TEREX CORPORATION
500 Post Road East, Westport, Connecticut 06880
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
-----------------
The Annual Meeting of Stockholders of Terex Corporation (hereafter, the
"Company") will be held at the St. Regis Hotel, 2 East 55th Street, New York,
New York, on Tuesday, May 19, 1998, at 11:00 a.m., local time, for the
following purposes:
1. To elect seven (7) directors to hold office for one year or until
their successors are duly elected and qualified.
2. To ratify the selection of Price Waterhouse LLP as independent
accountants of the Company for 1998.
3. To amend the Company's Restated Certificate of Incorporation to
increase the number of shares of common stock, par value $.01 per share, the
Company is authorized to issue to 150,000,000 shares.
4. To amend the Company's Restated Certificate of Incorporation to
increase the number of shares of preferred stock the Company is authorized to
issue to 50,000,000 shares.
5. To approve the Terex Corporation Annual Incentive Compensation
Plan.
6. To approve an amendment to the 1996 Terex Corporation Long-Term
Incentive Plan to increase the number of shares of the Company's Common Stock
available for issuance.
7. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are described more fully in the Proxy
Statement accompanying this Notice.
The Board of Directors of the Company has fixed the close of business on
April 6, 1998, as the record date for determining the stockholders entitled
to notice of, and to vote at, the meeting.
YOUR VOTE IS IMPORTANT. STOCKHOLDERS ARE URGED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF THE
PROXY CARD IS MAILED IN THE UNITED STATES. STOCKHOLDERS WHO ARE PRESENT AT
THE MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY SO DESIRE.
IT IS IMPORTANT THAT YOUR PROXY CARD BE RETURNED PROMPTLY IN ORDER TO AVOID
THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Directors,
Eric I Cohen
Secretary
April ___, 1998
Westport, Connecticut
<PAGE>
TEREX CORPORATION
500 Post Road East
Westport, Connecticut 06880
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Proxy Statement for the
Annual Meeting of Stockholders
to be held on May 19, 1998
------------------
This Proxy Statement is furnished to stockholders of Terex Corporation
("Terex" or the "Company") in connection with the solicitation of proxies by
and on behalf of the Company's Board of Directors (the "Board") for use at
the Annual Meeting of Stockholders of the Company to be held on May 19, 1998,
at the St. Regis Hotel, 2 East 55th Street, New York, New York and at any
adjournments or postponements thereof (collectively, the "Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders (the "Notice").
The Notice and proxy card (the "Proxy") accompany this Proxy Statement.
This Proxy Statement and the accompanying Notice, Proxy and related materials
are being mailed on or about April 13, 1998, to each stockholder entitled to
vote at the Meeting. As of April 6, 1998, the record date for determining
the stockholders entitled to notice of, and to vote at, the Meeting, the
Company had outstanding ________shares of common stock, $.01 par value per
share (the "Common Stock"). Each share of Common Stock is entitled to one
vote on all matters to be voted on at the Meeting.
A majority of the outstanding shares of Common Stock must be represented
at the Meeting in person or by proxy to constitute a quorum for the
transaction of business at the Meeting. All matters other than the election
of directors will be decided by the affirmative vote of the holders of a
majority of the shares of Common Stock represented at the Meeting in person
or by proxy. Directors shall be elected by a plurality of the votes of
shares of Common Stock represented at the Meeting in person or by proxy.
Proxy solicitations will be made primarily by mail, but solicitations
may also be made by telephone, telegraph or personal interviews conducted by
officers or employees of the Company. All costs of solicitations, including
(a) printing and mailing of this Proxy Statement and accompanying material,
(b) the reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material to the beneficial owners of the Company's
stock and (c) supplementary solicitations to submit Proxies, if any, will be
borne by the Company.
If the enclosed Proxy is properly executed and returned in time to be
voted at the Meeting, the shares of Common Stock represented thereby will be
voted in accordance with the instructions marked on the Proxy. If no
instructions are marked on the Proxy, the Proxy will be voted FOR election of
the nominees for Director, FOR the selection of Price Waterhouse LLP as the
independent accountants of the Company, FOR approval of the proposed
amendments to the Company's Restated Certificate of Incorporation, FOR the
approval of the Terex Corporation Annual Incentive Compensation Plan (the
"1998 Annual Plan"), FOR approval of the proposed amendment to the 1996 Terex
Corporation Long Term Incentive Plan (the "1996 Plan") and as determined by
the Board of Directors in their discretion with respect to any other matters
that may properly come before the Meeting and that are deemed appropriate.
Management does not presently know of any other matters which may come before
the Meeting. Abstentions and broker non-votes will have no effect on the
outcome of the election of the directors. Ratification of the appointment of
Price Waterhouse LLP as independent accountants, approval of the proposed
amendments to the Company's Restated Certificate of Incorporation, approval
of the 1998 Annual Plan and approval of the proposed amendment to the 1996
Plan require the affirmative votes of the majority of shares present in
person at the Annual Meeting or represented by proxy and entitled to vote
thereon. Abstaining from voting on the appointment of auditors or approval
of the proposed amendments to the Company's Restated Certificate of
Incorporation, approval of the 1998 Annual Plan and approval of the proposed
amendment to the 1996 Plan will have the same effect as voting against the
proposals. Broker non-votes on the proposals to ratify the appointment of
the auditors, approval of the proposed amendments to the Company's Restated
Certificate of Incorporation, approval of the 1998 Annual Plan and approval
of the proposed amendment to the 1996 Plan will not be included in the
calculation of shares entitled to vote for such proposals and will have no
effect on the outcome.
