484
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
03/02/2009
|
03/02/2012
|
—
|
148,722
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
15,502
|
10
|
$
|
883,459
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
666
|
11
|
$
|
37,955
|
|||
|
E.J.
Rapp
|
06/12/2001
|
06/12/2004
|
24,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
|||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
60,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
||||
|
02/18/2005
|
02/18/2005
|
60,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
||||
|
02/17/2006
|
02/17/2009
|
48,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||
|
03/02/2007
|
03/02/2010
|
47,044
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||||
|
03/03/2008
|
03/03/2011
|
—
|
109,898
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
||||
|
03/02/2009
|
03/02/2012
|
—
|
148,722
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
13,264
|
12
|
$
|
755,915
|
|||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
1,500
|
13
|
$
|
85,485
|
|||
(table
continued on next page)
Page 64
|
Outstanding
Equity Awards at 2009 Fiscal Year-End (continued)
|
||||||||||||||
|
Name
|
Grant
Date
|
Vesting
Date
|
Option
Awards
|
Stock
Awards
|
||||||||||
|
Number
of Securities Underlying Unexercised SARs/Options
|
SAR
/ Option
Exercise
Price
|
SAR
/ Option
Expiration
Date
1
|
Number
of Shares
or
Units of Stock
That
Have
Not
Vested 2
|
Market
Value of
Shares
or Units of
Stock
That Have
Not
Vested 3
|
||||||||||
|
Exercisable
|
Unexercisable
|
|||||||||||||
|
G.R.
Vittecoq
|
06/12/2001
|
06/12/2004
|
48,000
|
—
|
$
|
26.7650
|
06/12/2011
|
—
|
$
|
—
|
||||
|
06/11/2002
|
06/11/2005
|
54,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
|||||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||||
|
02/17/2006
|
02/17/2009
|
95,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||||
|
03/02/2007
|
03/02/2010
|
—
|
109,516
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||||
|
03/02/2009
|
03/02/2012
|
—
|
156,962
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
|||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
15,866
|
14
|
$
|
904,204
|
||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
2,177
|
15
|
$
|
124,067
|
||||
|
S.H.
Wunning
|
06/11/2002
|
06/11/2005
|
60,000
|
—
|
$
|
25.3575
|
06/11/2012
|
—
|
$
|
—
|
||||
|
06/10/2003
|
06/10/2006
|
54,000
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
|||||
|
06/08/2004
|
12/31/2004
|
126,000
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||||
|
02/18/2005
|
02/18/2005
|
130,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||||
|
02/17/2006
|
02/17/2009
|
95,000
|
—
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
|||||
|
03/02/2007
|
03/02/2010
|
—
|
124,694
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||||
|
03/03/2008
|
03/03/2011
|
—
|
111,294
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||||
|
03/02/2009
|
03/02/2012
|
—
|
148,722
|
$
|
22.1700
|
03/02/2019
|
—
|
$
|
—
|
|||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
15,502
|
16
|
$
|
883,459
|
||||
|
D.B.
Burritt
|
06/10/2003
|
06/10/2006
|
23,100
|
—
|
$
|
27.1425
|
06/10/2013
|
—
|
$
|
—
|
||||
|
06/08/2004
|
12/31/2004
|
23,100
|
—
|
$
|
38.6275
|
06/08/2014
|
—
|
$
|
—
|
|||||
|
02/18/2005
|
02/18/2005
|
54,000
|
—
|
$
|
45.6425
|
02/18/2015
|
—
|
$
|
—
|
|||||
|
02/17/2006
|
02/17/2009
|
48,000
|
$
|
72.0500
|
02/17/2016
|
—
|
$
|
—
|
||||||
|
03/02/2007
|
03/02/2010
|
—
|
47,342
|
$
|
63.0400
|
03/02/2017
|
—
|
$
|
—
|
|||||
|
03/03/2008
|
03/03/2011
|
—
|
45,909
|
$
|
73.2000
|
03/03/2018
|
—
|
$
|
—
|
|||||
|
03/02/2009
|
03/02/2012
|
—
|
71,176
|
$
|
22.1700
|
03/02/2019
|
$
|
|||||||
|
—
|
—
|
—
|
—
|
$
|
—
|
—
|
9,493
|
17
|
$
|
541,007
|
||||
|
1
|
SARs granted
in 2009 are exercisable three years after the grant date. The
SARs were granted with a 10-year term, subject to earlier termination in
the event of separation from service.
|
|||||||||||||
|
2
|
In addition to
the RSUs and restricted stock granted in 2009 to the NEOs (reported in the
2009 Summary Compensation Table), the amounts shown also include the
portion of any prior grants that were not vested as of December 31,
2009. Plan provisions exist for accelerated vesting in the
event of termination due to long-service separation (age 55 with 10 or
more years of company service), death, total disability or change in
control.
|
|||||||||||||
|
3
|
The market
value of the non-vested RSUs and restricted shares (or equivalent shares
in the case of Mr. Vittecoq) is calculated using the closing price of
Caterpillar common stock on December 31, 2009 ($56.99 per
share).
|
|||||||||||||
|
4
|
This amount
includes 14,238 RSUs that are scheduled to vest on March 2, 2010; 14,193
RSUs scheduled to vest on March 3, 2011; and 20,152 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
5
|
This amount
includes 6,664 shares of restricted stock scheduled to vest on March 1,
2010; 1,667 shares scheduled to vest on April 2, 2010; 1,667 shares
scheduled to vest on April 2, 2011; and 1,666 shares scheduled to vest on
April 2, 2012.
|
|||||||||||||
|
6
|
This amount
includes 4,832 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; and 7,335 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
7
|
This amount
includes 998 shares of restricted stock scheduled to vest on March 1,
2010, and 332 shares scheduled to vest on March 1,
2011.
|
|||||||||||||
|
8
|
This amount
includes 2,594 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; and 6,561 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
9
|
This amount
includes 332 shares of restricted stock scheduled to vest on March 1,
2010; 334 shares scheduled to vest on April 2, 2010; 334 shares scheduled
to vest on April 1, 2011; 333 shares scheduled to vest on April 2, 2011;
333 shares scheduled to vest on April 1, 2012; 333 shares scheduled to
vest on April 2, 2012; and 333 shares scheduled to vest on April 1,
2013.
|
|||||||||||||
|
10
|
This amount
includes 4,832 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; 6,561 RSUs scheduled to vest on
March 2, 2012.
|
|||||||||||||
|
11
|
This amount
includes 334 shares of restricted stock scheduled to vest on March 1,
2010, and 332 shares scheduled to vest on March 1,
2011.
|
|||||||||||||
|
12
|
This amount
includes 2,594 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; and 6,561 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
13
|
This amount
includes 334 shares of restricted stock scheduled to vest on April 2,
2010; 167 shares scheduled to vest on April 1, 2011; 333 shares scheduled
to vest on April 2, 2011; 167 shares scheduled to vest on April 1, 2012;
333 shares scheduled to vest on April 2, 2012; and 166 shares scheduled to
vest on April 1, 2013.
|
|||||||||||||
|
14
|
This amount
includes 4,832 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; and 6,925 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
15
|
This amount
includes 726 shares of restricted stock (in phantom form) scheduled to
vest on April 2, 2010; 726 shares (in phantom form) scheduled to vest on
April 2, 2011; and 725 shares (in phantom form) scheduled to vest on April
2, 2012.
|
|||||||||||||
|
16
|
This amount
includes 4,832 RSUs that are scheduled to vest on March 2, 2010; 4,109
RSUs scheduled to vest on March 3, 2011; and 6,561 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
|
17
|
This amount
includes 2,594 RSUs that are scheduled to vest on March 2, 2010; 2,450
RSUs scheduled to vest on March 3, 2011; and 4,449 RSUs scheduled to vest
on March 2, 2012.
|
|||||||||||||
Page 65
|
2009
Option Exercises and Stock Vested
|
|||||||||||||
|
Option
Awards1
|
Stock
Awards2
|
||||||||||||
|
Name
|
Number
of Shares
Acquired
on Exercise
|
Value
Realized
on
Exercise
|
Number
of Shares
Acquired
on Vesting
|
Value
Realized
on
Vesting
|
|||||||||
|
J.W.
Owens
|
108,000
|
$
|
3,090,074
|
6,668
|
$
|
153,964
|
|||||||
|
D.R.
Oberhelman
|
2,601
|
$
|
71,467
|
3,002
|
$
|
80,136
|
|||||||
|
R.P.
Lavin
|
42,132
|
$
|
845,651
|
998
|
$
|
26,636
|
|||||||
|
S.L.
Levenick
|
54,000
|
$
|
1,351,485
|
334
|
$
|
7,712
|
|||||||
|
E.J.
Rapp
|
83,202
|
$
|
2,751,209
|
664
|
$
|
18,924
|
|||||||
|
G.R.
Vittecoq
|
23,968
|
$
|
802,947
|
—
|
$
|
—
|
|||||||
|
S.H.
Wunning
|
48,000
|
$
|
1,025,520
|
—
|
$
|
—
|
|||||||
|
D.B.
Burritt
|
—
|
$
|
—
|
—
|
$
|
—
|
|||||||
|
1
|
Upon exercise,
option holders may surrender shares to pay the option exercise price and
satisfy income tax-withholding requirements. The amounts shown
are gross amounts absent netting for shares
surrendered.
|
||||||||||||
|
2
|
Upon release
of the restricted stock, shares are surrendered to satisfy income
tax-withholding requirements. The amounts shown are gross
amounts absent netting for shares surrendered. Mr. Vittecoq
received a cash payment for the value of his equivalent restricted
shares. Equivalent restricted shares are issued to Mr. Vittecoq
as they provide a tax efficient award under Swiss tax
law.
|
||||||||||||
|
2009
Pension Benefits
|
|||||||||
|
Name
|
Plan
Name 1
|
Number
of Years of
Credited Service 2 |
Present
Value of
Accumulated
Benefit 3
|
Payments
During Last
Fiscal Year |
|||||
|
J.W.
Owens
|
RIP
|
35.00
|
$
|
2,093,089
|
$
|
—
|
|||
|
SERP
|
35.00
|
$
|
16,124,598
|
$
|
—
|
||||
|
D.R.
Oberhelman
|
RIP
|
34.50
|
$
|
1,571,646
|
$
|
—
|
|||
|
SERP
|
34.50
|
$
|
4,717,927
|
$
|
—
|
||||
|
R.P.
Lavin
|
RIP
|
25.25
|
$
|
1,221,891
|
$
|
—
|
|||
|
SERP
|
25.25
|
$
|
2,178,279
|
$
|
—
|
||||
|
S.L.
Levenick
|
RIP
|
32.50
|
$
|
1,480,536
|
$
|
—
|
|||
|
SERP
|
32.50
|
$
|
3,746,719
|
$
|
—
|
||||
|
E.J.
Rapp
|
RIP
|
30.50
|
$
|
1,090,700
|
$
|
—
|
|||
|
SERP
|
30.50
|
$
|
1,740,514
|
$
|
—
|
||||
|
G.R.
Vittecoq
|
Caprevi,
Prevoyance
|
34.17
|
$
|
11,843,800
|
$
|
—
|
|||
|
S.H.
Wunning
|
RIP
|
35.00
|
$
|
1,782,196
|
$
|
—
|
|||
|
SERP
|
35.00
|
$
|
4,716,839
|
$
|
—
|
||||
|
D.B.
Burritt
|
RIP
|
31.92
|
$
|
1,265,440
|
$
|
—
|
|||
|
SERP
|
31.92
|
$
|
1,621,002
|
$
|
—
|
||||
|
1
|
Caterpillar
Inc. Retirement Income Plan (RIP) is a noncontributory U.S. qualified
defined benefit pension plan and the Supplemental Retirement Plan (SERP)
is a U.S. non-qualified pension plan. The benefit formula is
1.5 percent for each year of service (capped at 35 years) multiplied by
the final average earnings during the highest five of the final ten years
of employment. Final average earnings include base salary,
short-term incentive compensation and deferred compensation. If
an employee’s annual retirement income benefit under the qualified plan
exceeds the Internal Revenue Code limitations, the excess benefits are
paid from SERP. SERP is not funded. The same formula
is used to calculate the benefits payable in both the SERP and
RIP. Mr. Vittecoq participates in Caprevi, Prevoyance
Caterpillar, a Swiss pension benefit plan. The Swiss plan
requires participants to contribute approximately seven percent of
pensionable income to the plan. The benefit formula is 1.75
percent for each year of service multiplied by the final average earnings
for the highest three years of a participant’s career. Final
average earnings consist of base salary and short-term incentive pay,
reduced by a prescribed percentage to arrive at “salary considered for
contribution.” The benefit can be received in a 100 percent
lump sum payment or annuity.
|
||||||||
|
2
|
Mr. Owens and
Mr. Wunning have more than 35 years of service with the
Company. Amounts payable under both RIP and SERP are based upon
a maximum of 35 years of service. All RIP and SERP participants
may receive their benefit immediately following termination of employment,
or may defer benefit payments until any time between early retirement age
and normal retirement age. Normal retirement age is defined as
age 65 with five years of service. Early retirement is defined
as: any age with 30 years of service; age 55 with 15 years of service; age
plus service = 85 points; or age 60 with 10 years of
service. If a participant elects early retirement, benefits are
reduced by four percent per year, before age 62. Currently, all
NEOs are eligible to retire. Mr. Lavin, Mr. Levenick, Mr.
Oberhelman, Mr. Rapp, Mr. Wunning and Mr. Burritt are eligible for early
retirement, with a four percent reduction per year under age
62. Mr. Vittecoq is eligible under the Swiss pension plan for a
retirement benefit with no reduction.
|
||||||||
|
3
|
The amount in
this column represents the actuarial present value for each NEO’s
accumulated pension benefit on December 31, 2009, assuming benefits are
payable at each NEO’s earliest unreduced retirement age based upon current
level of pensionable income. The interest rate of 5.80 percent
and the RP2000 mortality table used in the calculations are based upon the
FASB ASC 715 disclosure on December 31, 2009. Mr. Vittecoq’s
pension measurement date changed from a fiscal (September to September)
date to a calendar date in 2009. Mr. Vittecoq’s lump sum
present value accumulated benefit is based upon the 12 month pension
measurement date ending on December 31, 2009. The EVK 2000
mortality table and the Swiss disclosure interest rate of 3.25 percent
were used to calculate Mr. Vittecoq’s
benefit.
|
||||||||
Page 66
|
2009
Nonqualified Deferred Compensation 1
|
|||||||||||||||
|
Name
|
Plan
Name
|
Executive
Contributions
in
2009 1
|
Registrant
Contributions
in
2009 2
|
Aggregate
Earnings
in
2009
3
|
Aggregate
Balance
at
12/31/09 4
|
||||||||||
|
J.W.
Owens
|
SDCP
|
$
|
189,494
|
$
|
189,494
|
$
|
491,230
|
$
|
1,833,156
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
168,362
|
$
|
709,933
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
257,481
|
$
|
1,105,316
|
|||||||
|
D.R.
Oberhelman
|
SDCP
|
$
|
71,491
|
$
|
71,491
|
$
|
370,307
|
$
|
1,219,547
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
122,680
|
$
|
500,324
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
161,667
|
$
|
659,323
|
|||||||
|
R.P.
Lavin
|
SDCP
|
$
|
161,400
|
$
|
51,974
|
$
|
303,969
|
$
|
760,181
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
45,051
|
$
|
183,732
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
3,012
|
$
|
12,285
|
|||||||
|
S.L.
Levenick
|
SDCP
|
$
|
240,040
|
$
|
68,491
|
$
|
379,830
|
$
|
2,125,909
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
7,337
|
$
|
30,444
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
531,671
|
$
|
3,317,614
|
|||||||
|
E.J.
Rapp
|
SDCP
|
$
|
51,974
|
$
|
51,974
|
$
|
340,888
|
$
|
1,222,127
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
11,419
|
$
|
47,596
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
79,997
|
$
|
611,986
|
|||||||
|
G.R.
Vittecoq
|
EIP
|
$
|
53,757
|
$
|
35,838
|
$
|
542,394
|
$
|
2,197,860
|
||||||
|
S.H.
Wunning
|
SDCP
|
$
|
390,255
|
$
|
68,491
|
$
|
297,176
|
$
|
2,362,309
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
80,492
|
$
|
328,566
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
222,581
|
$
|
909,210
|
|||||||
|
D.B.
