Registration No. - 333-_________
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CATERPILLAR INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
37-0602744
(IRS Employer Identification Number)
100 NE Adams Street, Peoria, Illinois
(Address of principal executive offices)
61629
(Zip Code)
Registrant's telephone number, including area code: (309) 675-1000
R. RENNIE ATTERBURY III
Vice President, General Counsel and Secretary
Caterpillar Inc.
100 NE Adams Street
Peoria, IL 61629-7310
Approximate Date of Commencement of Proposed Sale to the Public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box: __
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: X
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: __
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: __
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. __
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of each Class of Securities to be Registered:
Common Stock
Amount to be Registered<F1>
1,000,000
Proposed Maximum Offering Price per Unit<F2>
$47.4375
Proposed Maximum Aggregate Offering Price<F1><F2>
$47,437,500.00
Amount of Registration Fee<F3>
$0
<F1> In U.S. dollars or the equivalent thereof in foreign denominated
currency or a composite currency.
<F2> Estimated solely for the purpose of determining the amount of the
registration fee in accordance with Rule 457(h), based upon a price of
$47.4375 per share for 1,000,000 shares of Common Stock, such price being
the average of the high and low prices of the Common Stock reported for
the shares on the New York Stock Exchange on December 19, 1997, a date
within five business days prior to the date of filing of this Registration
Statement. Associated with the Common Stock are preferred stock purchase
rights that will not be exercisable or evidenced separately from the
Common Stock prior to the occurrence of certain events.
<F3> Pursuant to Rule 429(b) under the Securities Act, 1,000,000 shares
of Common Stock previously registered on Form S-8 (Registration
No. 333-03609) are being carried forward for purposes of this
registration statement. The filing fee associated with those securities
was $21,616. A post-effective amendment to that Form S-8 will be filed
to de-register those 1,000,000 shares.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
<PAGE>
[CATERPILLAR LOGO]
PROSPECTUS
1,000,000 SHARES
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
CATERPILLAR INC.
100 NE ADAMS STREET
PEORIA, IL 61629
(309) 675-1000
Caterpillar Inc. intends to offer at one or more times shares of its
Common Stock which may be purchased pursuant to the exercise of
transferable options issued to certain participants in our stock option
plans. For more details, see the "Plan of Distribution" section in
this prospectus.
These securities have not been approved by the Securities & Exchange
Commission or any state securities commission, nor have these
organizations passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is _____________, 1997.
<PAGE>
PROSPECTUS
TABLE OF CONTENTS
Where You Can Find More Information . . . . . . . . . . . . .1
The Company . . . . . . . . . . . . . . . . . . . . . . . . .1
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . .2
Plan of Distribution. . . . . . . . . . . . . . . . . . . . .2
Transferable Options . . . . . . . . . . . . . . . . . . .2
Federal Income Tax Consequences of Transferable Options. .3
The 1996 and 1987 Plans. . . . . . . . . . . . . . . . . .4
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . .6
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . .6
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
***********************************
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings
are also available to the public from the SEC's web site at
http://www.SEC.gov. Our common stock and certain debt securities are
listed on the New York Stock Exchange. Our common stock is also listed
on the Chicago and Pacific Stock Exchanges. Information about us is
also available at those locations.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated
by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the Common Stock. This prospectus is part of a registration
statement filed with the SEC.
* Annual Report on Form 10-K for the year ended December 31, 1996;
* Quarterly Reports on Form 10-Q for quarters ended March 31, June 30,
and September 30, 1997;
* Current Reports on Form 8-K filed on January 21, February 13, April 15,
June 2, July 17, July 22, August 19, October 15, November 3,
December 1, and December 11, 1997.
* The description of Caterpillar's Common Stock contained in Form S-3
filed on May 6, 1991 (Registration No. 33-40393), including any
amendment or report filed with the SEC updating that description; and
* The description of Caterpillar's Preferred Stock Purchase Rights
contained in Form 8-A filed on December 12, 1996 (Commission File
No. 1-768), including any amendment or report filed with the SEC
updating that description.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Caterpillar Inc.
100 N.E. Adams St.
Peoria, IL 61629
Attn: Corporate Secretary
(309)675-1000
You should rely only on the information incorporated by reference
or provided in this prospectus or any supplement. We have not authorized
anyone else to provide you with different information. We are not making
an offer of this Common Stock in any state where the offer is not
permitted. You should not assume that the information in this prospectus
or any supplement is accurate as of any date other than the date on the
front of those documents.
THE COMPANY
***********
Caterpillar, through its employees and dealers, design, manufacture,
market, finance and provide support for Caterpillar machines and engines.
More information about Caterpillar is available on our web site at
http://www.CAT.com.
<PAGE>
Construction, Mining and Agricultural Machinery:
- ------------------------------------------------
Caterpillar construction machines are used to build, maintain and
rebuild the world's infrastructure - highways, dams, airports, water
and sewer systems, office complexes and housing developments. Our
mining machines help extract and deliver needed raw materials, and
our agricultural tractors till the world's soil.
Engines:
- --------
Caterpillar engines provide power for on-highway trucks, ships and
boats, locomotives, and construction, mining and agricultural
equipment. Through electrical power generating systems, they supply
power to developing or isolated areas. Other systems provide emergency
power to hospitals, schools, factories, office buildings and airports.
A Caterpillar subsidiary, Solar Turbines Incorporated, makes turbine
engines that are used to produce, process and transport crude oil and
natural gas, and to provide electrical power in many different industries.
Financial Products:
- -------------------
Caterpillar Financial Services Corporation and its subsidiaries offer
a wide variety of financing options to help Caterpillar customers
worldwide acquire and use Caterpillar equipment. Caterpillar Insurance
Services Corporation provides various forms of insurance to Caterpillar
customers and dealers to help support their purchase and financing of
Caterpillar equipment.
USE OF PROCEEDS
***************
Proceeds received upon the exercise of transferable options will depend
upon the option exercise price and the extent to which they are
exercised. Those proceeds will be used for general corporate purposes.
PLAN OF DISTRIBUTION
********************
*Transferable Options*
We are offering shares of Common Stock covered by this Prospectus
to transferees of transferable options granted to certain officers and
directors of Caterpillar. Options that may be transferred have been
granted to officers at the level of Vice President and above, as well as
members of our Board of Directors, under both our 1996 Stock Option and
Long-Term Incentive Plan ("1996 Plan") and our 1987 Stock Option Plan
("1987 Plan).
Individuals that may receive transferred options, or "Permissible
Transferees," include:
* the spouse of the individual to whom the option is granted;
* the lineal descendants of the individual to whom the option is
granted;
* the spouses of the lineal descendants of the individual to whom the
option is granted; and
* all trusts, corporations, partnerships, limited liability companies
and other entities in which, directly or indirectly, but for the
exercise of a power of appointment or the death of the survivor of
the individuals who are Permitted Transferees, each owner of an
equitable interest is an individual who is a Permissible Transferee.
Options transferred will be fully vested and will not be incentive stock
options (as defined in Section 422 of the Internal Revenue Code).
The 1996 and 1987 Plan provisions apply to a transferred option. The
rights of Permissible Transferees are subject to the same limitations
as the original option grant to the transferor, including those related
to expiration, exercise, and forfeiture, except as otherwise described
below or in the Plan documents.
<PAGE>
A Permissible Transferee can not further transfer an option except by
will or the laws of descent and distribution. Beneficiaries may be
designated in writing by the Permissible Transferee to the attention of
Caterpillar's Compensation & Benefits Department.
A transferred option may be exercised by the Permissible Transferee at
any time after the transfer. The exercise price must be paid by the
Permissible Transferee at the time of exercise in cash or Caterpillar
stock of equivalent value.
Upon exercise of a transferred option by a Permissible Transferee,
federal, state, or local withholding taxes are the obligation of the
transferor. Once exercise is completed, stock certificates for the
appropriate number of shares will be delivered, or other means of
delivery effected, to the Permissible Transferee.