Any stockholder giving a Proxy has the right to attend the Meeting to
vote his or her shares of Common Stock in person (thereby revoking any prior
Proxy) and also has the right to revoke the Proxy at any time by written
notice received by the Secretary of the Company prior to the time the Proxy
is voted. All properly executed and unrevoked Proxies delivered pursuant to
this solicitation, if received in time, will be voted at the Meeting.
In order that your shares of Common Stock may be represented at the
Meeting, you are requested to:
- indicate your instructions on the Proxy;
- date and sign the Proxy;
- mail the Proxy promptly in the enclosed envelope; and
- allow sufficient time for the Proxy to be received by the Company
prior to the Meeting.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROXY STATEMENT.
PROPOSAL 1: ELECTION OF DIRECTORS
At the Meeting, seven directors of the Company are to be elected to hold
office until the Company's next Annual Meeting of Stockholders or until their
respective successors are duly elected and qualified. Directors shall be
elected by a plurality of the votes of shares of Common Stock represented at
the Meeting in person or by proxy. Unless marked to the contrary, the Proxies
received by the Company will be voted FOR the election of the seven nominees
listed below, all of whom (except Dr. Donald P. Jacobs) are presently members
of the Board. Each nominee has consented to being named in this Proxy
Statement and to serve as a director if elected. However, should any of the
nominees for director decline or become unable to accept nomination if
elected, it is intended that the Board will vote for the election of such
other person as director as it shall designate. The Company has no reason to
believe that any nominee will decline or be unable to serve if elected.
The information set forth below has been furnished to the Company by the
nominees and sets forth for each nominee, as of March 1, 1998, such nominee's
name, business experience during the past five years, other directorships
held and age. There is no family relationship between any nominee and any
other nominee or executive officer of the Company. For information regarding
the beneficial ownership of the Common Stock by the current directors of the
Company, see "Security Ownership of Management and Certain Beneficial Owners"
below.
The Board of Directors recommends that the stockholders vote FOR the
following nominees for director.
First Year
Positions and Elected
Name Age Offices with Company Director
---- --- -------------------- ----------
Ronald M. DeFeo 45 Chairman of the Board, 1993
President, Chief Executive
Officer, Chief Operating
Officer and Director
G. Chris Andersen 59 Director 1992
William H. Fike 61 Director 1995
Dr. Donald P. Jacobs 70 Director N/A
Bruce I. Raben 44 Director 1992
Marvin B. Rosenberg 57 Director 1992
David A. Sachs 38 Director 1992
Ronald M. DeFeo was appointed President and Chief Operating Officer of
the Company on October 4, 1993, Chief Executive Officer of the Company on
March 24, 1995 and Chairman of the Board on March 4, 1998. Mr. DeFeo joined
the Company in May 1992 as President of the Company's then Heavy Equipment
Group. A year later, he also assumed the responsibility of serving as the
President of the Company's Clark Material Handling Company ("CMHC")
subsidiary. Prior to joining the Company on May 1, 1992, Mr. DeFeo was a
Senior Vice President of J.I. Case Company, the former Tenneco farm and
construction equipment division, and also served as a Managing Director of
Case Construction Equipment throughout Europe. While at J.I. Case, Mr. DeFeo
was also a Vice President of North American Construction Equipment Sales and
General Manager of Retail Operations. Mr. DeFeo serves as a director of
United Rentals, Inc.
Marvin B. Rosenberg retired as a Senior Vice President of the Company, a
position he held since January 1, 1994, on December 31, 1997. He served as
Secretary and General Counsel of the Company since 1987 with his retirement
from the Company on December 31, 1997. From 1987 through 1993, Mr. Rosenberg
served as General Counsel of KCS Industries, L.P., a Connecticut limited
partnership and its predecessor, KCS Industries, Inc. ("KCS"), an entity
that, until December 31, 1993, provided administrative, financial, marketing,
technical, real estate and legal services to the Company and its
subsidiaries.
G. Chris Andersen was a Vice Chairman of PaineWebber Incorporated from
March 1990 through 1995. Mr. Andersen is currently a partner of Andersen,
Weinroth & Co. L.P. and also serves as a director of Sunshine Mining &
Refining Company, All Star Systems, Inc., Headway Corp. Services and Compost
America.
William H. Fike is the Vice Chairman of Magna International, Inc., an
automotive parts manufacturer based in Ontario, Canada ("Magna"). Prior to
joining Magna in August 1994, Mr. Fike was President of Fike & Associates, a
consulting firm and prior to February 1994, Mr. Fike was employed by Ford
Motor Company from 1966 to 1994, where he served most recently as President
of Ford Europe. Mr. Fike serves as a director of Magna and AGCO Corporation.
Dr. Donald P. Jacobs, who has been nominated to serve as a director of
the company for the first time, is Dean of the J. L. Kellogg Graduate School
of Management at Northwestern University. In addition to serving as director
of First National Bank of Chicago, Hartmarx Corporation, Security Capital
Industrial Trust, Unicom Corporation/Commonwealth Edison Company, Unocal
Corporation and Whitman Corporation, Dr. Jacobs is chairman of the Public
Review Board of Arthur Andersen & Co. and previously served as Chairman of
the Board of Amtrak.