Burritt
|
SDCP
|
$
|
151,304
|
$
|
42,684
|
$
|
72,914
|
$
|
606,364
|
||||||
|
SEIP
|
$
|
—
|
$
|
—
|
$
|
399
|
$
|
17,231
|
|||||||
|
DEIP
|
$
|
—
|
$
|
—
|
$
|
12,920
|
$
|
96,227
|
|||||||
|
1
|
The
Supplemental Deferred Compensation Plan (SDCP) is a non-qualified deferred
compensation plan created in March of 2007 with a retroactive effective
date of January 1, 2005, which effectively replaced the existing plans,
Supplemental Employees’ Investment Plan (SEIP) and Deferred Employees’
Investment Plan (DEIP). All future contributions will be made
under SDCP.
|
|
2
|
SDCP allows
eligible U.S. employees, including all NEOs (except Mr. Vittecoq), to
voluntarily defer a portion of their base salary and short-term incentive
pay into the plan and receive a Company matching
contribution. LTCPP pay may also be deferred, but does not
qualify for any Company matching contributions. Mr. Vittecoq is
a participant in a non-U.S. Employee Investment Plan that allows him to
contribute a portion of his base salary to the plan and receive a Company
matching contribution. Amounts deferred by executives in 2009
for base salary, short-term incentive pay and/or long-term cash
performance payouts are included in the 2009 Summary Compensation
Table. Matching contributions in non-qualified deferred
compensation plans made by Caterpillar in 2009 are also included in the
2009 All Other Compensation Table under the Matching Contributions SDCP
column. SDCP participants may elect a lump sum payment, or an
installment distribution payable for up to 15 years after
separation.
|
|
3
|
Aggregate
earnings comprise interest, dividends, capital gains and
appreciation/depreciation of investment results.
|
|
4
|
This column
includes any amounts deferred under SEIP and/or DEIP prior to the creation
of SDCP. The investment choices available to the participant
mirror those of our 401(k) plan. Amounts in this column were
previously reported in the Summary Compensation table for the years 2007 -
2009 as follows: Mr. Owens $1,143,892; Mr. Oberhelman $595,261;
Mr. Lavin $315,318; Mr. Levenick $829,753; Mr. Rapp $146,428; Mr. Vittecoq
$260,313; Mr. Wunning $1,396,360; and Mr. Burritt
$362,062.
|
Page 67
General
Caterpillar does
not have any special severance agreements or packages (such as golden
parachutes) under which payments are to be made to any NEO. Potential
payments to NEOs may, however, be available under the terms of existing
compensation and benefit programs in the case of 1) termination (including
voluntary separation, termination for cause or long-service separation) or 2) a
change in control of the Company. The terms applicable to these
potential payments in various termination scenarios are discussed
below.
The following
payments are not quantified in the following tabular information: Payments that
would be provided to an NEO under plans generally available to management
employees who are similarly situated to the NEOs in age, years of service, date
of hire, etc. and that do not discriminate in favor of the NEOs (such as death
and disability benefits, retiree medical and life insurance
benefits). The discussion below assumes that each NEO is eligible for
benefits unless otherwise noted.
The following
narrative and tabular information describes and quantifies certain payments and
benefits that would become payable under existing plans and arrangements if the
named executive’s employment had terminated on December 31, 2009. The
information is provided relative to the NEO’s compensation and service levels as
of the date specified. If applicable, they are based on the Company’s
closing stock price on December 31, 2009.
Terms
of Potential Payments - Termination
The terms of
potential payments to NEOs in each of the following termination scenarios under
existing compensation and benefit programs follows:
|
|
§
|
Voluntary
Separation (resignation or termination without
cause)
|
|
|
§
|
Termination
for Cause (termination)
|
|
|
§
|
Long-Service
Separation (retirement)
|
Equity
awards
Unvested equity
awards granted to NEOs in accordance with the long-term plan become fully vested
and exercisable upon retirement. In the event of resignation, NEOs
keep vested equity awards but forfeit any that are not yet vested. If
terminated, equity awards that are outstanding (whether vested or unvested) will
expire. Potential amounts and assumptions regarding equity awards are
included in the Potential Payments upon Termination or Change in Control table
(Potential Payments table) on page 70. These terms are applicable to
all employees covered by the LTIP.
Short-term incentive
pay
In the event of retirement at December 31, 2009, NEOs
would be eligible to receive the amount otherwise payable to them for the 2009
plan year under their applicable STIP. In the case of termination or
resignation at December 31, 2009, the NEO would forfeit all short-term incentive
pay. Potential amounts and assumptions regarding the short-term
incentive pay are included in the Potential Payments table on page
70.
Long-term performance
awards
In the event of retirement at December 31, 2009, NEOs
would be eligible to receive amounts otherwise payable to them under the LTCPP
feature of the Caterpillar Inc. 2006 Long-Term Incentive Plan and the 1996 Stock
Option and Long-Term Incentive Plan. The NEOs’ eligibility and award
amount would be determined at the conclusion of the performance period,
depending on the achievement of the established performance
criteria. Potential amounts and assumptions regarding the short-term
incentive pay are included in the Potential Payments table on page
70. These terms are applicable to all
employees covered by these long-term plans.
Page 68
Deferred
compensation
The 2009 Nonqualified Deferred Compensation table
on page 67 describes unfunded, non-qualified deferred compensation
plans that permit the deferral of salary, bonus and short-term cash performance
awards by NEOs. These plans also provide for matching contributions
by the Company. LTCPP pay may also be deferred, but is not eligible
for a Company matching contribution.
NEOs are eligible
to receive the amount in their deferred compensation accounts following
termination under any termination scenario unless the named executive elects to
further defer payment as permitted by the plans. The Non-Qualified
Deferred Compensation column of the Potential Payments table assumes the NEO
terminated employment at December 31, 2009 with no further deferral of
payments.
Severance
pay
Other than in
accordance with the terms of existing compensation and benefit programs, the
Company is not obligated to provide any special severance payments to any
NEOs.
Perquisites
In the event of
retirement, perquisites such as security may be provided to the NEO, at the
discretion of the Compensation Committee.
Pension
benefits
The footnotes to the 2009 Pension Benefits table on
page 66 include a description of the
defined benefit pension plans (qualified and non-qualified) in which the NEOs
participate, including the years of credited service and the present value of
each NEO’s accumulated pension benefit. These pension benefits are
available to management employees generally and are not quantified in the
tabular information in the Potential Payments table.
Terms
& Potential Payments – Change in Control
Change in control provisions within our long and
short-term plans generally provide for accelerated vesting. Potential
payment amounts and assumptions are included in the following Potential Payments
table. These change in control
provisions are designed so that employees are not harmed in the event of
termination of employment without cause or for good reason within 12 months
following a change in control. The provisions are intended to ensure
that executives evaluate business opportunities in the best interests of
stockholders. The terms are applicable to all employees covered by
these plans and there are no payments made for voluntary separation, resignation
or termination for cause.
Page 69
|
Potential
Payments Upon Termination or Change in Control
|
||||||||||||||||||||
|
Equity
Awards
|
Incentive
|
|||||||||||||||||||
|
Name
|
Termination
Scenario
|
Stock
Options/
SARs 1
|
Restricted
Stock/ RSUs 2
|
Short-term
Incentive 3
|
Long-term
Incentive 4
|
Non-Qualified
Deferred
Compensation 5
|
Total
|
|||||||||||||
|
J.W.
Owens
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
3,648,405
|
$
|
3,648,405
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
17,555,548
|
$
|
3,433,477
|
$
|
0
|
$
|
2,635,007
|
$
|
3,648,405
|
$
|
27,272,437
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
3,648,405
|
$
|
3,648,405
|
||||||||
|
Change in
Control
|
$
|
17,555,548
|
$
|
3,433,477
|
$
|
4,000,000
|
$
|
3,952,510
|
$
|
3,648,405
|
$
|
32,589,940
|
||||||||
|
D.R.
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,379,195
|
$
|
2,379,195
|
|||||||
| Oberhelman |
Long-Service
Separation/Retirement
|
$
|
5,788,895
|
$
|
1,003,366
|
$
|
0
|
$
|
1,074,557
|
$
|
2,379,195
|
$
|
10,246,013
|
|||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,379,195
|
$
|
2,379,195
|
||||||||
|
Change in
Control
|
$
|
5,788,895
|
$
|
1,003,366
|
$
|
1,459,992
|
$
|
1,611,835
|
$
|
2,379,195
|
$
|
12,243,283
|
||||||||
|
R.P.
Lavin
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
956,198
|
$
|
956,198
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
5,178,500
|
$
|
888,816
|
$
|
0
|
$
|
642,404
|
$
|
956,198
|
$
|
7,665,918
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
956,198
|
$
|
956,198
|
||||||||
|
Change in
Control
|
$
|
5,178,500
|
$
|
888,816
|
$
|
1,168,008
|
$
|
963,607
|
$
|
956,198
|
$
|
9,155,129
|
||||||||
|
S.L.
Levenick
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
5,473,967
|
$
|
5,473,967
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
5,178,500
|
$
|
921,414
|
$
|
0
|
$
|
802,996
|
$
|
5,473,967
|
$
|
12,376,877
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
5,473,967
|
$
|
5,473,967
|
||||||||
|
Change in
Control
|
$
|
5,178,500
|
$
|
921,414
|
$
|
1,459,992
|
$
|
1,204,493
|
$
|
5,473,967
|
$
|
14,238,366
|
||||||||
|
E.J.
Rapp
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,881,709
|
$
|
1,881,709
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
5,178,500
|
$
|
841,400
|
$
|
0
|
$
|
642,404
|
$
|
1,881,709
|
$
|
8,544,013
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,881,709
|
$
|
1,881,709
|
||||||||
|
Change in
Control
|
$
|
5,178,500
|
$
|
841,400
|
$
|
1,168,008
|
$
|
963,607
|
$
|
1,881,709
|
$
|
10,033,224
|
||||||||
|
G.R.
Vittecoq
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
$
|
—
|
$
|
—
|
$
|
2,197,860
|
$
|
2,197,860
|
||||||||
|
Long-Service
Separation/Retirement
|
$
|
5,465,417
|
$
|
1,028,271
|
$
|
0
|
$
|
955,687
|
$
|
2,197,860
|
$
|
9,647,235
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
2,197,860
|
$
|
2,197,860
|
||||||||
|
Change in
Control
|
$
|
5,465,417
|
$
|
1,028,271
|
$
|
1,791,912
|
$
|
1,433,530
|
$
|
2,197,860
|
$
|
11,916,990
|
||||||||
|
S.H.
Wunning
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
3,600,085
|
$
|
3,600,085
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
5,178,500
|
$
|
883,459
|
$
|
0
|
$
|
802,996
|
$
|
3,600,085
|
$
|
10,465,040
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
3,600,085
|
$
|
3,600,085
|
||||||||
|
Change in
Control
|
$
|
5,178,500
|
$
|
883,459
|
$
|
1,459,992
|
$
|
1,204,493
|
$
|
3,600,085
|
$
|
12,326,529
|
||||||||
|
D.B.
Burritt
|
Voluntary
Separation/Resignation
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
719,822
|
$
|
719,822
|
|||||||
|
Long-Service
Separation/Retirement
|
$
|
2,478,348
|
$
|
541,006
|
$
|
0
|
$
|
451,750
|
$
|
719,822
|
$
|
4,190,926
|
||||||||
|
Termination
for Cause
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
719,822
|
$
|
719,822
|
||||||||
|
Change in
Control
|
$
|
2,478,348
|
$
|
541,006
|
$
|
0
|
$
|
677,625
|
$
|
719,822
|
$
|
4,416,801
|
||||||||
|
1
|
In
the event of termination of employment due to a change in control, maximum
payout factors are assumed for amounts payable under the Caterpillar Inc.
2006 Long-Term Incentive Plan (LTIP) and the prior plan, the Caterpillar
Inc. 1996 Stock Option and Long-Term Incentive Plan and
ESTIP. Additionally, all unvested stock options, SARs,
restricted stock and RSUs vest immediately. Stock options and
SARs remain exercisable over the normal life of the grant. For
valuation purposes as of December 31, 2009, when the closing price of
Caterpillar common stock was $56.99, grants for 2007 and 2008 were “under
water,” with grant prices of $63.04 and $73.20, respectively; the 2009
grant, with a $22.17 grant price, was in the money by
$34.82. The 2007, 2008 and 2009 grants were not fully vested as
of December 31, 2009. For separations due to long-service
separation/retirement, death and disability, the life of the equity grant
is reduced to a maximum of 60 months from the date of separation or 10
years from the original granting date, whichever occurs
first. For voluntary separations, the equity grant life is
reduced to 60 days from the date of separation.
|
|
2
|
The
LTIP allows immediate vesting to occur on outstanding restricted stock and
RSUs in the event of a change in control. The valuation shown
is based upon the number of shares vesting multiplied by the closing price
of Caterpillar common stock on December 31, 2009, which was $56.99 per
share.
|
|
3
|
ESTIP
provisions provide for the maximum payout allowed under the plan in the
event of a change in control. The plan provisions limit the
payout to a maximum of $4 million in any single year. Mr.
Owens’ payout for a change in control is capped at $4
million. This amount is less than his plan payout at
maximum. Therefore, amounts shown for change in control
represent the maximum payout available under ESTIP for all NEOs, with the
exception of Mr. Burritt. Mr. Burritt is a participant in STIP,
which has no plan provisions for a change in control. Thus, Mr.
Burritt’s amount shown for change in control is his actual payout
available under the plan. In the event of a voluntary
separation or termination for cause before the completion of the
performance period, both the ESTIP and STIP plan participant forfeit any
benefit. Participants in both the ESTIP and STIP who separate
due to long-service separation/retirement receive a prorated benefit based
on the time of active employment during the performance
period.
|
|
4
|
The
LTCPP provisions provide for maximum payout allowed for each open plan
cycle in the event of a change in control. Participants who separate via a
change in control receive a prorated benefit based on the time of active
employment during the performance period. Change in control
amounts shown for all NEOs represent a prorated benefit at maximum payout
for plan cycles 2008-2010 and 2009-2011, both of which are open cycles as
of December 31, 2009. Plan provisions in effect for the
2008-2010 and 2009-2011 performance cycle restrict Mr. Owens’ payout to $5
million per plan cycle. The 2007-2009 plan cycle amounts are
not shown as this cycle was fully vested as of December 31,
2009. Participants who separate via a long-service
separation/retirement receive a prorated benefit based on the time of
active employment during the performance period. The amount
shown for long-service separation/retirement is the NEO’s prorated benefit
based on a target payout for plan cycles 2008-2010 and 2009-2011, both of
which were open cycles as of December 31, 2009. Participants
forfeit any benefit upon a voluntary separation or a termination for cause
that occurs prior to the completion of the performance
period.
|
|
5
|
Amounts
assume Termination or Change in Control separation occurring on December
31, 2009, with no further deferral of available
funds.
|
Of our current
Board members, only Mr. Owens is a salaried employee of Caterpillar.
Non-employee directors are compensated for Board service. For 2009,
compensation for non-employee directors was comprised of the following
components:
|
Retainer:
|
$208,000
annually (effective April, 2009)
|
||
|
Committee
Chairman Stipend:
|
Audit
|
$15,000
annually
|
|
|
Compensation
|
$10,000
annually
|
||
|
Governance
|
$10,000
annually
|
||
|
Public
Policy
|
$10,000
annually
|
||
|
Audit
Committee Members Stipend:
|
$10,000
annually
|
||
In April of 2009,
the cash retainer fee was increased from $90,000 to $208,000. This
increase in the retainer was to compensate for the elimination of the annual
equity grant to directors. In conjunction with this increase, new
target ownership guidelines were implemented that require directors to own
Caterpillar common stock in the amount of two and one half times their annual
retainer fee. Directors have a five-year period to meet the new
target ownership guidelines.
In addition to the
above, the Company reimburses non-employee directors’ expenses related to
meeting attendance.
Under Caterpillar’s
Directors’ Deferred Compensation Plan (DDCP), directors may defer 50 percent or
more of their annual retainer and stipend in an interest-bearing account or an
account representing equivalent shares of Caterpillar stock.
Eligible directors may also participate in a Charitable
Award Program. Under the program, a donation of up to $1 million will
be made by the Company, in the director’s name, in 10 equal annual installments,
with the first installment to be made as soon as practicable after the
director’s death. Of the total donation, half will be donated to the
eligible tax-exempt organization(s) selected by the director, and the remainder
will be directed to the Caterpillar Foundation. The maximum amount
payable is $1 million on behalf of each eligible director. The sum is
based on the director’s length of service. The program is financed
through the purchase of life insurance policies. Directors derive no
financial benefit from the program. Premiums paid by the Company for
this program are included in the following 2009 All Other Director Compensation
Table for non-employee directors and in the 2009 All Other Compensation Table on
page 62 for Mr.
Owens.
Page 71
|
Director
Compensation for 2009
|
||||||||||||||||
|
Director
|
Fees
Earned or
Paid
in Cash
|
Stock
Awards
1
|
Option
Awards
1
|
All
Other
Compensation
2
|
Total
|
|||||||||||
|
W. Frank
Blount
|
$
|
188,505
|
$
|
N/A
|
$
|
N/A
|
$
|
5,500
|
$
|
194,005
|
|
|||||
|
John R.
Brazil
|
$
|
181,008
|
$
|
N/A
|
$
|
N/A
|
$
|
1,500
|
$
|
182,508
|
||||||
|
Daniel M.
Dickinson
|
$
|
186,003
|
$
|
N/A
|
$
|
N/A
|
$
|
3,000
|
$
|
189,003
|
||||||
|
John T.