Because transferred options continue to be governed by the Plans, their
exercisability continues to be effected by the transferor's employment
status. In this regard, Permissible Transferees should pay particular
attention to the termination of employment provisions of the Plans, as
discussed below.
*Federal Income Tax Consequences of Transferable Options*
Prior to transferring an option, the transferor should consult his or
her personal tax advisor on possible federal and state gift, estate,
and inheritance tax consequences of transfer, as well as other state
and local income tax consequences not addressed below. This discussion
assumes the transferable option does not have a readily ascertainable
fair market value at the date of grant and the transfer is made by gift
with no consideration received.
Consequences for the Transferor
- -------------------------------
Transferors will not recognize income at the time of transfer. Instead,
at the time the Permissible Transferee exercises, the transferor will
recognize ordinary compensation income in an amount equal to the excess
of the fair market value of the shares purchased over the exercise price.
That income also will be subject to payment and withholding of income
and FICA taxes.
The transferor must satisfy these tax obligations by cash payment
to Caterpillar. Caterpillar will generally be able to claim
a federal income tax deduction at the same time, and in the same amount,
as the transferor recognizes as income. If a Permitted Transferee
exercises an option after the death of the transferor, ordinary income
will be recognized by the transferor's estate.
Consequences for the Permissible Transferee
- -------------------------------------------
A Permissible Transferee will not recognize income when the option is
transferred or exercised. If the Permissible Transferee later sells
stock acquired upon exercise, the difference between the sale price and
the Permissible Transferee's tax basis for the shares will be taxable
as long-term or short-term capital gain or loss, depending on whether
the stock has been held for more than one year after exercise. The tax
basis for the shares in the hands of the Permissible Transferee would
be the exercise price for the option plus the amount of income
recognized by the transferor at the time of exercise.
<PAGE>
*The 1996 and 1987 Plans*
The 1996 and 1987 Plans are attached as exhibits to the Registration
Statement containing this prospectus and will be made available to a
Permissible Transferee upon request. The following description
summarizes certain material plan provisions but is not a substitute
for the Plan documents, which will control in all instances.
Plan Administration
- -------------------
The 1996 Plan was approved by stockholders on April 10, 1996 and the
1987 Plan received stockholder approval on April 8, 1987. Both plans
provide for the award of stock options to certain officers and key
employees of Caterpillar, as well as our non-employee directors. Both
plans are designed to attract and retain outstanding individuals in key
positions and furnish incentives linked to the performance of Caterpillar
and its stock. Upon adoption of the 1996 Plan, option grants under the
1987 Plan ceased.
Both plans are administered by the Compensation Committee of our Board
of Directors ("Committee"). The Committee, consisting solely of
non-employee directors, may designate individuals to receive stock
option grants and may establish procedures under the plans related to
those grants.
The Option Grant
- ----------------
Under both plans, incentive stock options (those meeting the requirements
of Section 422 of the Internal Revenue Code) and non-qualified stock
options (those not meeting Section 422 requirements) may be granted.
Incentive stock options have a term of ten years from the date of grant,
while non-qualified stock options have a term of ten years and one day.
Under the 1996 Plan, no employee can receive options for more than
400,000 shares in any year.
The Committee can convert an incentive stock option to a non-qualified
stock option and amend the plans as necessary to comply with Section 422.
The Committee also can convert non-qualified stock options previously
granted to incentive stock options.
Under both plans, options are granted to non-employee directors in
amounts set by the plan, subject to adjustment for events such as a
stock split or stock dividend. Under the 1996 Plan, non-employee
directors receive options for 4,000 shares each year.
Option Exercises
- ----------------
Under both plans, options are exercisable in installments: typically,
by one-third at the end of the first year after the date of grant, by
two-thirds after the second year, and fully exercisable after three
years, subject to conditions in the event employment is terminated.
The option exercise price is set by the Committee but cannot be less
than 100% of the fair market value of shares underlying the option on
the date of grant.
Under both plans, when an option is exercised, the exercise price must
be paid in cash or with presently owned Caterpillar stock having a fair
market value equal to the exercise price. For a cash exercise, a check
for the full amount of the purchase price payable to Caterpillar must be
delivered to our Compensation & Benefits Department on the exercise date.
If the exercise involves the exchange of Caterpillar stock, verification
of shares owned must be provided.
When an option is exercised, resulting taxes must be withheld. Payment
of these taxes may be made by cash or, if the individual exercising is
the person to whom the option was granted, by withholding a portion of
shares that would have been received upon exercise.
<PAGE>
Termination of Employment
- -------------------------
Under both plans, for a Caterpillar employee to exercise an option, he
or she must have been employed by Caterpillar for a specific period of
time following the option grant: typically, one year as to one-third of
the grant, two years as to the second third, and three years as to the
balance. If the employee terminates because of death, retirement after
62, or disability, the required period of continuous employment is
reduced to six months.
If the requirements for continuous employment have been met, unexercised
portions of options may be exercised during the following time periods
after termination:
* Termination by death - sixty months;
* Termination by retirement or disability - sixty months;
* Other terminations - sixty days.
If death occurs following termination but before exercise period
expiration, unexercised portions of options may be exercised during the
following time periods after termination:
* Termination by retirement or disability - sixty-six months;
* Termination by other means - thirty-eight months.
For non-employee directors under both plans, an option may be exercised
within 60 months after the date of director termination. If a director
dies after termination, the option is exercisable for sixty-six months
after termination.
These time periods cannot extend beyond the original term of the option.
Change of Control
- -----------------
If a change of control occurs at Caterpillar, options outstanding under
the 1996 Plan become fully exercisable. A change of control occurs if
someone acquires 15% or more of Caterpillar's outstanding shares,
certain changes occur in the composition of the Caterpillar Board over
a two year period, or stockholders approve a plan of consolidation,
liquidation, or agreement to dispose of substantially all of
Caterpillar's assets.
Plan Amendment or Termination
- -----------------------------
Our Board may terminate the 1996 and 1987 Plans at any time, except for
grants and awards outstanding. The 1996 Plan may be amended without
shareholder approval unless that approval is necessary under applicable
law or stock exchange regulations. The 1987 Plan may be amended without
shareholder approval unless the amendment would increase the number of
shares issuable under the Plan; reduce the minimum option exercise
price; materially increase Plan benefits; impair an option; alter the
class of option recipients; or amend provisions applying only to
director grants.
Restrictions on Transferring Options
- ------------------------------------
Except as described above under "Transferable Options," options granted
under the plans can be transferred only in limited circumstances - by
will, the laws of descent and distribution, or pursuant to a qualified
domestic relations order. If an option holder becomes incapacitated or
disabled, the option may be exercised by the holder's authorized
representative.
<PAGE>
LEGAL OPINIONS
**************
Richard P. Konrath, our Securities Counsel, has issued an opinion
about the validity of the Caterpillar Common Stock. Robin D. Beran,
our Director - Corporate Tax, has passed upon the federal income tax
consequences described in this prospectus.
EXPERTS
*******
Price Waterhouse LLP, independent accountants, audited our financial
statements and schedules incorporated by reference in this prospectus
and elsewhere in the registration statement. These documents are
incorporated by reference in reliance upon the authority of Price
Waterhouse as experts in accounting and auditing in giving the report.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Accountants' Fees and Expenses $2,500
Legal Fees and Expenses $2,500
Miscellaneous Expenses $1,000
------
Total $6,000
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware Corporation Law and our Bylaws provide
for indemnification of officers and directors under certain circumstances.
Insurance carried by us provides (within limits and subject to certain
exclusions) for reimbursement of amounts which (a) we may be required to pay
as indemnities to officers or directors for claims made against them and (b)
individual directors, officers and certain employees may become legally
obligated to pay as the result of acts committed while acting in their
corporate fiduciary capacities.
The underwriting and distribution agreements may provide for the
indemnification of our officers and directors under certain circumstances.
Item 16. Exhibits
Reference is made to the Exhibit Index filed as part of this Registration
Statement.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement(or the most
recent post-effective amendment thereof) which, individually
<PAGE>
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of the securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3, Form S-8, or
Form F-3 and the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Securities and Exchange
Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Peoria, State of Illinois, on the
23rd day of December, 1997.