Bruce I. Raben is a managing director of CIBC Oppenheimer Corp. Prior
to joining CIBC Oppenheimer Corp. in January 1996, Mr. Raben was employed as
an Executive Vice President of Jefferies & Company, Inc. Mr. Raben serves as
a director of Equity Marketing Inc. and Optical Security, Inc.
David A. Sachs is a Managing Director of Ares Management, L.P., an
investment management firm and is a principal of Onyx Partners, Inc., a
merchant banking firm. From 1990 to 1994, Mr. Sachs was employed at TMT-FW,
Inc., an affiliate of Taylor & Co., a private investment firm based in Fort
Worth, Texas. Mr. Sachs serves as a director of Talton Holdings, Inc.
The Board met eight times in 1997 at regularly scheduled and special
meetings, including telephonic meetings. All of the directors in office
during 1997 attended at least 75% of the meetings which took place during
their tenure as directors. The Board has an Audit Committee, a Compensation
Committee and a Nominating Committee.
The Audit Committee of the Board of Directors consists of Messrs. Sachs
(chairperson), Raben and Wolf. (Mr. Adam Wolf, who has served as a member
of the Board of Directors since 1983, is retiring as a member of the Board of
Directors in May 1998). The Audit Committee met three times during 1997.
The Audit Committee recommends the engagement of the independent accountants
and makes other recommendations to the Board based on its review of all of
the financial matters of the Company. The Audit Committee also reviews
related party transactions.
The Compensation Committee of the Board of Directors consists of Messrs.
Andersen (chairperson), Fike and Sachs. The Compensation Committee met twice
during 1997. The Compensation Committee establishes compensation
arrangements for executive officers and for certain other key management
personnel. (See "Executive Compensation - Compensation Committee Report.")
The Nominating Committee of the Board of Directors consists of Messrs.
Raben (chairperson), Andersen and Fike. The Nominating Committee did not
meet during 1997. The Nominating Committee recommends nominees to fill
vacancies on the Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock by each person known by the Company
to own beneficially more than 5% of the Company's Common Stock, by each
director, by each executive officer of the Company named in the summary
compensation table below, and by all directors and executive officers as a
group, as of March 1, 1998 (unless otherwise indicated below). Each person
named in the following table has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
person, except as otherwise set forth in the notes to the table. Shares of
Common Stock that any person has a right to acquire within 60 days after
March 1, 1998, pursuant to an exercise of options, warrants or other rights
or conversion of preferred stock or otherwise, are deemed to be outstanding
for the purpose of computing the percentage ownership of such person, but are
not deemed to be outstanding for computing the percentage ownership of any
other person shown in the table.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- -------------------- -------------------- --------
Randolph W. Lenz (1)
c/o Equity Merchant Banking
2419 E. Commercial Blvd., Ste. 304
Fort Lauderdale, FL 33308 2,144,453 (2) 10.4 %
Schaenen Fox Capital Management, LLC
200 Park Avenue
Suite 3900
New York, NY 10166 1,055,044 (3) 5.13 %
Nicholas-Applegate Capital Management
600 West Broadway, 29th Floor
San Diego, CA 92101 1,047,900 (4) 5.09 %
Morgan Stanley, Dean Witter, Discover & Co.
1585 Broadway
New York, NY 10036 1,193,360 (5) 5.80 %
G. Chris Andersen
821 West Shore Drive
Kinnelon, NJ 07405 104,900 (6) *
William S. Buchan
c/o Terex Equipment Limited
Newhouse Estate
Motherwell, Scotland MLI 23,375 (7) *
Ronald M. DeFeo
c/o Terex Corporation
500 Post Road East
Westport, CT 06880 179,707 (8) *
William H. Fike
c/o Magna International Inc.
26200 Lasher Road, Suite 300
Southfield, MI 48034 50,000 (9) *
Fil Filipov
c/o Terex Cranes, Inc.
Hwy 501 East, P.O. Box 260002
Conway, SC 29526-2602 86,250 (10) *
David J. Langevin
c/o Terex Corporation
500 Post Road East
Westport, CT 06880 164,321 *
Bruce I. Raben
c/o CIBC Wood Gundy
1999 Avenue of the Stars
Suite 2340
Los Angeles, CA 90067 157,663 (11) *
Marvin B. Rosenberg
189 So. Compo Road
Westport, CT 06880 148,553 *
David A. Sachs
c/o Ares Management, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, CA 90067 95,300 (12) *
Adam E. Wolf
875 East Donges Lane
Milwaukee, WI 53217 32,000 (13) *
All directors and executive
officers as a group
(13 persons) 1,187,708 (14) 5.67%
__________________
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Pursuant to a retirement agreement between the Company and Mr. Lenz, Mr.
Lenz has agreed to vote his shares of the Company's Common Stock in the
manner recommended by the Company's Board of Directors. (See "Certain
Relationships and Related Transactions" below.)
(2) Includes (a) 1,644,828 shares of Common Stock directly owned by Mr.
Lenz, (b) 32,250 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days and held by Mr. Lenz, and (c) 467,375
shares of Common Stock indirectly owned by Mr. Lenz through four
corporations that he indirectly owns and controls.
(3) Ownership information is as of January 23, 1998.
(4) Ownership information is as of February 3, 1998.