Dillon
|
$
|
200,592
|
$
|
N/A
|
$
|
N/A
|
$
|
3,500
|
$
|
204,092
|
||||||
|
Eugene V.
Fife
|
$
|
188,923
|
$
|
N/A
|
$
|
N/A
|
$
|
34,879
|
$
|
223,802
|
||||||
|
Gail D.
Fosler
|
$
|
181,838
|
$
|
N/A
|
$
|
N/A
|
$
|
—
|
$
|
181,838
|
||||||
|
Juan
Gallardo
|
$
|
178,506
|
$
|
N/A
|
$
|
N/A
|
$
|
25,024
|
$
|
203,530
|
||||||
|
David R.
Goode
|
$
|
188,505
|
$
|
N/A
|
$
|
N/A
|
$
|
35,700
|
$
|
224,205
|
||||||
|
Peter A.
Magowan
|
$
|
178,506
|
$
|
N/A
|
$
|
N/A
|
$
|
1,500
|
$
|
180,006
|
||||||
|
William A.
Osborn
|
$
|
188,505
|
$
|
N/A
|
$
|
N/A
|
$
|
25,024
|
$
|
213,529
|
||||||
|
Charles D.
Powell
|
$
|
188,505
|
$
|
N/A
|
$
|
N/A
|
$
|
34,879
|
$
|
223,384
|
||||||
|
Edward B.
Rust, Jr.
|
$
|
178,506
|
$
|
N/A
|
$
|
N/A
|
$
|
36,560
|
$
|
215,066
|
||||||
|
Susan C.
Schwab
|
$
|
121,338
|
$
|
N/A
|
$
|
N/A
|
$
|
4,000
|
$
|
125,338
|
||||||
|
Joshua I.
Smith
|
$
|
178,506
|
$
|
N/A
|
$
|
N/A
|
$
|
1,500
|
$
|
180,006
|
||||||
|
1
|
In April of
2009, the cash retainer fee was increased from $90,000 to
$208,000. This increase in the retainer was to compensate for
the elimination of the annual equity grant to directors. In
conjunction with this increase, new target ownership guidelines were
implemented that require directors to own Caterpillar common stock in the
amount of two and one half times their annual retainer
fee. Directors have a five-year period to meet the new target
ownership guidelines. As of December 31, 2009, the number of
shares of stock/ vested and non-vested options held by each non-employee
director was: Mr. Blount: 18,033/ 62,439 which consists of
(48,000 non-qualified stock options (NQs), 12,833 SARs and 1,606 RSUs);
Mr. Brazil: 8,803/ 38,439 which consists of (24,000 NQs, 12,833 SARs and
1,606 RSUs); Mr. Dickinson: 3,820/ 7,439 which consists of (5,833 SARs and
1,606 RSUs); Mr. Dillon: 23,429/ 62,439 which consists of (48,000 NQs,
12,833 SARs and 1,606 RSUs); Mr. Fife: 22,000/ 38,439 which consists of
(24,000 NQs, 12,833 SARs and 1,606 RSUs); Ms. Fosler: 8,515/
30,439 which consists of (16,000 NQs, 12,833 SARs and 1,606
RSUs); Mr. Gallardo: 212,756/ 62,439 which consists of (48,000
NQs, 12,833 SARs and 1,606 RSUs); Mr. Goode: 51,800/ 54,439
which consists of (40,000 NQs, 12,833 SARs and 1,606 RSUs); Mr.
Magowan: 304,980/ 30,439 which consists of (16,000 NQs, 12,833 SARs and
1,606 RSUs); Mr. Osborn: 26,699/ 38,439 which consists of
(24,000 NQs, 12,833 SARs and 1,606 RSUs); Mr. Powell: 6,387/
54,439 which consists of (40,000 NQs, 12,833 SARs and 1,606
RSUs); Mr. Rust: 4,933/ 38,439 which consists of (24,000 NQs,
12,833 SARs and 1,606 RSUs); Ms. Schwab: 1,518/0 and Mr. Smith: 16,352/
34,439 which consists of (20,000 NQs, 12,833 SARs and 1,606
RSUs). In addition, Mr. Owens, the only employee director
serving on the Board, held the following number of shares of stock/ vested
and non-vested options on December 31, 2009: 345,336/ 2,821,249 which
consists of (1,290,000 NQs, 1,482,666 SARs and 48,583
RSUs).
|
|
2
|
All Other
Compensation represents Company matching gift contributions and premium
cost, plus administrative fees associated with the Directors’ Charitable
Award Program.
|
|
2009
All Other Director Compensation Table
|
||||||||||
|
Director
|
Company
Matching
Gift
Contributions 1
|
Director’s Charitable Award
Program – Insurance Premiums and
Administrative Costs 2 |
Total
|
|||||||
|
W. Frank
Blount
|
$
|
4,000
|
$
|
1,500
|
$
|
5,500
|
||||
|
John R.
Brazil
|
$
|
—
|
$
|
1,500
|
$
|
1,500
|
||||
|
Daniel M.
Dickinson
|
$
|
2,000
|
$
|
1,000
|
$
|
3,000
|
||||
|
John T.
Dillon
|
$
|
2,000
|
$
|
1,500
|
$
|
3,500
|
||||
|
Eugene V.
Fife
|
$
|
—
|
$
|
34,879
|
$
|
34,879
|
||||
|
Gail D.
Fosler
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Juan
Gallardo
|
$
|
—
|
$
|
25,024
|
$
|
25,024
|
||||
|
David R.
Goode
|
$
|
34,200
|
$
|
1,500
|
$
|
35,700
|
||||
|
Peter A.
Magowan
|
$
|
—
|
$
|
1,500
|
$
|
1,500
|
||||
|
William A.
Osborn
|
$
|
—
|
$
|
25,024
|
$
|
25,024
|
||||
|
Charles D.
Powell
|
$
|
—
|
$
|
34,879
|
$
|
34,879
|
||||
|
Edward B.
Rust, Jr.
|
$
|
4,000
|
$
|
32,560
|
$
|
36,560
|
||||
|
Susan C.
Schwab
|
$
|
4,000
|
$
|
—
|
$
|
4,000
|
||||
|
Joshua I.
Smith
|
$
|
—
|
$
|
1,500
|
$
|
1,500
|
||||
|
1
|
Outside
directors are eligible to participate in the Caterpillar Foundation
Matching Gift Program. The Foundation will match contributions
to eligible two-year or four-year colleges or universities, arts and cultural institutions,
public policy and environmental organizations, up to a maximum of
$2,000 per eligible organization per calendar year.
|
|||||||||
|
2
|
The amounts
listed represent the named directors’ year 2009 insurance premium and
administrative fee. For directors whose policy premiums are
fully paid up, the amount shown represents only the administrative fee of
$1,500.
|
|||||||||
Page 72
The Compensation
Committee regularly reviews the Company’s compensation policies and practices,
including the risks created by the Company’s compensation plans. In
addition, the Company also conducted a review of its compensation plans and
related risks to the Company. The Company reviewed its analysis with
the Compensation Committee, and the Compensation Committee concluded that the
compensation plans reflected the appropriate compensation goals and
philosophies. Based on this review and analysis, the Company has
concluded that any risks arising from its employee compensation policies and
practices are not reasonably likely to have a material adverse effect on the
Company.
Section 16(a) Beneficial Ownership Reporting
Compliance
Based upon a review
of our records, all reports required to be filed pursuant to Section 16(a) of
the Securities Exchange Act of 1934 were filed on a timely basis, except one
Form 4 filed with the SEC on April 14, 2009 reporting that 196 shares were
surrendered to satisfy tax withholding requirements upon the vesting of
restricted stock held by James B. Buda on April 1, 2009.
Director Legal Proceedings
On May 11, 2000,
the First Circuit Court in Mexico City granted Grupo Azucarero México, S.A. de
C.V., a public company of which Juan Gallardo is the controlling stockholder,
suspension of payments protection, which was at that time a legal protection
under Mexican law similar to Chapter 11 of the U.S. Bankruptcy
Code. This protection enabled the company to continue its operations
pending a debt restructuring. In August 2006, the company and its
subsidiaries reached an agreement with its creditors and such agreement was
approved by the Mexican Court. As a result of the foregoing Grupo
Azucarero México, S.A. de C.V. is no longer under the suspension of payments
protection. Pursuant to the agreed debt restructuring, the company paid 80
percent of its debt on August 30, 2008.
Matters Raised at the Meeting not Included in this
Statement
We do not know of
any matters to be acted upon at the Annual Meeting other than those discussed in
this statement. If any other matter is properly presented, proxy
holders will vote on the matter in their discretion.
Under Caterpillar
Bylaws, a stockholder may bring a matter to vote at the Annual Meeting by giving
adequate notice to Caterpillar Inc. by mail c/o Corporate Secretary at 100 NE
Adams Street, Peoria, Illinois 61629. To qualify as adequate, the
notice must contain information specified in our Bylaws and be received by us
not less than 45 days nor more than 90 days prior to the Annual
Meeting. However, if less than 60 days notice of the Annual Meeting
date is given to stockholders, notice of a matter to be brought before the
Annual Meeting may be provided to us up to the 15th day
following the date notice of the Annual Meeting was provided.
Page 73
Admission
Admission is limited
to stockholders of record on April 12, 2010 and one immediate family member, or
one individual designated as a stockholder’s authorized proxy holder or one
representative designated in writing to present a stockholder
proposal. In each case, the individual must have an admission ticket
and valid government issued photo identification to be admitted to the Annual
Meeting. In addition, share ownership will be verified.
Ticket
Request Deadline
Ticket requests must
include all information specified in the applicable table below and be submitted
in writing and received by Caterpillar on or before May 28, 2010. No
requests will be processed after that date.
To
Submit Request
Submit ticket
requests by mail to James B. Buda, Corporate Secretary, 100 NE Adams Street,
Peoria, Illinois 61629 or by facsimile to 309-494-1467. Ticket
requests by telephone will not be accepted.
Authorized
Proxy Representative
A stockholder may
appoint a representative to attend the Annual Meeting and/or vote on his/her
behalf. The admission ticket must be requested by the stockholder but
will be issued in the name of the authorized
representative. Individuals holding admission tickets that are not
issued in their name will not be admitted to the Annual
Meeting. Stockholder information specified below and a written proxy
authorization must accompany the ticket request.
Proponent
of Stockholder Proposal
For each stockholder
proposal included in this proxy statement, the stockholder sponsor should notify
the Company in writing of the individual authorized to present the proposal on
behalf of the stockholder at the Annual Meeting. One admission ticket
will be issued for the designated representative.
Media
Accredited members of the media must register with the
Company prior to the Annual Meeting. To register, please contact Jim
Dugan by phone 309-494-4100 or e-mail
(Dugan_Jim@CAT.com).
Analysts
Analysts must
register with the Company prior to the Annual Meeting. To register,
please contact Mike DeWalt by phone 309-675-4549 or e-mail
(CATir@CAT.com).
|
Registered
Stockholders
|
Beneficial
Holders
|
|
|
For
ownership verification provide:
|
For
ownership verification provide:
|
|
|
ØName(s) of
stockholder
ØAddress
ØPhone
number
ØSocial security
number and/or stockholder account key; or
ØA copy of your
proxy card or notice showing stockholder name and address
|
ØA copy of your
April brokerage account statement showing Caterpillar stock ownership as
of the record date (4/12/10);
ØA letter from your
broker, bank or other nominee verifying your record date (4/12/10)
ownership; or
ØA copy of your
brokerage account voting instruction card showing stockholder name and
address
|
|
|
Also
include:
|
Also
include:
|
|
|
ØName of immediate
family member guest, if not a stockholder
ØName of authorized
proxy representative, if applicable
ØAddress where
tickets should be mailed and phone number
|
ØName of immediate
family member guest, if not a stockholder
ØName of authorized
proxy representative, if applicable
ØAddress where
tickets should be mailed and phone
number
|
Page 74
|
Appendix A – Proposed Amendments to 2006 Long-Term
Incentive Plan
|
If Proposal 3 is approved by stockholders at the 2010 Annual Meeting, the following amendments to the 2006 Long-Term Incentive Plan will be adopted.
Caterpillar
Inc.
2006
Long-Term Incentive Plan
(AS
AMENDED AND RESTATED)
Section
1.
Establishment,
Objectives and Duration
1.1. Establishment. Subject
toWith
the approval of the stockholders of Caterpillar Inc., a Delaware corporation
(the “Company”), the Company has established
the Caterpillar Inc. 2006 Long-Term Incentive Plan (the “Plan”), as set forth
herein.
effective June 14, 2006. The Plan supersedes and replaces all
prior equity and non-equity long-term incentive compensation plans or programs
maintained by the Company; provided that, any prior plans of the Company shall
remain in effect until all awards granted under such prior plans have been
exercised, forfeited, canceled, expired or otherwise terminated in accordance
with the terms of such grants.
1.2. Purpose. The
Plan is intended to provide certain present and future employees and Directors
cash-based incentives, stock-based incentives and other equity interests in the
Company thereby giving them a stake in the growth and prosperity of the Company
and encouraging the continuance of their services with the Company or its
Subsidiaries.
1.3. Effective Date. The
Plan iswas
originally effective on June 14, 2006. This amendment and restatement
of the Plan shall be effective as of the later of (a) the date the amendment
and restatement of the Plan is adopted by the Board or (b) the date the
Company’s stockholders approve the amendment
and restatement of the Plan (the “Effective Date”). The
amendment and restatement of the Plan will be deemed to be approved by
the stockholders if it receives the affirmative vote of the holders of a
majority of the shares of stock of the Company present or represented and
entitled to vote at a meeting duly held in accordance with the applicable
provisions of the Certificate of Incorporation or Bylaws of the
Company.
1.4. Duration. The
Plan shall remain in effect, subject to the right of the Company’s Board of
Directors to amend or terminate the Plan at any time pursuant to Section 16,
until all Shares subject to the Plan shall have been purchased or granted
according to the Plan’s provisions. However, in no event may an Award
be granted under the Plan on or after the tenth anniversary of the Effective
Date.original
effective date of the Plan, June 14, 2006. Upon termination of
the Plan, no Awards may be granted but Awards previously granted shall remain
outstanding in accordance with the terms of the Plan and the applicable Award
Document.
Section
2.
Definitions and
Construction
When a word or
phrase appears in the Plan with the initial letter capitalized, and the word or
phrase does not commence a sentence, the word or phrase shall generally be given
the meaning ascribed to it in this Section unless a clearly different meaning is
required by the context. The following words and phrases shall have
the following meanings:
2.1.
“Award” means,
individually or collectively, a grant under the Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares or Performance Units.
Page 75
2.2.
“Award
Document” means any agreement, contract, or other written instrument that
evidences an Award granted to the Participant under the Plan and sets forth the
terms and provisions applicable to such Award.
2.3. “Award Gain” means (a)
with respect to a given Option exercise, the product of (X) the excess of the
Fair Market Value of a Share on the date of exercise over the Option Price times
(Y) the number of shares as to which the Option was exercised at that date, and
(b) with respect to any other settlement of an Award granted to the Participant,
the Fair Market Value of the cash or Shares paid or payable to the Participant
(regardless of any elective deferral pursuant to Section 13) less any cash or
the Fair Market Value of any Shares or property (other than an Award that would
have itself then been forfeitable hereunder and excluding any payment of tax
withholding) paid by the Participant to the Company as a condition of or in
connection such settlement.
2.4. “Board” means the
Board of Directors of the Company.
2.5.
“Cause” means,
except as otherwise provided in an Award Document, a willful engaging in gross
misconduct materially and demonstrably injurious to the Company. For
this purpose, “willful” means an act or omission in bad faith and without
reasonable belief that such act or omission was in or not opposed to the best
interests of the Company.
2.6.
“Change of
Control” means the occurrence of any of the following events: (a) any
person becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
15twenty
percent
(20%) or more of the combined voting power of the Company’s then
outstanding common stock, unless the Board by resolution negates the effect of
this provision in a particular circumstance, deeming that resolution to be in
the best interests of Company stockholders; (b) during any period of two
consecutive years, there shall cease to be a majority of the Board comprised of
individuals who at the beginning of such period constituted the Board; (c) upon
the stockholdersconsummation
of thea
Company approve
astockholder-approved
merger or consolidation which would
resultthat
results in the voting securities of the Company outstanding immediately
prior thereto representing (either by remaining outstanding or by being
converted into voting securities of the surviving entity) less than fifty
percent of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or (d) Company stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.
2.7. “Code” means the
Internal Revenue Code of 1986, as amended from time to time, or any successor
legislation thereto.
2.8.
“Committee”
means the Compensation Committee of the Board, appointed to administer the Plan,
as provided in Section 3.
2.9.
“Company” means
Caterpillar Inc., a Delaware corporation, and any successor to such entity as
provided in Section 18.
2.10.
“Director”
means any individual who is a member of the Board.
2.11.