CATERPILLAR INC.
(Registrant)
By: /s/R. R. ATTERBURY III
R. R. Atterbury III, Secretary
Date: December 23, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
December 23, 1997 /s/DONALD V. FITES Chairman of the Board, Director
and Chief Executive Officer
December 23, 1997 /s/GLEN A. BARTON Group President
December 23, 1997 /s/GERALD S. FLAHERTY Group President
December 23, 1997 /s/JAMES W. OWENS Group President
December 23, 1997 /s/RICHARD L. THOMPSON Group President
December 23, 1997 /s/DOUGLAS R. OBERHELMAN Vice President and
Chief Financial Officer
December 23, 1997 /s/ROBERT R. GALLAGHER Controller and
Chief Accounting Officer
<PAGE>
December 23, 1997 /s/LILYAN H. AFFINITO Director
December 23, 1997 /s/W. FRANK BLOUNT Director
December 23, 1997 /s/DAVID R. GOODE Director
December 23, 1997 /s/JAMES P. GORTER Director
December 23, 1997 /s/PETER A. MAGOWAN Director
December 23, 1997 /s/GORDON R. PARKER Director
December 23, 1997 /s/GEORGE A. SCHAEFER Director
December 23, 1997 /s/JOSHUA I. SMITH Director
December 23, 1997 /s/CLAYTON K. YEUTTER Director
EXHIBIT INDEX
Exhibit
Number Description
4.1 Rights Agreement dated as of December 11, 1996, between
Caterpillar Inc. and First Chicago Trust Company of New York
(incorporated by reference from Exhibit 1 to Form 8-A filed
December 11, 1996, Commission File No. 1-768).
4.2 Caterpillar Inc. 1987 Stock Option Plan and Long Term
Incentive Plan Supplement, as amended and restated.
4.3 Caterpillar Inc. 1996 Stock Option and Long-Term Incentive
Plan, as amended and restated.
5 Opinion of Richard P. Konrath, Securities Counsel for Caterpillar
Inc., as to the legality of debt securities.
23.1 The consent of Richard P. Konrath, Securities Counsel for
Caterpillar Inc., is contained in his opinion filed as
Exhibit 5 to this Registration Statement.
23.2 Consent of Price Waterhouse LLP
CATERPILLAR INC.
1987 STOCK OPTION PLAN
(Amended and Restated as of 12/18/97)
1. Establishment of Plan
Caterpillar Inc. (hereafter referred to as the "Company") proposes
to grant to selected key employees of the Company and its subsidiaries
restricted stock awards, options to purchase common stock of the Company
and stock appreciation rights in conjunction therewith for the purposes
of (i) furnishing to such employees maximum incentive through ownership
of Company shares to improve operations and increase profits and (ii)
encouraging such persons to accept or continue employment with the
Company and its subsidiaries. Such restricted stock awards, options and
stock appreciation rights will be granted pursuant to the plan herein
set forth, which shall be known as the Caterpillar Inc. 1987 Stock
Option Plan (hereafter referred to as the "Plan").
The Company also proposes to grant to the members of the Company's
Board of Directors who are not officers or employees of the Company at
the time of a grant (hereinafter referred to as "Outside Directors")
options to purchase common stock of the Company pursuant to the Plan.
The Company also proposes to grant to Outside Directors restricted
shares of Company common stock pursuant to the Plan. The purpose of
such grants is to provide incentives for highly qualified individuals
to stand for election to the Board and to continue service on the Board
and to encourage increased stock ownership by Outside Directors in order
to promote long-term stockholder value. Stock appreciation rights, and
incentive stock options, as defined in Section 422A of the Internal
Revenue Code, will not be granted to Outside Directors under the Plan.
2. Stock Reserved for Options and Restricted Stock Awards
Subject to adjustment as provided in Section 3, the maximum number
of shares of the Company that may be issued upon the granting of
restricted stock awards, performance awards or the exercise of options
and Stock Appreciation Rights under the Plan or any Supplement hereto
shall not exceed 7,500,000. The shares so issued may be authorized but
unissued shares, Treasury shares, or previously issued shares purchased
for purposes of the Plan. Any shares subject to options or awards may
thereafter be subject to new stock options or awards under the Plan if
there is a forfeiture of any such awards or lapse, expiration or
termination of any such option but not if there is a surrender of an
option or portion thereof pursuant to a stock appreciation right as
provided hereafter in Section 7.
3. Adjustment Provisions
If there is any change in the outstanding shares of common stock
without any consideration to the Company by stock dividend, stock
split-up, change in par or no par value, or other similar event, the
number and kind of shares then remaining available for issue under the
Plan shall be correspondingly changed, and a similar adjustment shall
be made in the unexercised portion of all options then outstanding
without change in the aggregate purchase price to be paid.
Options and stock appreciation rights may also contain provisions
for the continuation thereof, and for other equitable adjustments, after
other changes in the Company's shares, including changes resulting from
recapitalization, reorganization, sale, merger, consolidation, or other
similar occurrence.
4. Administration of the Plan
The authority to grant restricted stock awards, options and stock
appreciation rights to officers and employees under the Plan shall be
vested in the Stock Option and Officers' Compensation Committee
(hereafter referred to as the "Committee") consisting of not less than
three members of the Board of Directors appointed from time to time by
the Board. No member of the Board shall serve on the Committee at a
time when such member is, or within one year prior thereto has been,
eligible to receive restricted stock awards, options, or stock
appreciation rights under the Plan, or restricted stock awards, options,
or stock appreciation rights under any other stock option or stock bonus
plan of the Company; provided, however, that Outside Directors who
receive options and restricted stock under this Plan may serve on the
Committee. The Committee shall have no authority regarding the granting
of options and restricted stock to Outside Directors.
Subject to the provisions of the Plan, the Committee from time to
time shall determine (except as to options and restricted stock granted
to Outside Directors) the individuals to whom, and the time or times at
which, restricted stock awards, options, or stock appreciation rights
shall be granted; the number of shares to be subject to each restricted
stock award, each option, and each stock appreciation right; the option
price per share; the extent to which stock appreciation rights are
exercisable for cash, or stock, or a combination of cash and stock;
whether restricted shares [shares of common stock issued under
restrictions which subject them to a "substantial risk of forfeiture"
(as defined in Section 83 of the Internal Revenue Code of 1986, as
amended) until the restrictions lapse] should be issued on the exercise
of an option or stock appreciation right and, if so, the nature of the
restrictions; the duration of each option; the specific restrictions
applicable to restricted stock awards and the other terms and provisions
of each restricted stock award, option, and stock appreciation right.
In the case of officers to whom restricted stock awards, options, or
stock appreciation rights may be granted, the selection of such officers
and all of the foregoing determinations shall be made directly by the
Committee in its sole discretion. In the case of key employees other
than officers, the selection of such employees and all of the foregoing
determinations may be delegated by the Committee to an administrative
group of officers chosen by the Committee. Neither restricted stock
awards, options, nor stock appreciation rights granted to one employee
need be identical to those granted other employees.
Commencing with the 1988 annual meeting of stockholders, options
with a term of ten years and one day shall be granted to each Outside
Director for 1,000 shares of the Company's common stock effective as of
the close of each annual meeting of the stockholders (i) at which such
individual is elected a director or (ii) following which such individual
will continue to serve as a director as a member of a continuing class of
directors. Any option so granted shall be a nonqualified stock option.
In the event any change in the outstanding shares of the Company's common
stock occurs and an adjustment is made in the unexercised portion of
options outstanding, as provided in Section 3 above, a similar adjustment
shall be made in the number of shares to be granted to Outside Directors
thereafter under this paragraph.
On April 14, 1995, and each January 1 thereafter, 200 shares of
restricted stock shall be granted to each Outside Director. The stock
will be held in escrow for a period of three years from the award date.
Stock issued as restricted stock shall be forfeited if the director
ceases to serve as a director of the Company for any reason other than
death, disability, or retirement under the Directors' Retirement Plan.