(5) Ownership information is as of February 13, 1998
(6) Includes 55,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(7) Includes 12,375 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(8) Includes 37,941 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(9) Includes 50,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(10) Includes 33,750 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(11) Includes 10,000 shares owned by Mr. Raben's wife as to which Mr. Raben
does not have dispositive or voting power and disclaims beneficial
ownership. Also includes 70,000 shares of Common Stock issuable upon
the exercise of options held by Mr. Raben and which are exercisable
within 60 days.
(12) Includes 3,300 shares of Common Stock owned by Mr. Sachs' wife. Mr.
Sachs disclaims the beneficial ownership of such shares. Also includes
67,500 shares of Common Stock issuable upon the exercise of options held
by Mr. Sachs which are exercisable within 60 days.
(13) Includes 25,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Wolf which are exercisable within 60 days. Also
includes 800 shares of Common Stock held in a testamentary trust for
which Mr. Wolf has shared voting power and shared investment power and
200 shares of Common Stock held by Mr. Wolf's wife for which he claims
beneficial ownership.
(14) Includes 387,816 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
<PAGE>
MANAGEMENT OF THE COMPANY
The following table sets forth, as of March 1, 1998, the respective
names and ages of the Company's executive officers, indicating all positions
and offices held by each such person. Each officer is elected by the Board to
hold office for one year or until his successor is duly elected and
qualified.
Name Age Positions and Offices with Company
---- --- ----------------------------------
Ronald M. DeFeo 45 Chairman of the Board, President, Chief
Executive Officer and Chief Operating
Officer and Director
David J. Langevin 46 Executive Vice President
Eric I Cohen 39 Senior Vice President, General Counsel and
Secretary
Joseph F. Apuzzo 42 Vice President-Finance and Controller
Brian J. Henry 39 Vice President-Finance, Treasurer and
Director of Investor Relations
Steven E. Hooper 44 Vice President, Human Resources
For information regarding Mr. DeFeo, refer to the table listing nominees
in the prior section "Proposal 1: Election of Directors."
David J. Langevin became Executive Vice President of the Company
effective January 1, 1994, and served as Acting Chief Financial Officer of
the Company from March 1993 through December 1993. He had been employed as a
Vice President of KCS since 1988 until joining the Company in 1993.
Eric I Cohen became Senior Vice President, Secretary and General Counsel
of the Company on January 1, 1998. Prior to joining the Company, Mr. Cohen
was a partner with the law firm of Robinson Silverman Pearce Aronsohn &
Berman LLP since January 1992.
Joseph F. Apuzzo was appointed Vice President-Finance and Controller of
the Company on May 15, 1996. Mr. Apuzzo previously held the position of Vice
President, Corporate Controller since joining the Company on October 9, 1995.
Mr. Apuzzo was Vice President of Corporate Finance at D'Arcy Masius Benton &
Bowles, Inc. from September 1994 until October 1995. Mr. Apuzzo was employed
by Price Waterhouse LLP in various capacities from 1983 until September 1994.
Brian J. Henry was appointed Vice President-Finance and Treasurer of the
Company on July 11, 1995. Mr. Henry also serves as the Company's Director of
Investor Relations. Mr. Henry formerly held the position of the Company's
Vice President - Corporate Development and Acquisitions and has been employed
by the Company since 1993. He was employed by KCS from 1990 until 1993.
Steven E. Hooper was appointed Vice President, Human Resources of the
Company on September 15, 1995, after serving as Director of Human Resources
of the Company since January 1994. He was previously a Human Resources
Director at AlliedSignal Aerospace from October 1992 to December 1993. Prior
to October 1992, Mr. Hooper was with Tenneco Inc. for eight years in various
senior level human resources positions.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table below shows the compensation for the past
three fiscal years of the Company's Chief Executive Officer and its four
highest paid executive officers who had 1997 earned qualifying compensation
in excess of $100,000 (the "Named Executive Officers"). The Company has
included the presidents of each of its two business segments, Mr. William S.
Buchan, President of Terex Earthmoving, and Mr. Filip Filipov, President of
Terex Lifting, in lieu of less highly compensated executive officers of the
Company.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation ---------------------------
---------------------------------- Awards
Other --------------------------- All
Annual Restricted Underlying Other
Name and Compen- Stock Options/ Compen-
Principal Position Year Salary($) Bonus($) sation ($) Awards($) SARS(#) sation($)
------------------ ---- --------- -------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 1997 $418,750 $637,500 $- 0.- $ 0 $ 25,000 $ 4,800 (4)
Chairman, President, 1996 393,941 360,000 - 0 - 1,312,500 (2) 25,000 4,500 (4)
Chief Executive 1995 350,000 250,000 - 0 - 237,500 (3) 40,000 3,080 (4)
Officer and Chief
Operating Officer (1)
David J. Langevin 1997 303,600 325,000 - 0 - 121,875 (5) - 0 - 4,750 (4)
Executive Vice President 1996 303,600 250,000 - 0 - - 0 - 12,500 4,500 (4)
1995 303,600 150,000 - 0 - - 0 - 10,000 3,080 (4)
Marvin B. Rosenberg 1997 250,000 125,000 115,625 (7) - 0 - - 0 - 3,656 (4)
Senior Vice President, 1996 250,000 125,000 - 0 - - 0 - - 0 - 3,600 (4)
Secretary and General 1995 250,000 75,000 - 0 - - 0 - 5,000 - 0 -
Counsel (6)
William S. Buchan 1997 172,274 119,304 - 0 - - 0 - 7,500 14,494 (9)
Terex Earthmoving 1996 148,064 116,869 - 0 - - 0 - - 0 - 12,560 (9)
President (8) 1995 114,229 61,676 - 0 - - 0 - 10,000 11,225 (9)
Fil Filipov 1997 300,000 350,000(10) - 0 - 28,300 (12)
Terex Lifting 1996 227,083 506,205(10) - 0 - 500,000 (11) - 0 - 4,500 (4)
President 1995 216,667 450,281(10) - 0 - - 0 - 40,000 3,080 (4)
</TABLE>
<PAGE>
______________________
(1) Mr. DeFeo became Chief Executive Officer on March 24, 1995, and was
named Chairman on March 4, 1998.