“Disability”
means, unless otherwise provided for in an employment, change of control or
similar agreement in effect between the Participant and the Company or a
Subsidiary or in an Award Document, (a) in the case of an Employee, the Employee
qualifying for long-term disability benefits under any long-term disability
program sponsored by the Company or Subsidiary in which the Employee
participates, and (b) in the case of a Director, the inability of the Director
to engage in any substantial gainful business activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death, or which has lasted or can be expected to last for a continuous
period of not less than 12 months, as determined by the Committee, based upon
medical evidence.
2.12.
“Effective
Date” means the date specified in Section 1.3.
2.13.
“Employee”
means any employee of the Company or any Subsidiary.
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2.14.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, or any
successor act thereto.
2.15.
“Fair Market
Value” means, as of any given date, the fair market value of a Share on a
particular date determined by such methods or procedures as may be established
from time to time by the Committee. Unless otherwise determined by
the Committee, the Fair Market Value of a Share as of any date shall be the mean
between the high and low prices at which the Share is traded on the New York
Stock Exchange for that date or, if no prices are reported for that date, the
prices on the next preceding date for which prices were
reported. Notwithstanding the foregoing, unless otherwise determined
by the Committee, for purposes of Section 6.5(d) of the Plan, Fair Market Value
means the actual price at which the Shares used to acquire Shares are
sold.
2.16. “Family Member” means
any (a) child; (b) stepchild; (c) grandchild; (d) parent; (e) stepparent; (f)
grandparent; (g) spouse; (h) former spouse; (i) sibling; (j) niece; (k) nephew;
(l) mother-in-law; (m) father-in-law; (n) son-in-law; (o) daughter-in-law; (p)
brother-in-law; or (q) sister-in-law of the Participant (including adoptive
relationships). Family Member also shall mean any person sharing in
the Participant’s household (other than a tenant or an employee).
2.17. “Good Reason” means,
except as otherwise provided in an Award Document, the occurrence of any of the
following circumstances (unless such circumstances are fully corrected by the
Company before a Participant’s termination of employment):
(a) the
Company’s assignment of any duties materially inconsistent with the
Participant’s position within the Company, or which have a significant adverse
alteration in the nature or status of the responsibilities of the Participant’s
employment; or
(b) a
material reduction by the Company in the Participant’s annual base salary,
unless such reduction is part of a compensation reduction program affecting all
similarly situated management employees.
2.18. “Incentive Stock
Option” or “ISO” means the right
to purchase Shares pursuant terms and conditions that provide that such right
will be treated as an incentive stock option within the meaning of Code Section
422, as described in Section 6.
2.19. “Long Service
Separation” means, except as otherwise provided in an Award Document, a
termination of employment with the Company or a Subsidiary after the attainment
of age 55 and the completion of ten or more years of service with the Company
and/or its Subsidiaries. Notwithstanding the foregoing and
notwithstanding anything in an Award Document to the contrary, for purposes of
determining whether a Participant has incurred a Long Service Separation, the
last period of continuous service with Progress Rail Services, Inc. and/or its
subsidiaries and affiliates (“Progress Rail”) prior to May 16, 2006 shall be
considered service with the Company and/or its Subsidiaries, subject to such
administrative rules that the Committee (or its delegate) determines are
appropriate and provided such participant was employed by Progress Rail on May
16, 2006.
2.20. “Named Executive
Officer” means a Participant who is one of the group of covered employees
as defined in the regulations promulgated under Code Section 162(m), or any
successor provision or statute.
2.21.
“Nonqualified Stock
Option” or “NQSO” means the right
to purchase Shares pursuant to terms and conditions that provide that such right
will not be treated as an Incentive Stock Option, as described in Section
6.
2.22.
“Option” means
an Incentive Stock Option or a Nonqualified Stock Option, as described in
Section 6.
2.23.
“Option Price”
means the per share price of a Share available for purchase pursuant to an
Option.
2.24.
“Participant”
means an Employee, prospective Employee, Director, beneficiary or any other
person who has outstanding an Award granted under the Plan, and includes those
former Employees and Directors who have certain post-termination rights under
the terms of an Award granted under the Plan.
Page 77
2.25.
“Performance-Based
Exception” means the exception for performance-based compensation from
the tax deductibility limitations of Code Section 162(m).
2.26.
“Performance
Period” means the time period during which performance goals must be
achieved with respect to an Award, as determined by the Committee.
2.27.
“Performance
Share” means an Award granted to a Participant, as described in Section
9.
2.28.
“Performance
Unit” means an Award granted to a Participant, as described in Section
9.
2.29.
“Period of
Restriction” means the period during which the transfer of Shares of
Restricted Stock is limited in some way, and the Shares are subject to a
substantial risk of forfeiture, as provided in Section 8.
2.30. “Permitted Transferee”
means any one or more of the following: (a) Family Members; (b) a trust in which
the Participant and/or Family Members have more than fifty percent of the
beneficial interest; (c) a foundation in which the Participant and/or Family
Members control the management of the assets; or (d) any other entity in which
the Participant and/or Family Members own more than fifty percent of the voting
interests.
2.31.
“Plan” means
the Caterpillar Inc. 2006 Long-Term Incentive Plan, as set forth
herein.
2.32.
“Restricted
Stock” means an Award of
restricted stock or restricted stock units granted to a Participant
pursuant to Section 8.
2.33. “Section 16 Officer”
means any Employee who is considered an officer of the Company for purposes of
Section 16 of the Exchange Act.
2.34. “Share” or “Shares” means shares
of common stock of the Company.
2.35.
“Stock Appreciation
Right” or “SAR” means an Award,
granted alone or in connection with a related Option, designated as an SAR,
pursuant to the terms of Section 7.
2.36.
“Subsidiary”
means any partnership, limited liability company, corporation, trust or other
entity or association, directly or indirectly, through one or more
intermediaries, controlled by the Company. The term “control,” as
used in the immediately preceding sentence, means, with respect to a corporation
or limited liability company, the right to exercise, directly or indirectly,
more than fifty percent (50%) of the voting rights attributable to the
controlled corporation or limited liability company, and, with respect to any
partnership, trust, other entity or association, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the controlled entity.
2.37.
“Tandem SAR”
means a SAR that is granted in connection with a related Option pursuant to
Section 7, the exercise of which shall require forfeiture of the right to
purchase a Share under the related Option (and when a Share is purchased under
the Option, the Tandem SAR shall similarly be forfeited).
2.38.
“Non-Tandem
SAR” means a SAR that is granted independently of any Options, as
described in Section 7.
Section
3.
Administration
3.1. Plan
Administration. The Committee, or any other committee
appointed by the Board, shall administer the Plan. The Committee or
other committee appointed to administer the Plan shall consist of not less than
two non-Employee Directors of the Company, within the meaning of Rule 16b-3 of
the Exchange Act and not less than two outside directors, within the meaning of
Code Section 162(m). The Board may, from time to time, remove members
from, or add members to, the Committee. Members of the Board shall
fill any vacancies on the Committee. Acts of a majority of the
Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by unanimous consent of the members of the Committee, shall
be valid acts of the Committee.
Page 78
3.2. Authority of the
Committee. Except as limited by law or by the Certificate of
Incorporation or Bylaws of the Company, and subject to the provisions herein,
the Committee shall have full power to select Employees, prospective Employees
and Directors who shall participate in the Plan; determine the sizes and types
of Awards; determine the terms and conditions of Awards in a manner consistent
with the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan’s administration; and amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the sole
discretion of the Committee as provided in the Plan and subject to Section
16. Further, the Committee shall make all other determinations, which
may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate the authority granted to it
herein.
3.3. Electronic
Administration. The Committee may, in its discretion, utilize a system
for complete or partial electronic administration of the Plan and may replace
any written documents described in the Plan with electronic counterparts, as
appropriate.
3.4. Decisions
Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants, and their
estates and beneficiaries.
Section
4.
Shares Subject to
the Plan and Maximum Awards
4.1. Shares Available for
Awards.
(a) The
Shares available for Awards may be either authorized and unissued Shares or
Shares held in or acquired for the treasury of the Company. The
aggregate number of Shares that may be issued or used for reference purposes
under the Plan or with respect to which Awards may be granted shall not exceed
twentyforty
million (20,000,000)40,000,000)
Shares, subject to adjustment as provided in Section 4.3. In
addition, seventeen million six hundred thousand (17,600,000) Shares authorized
but unissued pursuant to the Caterpillar Inc. 1996 Stock Option and Long-Term
Incentive Plan shall be reserved and available for grant under the
Plan. Accordingly,
the total Shares authorized and available for Awards under the Plan are
fifty-seven million six hundred thousand (57,600,000)
Shares. Notwithstanding the foregoing, the aggregate number of
Shares with respect to which ISOs may be granted shall not exceed the number
specified above, and provided
further, that up
tono
more than an aggregate of twenty percent
(20thirty-five
percent (35%) of the authorized Shares under the Plan may be issued with
respect to Awards of Restricted Stock and up to an aggregate of
twenty percent (20%) of the authorized Shares under the Plan may be issued with
respect to Awards of Performance
Shares.
(b) Upon:
(i) a
payout of a Non-Tandem SAR or Tandem SAR in the form of cash;
(ii) a
cancellation, termination, expiration, forfeiture, or lapse for any reason (with
the exception of the termination of a Tandem SAR upon exercise of the related
Options, or the termination of a related Option upon exercise of the
corresponding Tandem SAR) of any Award; or
(iii) payment of an Option
Price or payout of any Award with previously acquired Shares or by withholding Shares which otherwise would be acquired
on exercise or issued upon such payout (excluding shares withheld for the payment of taxes),
the number of
Shares underlying any such Award that were not issued as a result of any of the
foregoing actions shall again be available for the all
purposes of Awards under the Plan
(including, without limitation, for purposes of applying the limitations set
forth in the last sentence of Section 4.1(a)). In addition, in
the case of any Award granted in substitution for an award of a company or
business acquired by the Company or a Subsidiary, Shares issued or issuable in
connection with such substitute Award shall not be counted against the number of
Shares reserved under the Plan, but shall be available under the Plan by virtue
of the Company’s assumption of the plan or arrangement of the acquired company
or business.
Page 79
4.2. Individual Participant
Limitations. Unless and until the Committee determines that an
Award to a Named Executive Officer shall not be designed to comply with the
Performance-Based Exception, the following rules shall apply to grants of such
Awards under the Plan:
(a) Subject
to adjustment as provided in Section 4.3, the maximum aggregate number of Shares
(including Options, SARs, Restricted Stock and Performance Shares to be paid out
in Shares) that may be granted in any one fiscal year to a Participant shall be
eight
hundred thousand (800,000)
Shares.
(b) Except
as otherwise provided in Section 7.5(b) regarding SAR exercise, the maximum
aggregate cash payout (including Performance Units and Performance Shares paid
out in cash) with respect to Awards granted in any one fiscal year that may be
made to any Participant shall be $5five
million
dollars ($5,000,000).
4.3. Adjustments in Authorized
Shares. 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 Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, an adjustment shall be made
in the number and class of Shares available for Awards, the number and class of
and/or price of Shares subject to outstanding Awards granted under the Plan and
the number of Shares set forth in Sections 4.1 and 4.2, to prevent dilution or
enlargement of rights. Such adjustment shall be made in a manner
determined by the Committee, in its sole discretion, to be appropriate and
equitable; provided, however, that (a) no such adjustment shall cause an
increase in the fair value of an Award for purposes of Statement of Financial
Accounting Standards No. 123 (revised 2004) or any successor thereto; and (b)
the number of Shares subject to any Award shall always be a whole number by
rounding any fractional Share (up or down) to the nearest whole
Share.
Section
5.
Eligibility and
Participation
5.1. Eligibility. Persons
eligible to participate in the Plan include all current and future Employees
(including officers), persons who have been offered employment by the Company or
a Subsidiary (provided that such prospective Employee may not receive any
payment or exercise any right relating to an Award until such person begins
employment with the Company or Subsidiary), and Directors, as determined by the
Committee.
5.2. Participation. Subject
to the provisions of the Plan, the Committee shall determine and designate, from
time to time, the Employees, prospective Employees, and Directors to whom Awards
shall be granted, the terms of such Awards, and the number of Shares subject to
such Award.
5.3. Foreign
Participants. In order to assure the viability of Awards
granted to Participants employed in foreign countries, the Committee may provide
for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or
custom. Moreover, the Committee may approve such supplements to, or
amendments, restatements, or alternative versions of the Plan as it may consider
necessary or appropriate for such purposes without thereby affecting the terms
of the Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions shall increase
the share limitations contained in Section 4 of the Plan.
Section
6.
Stock
Options
6.1. Grant of
Options.
(a) Option
Grant. Subject to the terms and provisions of the Plan,
Options may be granted to one or more Participants in such number, upon such
terms and provisions, and at any time and from time to time, as determined by
the Committee, in its sole discretion. The Committee may grant either
Nonqualified Stock Options or (in the case of Options granted to Employees)
Incentive Stock Options, and shall have complete discretion in determining the
number of Options of each granted to each Participant, subject to the
limitations of Section 4. Each Option grant shall be evidenced by a
resolution of the Committee approving the Option grant.
Page 80
(b) Award
Document. All Options shall be evidenced by an Award
Document. The Award Document shall specify the Option Price, the term
of the Option, the number of Shares subject to the Option, and such other
provisions as the Committee shall determine, and which are not inconsistent with
the terms and provisions of the Plan. The Award Document shall also
specify whether the Option is to be treated as an ISO within the meaning of Code
Section 422. If such Option is not designated as an ISO, such Option
shall be a NQSO.
6.2. Option
Price. The Committee shall designate the Option Price for each
Share subject to an Option under the Plan, provided that such Option Price shall
not be less than 100% of the Fair Market Value of Shares subject to an Option on
the date the Option is granted, and which Option Price
may not be subsequently changed by the Committee except pursuant to Section
4.3.. With
respect to a Participant who owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of the stock of the Company or any
Subsidiary, the Option Price of Shares subject to an ISO shall be at least 110%
of the Fair Market Value of such Shares on the ISO’s grant date.
6.3. Term of
Options. Each Option granted to a Participant shall expire at
such time as the Committee shall determine at the time of grant, but in no event
shall be exercisable later than the 10th anniversary of the grant
date. Notwithstanding the foregoing, with respect to ISOs, in the
case of a Participant who owns, directly or indirectly, more than 10% of the
total combined voting power of all classes of the stock of the Company or any
Subsidiary, no such ISO shall be exercisable later than the fifth anniversary of
the grant date.
6.4. Exercise of
Options. Options granted under this Section 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant, and shall be set forth in the applicable
Award Document. Notwithstanding the preceding sentence, the Fair
Market Value of Shares to which ISOs are exercisable for the first time by any
Participant during any calendar year (under all plans of the Company and its
Subsidiaries) may not exceed $100,000. Any ISOs that become
exercisable in excess of such amount shall be deemed NQSOs to the extent of such
excess. If the Award Document does not specify the time or times at
which the Option shall first become exercisable, such an Option shall become
fully vested and exercisable by the Participant on the third anniversary of the
grant date.
6.5. Payment. Options
granted under this Section 6 shall be exercised by the delivery of a notice of
exercise to the Company (or its designated agent(s)), setting forth the number
of Shares with respect to which the Option is to be exercised, accompanied by
full payment for the Shares. The Option Price upon exercise of any
Option shall be payable to the Company in full either:
(a) in
cash or its equivalent, or
(b) by
tendering previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the total Option Price, or
(c) by
cashless exercise through delivery of irrevocable instructions to a broker to
promptly deliver to the Company the amount of proceeds from a sale of shares
having a Fair Market Value equal to the purchase price.
6.6. Termination of Employment or
Service as a Director. The Committee, in its sole discretion,
shall set forth in the applicable Award Document the extent to which a
Participant shall have the right to exercise the Option or Options following
termination of his or her employment with the Company or any Subsidiary or
following termination of his or her service as a Director. Such
provisions need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for such termination,
including, but not limited to, termination for Cause or for Good Reason, or
reasons relating to the breach or threatened breach of restrictive
covenants. Subject to Section 15, in the event that a Participant’s
Award Document does not set forth such provisions, the following provisions
shall apply:
(a) Long Service Separation,
Death or Disability. If a Participant’s employment with the
Company and/or any Subsidiary or service as a Director terminates by reason of
Long Service Separation, death or Disability, to the extent that the Option is
not exercisable, all Shares covered by his or her Options shall immediately
become fully vested and shall remain exercisable until the earlier of (i) the
remainder of the term of the Option, or (ii) 60 months from the date of such
termination. In the case of the Participant’s death, the
Participant’s beneficiary or estate may exercise the Option.
Page 81
(b) Termination for
Cause. If a Participant’s employment with the Company and/or
any Subsidiary or service as a Director terminates for Cause, all Options
granted to such Participant shall expire immediately and all rights to purchase
Shares (vested or nonvested) under the Options shall cease upon such
termination.