In the event any change in the outstanding shares of the Company's
common stock occurs as provided in Section 3 above, a similar adjustment
shall be made in the number of restricted shares to be granted to Outside
Directors thereafter under this paragraph.
Subject to the provisions of the Plan specifically governing options
and restricted stock granted or to be granted to Outside Directors, the
Committee may also interpret the Plan; prescribe, amend and rescind rules
and regulations relating to the Plan; and make all other determinations
necessary or advisable for the administration of the Plan. The
determinations of the Committee shall be made in accordance with its
judgment as to the best interests of the Company and its stockholders
and in accordance with the purposes of the Plan. The Committee's
determinations shall in all cases be conclusive.
A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee may be made, without
notice or meeting, by the written consent of a majority of the Committee
members.
5. Eligibility
Restricted stock awards, options, and stock appreciation rights may
be granted to officers and other key employees of the Company or of its
present or future subsidiaries. Options and restricted stock will be
granted to Outside Directors as provided in Sections 4 and 14 hereof.
A director of the Company or a subsidiary who is not also an
employee of the Company or a subsidiary shall not be eligible to receive
a stock appreciation right or an alternative stock option. An employee
or officer who has been granted a restricted stock award, option, or
stock appreciation right under this or any other stock option plan may
or may not be granted additional restricted stock awards, options, and
stock appreciation rights at the direction of the Committee.
Options and Stock Appreciation Rights
6. Option Price
The per share option price shall not be less than 100% of the fair
market value of the common stock at the time the option is granted.
The per share option price of options granted to Outside Directors
shall be 100% of the market value of the common stock at the time an
option is granted.
7. Stock Appreciation Rights
Stock appreciation rights will permit the holder to elect to
surrender any option or any portion thereof which is then exercisable
and receive in exchange therefor shares of common stock, cash, or a
combination thereof. Such stock, cash, or combination shall have an
aggregate value equal to the excess of the fair market value of one
share of common stock over the purchase price specified in such option
multiplied by the number of shares of common stock covered by such
option or portion thereof which is so surrendered. The fair market value
of one share of common stock shall equal (a) in the case of such a
holder who is not a Company officer, the mean of the highest and lowest
quoted selling price of shares of the Company's common stock on the New
York Stock Exchange on the date of surrender and (b) in the case of
such a holder who is a Company officer, but subject to the provisions
of the succeeding sentence, the highest of the means of the highest and
lowest quoted selling price of shares of the Company's common stock on
the New York Stock Exchange determined for each day occurring during
the window period during which such election to surrender the option or
portion thereof is made; and the window period is the applicable period
for making such an election (currently ten business days) prescribed
from time to time pursuant to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. In the case of such a holder who is a Company
officer, the fair market value of one share of common stock with respect
to the surrender of an incentive stock option granted, shall equal the
mean of the highest and lowest quoted selling price of shares of the
Company's common stock on the New York Stock Exchange on the date of
surrender unless it is specifically provided in the option form, or any
amendment thereto, that the valuation described in item (b) above shall
apply. In the case of any option holder who at the time of an election
is an officer of the Company, each election to receive cash alone or in
combination with stock shall be subject to the approval of the Committee
in its sole discretion.
Stock appreciation rights may be granted as part of a stock option
or as a separate right to any holder of any option theretofore or then
being granted under this Plan. A stock appreciation right shall be
exercisable upon any additional terms and conditions (including, without
limitation, the issuance of restricted shares and the imposition of
restrictions upon the timing of exercise) which may be determined as
provided in Section 4 of the Plan.
In the event of the exercise of a stock appreciation right, the
number of shares reserved for issuance under the Plan shall be reduced
by the number of shares of common stock covered by such option or portion
thereof which is surrendered in connection with such exercise. No
fractional shares shall be issued on the exercise of a stock appreciation
right.
8. Exercise of Options and Stock Appreciation Rights
Options (other than options granted to Outside Directors) shall
be exercisable in such installments and during such periods as may be
fixed by the Committee at the time of granting. Options granted to
Outside Directors shall become exercisable as follows: one-third at the
end of each of the three successive one-year periods commencing on the
date of each option grant. Notwithstanding any other provision hereof,
no option and no stock appreciation right shall be exercisable after
the expiration of ten years and one day from the date such option or
stock appreciation right is granted, provided that no incentive stock
option (or related stock appreciation right) shall be exercisable after
the expiration of ten years from the date such option is granted.
Payment of the purchase price shall be made upon exercise of all
or a portion of any option. Such payment shall be made pursuant to rules
adopted by the Committee and the Company in cash or by the tendering
(through one transaction or in a series of consecutive transactions) of
shares of common stock of the Company having a fair market value equal
to 100% of such purchase price or by any combination thereof. The fair
market value of a share of common stock so tendered shall be the mean of
the highest and lowest quoted selling price of shares of the Company's
common stock on the New York Stock Exchange on date of exercise. In
addition, on the exercise of an option, surrender of a stock appreciation
right, or upon the granting of any restricted stock award or performance
award, any applicable taxes which the Company is required to withhold
shall be paid to the Company and any information which the Company deems
necessary shall be provided to the Company. In fulfilling its withholding
obligation, the Company may withhold a portion of any shares to be issued
to satisfy such withholding obligation in accordance with rules
promulgated by the Committee, in its sole discretion.
9. Termination of Employment
Each option granted to an officer or employee shall, and each stock
appreciation right granted to an officer or employee may, in the
Committee's sole discretion require a period or periods of continued
employment with the Company and/or its subsidiaries before it may be
exercised in whole or in part. No such period shall be less than one
year except that the Committee may permit a shorter period in the event
of termination of employment by reason of retirement or death.
Termination of the employment with the Company and its subsidiaries
of an officer or employee who holds an option shall terminate any
remaining rights under options and stock appreciation rights then held
by such holder except as hereinafter provided.
Each option and stock appreciation right granted to an officer or
employee may provide that if employment of the holder with the Company
and its subsidiaries terminates after completion of a period of employment
so specified, the option or stock appreciation right may be exercised
(to the extent then exercisable) by the holder (or, in the event of the
holder's death, by whoever shall have received the holder's rights under
the option or stock appreciation right) during a specified period of time
after such termination of employment. Such a specified period of time may
not exceed sixty months where termination of employment is caused by
retirement or death and sixty days where it results from any other cause;
provided that if death occurs after termination of employment but during
the period of time so specified, such period may be extended to not more
than sixty-six months after retirement, or thirty-eight months after
termination of employment for any other cause. In the event that any such
option or stock appreciation right granted under the Plan has a specified
period for exercise after retirement or death which is less than the
maximum period permitted under this section, the Committee may modify
such option or right to extend such specified period up to such maximum
period.
Such options and stock appreciation rights shall not be affected by
authorized leaves of absence or by any change of employment so long as
the holder continues to be an employee of the Company or a subsidiary.
Nothing in the Plan or in any such option or stock appreciation
right shall interfere with or limit in any way the right of the Company
or of any of its subsidiaries to terminate any employee's employment at
any time, nor confer upon any employee any right to continue in the
employ of the Company or any of its subsidiaries. Notwithstanding the
foregoing, the Committee may change the post-termination period of
exercisability of an option or stock appreciation right provided that
no such change shall extend the original maximum term of the option or
stock appreciation right.
9A. Termination of Outside Directorship
No period of continued service as an Outside Director following
the grant of an option shall be required to render exercisable an option
granted to an Outside Director in the event an Outside Director holding
an option which has not become exercisable or has not been fully exercised
shall cease to be an Outside Director. In such event any such option may
be exercised at any time within sixty months of the date such Director
ceased to be a Director. In the event an Outside Director shall die
holding an option which has not become exercisable or has not been fully
exercised, his executors, administrators, heirs or distributees, as the
case may be, may exercise such option at any time within sixty months of
the date of such death provided that if death occurs after the date an
Outside Director ceases to be a Director, such option shall be
exercisable within sixty-six months of such date. In no event, however,
shall an option which has expired by its terms be exercisable.