(2) As part of Mr. DeFeo's 1996 long term incentive compensation, on March
31, 1997, Mr. DeFeo was conditionally granted 100,000 shares of
Restricted Stock (as defined in the "Compensation Committee Report"
below) under the 1996 Plan. The value of the Restricted Stock granted
to Mr. DeFeo set forth in the table above for 1996 is based on the
closing stock price on the New York Stock Exchange ("NYSE") of Common
Stock of $13.125 per share as of March 31, 1997, the date of grant.
The value of Mr. DeFeo's Restricted Stock as of December 31, 1997,
based on a closing stock price on the NYSE of Common Stock of $23.50
per share, is $2,350,000. The shares of Restricted Stock awarded to
Mr. DeFeo become vested within three years upon the attainment of
certain performance objectives in four categories: share price,
operating profit percentage, peer group operating profit percentage and
executive development. Specifically: (i) 15,000 of the 100,000 shares
vested on July 23, 1997, when the average closing stock price on the
NYSE of the Common Stock during a 30 consecutive trading day period was
$18.00 per share; (ii) 15,000 of the 100,000 shares will vest on a date
prior to March 31, 2000, when the average closing stock price on the
NYSE of the Common Stock during a 30 consecutive trading day period is
$24.00 per share; (iii) 16,500 of the 100,000 shares vested on December
31, 1997, when operating profit of the Company reached 8.00% for 1997;
(iv) 8,500 of the 100,000 shares will vest if the Company's operating
profit percentage reaches 8.75% for 1998 or 1999; (vi) 8,250 of the
100,000 shares will vest if the Company's operating profit percentage
reaches 70% of the average operating profit percentage of the Company's
peer group of companies (the "Peer Group Average Operating Profit");
(vii) 8,250 of the 100,000 shares will vest if the Company's operating
profit percentage reached 80% of the Peer Group Average Operating
Profit; (viii) 8,500 of the 100,000 shares will vest if the Company's
operating profit percentage reaches 90% of the Peer Group Average
Operating Profit; (ix) 6,600 of the 100,000 shares will vest upon the
promotion of an existing employee or the hiring of two new employees to
an executive position comprising one (1) of the Company's 10 most
senior executive positions (each change, an "Executive Change"); (x)
6,600 of the 100,000 shares will vest when four Executive Changes have
occurred; and (xi) 6,800 of the 100,000 shares will vest when five
Executive Changes have occurred. Upon the earliest to occur of a change
of control of the Company or the death or disability of Mr. DeFeo, any
unvested portion of such Restricted Stock shall vest immediately.
Dividends, if any, are paid on Restricted Stock awards at the same rate
paid to all stockholders.
(3) As part of Mr. DeFeo's 1995 long term incentive compensation, on
February 15, 1996, Mr. DeFeo was granted 5,000 shares of Restricted
Stock (as defined in the "Compensation Committee Report" below) under
the Company's 1994 Long Term Incentive Plan (the "1994 Plan") and
45,000 shares of Restricted Stock under the 1996 Plan. The value of
the Restricted Stock granted to Mr. DeFeo set forth in the table above
for 1995 is based on the closing stock price on the NYSE of Common
Stock of $5.00 per share as of February 15, 1996, the date of grant.
The value of such Restricted Stock as of December 31, 1997, based on a
closing stock price on the NYSE of Common Stock of $23.50 per share, is
$1,175,000. Of the 50,000 shares of Restricted Stock granted to Mr.
DeFeo, 25,000 have vested and the 12,500 shares become vested on
February 15, 1999 and the final 12,500 become vested on February 15,
2000; however, upon the earliest to occur of a change in control of the
Company or the death or disability of Mr. DeFeo, any unvested portion
of such Restricted Stock shall vest immediately. Dividends, if any, are
paid on Restricted Stock awards at the same rate as paid to all
stockholders.
(4) Company's matching contribution to defined contribution plan account.
(5) As part of Mr. Langevin's 1996 long term incentive compensation, on
February 27, 1997, Mr. Langevin was granted 12,500 shares of Restricted
Stock under the Company's 1994 Plan. The value of the Restricted Stock
granted to Mr. Langevin set forth in the table above for 1996 is based
on the closing stock price on the NYSE of Common Stock of $12.00 per
share as of February 27, 1997, the date of grant. The value of such
Restricted Stock as of December 31, 1997, based on a closing stock
price on the NYSE of Common Stock of $23.50 per share, is $295,750.
The shares of Restricted Stock awarded to Mr. Langevin for 1996 become
vested to the extent of one-fourth of the shares covered thereby on
each of the first four anniversaries of February 27, 1997 and
accordingly, 4,125 shares became vested on February 27, 1998; however,
upon the earliest to occur of a change in control of the Company or the
death or disability of Mr. Langevin, any unvested portion of such
Restricted Stock shall vest immediately. Dividends, if any, are paid
on Restricted Stock awards at the same rate as paid to all
stockholders.