(c) Other Termination. If
a Participant’s employment with the Company and/or any Subsidiary or service as
a Director terminates for any reason other than Long Service Separation, death,
Disability, or for Cause, all Options shall remain exercisable until the earlier
of (i) the remainder of the term of the Option, or (ii) 60 days from the date of
such termination. In such circumstance, the Option shall only be
exercisable to the extent that it was exercisable as of such termination date
and shall not be exercisable with respect to any additional
Shares. Notwithstanding the foregoing or anything herein or in an
Award Document to the contrary, the Committee, in its sole discretion, shall
have the authority to extend the period during which an Option is exercisable
pursuant to this Section 6.6(c) to a period that is no longer than the earlier
of (A) the remainder of the term of the Option, or (B) 60 months from the date
of the Participant’s termination of employment.
6.7. Restrictions on
Shares. The Committee may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option granted under this Section
6 as it may deem advisable, including, without limitation, restrictions under
applicable Federal securities laws, under the requirements of any stock exchange
or market upon which such Shares are then listed and/or traded, and under any
blue sky or state or foreign securities laws applicable to such
Shares.
6.8. Transferability of
Options.
(a) Incentive Stock
Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all
ISOs granted to a Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
(b) Nonqualified Stock
Options. NQSOs may only be transferred in accordance with this
Section 6.8(b).
(i) Except
as otherwise provided in paragraph (ii) below or in an Award Document, no NQSO
shall be assignable or transferable by a Participant other than by will, by the
laws of descent and distribution or pursuant to a Domestic Relations Order (as
such term is defined in Section 414(p)(1)(B) of the Code).
(ii) NQSOs
(whether vested or unvested) held by (A) Participants who are Section 16
Officers; (B) Participants who are Directors; or (C) any Participants who
previously held the positions in clauses (A) and (B) may be transferred by gift
or by domestic relations order to one or more Permitted
Transferees. NQSOs (whether vested or unvested) held by all other
Participants and by Permitted Transferees may be transferred by gift or by
domestic relations order only to Permitted Transferees upon the prior written
approval of the Company’s Director of Compensation + Benefits.
6.9. Prohibition
on Repricing. Except (a) as provided in Section 4.3 or (b) to the
extent approved by the stockholders of the Company, the Option Price of an
Option may not be changed following the date such Option is
granted. Similarly, the exchange of an Option (an “Original Option”)
for cash, Shares, or other Awards at a time when the Option Price of such
Original Option is equal to or greater than the Fair Market Value of a Share is
prohibited. Notwithstanding the preceding sentence, the exchange of
an Original Option for a SAR or another Option (a “New Option”) shall be
permitted only if: (a) the exchange is approved by the stockholders of the
Company and (b) either (i) the grant price of the SAR is greater than the Option
Price of the Original Option or (ii) the Option Price of the New Option is
greater than the Option Price of the Original Option.
6.10. 6.9. Acceleration of
Vesting. Notwithstanding anything in this Section 6 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of Options at any
time.
Page 82
Section
7.
Stock Appreciation
Rights
7.1. Grant of
SARs.
(a) SAR
Grant. Subject to the terms and provisions of the Plan, SARs
may be granted to Participants in such number, upon such terms and provisions,
and at any time and from time to time, as determined by the Committee in its
sole discretion. The Committee may grant Non-Tandem SARs, Tandem
SARs, or any combination of these forms of SARs. The Committee shall
have complete discretion in determining the number of SARs granted to each
Participant (subject to Section 4) and, consistent with the provisions of the
Plan, in determining the terms and conditions pertaining to such
SARs. The Committee shall designate, at the time of grant, the grant
price of a Non-Tandem SAR, which grant price shall not be less than 100% of the
Fair Market Value of a Share on the grant date of the SAR. The grant
price of Tandem SARs shall equal the Option Price of the related Option. Grant prices
of SARs shall not subsequently be changed by the Committee, except pursuant to
Section 4.3.
(b) Award
Document. All SARs shall be evidenced by an Award
Document. The Award Document shall specify the grant price, the term
of the SAR, and such other provisions as the Committee shall determine, and
which are not inconsistent with the terms and provisions of the
Plan.
7.2. Term of
SARs. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
unless otherwise designated by the Committee, such term shall not exceed ten
years from the grant date.
7.3. Exercise of Tandem
SARs. Tandem SARs may be exercised for all or part of the
Shares subject to the related Option upon the surrender of the right to exercise
the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. Notwithstanding any other provision of the Plan to the
contrary, with respect to a Tandem SAR granted in connection with an
ISO: (i) the Tandem SAR will expire no later than the expiration of
the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR
may be for no more than 100% of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the underlying
ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be
exercised only when the Fair Market Value of the Shares subject to the ISO
exceeds the Option Price of the ISO.
7.4. Exercise of Non-Tandem
SARs. Non-Tandem SARs may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes upon
them.
7.5. Payment of SAR
Amount.
(a) Upon
exercise of a SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:
(i) The
excess of the Fair Market Value of a Share on the date of exercise over the
grant price; by
(ii) The
number of Shares with respect to which the SAR is exercised.
(b) Unless
otherwise provided in the Award Document, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination
thereof. If, and to the extent that the payment upon SAR exercise is
made in cash, such cash payment shall not be subject to the limitation of
Section 4.2(b).
7.6. Termination of Employment or
Service as a Director. The Committee, in its sole discretion,
shall set forth in the applicable Award Document the extent to which a
Participant shall have the right to exercise the SAR or SARs following
termination of his or her employment with the Company or any Subsidiary or
following termination of his or her service as a Director. Such
provisions need not be uniform among all SARs issued pursuant to the Plan, and
may reflect distinctions based on the reasons for such termination, including,
but not limited to, termination for Cause or for Good Reason, or reasons
relating to the breach or threatened breach of restrictive
covenants. Subject to Section 15, in the event that a Participant’s
Award Document does not set forth such provisions, the following provisions
shall apply:
Page 83
(a) Long Service Separation,
Death or Disability. If a Participant’s employment with the
Company and/or any Subsidiary or service as a Director terminates by reason of
Long Service Separation, death or Disability, to the extent that the SARs are
not exercisable, all of his or her SARs shall immediately become fully vested
and shall remain exercisable until the earlier of (i) the remainder of the term
of the SAR, or (ii) 60 months from the date of such termination. In
the case of the Participant’s death, the Participant’s beneficiary or estate may
exercise the SAR.
(b) Termination for
Cause. If a Participant’s employment with the Company and/or
any Subsidiary or service as a Director terminates for Cause, all SARs shall
expire immediately and all rights thereunder shall cease upon such
termination.
(c) Other
Termination. If a Participant’s employment with the Company
and/or any Subsidiary or service as a Director terminates for any reason other
than Long Service Separation, death, Disability, or for Cause, all SARs shall
remain exerciseable until the earlier of (i) the remainder of the term of the
SAR, or (ii) 60 days from the date of such termination. In such
circumstance, the SAR shall only be exercisable to the extent it was exercisable
as of such termination date and shall not be exercisable with respect to any
additional SARs. Notwithstanding the foregoing or anything herein or
in an Award Document to the contrary, the Committee, in its sole discretion,
shall have the authority to extend the period during which a SAR is exercisable
pursuant to this Section
76.6(c)
to a period that is no longer than the earlier of (A) the remainder of the term
of the SAR, or (B) 60 months from the date of the Participant’s termination of
employment.
7.7. Transferability of
SARs. SARs may only be transferred in accordance with this
Section 7.7.
(a) Except
as otherwise provided in paragraph (b) below or in an Award Document, no SAR
shall be assignable or transferable by a Participant other than by will, by the
laws of descent and distribution or pursuant to a Domestic Relations Order (as
such term is defined in Section 414(p)(1)(B) of the Code).
(b) SARs
held by (i) Participants who are Section 16 Officers; (ii) Participants who are
Directors; or (iii) any Participants who previously held the positions in
clauses (i) and (ii) may be transferred by gift or by domestic relations order
to one or more Permitted Transferees. SARs held by all other
Participants and by Permitted Transferees may be transferred by gift or by
domestic relations order to Permitted Transferees only upon the prior written
approval of the Company’s Director of Compensation and Benefits.
(c) Notwithstanding
the foregoing, with respect to a Tandem SAR granted in connection with an ISO,
no such Tandem SAR may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution.
7.8. Prohibition
on Repricing. Except (a) as provided in Section 4.3 or (b) to the
extent approved by the stockholders of the Company, the grant price of a SAR may
not be changed following the date the SAR is granted. Similarly, the
exchange of a SAR (an “Original SAR”) for cash, Shares, or other Awards at a
time when the grant price of such Original SAR is equal to or greater than the
Fair Market Value of a Share is prohibited. Notwithstanding the
preceding sentence, the exchange of an Original SAR for an Option or another SAR
(a “New SAR”) shall be permitted only if: (a) the exchange is approved by the
stockholders of the Company and (b) either (i) the Option Price amount is
greater than the grant price of the Original SAR or (ii) the grant price of the
New SAR is greater than the grant price of the Original
SAR.
7.9. 7.8. Acceleration of
Vesting. Notwithstanding anything in this Section 7 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of SARs at any time.
Section
8.
Restricted
Stock
8.1. Grant of Restricted
Stock.
(a) Grant of Restricted
Stock. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
Page 84
(b) Award
Document. All sharesgrants
of Restricted Stock shall be evidenced by an Award Document. The
Award Document shall specify the Period or Periods of Restriction (consistent with the
next sentence), the number of Sharesshares
of Restricted Stock granted, and such other provisions as the Committee shall
determine pursuant to Section 8.38.2
or otherwise, and which shall not be inconsistent with the terms and provisions
of the Plan. Shares of Restricted
Stock not in excess of five percent of the number of shares that may be
issued with
respect to Awards of Restricted Stock, as provided in Section 4.1, may have a
Period or Periods of Restriction as determined by the Committee in its sole
discretion, and any other shares of Restricted Stock shall have a Period of
Restriction, as determined by the Committee, that shall not lapse in any
respect
until on or after the third anniversary of the grant date. If
no Period of Restriction is set forth in the Award Document, the transfer and
any other restrictions shall lapse (i) to the extent of one-third of the Sharesshares
(rounded to the nearest whole) covered by the Restricted Stock Award on the
third anniversary of the grant date, (ii) to the extent of two-thirds of the
Sharesshares
(rounded to the nearest whole) covered by the Restricted Stock Award on the
fourth anniversary of the grant date, and (iii) to the extent of 100% of the
Sharesshares
covered by the Restricted Stock Award on the fifth anniversary of the grant
date.
(c) Limitation
on the Committee. Notwithstanding the preceding provisions
of Section 8.1(b) and subject to the provisions of the Plan, no more
than five percent (5%) of the
shares that may be issued as
Restricted Stock pursuant to Section 4.1) may have a Period of Restriction as
determined by the Committee at the time of grant that will lapse prior to the
third anniversary of the grant date. All remaining shares that may be
issued with respect to Awards of Restricted Stock pursuant to Section 4.1 shall
have a Period of Restriction determined by the Committee at the time of grant
that will not lapse
until on or after the third anniversary of the grant
date. For
the avoidance of doubt, this Section 8.1(c) shall not impair the Committee’s
ability to accelerate the vesting of Restricted Stock pursuant to Section 8.6 or
to make grants that provide that vesting is accelerated upon Long Service
Separation, death or Disability pursuant to Section 8.5 and the shares of
Restricted Stock for which such acceleration of vesting occurs shall not be
considered in applying the limitations set forth in this Section
8.1(c).
8.2. Other
Restrictions. Subject to Section 10 herein, the Committee may
impose such other conditions and/or restrictions on any Sharesshares
of Restricted Stock granted pursuant to the Plan as it may deem advisable
including without limitation, a requirement that Shares will not be issued until
the end of the applicable Period of Restriction
(i.e., a restricted stock unit), a requirement that Participants pay a
stipulated purchase price for each Shareshare
of Restricted Stock, restrictions based upon the achievement of specific
performance goals (Company-wide, Subsidiary-wide, divisional, and/or
individual), time-based restrictions on vesting, which may or may not be
following the attainment of the performance goals, sales restrictions under
applicable shareholder agreements or similar agreements, and/or restrictions
under applicable Federal or state securities laws. The Company shall
retain the certificates representing Shares of Restricted Stock in the Company’s
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied. Except as otherwise provided in this
Section 8 or in any Award Document, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan shall become freely transferable by
the Participant after the last day of the applicable Period of
Restriction.
8.3. Voting
Rights. Unless otherwise designated by the Committee at the
time of grant, Participants to whom Shares of Restricted Stock (but
not restricted stock units) have been granted hereunder may exercise full
voting rights with respect to those Shares during the Period of
Restriction.
8.4. Dividends and Other
Distributions. Unless otherwise designated by the Committee at
the time of grant, Participants holding Shares of Restricted Stock
(but not restricted stock units) granted hereunder shall be credited with
regular cash dividends paid with respect to the underlying Shares while they are
so held during the Period of Restriction. The Committee may apply any
restrictions to the dividends that the Committee deems
appropriate. Without limiting the generality of the preceding
sentence, if the grant or vesting of Shares of Restricted Stock granted to a
Named Executive Officer is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such Shares of
Restricted Stock, such that the dividends and/or the Shares of Restricted Stock
maintain eligibility for the Performance-Based Exception. In the
event that any dividend constitutes a derivative security or an equity security
pursuant to the rules under Section 16 of the Exchange Act, such dividend shall
be subject to a vesting period equal to the remaining vesting period of the
Shares of Restricted Stock with respect to which the dividend is
paid.
Page 85
8.5. Termination of Employment or
Service as a Director. The Committee, in its sole discretion,
shall set forth in the applicable Award Document the extent to which the
Participant shall have the right to receive unvested Shares of
Restricted Stock following termination of the Participant’s employment
with the Company and/or its Subsidiaries or termination of service as a
Director. Such provisions need not be uniform among all Sharesshares
of Restricted Stock issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination of employment including; but not limited
to, termination of employment for Cause or for Good Reason, or reasons relating
to the breach or threatened breach of restrictive covenants; provided, however
that, except in the cases of terminations connected with a Change of Control and
terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock that qualify for the Performance-Based Exception and
that are held by Named Executive Officers shall not occur before the time they
otherwise would have, but for the employment termination. Subject to
Section 15, in the event that a Participant’s Award Document does not set forth
such termination provisions, the following termination provisions shall
apply:
(a) Long-Service
Separation, Death and
Disability. Unless the Award qualifies for the
Performance-Based Exception, if a Participant’s employment with the Company
and/or any Subsidiary or service as a Director is terminated due to Long
Service Separation, death or Disability, all Sharesshares
of Restricted Stock of such Participant shall immediately become fully vested on
the date of such termination and any restrictions shall lapse.
(b) Other
Termination. If a Participant’s employment with the Company
and/or any Subsidiary or service as a Director is terminated for any reason
other than Long
Service Separation, death or Disability,
all Sharesshares
of Restricted Stock that are unvested at the date of termination shall be
forfeited to the Company.
8.6. Acceleration of
Vesting. Notwithstanding anything in this Section 8 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of Sharesshares
of Restricted Stock at any time.
8.7. Transferability. Except
as provided in this Section 8, the Sharesshares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction established by the
Committee and specified in the Award Document, or upon earlier satisfaction of
any other conditions, as specified by the Committee in its sole discretion and
set forth in the Award Document. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
Section
9.
Performance Units
and Performance Shares
9.1. Grant of Performance
Units/Shares.
(a) Grant of Performance
Unit/Shares. Subject to the terms of the Plan, Performance
Units and/or Performance Shares may be granted to Participants in such amounts
and upon such terms, and at any time and from time to time, as shall be
determined by the Committee, which shall not be inconsistent with the terms and
provisions of the Plan and shall be set forth in an Award Document.
(b) Award
Document. All Performance Units and Performance Shares shall
be evidenced by an Award Document. The Award Document shall specify
the initial value of the Award, the performance goals and the Performance
Period, as the Committee shall determine, and which are not inconsistent with
the terms and provisions of the Plan.
9.2. Value of Performance
Units/Shares. Each Performance Unit shall have an initial
value (which may be $0) that is established by the Committee at the time of
grant. Each Performance Share shall have an initial value equal to
the Fair Market Value of a Share on the grant date. The Committee
shall set performance goals in its sole discretion which, depending on the
extent to which they are met will determine the number and/or value of
Performance Units and/or Performance Shares that will be paid out to the
Participant. For purposes of this Section 9, the time period during
which the performance goals must be met shall be called a Performance
Period. Performance Shares not in excess of five percent of the
number of shares that may be issued with respect to Awards of Performance
Shares, as provided in Section 4.1, may have a Performance Period as determined
by the Committee in its sole discretion, and any other Performance Shares shall
have a Performance Period, as determined by the Committee, of not less than one
year.
Page 86
9.3. Earning of Performance
Units/Shares. Subject to the terms of the Plan, after the
applicable Performance Period has ended, the holder of Performance Units and/or
Performance Shares shall be entitled to receive payout on the number and value
of Performance Units and/or Performance Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved, as established by the
Committee.