10. Incentive Stock Options
Notwithstanding anything contained herein to the contrary, there
may be granted under the Plan, other than to Outside Directors, incentive
stock options as defined in Section 422A of the Internal Revenue Code as
it may be amended from time to time. The Committee from time to time
shall determine whether any incentive stock options shall be granted.
It shall also determine in its full discretion the individuals to whom,
and the time or times at which, any such grants shall be made. Incentive
stock options shall not by their terms be transferable by the holder
other than by will or the laws of descent and distribution and shall be
exercisable during the holder's lifetime only by the holder. The
aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options
are exercisable for the first time by the holder during any calendar
year (under all incentive stock option plans of the Company) shall not
exceed $100,000; provided, however, that all or any portion of an option
which cannot be exercised as an incentive stock option because of such
limitation may be converted by the Committee to an option other than an
incentive stock option. The Board of Directors of the Company may amend
the Plan from time to time as may be necessary (1) to comply with Section
422A of the Internal Revenue Code, or other sections of the Code or other
applicable laws or regulations, and (2) to permit any options granted as,
or converted to, incentive stock options to have all of the features
provided for incentive stock options in the applicable laws and
regulations.
11A. Transferability of Options and Stock Appreciation Rights
Except as otherwise permitted in Section 11B, options and stock
appreciation rights shall not be transferable otherwise than by will or
the laws of descent and distribution, and shall be exercisable, during
the holder's lifetime, only by the holder except in the case of holder's
incapacity or disability when such options and stock appreciation rights
may be exercised by the holder's duly appointed guardian or representative.
A holder, however, may file with the Company a written designation
of a beneficiary or beneficiaries (subject to such limitations as to the
classes and number of beneficiaries and contingent beneficiaries and such
other limitations as the Committee from time to time may prescribe) to
exercise, in the event of the death of the optionee, an option or stock
appreciation right, subject to the provisions of the Plan. A holder may
from time to time revoke or change any such designation of beneficiary
and any designation of beneficiary under the Plan shall be controlling
over any other disposition, testamentary or otherwise; provided, however,
that if the Committee shall be in doubt as to the right of any such
beneficiary to exercise any option or stock appreciation right, the
Committee may determine to recognize only an exercise by the legal
representative of the optionee, in which case the Company, the Committee
and the members thereof shall not be under any further liability to
anyone.
11B. Permissible Transfers of Options
(a) Notwithstanding the provisions of Section 11A, and in addition
to permissible transfers under that provision, options granted
to persons at the level of Vice President and above, as well
as directors of this corporation and persons retired from
those positions, may be transferred to any one or more
"Permitted Transferees," as long as those options are
vested and are not incentive stock options as defined above.
(b) For purposes of Section 11B, the term "Permitted Transferees"
shall mean the individual to whom the option is granted; the
lineal descendants of the individual to whom the option is
granted; the spouses of the lineal descendants of the
individual to whom the option is granted; the estate (and any
trust that serves a distributive function of an estate) of the
individual to whom the option is granted; and all trusts,
corporations, partnerships, limited liability companies and
other entities in which, directly or indirectly, but for the
exercise of a power of appointment or the death of the
survivor of the individuals who are Permitted Transferees,
each owner of an equitable interest is an individual who is a
Permitted Transferee.
Restricted Stock Awards to Company Employees
12. Granting of Awards
The Committee from time to time may determine whether any restricted
stock awards shall be granted to other than an Outside Director either
alone or in combination with the granting of options under the Plan. The
Committee will in so granting establish the time, conditions and
restrictions in connection with the issuance or transfer of a restricted
stock award, including the restriction period which may differ with
respect to each grantee.
13. Shares and Restrictions
Restricted stock awards will be made from shares of Company common
stock otherwise available for stock option grants under the Plan. During
the restriction period the grantee shall have a beneficial interest in
the restricted stock and all rights and privileges of a stockholder with
respect thereto, including the right to vote and receive dividends,
subject to the restrictions imposed by the Committee at the time of grant.
The following restrictions will be imposed on shares of common
stock issued as a restricted stock award until the expiration of the
restricted period:
(a) The grantee shall not be entitled to delivery of the stock
certificate which certificate shall be held in escrow by the
secretary of the Committee;
(b) None of the stock issued as a restricted stock award may be
transferred other than by will or by the laws of descent and
distribution; and
(c) Stock issued as a restricted stock award shall be forfeited and
the stock certificate shall be returned to the Company if the
grantee terminates employment with the Company and its
subsidiaries except for termination due to retirement after a
specified age, disability, death or other special circumstances
approved by the Committee.
Shares awarded as a restricted stock award will be issued subject
to a restriction period set by the Committee of no less than two nor
more than ten years. The Committee except for the restrictions specified
in the preceding paragraphs shall have the discretion to remove any or
all of the restrictions on a restricted stock award whenever it may
determine that such action is appropriate. Upon the expiration of the
restriction period with respect to any shares of a restricted stock
award, a stock certificate will be delivered out of escrow, subject to
satisfaction by the grantee of the applicable withholding tax
requirements, without charge to the grantee.
Restricted Stock Awards to Outside Directors
14. Terms of Grant and Restrictions
On April 14, 1995, and each January 1 thereafter, 200 shares of
restricted stock shall be granted to each Outside Director who following
such date continues to serve as a director. Restricted stock awards
will be made from shares of Company common stock otherwise available
for stock option grants under the Plan.
The stock will be subject to a restriction period of three years
from the date of grant. During that restricted period, subject to the
restrictions set forth in the next paragraph, the grantee shall have a
beneficial interest in the restricted stock and all rights and privileges
of a stockholder with respect thereto, including the right to vote and
receive dividends.
The following restrictions will be imposed on shares of common
stock issued as a restricted stock award until the expiration of the
restricted period:
(a) The grantee shall not be entitled to delivery of the stock
certificate which certificate shall be held in escrow by the
secretary of the Committee;
(b) None of the stock issued pursuant to a restricted stock award
may be transferred other than by will or by the laws of descent
and distribution; and
(c) Stock issued pursuant to a restricted stock award shall be
forfeited and the stock certificate returned to the Company if
the grantee ceases to serve as a director of the Company, except
for termination due to death, disability, or retirement under
the Directors' Retirement Plan.
Upon expiration of the restricted period with respect to any shares
of a restricted stock award, a stock certificate will be delivered out
of escrow, subject to satisfaction by the grantee of applicable tax
withholding requirements, without charge to the grantee.
General Provisions
15. Amendment and Termination
The Plan may be terminated at any time by the Board of Directors
except with respect to any restricted stock awards, options, or stock
appreciation rights then outstanding. Also, the Board may, from time to
time, amend the Plan as it may deem proper and in the best interests of
the Company or as may be necessary to comply with any applicable laws or
regulations, provided that no such amendment shall (i) increase the
total number of shares which may be issued under the Plan, (ii) reduce
the minimum purchase price or otherwise materially increase the benefits
under the Plan, (iii) change the basis for valuing stock appreciation
rights, (iv) impair any outstanding option, stock appreciation right or
restricted stock award without the consent of the holder, (v) alter the
class of employees eligible to receive options, stock appreciation rights
or restricted stock awards, or (vi) amend any provision of the Plan
insofar as it applies specifically to options and restricted stock
granted or to be granted to Outside Directors, unless, in each case,
such amendment is required in order to assure the Plan's continued
compliance with applicable laws, including Rule 16b-3 under the
Securities Exchange Act of 1934.
Plan provisions applicable to Outside Director option and restricted
stock awards shall not be amended more than once every six months other
than to comply with changes in the Internal Revenue Code, Employee
Retirement Income Security Act, or rules thereunder.
16. Regulatory Compliance
Notwithstanding any other provision of the Plan, the issuance or
delivery of any shares of common stock may be postponed for such period
as may be required to comply with any applicable requirements of any
national securities exchange or any requirements under any other law or
regulation applicable to the issuance or delivery of such shares. The
Company shall not be obligated to issue or deliver any shares if such
issuance or delivery shall constitute a violation of any provision of
any law or regulation of any governmental authority or national
securities exchange.