(6) Mr. Rosenberg retired as an executive officer and employee of the
Company on December 31, 1997.
(7) In consideration for his years of service to the Company, Mr. Rosenberg
received an award of 5,000 shares of Common Stock upon his retirement
from the Company on December 31, 1997. The value of the Common Stock
awarded to Mr. Rosenberg set forth in the table above for 1997 is based
on the closing stock price on the NYSE of Common Stock of $23.50 per
share as of January 2, 1998, the date of the award.
(8) Mr. Buchan was paid all amounts in British pounds. The amounts listed
above as paid to Mr. Buchan were computed by using the exchange rate of
1.6407 to convert the British pounds paid into US dollars.
(9) Amounts paid by Terex Equipment Limited, a wholly owned subsidiary of
the Company ("TEL") on behalf on Mr. Buchan, to the TEL pension scheme.
The amounts listed above as "All Other Compensation" paid to Mr. Buchan
were computed by using the exchange rate of 1.6407 to convert the
British pounds paid into US dollars.
(10) As part of Mr. Filipov's 1996 long term incentive compensation, on
January 2, 1997, Mr. Filipov was granted 50,000 shares of Restricted
Stock under the Company's 1994 Plan. The value of the Restricted Stock
so granted to Mr. Filipov is based on the closing stock price on the
NYSE of the Company's Common Stock of $10.00 per share as of January 2,
1997, the date of grant. The value of such Restricted Stock as of
December 31, 1997, based on a closing stock price on the NYSE of Common
Stock of $23.50 per share, is $1,175,000. The shares of Restricted
Stock awarded to Mr. Filipov for 1995 become vested to the extent of
one-fourth of the shares covered thereby on each of the first four
anniversaries of January 2, 1997 and accordingly, 12,500 of the shares
awarded became vested on January 2, 1998; however, upon the earliest to
occur of a change in control of the Company or the death or disability
of Mr. Filipov, any unvested portion of such Restricted Stock shall
vest immediately. Dividends, if any, are paid on Restricted Stock
awards at the same rate as paid to all stockholders.
(11) Pursuant to the terms of compensation arrangements with the Company,
Mr. Filipov's annual bonus is equal to a percentage of net income
(after certain adjustments) of the Company division or subsidiary for
which he has responsibility. From May 1995 through 1996, Mr. Filipov's
bonus was equal to 4% of the Company's net income (after certain
adjustments) from its P.P.M. S.A. and PPM Crane, Inc., subsidiaries.
From January 1994 through April 1995, Mr. Filipov's bonus was equal to
7.5% of the Company's net income (after certain adjustments) from its
Koehring Cranes, Inc., subsidiary.
(12) Includes $23,500 paid by P.P.M. S.A., a wholly owned subsidiary of the
Company on behalf on Mr. Filipov under his P.P.M. S.A. pension fund
and $4,800 constituting the Company's matching contribution to defined
contribution plan account. The amounts paid by P.P.M. S.A. listed
above as "All Other Compensation" paid to Mr. Filipov were computed by
using the exchange rate of .595 to convert the French francs paid into
US dollars.
<PAGE>
Stock Option Grants in 1997
The following table sets forth information on grants of stock options
under the Company's 1988 Incentive Stock Option plan covering key management
employees (the "1988 Plan"), as well as under the Company's 1994 Plan and the
Company's 1996 Plan during the Company's 1997 fiscal year to the Named
Executive Officers. The number of stock options and SARs granted to the
Named Executive Officers during the Company's 1997 fiscal year is also listed
in the Summary Compensation Table in the column entitled "Securities
Underlying Options/SARs." The exercise price of the options equaled or
exceeded the fair market price of the Common Stock at the time of the grant.
Options granted under the 1988 Plan vest ratably over three years from the
date of grant. Options granted under the 1994 Plan and under the 1996 Plan
vest ratably over four years from the date of grant.
<PAGE>
<TABLE>
<CAPTION>
Stock Option/SAR Grants in 1997
Individual Grants
--------------------------------------------------------------------------
% of
Total
Options Potential Realizable
Granted Exer- Value at Assumed
Number of to cise Annual Rates of Stock
Securities Employ- or Price Appreciation
Underlying ees in Base Expir- for Option Term
Options Fiscal Price ation -----------------------
Name Granted(#)(1) Year ($/Sh) Date 5%(S) 10%(S)
------------ ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 25,000 12% $22.75 3/03/08 $357,684 $906,441
David J. Langevin - 0 - - 0 - - - - 0 - - 0 -
Marvin B. Rosenberg - 0 - - 0 - - - - 0 - - 0 -
William S. Buchan 7,500 3% 12.00 2/27/07 56,601 143,437
Filip Filipov - 0 - - 0 - - - - 0 - - 0 -
__________________
(1) The options listed above for Messrs. DeFeo and Buchan, respectively, were granted under the 1996
Plan and become vested to the extent of one-fourth of the shares of Common Stock covered thereby
on each of the first four anniversaries of March 4 1998, and February 27, 1997, respectively, the
dates of grant.
</TABLE>
<PAGE>
Aggregated Option Exercises in 1997 and Year-End Option Values
The table below summarizes options exercised during 1997 and year-end
option values of the Named Executive Officers listed in the Summary
Compensation Table.