9.4. Form and Timing of Payment
of Performance Units/Shares. Except as provided below, payment
of earned Performance Units and/or Performance Shares shall be made in a single
lump sum as soon as reasonably practicable following the close of the applicable
Performance Period. Subject to the terms of the Plan, the Committee,
in its sole discretion, may pay earned Performance Units and/or Performance
Shares in the form of cash or in Shares (or in a combination thereof) which have
an aggregate Fair Market Value equal to the value of the earned Performance
Units and/or Performance Shares at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee. At the sole discretion of the
Committee, Participants may be entitled to receive any dividends declared with
respect to Shares which have been earned in connection with grants of
Performance Units and/or Performance Shares which have been earned, but not yet
distributed to Participants.
9.5. Termination of Employment or
Service as a Director. The Committee, in its sole discretion,
shall set forth in the applicable Award Document the extent to which the
Participant shall have the right to receive payment for Performance Units and/or
Performance Shares following termination of the Participant’s employment with
the Company and/or its Subsidiaries or termination of service as a
Director. Such provisions need not be uniform among all Performance
Units and/or Performance Shares granted pursuant to the Plan, and may reflect
distinctions based on the reasons for such termination including; but not
limited to, termination for Cause or for Good Reason, or reasons relating to the
breach or threatened breach of restrictive covenants. Subject to
Section 15, in the event that a Participant’s Award Document does not set forth
such termination provisions, the following termination provisions shall
apply:
(a) Long Service Separation,
Death or Disability. Subject to Section 15, if a Participant’s
employment with the Company and/or any Subsidiary or service as a Director is
terminated during a Performance Period due to Long Service Termination, death or
Disability, the Participant shall receive a prorated payout of the Performance
Units and/or Performance Shares, unless the Committee determines
otherwise. The prorated payout shall be determined by the Committee,
shall be based upon the length of time that the Participant held the Performance
Units and/or Performance Shares during the Performance Period, and shall further
be adjusted based on the achievement of the preestablishedpre-established
performance goals. Unless the Committee determines otherwise in the
event of a termination due to death, Disability or Long Service Separation,
payment of earned Performance Units and/or Performance Shares shall be made at
the same time as payments are made to Participants who did not terminate
employment during the applicable Performance Period.
(b) Other
Termination. If a Participant’s employment with the Company
and/or any Subsidiary or service as a Director is terminated during a
Performance Period for any reason other than Long Service Termination, death or
Disability all Performance Units and/or Performance Shares shall be forfeited by
the Participant to the Company.
9.6. Nontransferability. Except
as otherwise provided in a Participant’s Award Document, Performance Units
and/or Performance Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided in a
Participant’s Award Document, a Participant’s rights under the Plan shall be
exercisable during the Participant’s lifetime only by the Participant or the
Participant’s legal representative.
9.7. Acceleration of
Vesting. Notwithstanding anything in this Section 9 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of Performance Units and/or Performance Shares at any
time.
Page 87
Section
10.
Performance
Measures
10.1. Performance
Measures. Unless and until the Committee proposes for
stockholder vote and stockholders approve a change in the general performance
measures set forth in this Section 10, the attainment of which may determine the
degree of payout and/or vesting with respect to Awards to Named Executive
Officers that are designed to qualify for the Performance-Based Exception, the
performance goals to be used for purposes of such grants shall be established by
the Committee in writing and stated in terms of the attainment of specified
levels of or percentage changes in any one or more of the following
measurements: (a) revenue; (b) primary or fully-diluted earnings per Share; (c)
earnings before interest, taxes, depreciation, and/or amortization; (d) pretax
income; (e) cash flow from operations; (f) total cash flow; (g) return on
equity; (h) return on invested capital; (i) return on assets; (j) net operating
profits after taxes; (k) economic value added; (l) total stockholder return; (m)
return on sales; or (n) any individual performance objective which is measured
solely in terms of quantifiable targets related to the Company or the Company’s
business; or any combination thereof. In addition, such performance
goals may be based in whole or in part upon the performance of the Company, a
Subsidiary, division and/or other operational unit under one or more of such
measures.
10.2. Performance
Procedures. The degree of payout and/or vesting of such Awards
designed to qualify for the Performance-Based Exception shall be determined
based upon the written certification of the Committee as to the extent to which
the performance goals and any other material terms and conditions precedent to
such payment and/or vesting have been satisfied. The Committee shall
have the sole discretion to adjust the determinations of the degree of
attainment of the preestablished performance goals; provided, however, that the
performance goals applicable to Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Named Executive Officers, may
not be adjusted so as to increase the payment under the Award (the Committee
shall retain the sole discretion to adjust such performance goals upward, or to
otherwise reduce the amount of the payment and/or vesting of the Award relative
to the pre-established performance goals). In the event that
applicable tax and/or securities laws change to permit Committee sole discretion
to alter the governing performance measures without obtaining stockholder
approval of such changes, the Committee shall have sole discretion to make such
changes without obtaining stockholder approval. In addition, in the
event that the Committee determines that it is advisable to grant Awards which
shall not qualify for the Performance-Based Exception, the Committee may make
such grants without satisfying the requirements of Code Section 162(m) and,
thus, which use performance measures other than those specified
above.
Section
11.
Award
Forfeitures
11.1. Forfeiture of Options and
Other Awards. Each Award granted hereunder shall be subject to
the following additional forfeiture conditions, to which the Participant, by
accepting an Award hereunder, agrees. If any of the events specified
in Section 11.2 occurs (a “Forfeiture Event”), all of the following forfeitures
will result:
(a) The
unexercised portion of any Option, whether or not vested, and any other Award
not then settled (except for an Award that has not been settled solely due to an
elective deferral pursuant to Section 13 by the Participant and otherwise is not
forfeitable in the event of any termination of service of the Participant) will
be immediately forfeited and canceled upon the occurrence of the Forfeiture
Event; and
(b) The
Participant will be obligated to repay to the Company, in cash, within five
business days after demand is made therefor by the Company, the total amount of
Award Gain (as defined herein) realized by the Participant upon each exercise of
an Option or settlement of an Award (regardless of any elective deferral
pursuant to Section 13) that occurred on or after (i) the date that is six
months before the occurrence of the Forfeiture Event, if the Forfeiture Event
occurred while the Participant was employed by the Company or a Subsidiary, or
(ii) the date that is six months before the date the Participant’s employment
by, or service as a Director with the Company or a Subsidiary terminated, if the
Forfeiture Event occurred after the Participant ceased to be so
employed.
11.2. Events Triggering
Forfeiture. The forfeitures specified in Section 11.1 will be
triggered upon the occurrence of any one of the following Forfeiture Events at
any time during the Participant’s employment by or service as a Director with
the Company or a Subsidiary or during the one-year period following termination
of such employment or service:
Page 88
(a) Non-Solicitation. The
Participant, for his or her own benefit or for the benefit of any other person,
company or entity, directly or indirectly, (i) induces or attempts to induce or
hires or otherwise counsels, induces or attempts to induce or hire or otherwise
counsel, advise, encourage or solicit any person to leave the employment of or
the service for the Company or any Subsidiary, (ii) hires or in any manner
employs or retains the services of any individual employed by or providing
services to the Company or any Subsidiary as of the date of his or her
termination of employment, or employed by or providing services to the Company
or any Subsidiary subsequent to such termination, (iii) solicits, pursues, calls
upon or takes away, any of the customers of the Company or any Subsidiary, (iv)
solicits, pursues, calls upon or takes away, any potential customer of the
Company or any Subsidiary that has been the subject of a bid, offer or proposal
by the Company or any Subsidiary, or of substantial preparation with a view to
making such a bid, proposal or offer, within six months before such
Participant’s termination of employment with the Company or any Subsidiary, or
(v) otherwise interferes with the business or accounts of the Company or any
Subsidiary.
(b) Confidential
Information. The Participant discloses to any person or entity
or makes use of any “confidential or proprietary information” (as defined below
in this subparagraph (b)) for his or her own purpose or for the benefit of any
person or entity, except as may be necessary in the ordinary course of
employment with or other service to the Company or any
Subsidiary. Such “confidential or proprietary information” of the
Company or any Subsidiary, includes, but is not limited to, the design,
development, operation, building or manufacturing of products manufactured and
supplied by the Company and its Subsidiaries, the identity of the Company’s or
any Subsidiary’s customers, the identity of representatives of customers with
whom the Company or any Subsidiary has dealt, the kinds of services provided by
the Company or any Subsidiary to customers and offered to be performed for
potential customers, the manner in which such services are performed or offered
to be performed, the service needs of actual or prospective customers, pricing
information, information concerning the creation, acquisition or disposition of
products and services, customer maintenance listings, computer software and
hardware applications and other programs, personnel information, information
identifying, relating to or concerning investors in the Company or any
Subsidiary, joint venture partners of the Company or any Subsidiary, business
partners of the Company or any Subsidiary or other entities providing financing
to the Company or any Subsidiary, real estate and leasing opportunities,
communications and telecommunications operations and processes, zoning and
licensing matters, relationships with, or matters involving, landlords and/or
property owners, and other trade secrets.
11.3. Agreement Does Not Prohibit
Competition or Other Participant Activities. Although the
conditions set forth in this Section 11 shall be deemed to be incorporated into
an Award, the Plan does not thereby prohibit the Participant from engaging in
any activity, including but not limited to competition with the Company and its
Subsidiaries. Rather, the non-occurrence of the Forfeiture Events set
forth in Section 11.2 is a condition to the Participant’s right to realize and
retain value from his or her compensatory Awards, and the consequence under the
Plan if the Participant engages in an activity giving rise to any such
Forfeiture Event are the forfeitures specified herein. This provision
shall not preclude the Company and the Participant from entering into other
written agreements concerning the subject matter of Sections 11.1 and 11.2 and,
to the extent any terms of this Section 11 are inconsistent with any express
terms of such agreement, this Section 11 shall not be deemed to modify or amend
such terms.
11.4. Committee
Discretion. The Committee may, in its sole discretion, waive
in whole or in part the Company’s right to forfeiture under this Section 11, but
no such waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may
impose additional conditions on Awards, by inclusion of appropriate provisions
in the Award Document. Nothing contained herein shall require the
Committee to enforce the forfeiture provisions of this Section
11. Failure to enforce these forfeiture provisions against any
individual shall not be construed as a waiver of the Company’s right to
forfeiture under this Section 11.
11.5. Clawback
Provision. Notwithstanding any other provision of the Plan to
the contrary, including Section 16.1 which prohibits material and adverse
changes to any outstanding Award, any Participant who is an officer of the
Company whose negligent, intentional or gross misconduct contributes to the
Company’s having to restate all or a portion of its financial statements, will
be required to forfeit Awards granted under this Plan and repay the Company the
total amount of Award Gain realized by the Participant upon the exercise of an
Option or settlement of an Award, as determined by the Board of
Directors, an authorized committee, or its designee, pursuant to the Caterpillar
Inc. Guidelines on Corporate Governance Issues, as adopted on February 14, 2007
and any subsequent amendments. Any Awards granted under this Plan
prior to February 14, 2007 are subject to the provisions of this Section 11.5
only with the written consent of the Participant.
Page 89
Section
12.
Beneficiary
Designation
12.1. Beneficiary
Designations. Each Participant under the Plan may, from time
to time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of his or
her death before he or she receives any or all of such benefit. Each
such designation shall revoke all prior designations by the same Participant,
shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participant’s
lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant’s death shall be paid to the Participant’s
estate.
Section
13.
Deferrals
13.1. Deferrals. The
Committee may permit a Participant to defer such Participant’s receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant upon the exercise of any Option or by virtue of the lapse or waiver
of restrictions with respect to Restricted Stock, or the satisfaction of any
requirements or goals with respect to Performance Units/Shares. If
any such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment
deferrals. All such deferrals (and rules and procedures) shall be
consistent with Code Section 409A and any other applicable law.
Section
14.
Rights and
Obligations of Parties
14.1. No Guarantee of Employment
or Service Rights. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant’s
employment at any time, nor confer upon any Participant any right to continue in
the employ of the Company or any Subsidiary.
14.2. Temporary
Absence. For purposes of the Plan, temporary absence from
employment because of illness, vacation, approved leaves of absence, and
transfers of employment among the Company and its Subsidiaries, shall not be
considered to terminate employment or to interrupt continuous
employment.
14.3. Participation. No
Employee or Director shall have the right to be selected to receive an Award
under the Plan, or, having been so selected, to be selected to receive a future
Award.
14.4. Right of
Setoff. The Company or any Subsidiary may, to the extent
permitted by applicable law, deduct from and set off against any amounts the
Company or Subsidiary may owe to the Participant from time to time, including
amounts payable in connection with any Award, owed as wages, fringe benefits, or
other compensation owed to the Participant, such amounts as may be owed by the
Participant to the Company, although the Participant shall remain liable for any
part of the Participant’s payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the
Participant agrees to any deduction or setoff under this Section
14.
14.5. Section 83(b)
Election. No election under Section 83(b) of the Code (to
include in gross income in the year of transfer the amounts specified in Code
Section 83(b)) or under a similar provision of the laws of a jurisdiction
outside the United States may be made, unless expressly permitted by the terms
of the Award Document or by action of the Committee in writing before the making
of such election. In any case in which a Participant is permitted to
make such an election in connection with an Award, the Participant shall notify
the Company of such election within ten days of filing notice of the election
with the Internal Revenue Service or other governmental authority, in addition
to any filing and notification required pursuant to regulations issued under
Code Section 83(b) or other applicable provision.
14.6. Disqualifying Disposition
Notification. If any Participant shall make any disposition of
Shares delivered pursuant to the exercise of an Incentive Stock Option under the
circumstances described in Code Section 421(b) (relating to certain
disqualifying dispositions), such Participant shall notify the Company of such
disposition within ten days thereof.
Page 90
Section
15.
Change of
Control
15.1. Change of
Control. If a Participant’s employment or service with the
Company and/or any Subsidiary terminates either without Cause or for Good Reason
within the 12 month period following a Change of Control, unless otherwise
specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities
exchanges:
(a) Any
and all Options and SARs granted hereunder shall become immediately exercisable,
and shall remain exercisable throughout their entire term;
(b) Any
Period of Restriction and other restrictions imposed on Restricted Stock shall
lapse; and
(c) Unless
otherwise specified in an Award Document, the maximum payout opportunities
attainable under all outstanding Awards of Performance Units and Performance
Shares shall be deemed to have been fully earned for the entire Performance
Period(s) as of the effective date of the Change of Control. The
vesting of all such Awards shall be accelerated as of the effective date of the
Change of Control, and in full settlement of such Awards, there shall be paid
out in cash to Participants within 30 days following the effective date of the
Change of Control the maximum of payout opportunities associated with such
outstanding Awards.
Section
16.
Amendment,
Modification, and Termination
16.1. Amendment, Modification, and
Termination. The Board may amend, suspend or terminate the
Plan or the Committee’s authority to grant Awards under the Plan without the
consent of stockholders or Participants; provided, however, that any amendment
to the Plan shall be submitted to the Company’s stockholders for approval not
later than the earliest annual meeting for which the record date is after the
date of such Board action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted and
the Board may otherwise, in its sole discretion, determine to submit other
amendments to the Plan to stockholders for approval; and provided further, that,
without the written consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
outstanding Award. The Committee shall have no authority to waive or
modify any other Award term after the Award has been granted to the extent that
the waived or modified term was mandatory under the Plan.
Section
17.
Withholding
17.1. Tax
Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan.
17.2. Share
Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
the withholding requirement shall be satisfied by the Company withholding Shares
having a Fair Market Value on the date the tax is to be determined equal to the
minimum statutory total tax which would be imposed on the
transaction.
Section
18.
Miscellaneous
18.1. Unfunded
Plan. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation. With respect to any payments
not yet made to a Participant or obligation to deliver Shares pursuant to an
Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general creditor of the
Company; provided that the Committee may authorize the creation of trusts and
deposit therein cash, Shares, other Awards or other property, or make other
arrangements to meet the Company’s obligations under the Plan. Such
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. No such funding shall be established that would
cause an amount to be taxable under Code Section 409A before it is received by a
Participant or cause an amount to be subject to additional tax under such
Section.
Page 91
18.2. Forfeitures; Fractional
Shares. Unless otherwise determined by the Committee, in the
event of a forfeiture of an Award with respect to which a Participant paid cash
consideration, the Participant shall be repaid the amount of such cash
consideration. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional Shares or whether such fractional Shares or any rights thereto
shall be forfeited or otherwise eliminated.