17. Miscellaneous
For purposes of this Plan:
(i) The term "subsidiary" means any corporation in which the Company
owns, directly or indirectly, at least 35% of the total combined voting
power of all classes of stock; except that for purposes of any option
subject to the provisions of Section 425 of the Internal Revenue Code,
as amended, the term "subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if, at the time of the
granting of an option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(ii) "Retirement" as used herein means retirement under any pension
or retirement plan of the Company or of a subsidiary, or termination of
employment with the Company or a subsidiary, by action of the employing
company, because of disability.
CATERPILLAR INC.
LONG TERM INCENTIVE SUPPLEMENT
ARTICLE I - PURPOSE
The provisions of this Long Term Incentive Supplement (the
"Supplement") shall supplement the provisions of the Caterpillar Inc.
1987 Stock Option Plan (the "Plan") and, unless otherwise expressly
qualified by the context of the Supplement, the conditions contained in
the Plan shall be applicable to the Supplement and terms used in the
Supplement shall have the meanings defined in the Plan.
The purposes of the Supplement are to (i) strengthen the commonality
of interest between management and Caterpillar Inc.'s stockholders,
(ii) link effectively executive motivation and compensation with
Caterpillar Inc.'s performance, (iii) provide incentives and rewards
for key executives to accomplish Caterpillar Inc.'s goals and objectives
over the long term, (iv) offer a comprehensive and competitive total
compensation program, and (v) attract and retain executives of high
caliber and ability.
ARTICLE II - DEFINITIONS
For purposes of the Supplement:
2.1 "AWARD" shall mean the sum of the cash amount and/or restricted
stock awarded to a Participant following the conclusion of a Performance
Period in which Performance Measures were met or exceeded.
2.2 "DISABILITY" shall mean the total and permanent disability of a
Participant as defined by any Caterpillar Inc. long-term disability
plan in effect for such Participant.
2.3 "PARTICIPANT" shall mean any employee of Caterpillar Inc. or any
subsidiary of Caterpillar Inc. holding a position which the Committee
has determined is eligible to participate in the Supplement.
2.4 "PERFORMANCE MEASURES" shall mean the criteria established by the
Committee at the beginning of each Performance Period as the basis for
making Awards.
2.5 "PERFORMANCE PERIOD" shall mean any period of time determined by
the Committee for which the Performance Measures are established.
ARTICLE III - TERM OF PLAN
This Supplement shall be effective from the 1st day of January, 1993,
and shall remain in effect until terminated by the Board of Directors
of Caterpillar Inc.
ARTICLE IV - PAYMENT AND AMOUNT OF BENEFITS
4.1 Payment of Awards - Awards shall be paid in cash, shares of
restricted stock, or a combination of cash and restricted stock as
determined by the Committee in its sole discretion. A check for any cash
Award or a certificate for shares of restricted stock awarded shall be
delivered to each Participant not later than 90 days following the end
of the relevant Performance Period. The number of Caterpillar Inc. shares
of restricted stock awarded shall be determined by dividing the portion
of the Award payable in restricted stock by the average of the high and
low price of Caterpillar Inc. shares on the New York Stock Exchange on
the last business day of the Performance Period for which payment is
made. The terms of any such restricted stock shall be determined by the
Committee in its sole discretion subject to the restrictions of Section
13 of the Plan. Federal, state and local taxes will be withheld as
appropriate.
4.2 Amount of Award - Prior to the beginning of any Performance Period,
the Committee in its sole discretion will determine the target award for
each salary grade or position for all Participants. The Award amount will
be calculated by multiplying such target award by the percentage of the
Award payable based on attainment of the applicable Performance Measures.
4.3 Required Employment - An eligible Participant shall receive an
Award under this Supplement for a Performance Period provided he is
actively employed by Caterpillar Inc. on the last day of the Performance
Period, except for a Participant whose employment terminates during a
Performance Period by reason of death, disability, or retirement in which
case a prorated Award shall be paid for the time during the Performance
Period that he was actively employed. Participants who are employed on
the last day of the Performance Period but were not Participants for the
entire Performance Period shall receive an Award prorated for that part
of the Performance Period for which they were Participants.
ARTICLE V - ADMINISTRATION
5.1 Authority - The Supplement shall be administered by the Committee
which shall have full power and authority to administer and interpret
the Supplement within its terms. The Committee's authority shall include,
but not be limited to, (i) selecting participants, (ii) determining the
timing, amounts and composition of Awards, (iii) setting the duration
of Performance Periods, (iv) establishing performance goals for the
Performance Periods, and (v) measuring such performance at the end of
each Performance Period. All decisions made by the Committee shall be
final and binding and shall be given the maximum deference provided by
law.
5.2 Adjustments of Company Performance Measures - At any time during a
Performance Period, the Committee may, in its discretion, increase or
decrease previously set Performance Measures for such Performance Period
to reflect changes in tax laws, regulations or rulings; changes in
accounting principles or practices; mergers, acquisitions or divestitures;
major technical innovations; or extraordinary, nonrecurring or unusual
items.
5.3 Suspension and Termination - The Committee and/or the Board of
Directors of Caterpillar Inc. may suspend or terminate this Supplement
at any time. In such event, all Performance Periods then in effect shall
be deemed to have
ended on the effective date of such suspension or termination, the
applicable Performance Measures shall be appropriately prorated and
modified to apply to the shortened Performance Periods, and Awards shall
be appropriately prorated and based upon results accomplished over the
time intervals from the start of each respective Performance Period
through the effective date of suspension or termination.
5.4 Rules and Regulations - The Committee may adopt from time to time
such rules and regulations as it reasonably deems appropriate to assist
in administration of this Supplement.
ARTICLE VI - MISCELLANEOUS
6.1 Other Benefit Plans - No Award amount shall be taken into account
under the Retirement Income Plan, the Employees' Investment Plan, the
Insurance Benefits Plan, or any other employee benefit plan or payroll
practice of Caterpillar Inc. or its subsidiaries.
6.2 Beneficiaries - If an Employee is deceased at the time any benefit
is payable to him, the amount of such benefit shall be payable to the
same person or persons and in the same proportionate amount as shall be
payable to the beneficiary or beneficiaries for his basic life insurance
under the applicable insurance plan of Caterpillar Inc. or its
subsidiaries, or if no beneficiary is so designated, to the executor
of his estate.
6.3 Employment Rights - Participation in the Supplement will not give
any Participant the right to be retained in the service of Caterpillar
Inc., or its subsidiaries, nor shall such participation provide any
right or claim to any benefit under the Supplement unless such right
or claim has specifically accrued under the terms of the Supplement.
6.4 Gender and Number - Where the context permits, words in the masculine
gender shall include the feminine gender, the plural shall include the
singular, and the singular shall include the plural.
6.5 Governing Law - The Supplement shall be construed in accordance
with and governed by the laws of the State of Illinois.
CATERPILLAR INC.
1996 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
(Amended and Restated as of 12/18/97)
Section 1. Purpose
The Caterpillar Inc. 1996 Stock Option and Long-Term
Incentive Plan ("Plan") is designed to attract and retain outstanding
individuals as directors, officers and key employees of Caterpillar Inc.
and its subsidiaries (collectively, the "Company"), and to furnish
incentives to such individuals through awards based upon the performance
of the Company and its stock. To this end, the Plan provides for grants
of stock options, restricted stock, and performance awards, or
combinations thereof, to non-employee directors, officers and other key
employees of the Company, on the terms and subject to the conditions
set forth in the Plan.
Section 2. Shares Subject to the Plan
2.1 Shares Reserved for Issuance
Seven million shares of Company common stock ("Shares")
shall be available for issuance under the Plan either from authorized
but unissued Shares or from Shares acquired by the Company, including
Shares purchased in the open market. An additional four million Shares
authorized but unissued under prior Company stock option plans shall be
available for issuance under this Plan.