<TABLE>
Aggregated Option Exercises in 1997 and Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Year-End (#) Year-End ($)(1)
Shares --------------- ---------------
Acquired on Value Exercisable/ Exercisable/
Exercise(#) Realized($) Unexercisable Unexercisable
---------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Ronald M. DeFeo 44,792 $674,492 31,691/49,317 $465,414/$745,977.25
David J. Langevin 26,396 $434,576 0/23,504 $ 0/$347,014.50
Marvin B. Rosenberg 27,600 $492,657 0/0 $0/$0
William S. Buchan 2,000 $ 16,775 500/13,750 $78,975/$205,000
Filip Filipov - 0 - - 0 - 33,750/21,250 $589,325/$375,625
</TABLE>
_______________________
(1) Based on the closing price of the Company's Common Stock on the NYSE on
December 31, 1997 of $23.50.
<PAGE>
Pension Plans
The Company maintains four defined benefit pension plans covering
certain domestic employees, including, as described below, certain officers
of the Company or its subsidiaries. Retirement benefits for the plans
covering the salaried employees are based primarily on years of service and
employees' qualifying compensation during the final years of employment. In
addition, TEL maintains a pension scheme for its salaried employees.
Mr. DeFeo and Mr. Filipov participate in the Terex Corporation Salaried
Employees' Retirement Plan (the "Retirement Plan"). None of the other Named
Executive Officers participate in the Retirement Plan. Participation in the
Retirement Plan was frozen as of May 7, 1993.
Participants with five or more years of eligible service are fully
vested and entitled to annual pension benefits beginning at age 65.
Retirement benefits under the Retirement Plan are equal to the product of (i)
the participant's years of service (as defined in the Retirement Plan) and
(ii) 1.02% of final average earnings (as defined in the Retirement Plan) plus
0.71% of such compensation in excess of amounts shown on the applicable
Social Security Integration Table for participants born prior to 1938. For
participants born during 1938-1954, the formula is modified by replacing the
1.02% and 0.71% figures with 1.08% and 0.65%, respectively. For participants
born after 1954, the formula is modified by replacing the 1.02% and 0.71%
figures with 1.13% and 0.60%, respectively. Service in excess of 25 years is
not recognized. There is no offset for primary Social Security.
Participation in the Retirement Plan was frozen as of May 7, 1993, and no
participants, including Mr. DeFeo, will be credited with service following
such date. However, participants not currently fully vested, including Mr.
DeFeo, will be credited with service for purposes of determining vesting
only. The annual retirement benefits payable at normal retirement age under
the Retirement Plan will be $4,503 for Mr. DeFeo and $259.28 for Mr. Filipov
(assuming full vesting).
Mr. Buchan participates in the TEL pension scheme, which provides a
pension benefit to employee participants based primarily on an average of the
last three years of earnings prior to retirement and accumulates at a rate of
1/60 for each year of pensionable service up to a maximum of 2/3 of final
pensionable pay at the normal retirement date. Early retirement causes the
pension amount to be reduced by approximately 4% per annum based on an
actuarial valuation. Assuming Mr. Buchan retires at normal retirement age
and based on the most recent benefit statement published, Mr. Buchan's
pension benefits will be $40,355 per year (assuming a 1.6207 exchange rate
for converting British pounds to US dollars).
Mr. Filipov also participates in the P.P.M S.A. pension plan, which
provides a pension benefit to employee participants based primarily on
amounts contributed. To receive a benefit, employees must participate a
minimum of eight years. Commencing on the later of November 2004 or Mr.
Filipov's retirement, Mr. Filipov will be entitled to withdraw either
annually or quarterly from his pension, which in the aggregate is currently
$65,000.
Compensation of Directors
Directors who are employees of the Company receive no additional
compensation by virtue of their being directors of the Company. For their
service in 1997 nonemployee directors received a cash retainer of $24,000.
All directors of the Company are reimbursed for travel, lodging and related
expenses incurred in attending Board and committee meetings.
In 1997 each outside director also received an option to purchase 7,500
shares of Common Stock.
In addition, an outside director who served as chairperson of a
committee of the Board of Directors in 1997 received an option to purchase
5,000 shares of Common Stock, and an outside director who served as a member
of a committee (but not as a chairperson of such committee) received an
option to purchase 2,500 shares of Common Stock. However, irrespective of
the number of positions held, no outside director received options to
purchase more then 7,500 shares of Common Stock for service as a committee
chairperson or member or as both.
Outside director options granted in 1997 have a term of five years. The
grants were made five business days after the date on which the Company filed
its Annual Report on Form 10-K with the Securities and Exchange Commission.
The exercise price is the closing price on the NYSE of the Common Stock on
such date. The options vested upon grant.
Effective January 1, 1998, the compensation program for outside
directors was revised, primarily to make the annual retainer for Board
service payable in Common Stock or in options for Common Stock or both, in
the proportion elected by each director, to enable directors to defer receipt
of their fees and to establish a Common Stock ownership objective for outside
directors.