18.3. Compliance with Code Section
162(m). The Company intends that Options and SARs granted to
Named Executive Officers and other Awards designated as Awards to Named
Executive Officers shall constitute qualified “performance-based compensation”
within the meaning of Code Section 162(m) and regulations thereunder, unless
otherwise determined by the Committee at the time of allocation of an
Award. Accordingly, the terms of Sections 4.2, 6, 7, 8.5, 8.6, 9 and
10, including the definitions of Named Executive Officer and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because
the Committee cannot determine with certainty whether a given Participant will
be a Named Executive Officer with respect to a fiscal year that has not yet been
completed, the Committee may, in its discretion, extend the terms of such
Sections to any Participant that the Committee deems appropriate. If
any provision of the Plan or any Award Document relating to a Performance Award
that is designated as intended to comply with Code Section 162(m) does not
comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements, and no provision shall be
deemed to confer upon the Committee or any other person sole discretion to
increase the amount of compensation otherwise payable in connection with any
such Award upon attainment of the applicable performance
objectives.
18.4. Gender and Number;
Headings. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the
plural. Headings are included for the convenience of reference only
and shall not be used in the interpretation or construction of any such
provision contained in the Plan.
18.5. Severability. In
the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
18.6. Successors. All
obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.
18.7. Requirements of
Law. The granting of Awards and the issuance of Shares under
the Plan shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.
18.8. Securities Law
Compliance. With respect to “insiders,” transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee. An “insider” includes any individual who is, on the
relevant date, an officer, Director or more than 10% beneficial owner of any
class of the Company’s equity securities that is registered pursuant to Section
12 of the Exchange Act, all as defined under Section 16 of the Exchange
Act.
18.9. Governing
Law. To the extent not preempted by Federal law, the Plan, and
all agreements hereunder, shall be construed in accordance with and governed by
the laws of the State of Illinois without regard to the conflict of law
provisions thereof.
Page 92
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Appendix B – Proposed Amendments to Restated
Certificate of Incorporation
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If
Proposal 4 is approved by stockholders at the 2010 Annual Meeting, amendments to
Article Sixth, subsections (b), (c), (d) and (f) will be approved. If
Proposal 5 is approved by stockholders at the 2010 Annual Meeting, amendments to
Article Fifth and Article Sixth, subsection (e) and Article Eighth will be
approved.
RESTATED
CERTIFICATE OF INCORPORATION
OF
CATERPILLAR
INC.
Caterpillar Inc., a
corporation organized and existing under the laws of the State of Delaware,
hereby certifies as follows:
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1.
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The name of
the corporation is Caterpillar Inc. The date of filing its
original Certificate of Incorporation with the Secretary of State was
March 12, 1986.
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2.
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This Restated
Certificate of Incorporation restates and integrates and further amends
the provisions of the Certificate of Incorporation of this corporation
and
has been duly adopted by the stockholders of the corporation in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law
of Delaware. by
amending paragraph (a) of Article FOURTH to increase the total authorized
shares and the authorized common
stock.
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3.
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The text of
the Certificate of Incorporation as
is amended
or
supplemented and
restated heretofore
is hereby further amended to read as herein set forth in
full:
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FIRST: The
name of this corporation is Caterpillar Inc.
SECOND: The
address of the registered office of the corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, and the name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The
purpose of the corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: (a)
The corporation is authorized to issue two classes of shares to be designated,
respectively, "common stock" and "preferred stock." The total number
of such shares shall be nine hundred and five million (905,000,000), all of
which shares shall have a par value of $1.00 per share. The total
number of shares of common stock authorized to be issued shall be nine hundred
million (900,000,000) and the total number of shares of preferred stock
authorized to be issued shall be five million (5,000,000).
(b) The shares of
preferred stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to establish from
time to time by resolution or resolutions the number of shares to be included in
each such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof, including but not limited to the fixing or alteration of
the dividend rights, dividend rate or rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of shares of preferred stock, and the number of shares
constituting any such series and the designation thereof, or any or all of them;
and to increase or decrease the number of shares of any series subsequent to the
issue of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
Page 93
FIFTH: In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors shall have power to make, alter, amend and repeal the bylaws
(except so far as the bylaws adopted by the stockholders shall otherwise
provide). Any bylaws made by the Board of Directors under the powers
conferred hereby may be altered, amended or repealed by the Board of Directors
or by the stockholders. Notwithstanding the foregoing and anything
contained in this Certificate of Incorporation to the contrary, Sections
1(b)(ii), 1(c) and 3(e)(f)1 of
Article II, and Section 1 of Article III of the bylaws shall not be altered,
amended or repealed, and no provisions inconsistent therewith shall be adopted,
without the affirmative vote of the holders of not less than a
majority seventy-five
percent (75%) of the
outstanding stock of the corporation entitled to vote generally in the election
of directors, voting together as a single class (it being understood that for
the purposes of this Article FIFTH, each share shall have one vote except as
otherwise provided in accordance with Article FOURTH).
SIXTH: (a)
The number of directors which shall constitute the whole Board of Directors of
this corporation shall be as specified in the bylaws of the corporation, subject
to the provisions of Article FIFTH herein and this Article SIXTH.
(b) The
Board of Directors shall be and is divided into three classes: Class
I, Class II and Class III, which shall be as nearly equal in number as
possible. Each director shall serve At each
annual meeting of stockholders, directors shall be elected for a term
of
office to expire at the next annual meeting of stockholders, with each director
to ending
on the date of the third annual meeting of stockholders following the annual
meeting at which the director was elected, provided, however, that each initial
director in Class I shall hold office until the annual meeting of stockholders
in 1987; each initial director in Class II shall hold office until the annual
meeting of stockholders in 1988; and each initial director in Class III shall
hold office until the annual meeting of stockholders in
1989. Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal.
(c) In the
event of any increase or decrease in the authorized number of directors, the
newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors among the three classes
of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent
director.
(d) Newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the affirmative vote
of a majority of the remaining directors then in office (and not by
stockholders), even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding
sentence shall hold office until the
next annual meeting of stockholders for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until
such director's successor shall have been elected and qualified.
(e) Any director may be removed from office without cause but only by the affirmative vote of the holders of not less than a majority seventy-five percent (75%) of the outstanding stock of the corporation entitled to vote generally in the election of directors, voting together as a single class (it being understood that for the purpose of this Article SIXTH, each share shall have one vote except as otherwise provided in accordance with Article FOURTH).
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1
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A December
2009 amendment to the Bylaws inserted an additional item into Section 3 of
Article II. This conforming change is necessary to ensure the
Restated Certificate of Incorporation references the appropriate section
of the Bylaws.
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Page 94
(f) Notwithstanding
the foregoing, whenever the holders of any one or more classes or series of
stock issued by this corporation having a preference over the common stock as to
dividends or upon liquidation, shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies, terms of removal and other
features of such directorships shall be governed by the terms of Article FOURTH
and the resolution or resolutions establishing such class or series adopted
pursuant thereto and
such directors so elected shall not be divided into classes pursuant to this
Article SIXTH unless expressly provided by such terms.
SEVENTH: (a)
Any action required or permitted to be taken by the stockholders of the
corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such
holders.
(b) Special
meetings of the stockholders of this corporation for any purpose or purposes may
be called at any time by the Chairman of the Board or the President, or by the
Board of Directors pursuant to a resolution approved by a majority of the entire
Board of Directors, but such special meetings may not be called by any other
person or persons.
(c) Advance notice
of stockholder nominations for the election of directors shall be given in the
manner provided in the bylaws of this corporation.
(d) Election of
directors need not be by written ballot unless the bylaws of this corporation
shall so provide.
EIGHTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the
affirmative vote of not less than a
majority seventy-five
percent (75%) of the total voting power of all outstanding shares of
stock in this corporation entitled to vote generally in the election of
directors voting together as a single class (it being understood that for the
purposes of this Article EIGHTH, each share shall have one vote except as
otherwise provided in accordance with Article FOURTH) shall be required to
alter, amend or repeal, or adopt any provisions inconsistent with the provisions
set forth in Articles FIFTH, SIXTH, SEVENTH, and this Article
EIGHTH.
NINTH: No
director shall be personally liable to the corporation or any stockholders for
monetary damages for breach of fiduciary duty as a director, except for any
matter in respect of which such director shall be liable under Section 174 of
Title 8 of the Delaware Code (relating to the Delaware General Corporation Law)
or any amendment thereto or any successor provision thereto or shall be liable
by reason that, in addition to any and all other requirements for such
liability, such director (i) shall have breached the duty of loyalty to the
corporation of its stockholders, (ii) shall not have acted in good faith, or, in
failing to act, shall not have acted in good faith, (iii) shall have acted in a
manner involving intentional misconduct or a knowing violation of law or, in
failing to act, shall have acted in a manner involving intentional misconduct or
a knowing violation of law, or (iv) shall have derived an improper personal
benefit. Neither the amendment nor repeal of this Article NINTH, nor
the adoption of any provision of the Certificate of Incorporation inconsistent
with this Article NINTH, shall eliminate or reduce the effect of this Article
NINTH in respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article NINTH would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
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4.
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This Restated
Certificate of Incorporation was duly adopted by vote of the stockholders
in
accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
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Page 95
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Appendix C – Proposed Amendments to
Bylaws
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If Proposal 4 is approved by stockholders at the 2010 Annual Meeting, amendments to Article III, Section 1, Subsections (b), (c) and (f) will be approved. If Proposal 5 is approved by stockholders at the 2010 Annual Meeting, the amendment to Article III, Section 1, Subsection (e) will be approved.
CATERPILLAR
INC.
BYLAWS
Article I
Offices
Section 1. Registered
Office.
The registered office of the corporation in the State of
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section
2. Other Offices.
The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may
require.
Article II
Stockholders
Section
1. Stockholder Meetings.
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(a)
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Place of Meetings. Meetings of stockholders shall
be held at such places, within or without the State of Delaware, as may
from time to time be designated by the board of
directors.
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(b)
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Annual
Meeting.
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(i)
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The annual meeting of stockholders shall be held
on the second Wednesday in April in each year at a time designated by the
board of directors, or at such a time and date as may be designated by the
board.
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(ii)
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At an annual meeting of the stockholders, only
such business shall be conducted as shall have been properly brought
before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b)
otherwise properly brought before the meeting by or at the direction of
the board of directors, or (c) otherwise properly brought before the
meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation, not less than 45
days nor more than 90 days prior to the meeting; provided, however, that
in the event that less than 60 days' notice of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the fifteenth
(15th) day following the date on which such notice of the date of the
annual meeting was mailed. A stockholder's notice to the secretary shall
set forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a brief description of the business desired to be
brought before the annual meeting, (b) the name and address, as they
appear on the corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the bylaws to
the contrary, no business shall be conducted at an annual meeting except
in accordance with the procedures set forth in this Section 1(b)(ii). The
presiding officer of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this
Section 1, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting
shall not be transacted.
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Page 96
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(c)
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Special Meetings. Special meetings of the
stockholders of this corporation for any purpose or purposes may be called
at any time by the chairman of the board or the vice chairman, or by the
board of directors pursuant to a resolution approved by a majority of the
entire board of directors, but such special meetings may not be called by
any other person or persons.
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(d)
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Notice of Meetings. Notice of every meeting of the
stockholders shall be given in any manner permitted by law, and such
notice shall include the record date for determining the stockholders
entitled to vote at the meeting, if such date is different from the record
date for determining stockholders entitled to notice of the
meeting.
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(e)
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Quorum.
Except as otherwise required by law, the certificate of incorporation and
these bylaws, the holders of not less than one-third of the shares
entitled to vote at any meeting of the stockholders, present in person or
by proxy, shall constitute a quorum at all meetings of the
stockholders. If a quorum shall fail to attend any meeting, the
chairman of the meeting may adjourn the meeting to another place, date or
time. If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held
with those present constituting a quorum, then, except as otherwise
required by law, those present at such adjourned meeting shall constitute
a quorum.
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Section
2. Determination of Stockholders Entitled to Vote.
To determine the stockholders entitled to notice of any
meeting or to vote, the board of directors may fix in advance a record date for
each as provided in Article VI, Section 1 hereof.
Section
3. Voting.
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(a)
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Subject to
the provisions of applicable law, and except as otherwise provided in the
certificate of incorporation, each stockholder present in person or by
proxy shall be entitled to one vote for each full share of stock
registered in the name of such stockholder at the time fixed by the board
of directors or by law as the record date of the determination of
stockholders entitled to vote at a
meeting.
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(b)
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Every stockholder entitled to vote may do so in
person or by one or more agents authorized by proxy. Such authorization
may be in writing or by transmission of an electronic communication, as
permitted by law and in accordance with procedures established for the
meeting.
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(c)
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Voting may be by voice or by ballot as the
chairman of the meeting shall
determine.
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(d)
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In all
matters other than the election of directors, the affirmative vote of the
majority of shares present in person or by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the
stockholders. Directors shall be elected by a plurality of the
votes of the shares present in person or by proxy at the meeting and
entitled to vote on the election of
directors.
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(e)
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In advance of any meeting of stockholders the
board of directors may appoint one or more persons (who shall not be
candidates for office) as inspectors of election to act at the meeting. If
inspectors are not so appointed, or if an appointed inspector fails to
appear or fails or refuses to act at a meeting, the chairman of any
meeting of stockholders may, and on the request of any stockholder or his
proxy shall, appoint inspectors of election at the
meeting.
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(f)
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Any action required or permitted to be taken by
the stockholders of the corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by any
consent in writing by such
holders.
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Page 97
Article
III
Board of
Directors
Section
1. Election of Directors.
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(a)
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Number. The authorized number of directors of the
corporation shall be fixed from time to time by the board of directors but
shall not be less than three (3). The exact number of directors shall be
determined from time to time either by a resolution or bylaw duly adopted
by the board of directors.
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(b)
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Election
and Terms of Directors. Each director shall serve for a term of
office to expire at the next annual meeting of stockholders, with each
director to Classes
of Directors. The board of directors shall be and is divided into three
classes: Class I, Class II and Class III, which shall be as nearly equal
in number as possible. Each director shall serve for a term ending on the
date of the third annual meeting of stockholders following the annual
meeting at which the director was elected; provided, however, that each
initial director in Class I shall hold office until the annual meeting of
stockholders in 1987; each initial director in Class II shall hold office
until the annual meeting of stockholders in 1988; and each initial
director in Class III shall hold office until the annual meeting of
stockholders in 1989. Notwithstanding the foregoing provisions of this
subsection (b), each director shall serve until his successor is
duly elected and qualified or until his death, resignation or
removal.
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(c)
|
Newly Created
Directorships and Vacancies. In
the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the board of directors
among the three classes of directors so as to maintain such classes as
nearly equal in number as possible. No decrease in the number of
directors constituting the board of directors shall shorten the term of
any incumbent director. Newly created directorships resulting from any
increase in the number of directors and any vacancies on the board of
directors resulting from death, resignation, disqualification, removal or
other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office (and not by stockholders), even though
less than a quorum of the board of directors. Any director elected in
accordance with the preceding sentence shall hold office until
the next annual meeting of stockholders for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such
director's successor shall have been elected and
qualified.
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(d)
|
Nomination of Directors. Candidates for director
shall be nominated either
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(i)
|
by the board of directors or a committee appointed
by the board of directors or
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(ii)
|
by nomination at any such stockholders' meeting by
or on behalf of any stockholder entitled to vote at such meeting provided
that written notice of such stockholder's intent to make such nomination
or nominations has been given, either by personal delivery or by United
States mail, postage prepaid, to the secretary of the corporation not
later than (1) with respect to an election to be held at an annual meeting
of stockholders, ninety (90) days in advance of such meeting, and (2) with
respect to an election to be held at a special meeting of stockholders for
the election of directors, the close of business on the tenth (10th) day
following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description
of all arrangements or understandings between the stockholder and each
nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated,
by the board of directors; and (e) the consent of each nominee to serve as
a director of the corporation if so elected. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing
procedure.
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Page 98
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(e)
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Removal. Any director may be removed from office
without cause but only by the affirmative vote of the holders of not less
than a
majority seventy-five
percent (75%) of the outstanding stock of the corporation
entitled to vote generally in the election of directors, voting together
as a single class.
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(f)
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Preferred Stock Provisions. Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of
stock issued by this corporation having a preference over the common stock
as to dividends or upon liquidation, shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of
vacancies, nominations, terms of removal and other features of such
directorships shall be governed by the terms of Article FOURTH of the
certificate of incorporation and the resolution or resolutions
establishing such class or series adopted pursuant thereto
and such directors so elected shall not be divided into classes pursuant
to Article SIXTH of the certificate of incorporation unless expressly
provided by such terms.
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Section
2. Meetings of the Board of Directors.
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(a)
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Regular Meetings. Regular meetings of the board of
directors shall be held without call at the following
times:
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(i)
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8:30 a.m. on the second Wednesday in February,
April, June, August, October and
December;
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(ii)
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one-half hour prior to any special meeting of the
stockholders, and immediately following the adjournment of any annual or
special meeting of the
stockholders.
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Notice of all such regular meetings is hereby dispensed
with.
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(b)
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Special Meetings. Special meetings of the board of
directors may be called by the chairman of the board, any two (2)
directors or by any officer authorized by the board. Notice of the time
and place of special meetings shall be given by the secretary or an
assistant secretary, or by any other officer authorized by the board. Such
notice shall be given to each director personally or by mail, messenger,
telephone or telegraph at his business or residence address. Notice by
mail shall be deposited in the United States mail, postage prepaid, not
later than the third (3rd) day prior to the date fixed for the meeting.