2.2 Stock Splits/Stock Dividends
In the event of a change in the outstanding Shares of the
Company by reason of a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of shares, or similar
event, the Compensation Committee ("Committee") of the Company's Board
of Directors ("Board") shall take any action, which, in its discretion,
it deems necessary to preserve benefits under the Plan, including
adjustment to the aggregate number of Shares reserved for issuance
under the Plan, the number and option price of Shares subject to
outstanding options granted under the Plan and the number and price
of Shares subject to other awards under the Plan.
2.3 Reacquired Shares
If Shares issued pursuant to the Plan are not acquired by
participants because of lapse, expiration or termination of an award,
such Shares shall again become available for issuance under the Plan.
Shares tendered upon exercise of an option by a Plan participant may
be added back and made available solely for future grants under the
Plan.
Section 3. Administration
The Committee shall have the authority to grant awards
under the Plan to officers and other key employees of the Company.
Except as limited by the express provisions of the Plan or by resolutions
adopted by the Board, the Committee also shall have the authority and
discretion to interpret the Plan, to establish and revise rules and
regulations relating to the Plan, and to make any other determinations
that it believes necessary or advisable for administration of the Plan.
The Committee shall be composed solely of members of the
Board that are outside directors, as that term is defined in Section
162(m) of the Internal Revenue Code. The Committee shall have no
authority with respect to non-employee director awards under the Plan.
Section 4. Stock Options
4.1 Company Employees
(a) Eligibility
-----------
The Committee shall determine Company officers and employees
to whom options shall be granted, the timing of such grants, and the
number of shares subject to the option; provided that the maximum number
of Shares upon which options may be granted to any employee in any
calendar year shall be 400,000.
(b) Option Exercise Price
---------------------
The exercise price of each option shall not be less than
100% of the fair market value of Shares underlying the option at the
time the option is granted. The fair market value for purposes of
determining the exercise price shall be the mean between the high and
low prices at which Shares are traded on the New York Stock Exchange
the day the option is granted. In the event this method for determining
fair market value is not practicable, fair market value shall be
determined by such other reasonable method as the Committee shall select.
(c) Option Exercise
---------------
Options shall be exercisable in such installments and during
such periods as may be fixed by the Committee at the time of grant.
Options that are not incentive stock options as defined in Section 4.1(f)
of the Plan shall not be exercisable after the expiration of ten years
and one day from the date of grant.
Payment of the exercise price shall be made upon exercise of
all or a portion of any option. Such payment shall be in cash or by
tendering Shares having a fair market value equal to 100% of the exercise
price. The fair market value of Shares for this purpose shall be the mean
between the high and low prices at which Shares are traded on the
New York Stock Exchange on the date of exercise. Upon exercise of an
option, any applicable taxes the Company is required to withhold shall
be paid to the Company. Shares to be received upon exercise may
be surrendered to satisfy withholding obligations.
(d) Termination of Employment
-------------------------
The Committee may require a period of continued employment
before an option can be exercised. That period shall not be less than
one year, except that the Committee may permit a shorter period in the
event of termination of employment by retirement or death.
Termination of employment with the Company shall terminate
remaining rights under options then held; provided, however, that an
option grant may provide that if employment terminates after completion
of a specific period, the option may be exercised during a period of
time after termination. That period may not exceed sixty months where
termination of employment is caused by retirement or death or sixty days
where termination results from any other cause. If death occurs after
termination of employment but during the period of time specified, such
period may be extended to not more than sixty-six months after retirement,
or thirty-eight months after termination of employment for any other
cause. In the event of termination within two years after a Change of
Control as defined in Section 7.2 of the Plan, options shall be
exercisable for a period of sixty months following the date of
termination or for the maximum term of the option, whichever is
shorter. Notwithstanding the foregoing, the Committee may change the
post-termination period of exercisability of an option provided that
change does not extend the original maximum term of the option.
(e) Transferability of Options
--------------------------
(i) Except as otherwise permitted in Section 4.1(e)(ii),
options shall not be transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code or the Employee Retirement
Income Security Act. Options are exercisable during the holder's
lifetime only by the holder, unless the holder becomes incapacitated or
disabled, in which case the option may be exercised by the holder's
authorized representative. A holder may file with the Company a written
designation of beneficiaries with the authority to exercise options in
the event of the holder's death.
(ii) Notwithstanding the provisions of Section 4.1(e)(i),
and in addition to the permissible transfers under that provision,
options granted to persons at the level of Vice President and above, as
well as directors of this corporation and persons retired from those
positions, may be transferred to any one or more "Permitted
Transferees," as long as those options are vested and are not
incentive stock options as defined below.
(iii) For purposes of Section 4.1(e)(ii), the term
"Permitted Transferees" shall mean the individual to whom the option is
granted; the lineal descendants of the individual to whom the option is
granted; the spouses of the lineal descendants of the individual to whom
the option is granted; the estate (and any trust that serves a
distributive function of an estate) of the individual to whom the option
is granted; and all trusts, corporations, partnerships, limited
liability companies and other entities in which, directly or indirectly,
but for the exercise of a power of appointment or the death of the
survivor of the individuals who are Permitted Transferees, each owner of
an equitable interest is an individual who is a Permitted Transferee.
(f) Incentive Stock Options
-----------------------
Incentive stock options, as defined in Section 422 of the
Internal Revenue Code, may be granted under the Plan. The decision to
grant incentive stock options to particular persons is within the
Committee's discretion. Incentive stock options shall not be exercisable
after expiration of ten years from the date of grant. The amount of
incentive stock options vesting in a particular year cannot exceed
$100,000 per option recipient, based on the fair market value of the
options on the date of grant; provided that any portion of an option
that cannot be exercised as an incentive stock option because of this
limitation may be converted by the Committee to another form of option.
The Board may amend the Plan to comply with Section 422 of the Internal
Revenue Code or other applicable laws and to permit options previously
granted to be converted to incentive stock options.
4.2 Non-Employee Directors
(a) Terms
-----
Options with a term of ten years and one day are granted to
each non-employee director for 4,000 Shares, effective as of the close
of each annual meeting of stockholders at which an individual is elected
a director or following which such individual continues as a director.
Options granted to non-employee directors shall become exercisable by
one-third at the end of each of the three successive one-year periods
since the date of grant. The exercise price of each option shall be
100% of the fair market value of Shares underlying the option on the
date of grant.
(b) Termination of Directorship
---------------------------
An option awarded to a non-employee director may be exercised
any time within 60 months of the date the director terminates such
status. In the event of a director's death, the director's authorized
representative may exercise the option within 60 months of the date of
death, provided that if the director dies after cessation of director
status, the option is exercisable within 66 months of such cessation.
In no event shall an option awarded to a non-employee director be
exercisable beyond the expiration date of that option.
Section 5. Restricted Stock
5.1 Company Employees
(a) Eligibility
-----------
The Committee may determine whether restricted stock shall
be awarded to Company officers and employees, the timing of award, and
the conditions and restrictions imposed on the award.
(b) Terms
-----
During the restriction period, the recipient shall have a
beneficial interest in the restricted stock and all associated rights
and privileges of a stockholder, including the right to vote and receive
dividends, subject to any restrictions imposed by the Committee at the
time of grant.
The following restrictions will be imposed on Shares of
restricted stock until expiration of the restriction period:
(i) The recipient shall not be entitled to delivery of the
Shares;
(ii) None of the Shares issued as restricted stock may be
transferred other than by will or by the laws of
descent and distribution; and
(iii) Shares issued as restricted stock shall be forfeited
if the recipient terminates employment with the Company,
except for termination due to retirement after a
specified age, disability, death or other special
circumstances approved by the Committee.
Shares awarded as restricted stock will be issued subject
to a restriction period set by the Committee of no less than two nor more
than ten years. The Committee, except for restrictions specified in the
preceding paragraphs, shall have the discretion to remove any or all of
the restrictions on a restricted stock award whenever it determines such
action appropriate. Upon expiration of the restriction period, the
Shares will be made available to the recipient, subject to satisfaction
of applicable tax withholding requirements.
5.2 Non-Employee Directors
(a) On January 1 of each year, 400 Shares of restricted stock
shall be granted to each director who is not currently an employee of
the Company. The stock will be subject to a restriction period of three
years from the date of grant. During the restriction period, the
recipient shall have a beneficial interest in the restricted stock and
all associated rights and privileges of a stockholder, including the
right to vote and receive dividends.