Notice by telephone or telegraph shall be sent, and notice given
personally or by messenger shall be delivered, at least twenty-four (24)
hours prior to the time set for the meeting. Notice of a special meeting
need not contain a statement of the purpose of the
meeting.
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(c)
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Adjourned Meetings. A majority of directors
present at any regular or special meeting of the board of directors,
whether or not constituting a quorum, may adjourn from time to time until
the time fixed for the next regular meeting. Notice of the time and place
of holding an adjourned meeting shall not be required if the time and
place are fixed at the meeting
adjourned.
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(d)
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Place of Meetings. Unless a resolution of the
board of directors, or the written consent of all directors given either
before or after the meeting and filed with the secretary, designates a
different place within or without the State of Delaware, meetings of the
board of directors, both regular and special, shall be held at the
corporation's offices at 100 N.E. Adams Street, Peoria,
Illinois.
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(e)
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Participation by Telephone. Members of the board
may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in
such meeting can hear one another, and such participation shall constitute
presence in person at such
meeting.
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(f)
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Quorum. At all meetings of the board one-third of
the total number of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or
by the certificate of incorporation. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action is approved by at least a majority
of the required quorum for such meeting. Less than a quorum may adjourn
any meeting of the board from time to time without
notice.
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Page 99
Section
3. Action Without Meeting.
Any action required or permitted to be taken by the
board of directors may be taken without a meeting if all members of the board
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the board.
Section
4. Compensation of Directors.
The directors may be paid such compensation for their
services as the board shall from time to time determine. Directors who receive
salaries as officers or employees of the corporation shall not receive
additional compensation for their services as directors.
Section
5. Committees of the Board.
There shall be such committees of the board of directors
each consisting of two or more directors with such authority, subject to
applicable law, as a majority of the board shall by resolution determine.
Committees of the board shall meet subject to the call of the chairman of each
committee and shall prepare and file with the secretary minutes of their
meetings. Unless a committee shall by resolution establish a different
procedure, notice of the time and place of committee meetings shall be given by
the chairman of the committee, or at his request by the chairman of the board or
by the secretary or an assistant secretary. Such notice shall be given to each
committee member personally or by mail, messenger, telephone or telegraph at his
business or residence address at the times provided in subsection (b) of Section
2 of this Article for notice of special meetings of the board of directors.
One-third of a committee but not less than two members shall constitute a quorum
for the transaction of business. Except as a committee by resolution may
determine otherwise, the provisions of Section 3 and of subsections (c), (d) and
(e) of Section 2 of this Article shall apply, mutatis mutandis, to meetings of
board committees.
Article IV
Officers
Section
1. Officers.
The officers of the corporation shall be a chairman of
the board, who shall be the chief executive officer, one or more group
presidents, one or more vice presidents (one of whom shall be designated the
chief financial officer), a secretary and a treasurer, together with such other
officers as the board of directors shall determine. Any two or more offices may
be held by the same person.
Section
2. Election and Tenure of Officers.
Officers shall be elected by the board of directors,
shall hold office at the pleasure of the board, and shall be subject to removal
at any time by the board. Vacancies in office may be filled by the
board.
Section
3. Powers and Duties of Officers.
Each officer shall have such powers and duties as may be
prescribed by the board of directors or by an officer authorized so to do by the
board.
Section
4. Compensation of Officers.
The compensation of officers shall be determined by the
board of directors; provided that the board may delegate authority to determine
the compensation of any assistant secretary or assistant treasurer, with power
to redelegate.
Page 100
Article V
Indemnification
The corporation shall indemnify to the full extent
permitted by, and in the manner permissible under, the laws of the State of
Delaware any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative
(hereinafter a “proceeding”), by reason of the fact that he, his testator or
intestate is or was a director or officer of the corporation or any predecessor
of the corporation, or served any other enterprise as a director or officer at
the request of the corporation or any predecessor of the corporation. The
corporation shall pay or reimburse the actual and reasonable expenses (including
attorneys fees) of such person incurred in defending any threatened or pending
proceeding in advance of its final disposition if the corporation has received
an undertaking by the person receiving such payment or reimbursement to repay
all amounts advanced if it should be ultimately determined that he or she is not
entitled to be indemnified under this Article V or otherwise.
The foregoing provisions of this Article V shall be
deemed to be a contract between the corporation and each director and officer
who serves in such capacity at any time while this bylaw is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts.
The foregoing rights of indemnification and advancement
of expenses shall not be deemed exclusive of any other rights to which any
director or officer may be entitled apart from the provisions of this
Article.
The board of directors in its discretion shall have
power on behalf of the corporation to indemnify and advance expenses to any
person, other than a director or officer, made a party to any action, suit or
proceeding by reason of the fact that he, his testator or intestate, is or was
an employee of the corporation.
Article VI
Miscellaneous
Section
1. Record Date.
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(a)
|
In order that
the corporation may determine the stockholders entitled to notice of any
meeting of stockholders or any adjournment thereof, the board of directors
may fix, in advance, a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by
the board of directors and which record date shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such
meeting. If the board of directors so fixes a date, such date
shall also be the record date for determining the stockholders entitled to
vote at such meeting unless the board of directors determines, at the time
it fixes such record date, that a later date on or before the date of the
meeting shall be the date for making such determination. If no
record date is fixed by the board of directors, the record date for
determining stockholders entitled to notice of and to vote at a meeting of
stockholders shall be at the close of business on the day next preceding
the day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for determination of stockholders entitled to
vote at the adjourned meeting, and in such case shall also fix as the
record date for stockholders entitled to notice of such adjourned meeting
the same or an earlier date as that fixed for determination of
stockholders entitled to vote in accordance with the foregoing provisions
at the adjourned meeting.
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(b)
|
In order that
the corporation may determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the
board may fix, in advance, a record date, which shall not be more than
sixty (60) days prior to any such corporate action. If not fixed by the
board, the record date shall be at the close of business on the day on
which the board of directors adopts resolution relating
thereto.
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Page 101
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|
(c)
|
Stockholders on a record date are entitled to
notice, to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record
date, except as otherwise provided by agreement or by applicable
law.
|
Section
2. Stock Certificates.
|
|
(a)
|
Shares of the corporation may be certificated or
uncertificated, as provided under the laws of the State of
Delaware. Every holder of certificated shares in the
corporation shall be entitled to have a certificate signed in the name of
the corporation by the chairman of the board or the vice chairman, or by
the president or vice president, and by the treasurer or an assistant
treasurer, or the secretary or an assistant secretary, certifying the
number of shares and the class or series of shares owned by the
stockholder. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at
the date of issue.
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|
(b)
|
The corporation may issue a new share certificate
or a new certificate for any other security in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen
or destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new
certificate.
|
Section
3. Corporate Seal.
The corporation shall have a corporate seal in such form
as shall be prescribed and adopted by the board of
directors.
Section
4. Construction and Definitions.
Unless the context requires otherwise, the general
provisions, rules of construction, and definitions in the General Corporation
Law of Delaware shall govern the construction of these
bylaws.
Section
5. Amendments.
Subject to the provisions of the certificate of
incorporation, these bylaws may be altered, amended or repealed at any regular
meeting of the stockholders (or at any special meeting thereof duly called for
that purpose) by a majority vote of the shares represented and entitled to vote
at the meeting; provided that in the notice of such special meeting notice of
such purpose shall be given. Subject to the laws of the State of Delaware, the
certificate of incorporation and these bylaws, the board of directors may by
majority vote of those present at any meeting at which a quorum is present amend
these bylaws, or enact such other bylaws as in their judgment may be advisable
for the regulation of the conduct of the affairs of the
corporation.
Page 102
Proxy Card
Notice Card
PROXY
AND VOTING INSTRUCTION
ANNUAL MEETING OF STOCKHOLDERS—JUNE 9,
2010
This
proxy is solicited on behalf of the Board of Directors
At the Annual
Meeting of Stockholders of Caterpillar Inc. (the "Company" or "Caterpillar") on
June 9, 2010, or at any adjournments thereof, the undersigned hereby (i)
appoints C.C. SPEARS and J.J. FUNK, and each of them, proxies with power of
substitution to vote the common stock of the undersigned and/or (ii) directs THE
NORTHERN TRUST COMPANY, CIBC MELLON TRUST COMPANY or RELIANCE TRUST COMPANY, as
Trustee, to appoint C.C. SPEARS and J.J. FUNK, and each of them, proxies with
power of substitution to vote all shares of the Company’s stock credited to the
accounts of the undersigned under any Caterpillar Inc. or subsidiary employee
benefit plan at the close of business on April 12, 2010, as directed hereon on
the following matters, and, in their discretion, on any other matters that may
come before the meeting. For employee benefit plan participants, if the trustees
have not received directions from the undersigned by 8:00 a.m. Eastern Time, on
June 7, 2010, the trustees will act in accordance with the employee benefit plan
documents.
You
are encouraged to specify your choices by marking the appropriate boxes.
However, if you wish to vote in accordance with the Board of Directors’
recommendations, simply sign and return this card.
|
SEE
REVERSE SIDE
|
||
|
^TO VOTE BY MAIL, PLEASE DETACH
HERE^
|
PLEASE
VOTE TODAY!
SEE
REVERSE SIDE FOR THREE EASY WAYS TO VOTE.
ELECTRONIC
DELIVERY OF PROXY MATERIALS
Sign up to receive
next year’s proxy materials via the Internet. To sign up for this optional
service, visit https://www.proxyvotenow.com/cat.
Please note you must type an “s” after “http”.
|
X
|
Please mark
your vote as in this example
|
|
This Proxy, when
properly executed, will be voted in the manner you have directed. If you return
a signed proxy with no direction given, it will be voted in accordance with the
Board of Directors' recommendations.
|
Directors
recommend a vote "FOR"
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|
1.
|
Election
of Class III - Directors nominated for election this year
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|||||||
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FOR
|
WITHHOLD
|
|||||||
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|||||||
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Nominees:
01. John
T. Dillon
02. Juan
Gallardo
03. William
A. Osborn
04. Edward
B. Rust, Jr.
05.
Susan C. Schwab
|
||||||||
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For, except
vote withheld from the following
nominee(s):
|
||||||||
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FOR
|
AGAINST
|
ABSTAIN
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|||||
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2.
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Ratify
Auditors
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|||
| 3. | Amend 2006 Long-Term Incentive Plan |
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|||
| 4. | Amend Articles and Bylaws to Declassify Board |
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| 5. | Amend Articles and Bylaws to Eliminate Supermajority Vote Requirements |
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Directors
recommend a vote "AGAINST"
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FOR
|
AGAINST
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ABSTAIN
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|||||
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6.
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Stockholder
Proposal—Independent
Chairman of the Board
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7.
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Stockholder
Proposal—Review
of Global Corporate Standards
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8.
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Stockholder
Proposal—Special
Stockholder Meetings
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|
DATE
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2010
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|||
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||||
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SIGNATURE
|
||||
|
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||||
|
SIGNATURE
|
||||
|
|
||||
|
NOTE: Please
sign exactly as name appears hereon. If more than one owner,
each must sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as
such.
|
||||
|
^TO VOTE BY MAIL, PLEASE DETACH
HERE^
|
YOUR
VOTE IS IMPORTANT.
Please take a
moment now to vote your shares of Caterpillar Inc.
common stock for
the upcoming Annual Meeting of Stockholders.
YOU
CAN VOTE TODAY IN ONE OF THREE WAYS:
|
1.
|
Vote
by Telephone—Please call
toll-free at 1-888-216-1363 on a touch-tone telephone and follow
the simple recorded instructions. Then, if you wish to vote as recommended
by the Board of Directors, simply press 1. If you do not wish to vote as
the Board recommends, you need only respond to a few simple prompts. Your
vote will be confirmed and cast as you directed. (Telephone voting is
available for residents of the U.S. and Canada
only.)
|
|
|
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OR
|
|
2.
|
Vote
by Internet—Please access https://www.proxyvotenow.com/cat
and follow the simple instructions on the screen. Please note you
must type an “s” after
“http”.
|
|
[Control
Number]
|
|
You may vote by telephone or
Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies in the same manner as if you had executed a proxy card. |
|
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OR
|
|
3.
|
Vote
by Mail—If you do not wish to vote by telephone or over the
Internet, please complete, sign, date and return the proxy card in the
envelope provided to: Caterpillar Inc., c/o Innisfree M&A
Incorporated, FDR Station, P.O. Box 5156, New York, NY
10150-5156.
|
Notice Card
Important
Notice Regarding the Availability of
Proxy
Materials for the Caterpillar Inc.
Annual
Meeting of Stockholders to Be Held on June 9, 2010
As allowed under
U.S. Securities and Exchange Commission rules, you are receiving this notice
that the proxy materials, including the 2010 proxy statement and 2009 general
and financial information, for the Caterpillar Inc. 2010 Annual Meeting of
Stockholders are available on the Internet. Follow the instructions below to
view the proxy materials and vote online or request paper or e-mail copies.
Information about the annual meeting, including the items to be voted on, is
provided on the reverse side of this notice.
THIS
IS NOT A PROXY CARD. If you wish to cast your vote on a traditional proxy card,
you must request that a paper copy of the proxy materials be mailed to you by
following the instructions at the bottom of this page.
This
communication presents only an overview of the more complete proxy materials
that are available to you on the Internet. We encourage you to access and review
all of the important information contained in the proxy materials before
voting.
|
[Control
Number]
|
To
view the proxy materials, please have this notice available and visit:
www.eproxyaccess.com/cat2010
Please
have this notice available when you access the voting website. Follow the
instructions on the screen to log into the website to vote. Your Internet vote
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned a proxy card.
If
you want to receive a paper or e-mail copy of the proxy materials, you must
request one by following the instructions below:
|
§
|
Internet
– Go to
www.eproxyaccess.com/cat2010 and follow the registration
instructions.
|
|
§
|
Telephone
– Call us free
of charge at 1-866-580-7648 from within the United States or
Canada.
|
|
§
|
E-mail
– Send us an
e-mail at cat@eproxyaccess.com, using the number in the box above as the
subject line, and state whether you wish to receive a paper or e-mail copy
of the proxy materials and whether your request is for this meeting only
or all future meetings.
|
There
is no charge to you for requesting a copy. Please make your request for a copy
as instructed above on or before June 1, 201009 to facilitate timely
delivery.
Caterpillar
Inc.
Notice
of Annual Meeting of Stockholders
The
annual meeting of stockholders of Caterpillar Inc. will be held on Wednesday,
June 10, 2009 at 1:30 p.m., Central Daylight Time, at the Northern Trust
Building, 50 South LaSalle Street, Chicago, Illinois.
The
matters intended to be acted upon at the meeting are listed below:
|
1.
|
Election of
directors: John T. Dillon, Juan Gallardo, William A. Osborn, Edward B.
Rust, Jr., and Susan C. Schwab.
|
|
2.
|
Proposal to
ratify the appointment of the independent registered public accounting
firm for the 2010 fiscal year.
|
|
3.
|
Amend 2006
Long-Term Incentive Plan.
|
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4.
|
Amend
Restated Certificate of Incorporation and Bylaws to Provide for Annual
Election of Directors.
|
|
5.
|
Amend
Restated Certificate of Incorporation and Bylaws to Eliminate
Supermajority Voting Requirements.
|
|
6.
|
Stockholder
Proposal - Independent Chairman of the Board.
|
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7.
|
Stockholder
Proposal - Review of Global Corporate Standards.
|
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8.
|
Stockholder
Proposal - Special Stockholder Meetings.
|
|
9.
|
To consider
such other business as may properly come before the meeting.
|
The
Board of Directors recommends that you vote FOR the election of each of the
nominees for director, FOR the ratification of the appointment of the
independent registered public accounting firm for the 2010 fiscal year, FOR the
amendment of the 2006 Long-Term Incentive Plan, FOR the amendments to the
Restated Certificate of Incorporation and Bylaws and AGAINST the three
stockholder proposals.
THIS IS NOT A PROXY
CARD. If you wish to cast your vote on a traditional proxy card, you must
request that a paper copy of the proxy materials be mailed to you by following
the instructions on the reverse side of this notice.
These items of
business are more fully described in the proxy materials relating to the annual
meeting. Follow the instructions on the reverse side of this notice to view the
proxy materials and vote via the Internet or to request a paper or e-mail copy
of the proxy materials. Any action on the items of business described above may
be considered at the annual meeting at the time and on the date specified above
or at any time and date to which the annual meeting may be properly adjourned or
postponed.
You are entitled to
vote at the annual meeting only if you were a stockholder of Caterpillar Inc. as
of the close of business on April 12, 2010, which is the record date for the
annual meeting.
If you are a
stockholder as of the record date, you are invited to attend the annual meeting
and you may vote in person.
You must have an
admission ticket to attend. Procedures for requesting the admission ticket are
included in the proxy materials. Directions to attend the meeting will be
provided along with any issued admission tickets.