The following restrictions will be imposed on restricted
stock until expiration of the restricted period:
(i) The recipient shall not be entitled to delivery of
the Shares;
(ii) None of the Shares issued as restricted stock may be
transferred other than by will or by the laws of descent
and distribution; and
(iii) Shares issued as restricted stock shall be forfeited
if the recipient ceases to serve as a director of the
Company, except for termination due to death, disability,
or retirement under the Company's Directors' Retirement
Plan.
Upon expiration of the restriction period, the Shares will be
made available to the recipient, subject to satisfaction of applicable
tax withholding requirements.
(b) Each January 1st, 350 shares of restricted stock, in
addition to shares described in Section 5.2(a), shall be awarded to
each director who is not currently and has not been an employee of the
Company. Shares awarded under this Section 5.2(b) will be held in
escrow until the director terminates service with the Company. During
the restriction period, the recipient shall have a beneficial interest
in the restricted stock and all associated rights and privileges of a
stockholder except as discussed below.
The following restrictions will be imposed on restricted stock awarded
under this Section 5.2(b) until it is made available to the recipient:
(i) The recipient shall not receive dividends on the shares,
but an amount equal to such dividends will be credited
to the director's stock equivalent account in the
Company's Directors' Deferred Compensation Plan;
(ii) The recipient shall not be entitled to delivery of
the shares;
(iii) None of the shares awarded may be transferred other
than by will or by the laws of descent and distribution;
and
(iv) The right to receive shares shall be subordinate to the
claims of general creditors of the Company.
Upon termination of service, restricted shares will be made available to
the recipient subject to satisfaction of applicable tax withholding
requirements; provided, however, that if the recipient has not served on
the Board for at least five years at the time of such termination, all
restricted shares awarded under this Section 5.2(b) shall be forfeited.
Pursuant to termination of the Company's Directors' Retirement Plan
effective December 31, 1996, each director continuing in office was
awarded an amount of restricted stock equal to the accumulated value of
past pension accruals as determined by the Company's actuary. Those
shares will be subject to the same restrictions as shares awarded
annually pursuant to this Section 5.2(b).
Section 6. Performance Awards
6.1 Eligibility and Terms
The Committee may grant awards to officers and other key
employees ("Performance Awards") based upon Company performance over a
period of years ("Performance Period"). The Committee shall have sole
discretion to determine persons eligible to participate, the Performance
Period, Company performance factors applicable to the award ("Performance
Measures"), and the method of Performance Award calculation.
At the time the Committee establishes a Performance Period for
a particular award, it shall also establish Performance Measures and
targets to be attained relative to those measures ("Performance Targets").
Performance Measures may be based on any of the following factors, alone
or in combination, as the Committee deems appropriate: (i) return on
assets; (ii) return on equity; (iii) return on sales; (iv) total
shareholder return; (v) cash flow; (vi) economic value added; and
(vii) net earnings. Performance Targets may include a minimum, maximum
and target level of performance with the size of Performance Awards
based on the level attained. Once established, Performance Targets and
Performance Measures shall not be changed during the Performance Period;
provided, however, that the Committee may eliminate or decrease the
amount of a Performance Award otherwise payable to a participant. Upon
completion of a Performance Period, the Committee shall determine the
Company's performance in relation to the Performance Targets for that
period and certify in writing the extent to which Performance Targets
were satisfied.
6.2 Payment of Awards
Performance Awards may be paid in cash, Shares of restricted
stock (pursuant to terms applicable to restricted stock awarded to
Company employees as described in the Plan) or a combination thereof, as
determined by the Committee. Performance Awards shall be made not later
than 90 days following the end of the relevant Performance Period. The
fair market value of a Performance Award payment to any individual
employee in any calendar year shall not exceed $2.5 million. The fair
market value of Shares to be awarded shall be determined by the average
of the high and low price of Shares on the New York Stock Exchange on
the last business day of the Performance Period. Federal, state and
local taxes will be withheld as appropriate.
6.3 Termination
To receive a Performance Award, the participant must be
employed by the Company on the last day of the Performance Period.
If a participant terminates employment during the Performance Period
by reason of death, disability or retirement, a payout based on the time
of employment during the Performance Period shall be distributed.
Participants employed on the last day of the Performance Period, but
not for the entire Performance Period, shall receive a payout prorated
for that part of the Performance Period for which they were participants.
If the participant is deceased at the time of Performance Award payment,
the payment shall be made to the recipient's designated representative.
Section 7. Change of Control
7.1 Effect on Grants and Awards.
Unless the Committee shall otherwise expressly provide in the
agreement relating to a grant or award under the Plan, upon the occurrence
of a Change of Control as defined below: (i) all options then outstanding
under the Plan shall become fully exercisable as of the date of the Change
of Control; (ii) all terms and conditions of restricted stock awards then
outstanding shall be deemed satisfied as of the date of the Change of
Control; and (iii) all Performance Awards for a Performance Period not
completed at the time of the Change of Control shall be payable in an
amount equal to the product of the maximum award opportunity for the
Performance Award and a fraction, the numerator of which is the number
of months that have elapsed since the beginning of the Performance Period
through the later of (A) the date of the Change of Control or (B) the
date the participant terminates employment, and the denominator of which
is the total number of months in the Performance Period; provided,
however, that if this Plan shall remain in force after a Change of
Control, a Performance Period is completed during that time, and the
participant's employment has not terminated, this provision (iii) shall
not apply.
7.2 Change of Control Defined
For purposes of the Plan, a "Change of Control" shall be deemed
to have occurred if:
(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 15 percent 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) The shareholders of the Company approve a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (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 shareholders 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.
Section 8. Amendment and Termination
The Board may terminate the Plan at any time, except with respect
to grants and awards then outstanding. The Board may amend the Plan
without shareholder approval, unless such approval is necessary to comply
with applicable laws, including provisions of the Exchange Act or
Internal Revenue Code.
Section 9. Regulatory Compliance
Notwithstanding any other provision of the Plan, the issuance or
delivery of any Shares may be postponed for such period as may be
required to comply with any applicable requirements of any national
securities exchange or any requirements under any other law or regulation
applicable to the issuance or delivery of such Shares. The Company shall
not be obligated to issue or deliver any Shares if such issuance or
delivery shall constitute a violation of any provision of any law or
regulation of any governmental authority or national securities exchange.
Section 10. Effective Date
The Plan shall be effective upon its approval by the Company's
stockholders at the 1996 Annual Meeting of Stockholders.
December 23, 1997
Caterpillar Inc.
100 N.E. Adams St.
Peoria, IL 61629
Ladies and Gentlemen:
I am Securities Counsel for Caterpillar Inc. and am delivering this
opinion in connection with the filing by Caterpillar of a Registration
Statement on Form S-3 under the Securities Act of 1933 ("Securities Act")
registering one million shares of Common Stock that may be issued to
Permitted Transferees upon the exercise of transferred options assigned
to them by certain participants in Caterpillar's 1996 Stock Option and
Long-Term Incentive Plan, and 1987 Stock Option Plan ("Plans").
On the basis of my examination of relevant documents, records, and
matters of law, I am of the opinion that when the Registration Statement
becomes effective under the Securities Act, any Common Stock issued and
delivered to Permitted Transferees upon the exercise of transferred
options in accordance with the terms of the Plans, when so delivered,
will be legally issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement.
I express no opinion as to any laws other than the General Corporation
Law of the State of Delaware and the federal laws of the United States.
Sincerely,
Richard P. Konrath
Securities Counsel
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of
Caterpillar Inc. of our report dated January 21, 1997 appearing on page
A-3 of the Appendix to the Company's 1997 Annual Meeting of Stockholders
Proxy Statement, which is incorporated by reference in Caterpillar
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996.
We also consent to the incorporation by reference of our report on the
Financial Statement Schedules listed in Item 14(a) of such Annual Report
on Form 10-K. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Peoria, Illinois
December 19, 1997