Under the new program, outside directors receive annually the equity
equivalent of $35,000 for service as a Board member (or a prorated amount if
a director's service begins other than on the first day of the year). Each
director elects annually, for the particular year, to receive (i) shares of
Common Stock currently, (ii) options to purchase shares of Common Stock
currently, (iii) shares of Common Stock on a deferred basis or (iv) any
combination of the three preceding alternatives. The total for any year of
the (i) number of shares paid, (ii) the number of shares covered by options
granted, and (iii) the number of shares deferred may not exceed 5,000 (as
such number may be adjusted to take into account any change in the capital
structure of the Company by reason of any stock split, stock dividend or
recapitalization).
For purposes of calculating the number of shares of Common Stock or
number of options into which the fixed sum translates, Common Stock is valued
at its opening price on the NYSE on the payment or grant date (the first
trading day of any year or any other applicable date). A director who elects
to receive shares of Common Stock currently receives 60% of their dollar
value in shares and the other 40% in cash toward the tax liability on the
payment, as an incentive to hold the shares paid.
In respect of options that a director elects to receive, the price of
the Common Stock, determined as above, is adjusted to reflect year-to-year
volatility in the market price of the Common Stock. This adjusted price is
the value of the underlying option at the time of grant. For 1998 the
adjustment for option valuation purposes values the grant-date price of the
Common Stock at 25%. Options vest immediately upon grant and have a five-
year term.
Also under the new program, each director who serves as chairperson of a
committee of the Board receives an annual retainer of $2,500, payable in
cash, and each director who serves as a member of a committee (including any
committee that the director chairs) receives an annual retainer of $2,500,
payable in cash. For a director whose service begins other than on the first
day of the year, any retainer is prorated. Directors may elect to defer
receipt of retainers for committee service in Common Stock or cash or a
combination of both.
Board retainers and committee retainers (or portions of either) that a
director elects to defer in Common Stock under the Company's Deferred
Compensation Plan are credited to a Common Stock index account, which
fluctuates in value with the market value of the Common Stock. Committee
retainers (or portions thereof) that a director elects to defer in cash are
credited to an interest-bearing account and earn interest, which is
compounded annually. The current rate of interest is 8% per annum. Payment
of any deferral (whether in Common Stock or cash) is deferred until the
director's termination of service or such earlier date as the director
specifies when electing the applicable deferral.
The new program also establishes a Common Stock ownership objective for
outside directors. Each director is expected to accumulate, over the first
three years of Board service beginning on or after January 1, 1998, the
number of shares of Common Stock that is equal in market value to three times
the annual retainer for Board service ($105,000). Once this ownership
objective is achieved, the director is expected to maintain such minimum
ownership level.
The intent is to encourage acquisition and retention of Common Stock by
directors, evidencing the alignment of their interests with the interests of
stockholders. To this end, each new director will receive an award of 1,000
shares of Common Stock and, as an incentive to retention, a cash payment
equal to 40% of the market value of the shares, to defray the income tax
liability related to such award. As set forth above, the Board retainer is
payable in Common Stock or options, and committee retainers may be deferred
in Common Stock.
In addition to compensation under the 1996 Plan, two directors, Mr.
Andersen and Mr. Raben, received an award of 10,000 shares of Common Stock
for their special services in facilitating the completion of the successful
negotiations of a Standstill Agreement with Mr. Randolph W. Lenz, an
approximately 10% stockholder of the Company, in connection with the public
offering by the Company of 5,700,000 shares of Common Stock on July 28, 1997.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Company has agreed with Ronald M. DeFeo that in the event of a
change in ownership of the Company which prevents him from continuing in his
position as Chairman, President and Chief Executive Officer or in the event
of a termination of his employment without cause, the Company will provide
for a continuance of his income for a period of 24 months.
The Company has entered into an employment agreement with Mr. Fil
Filipov pursuant to which Mr. Filipov is to be paid a base salary of a
minimum of $300,000 and is to participate in a bonus scheme with a target of
75% of his salary, based on performance as determined in the discretion of
management. The contract is of indefinite duration; however, in the event
that either party desires to terminate the contract for other than cause, a
one (1) year notice period must be provided; provided, further, however, that
Mr. Filipov has the right at any time, upon thirty (30) days notice to the
Company to change his employment status from that of an employee of the
Company to consultant, and if he chooses to exercise such an option, the
Company has agreed to pay Mr. Filipov an amount equal to 60% of his salary in
effect immediately prior to his change in status for a 36 month period.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board recommending compensation for
executive officers, including the Named Executive Officers, during the
Company's 1997 fiscal year consisted of G. Chris Andersen, William H. Fike
and David A. Sachs. There are no Compensation Committee interlocks or
insider participation with respect to such individuals.
Compensation Committee Report
Executive Compensation Philosophy
The objectives of the Company's executive compensation program are to (i)
attract and retain the executives with the skills critical to the long-term
success of the Company, (ii) motivate and reward individual and team
performance in attaining business objectives and maximizing stockholder value
and (iii) link a significant portion of compensation to appreciation in the
price of the Company's stock, so as to align the interests of the executive
officers with those of the stockholders.
To meet these objectives, the total compensation program is designed to be
competitive with the programs of other corporations of comparable revenue
size in industries with which the Company competes for customers and
executives and to be fair and equitable to both the employee and the Company.
Consideration is given to the employee's overall responsibilities,
professional qualifications, business experience, job performance, technical
expertise and career potential and the combined value of these factors to the
Company's long-term performance and growth.
Executive Compensation Program
Each year the Compensation Committee (the "Committee"), which is comprised
entirely of outside directors, determines the compensation arrangements for
the Company's executive officers, including the individuals whose
compensation is detailed in this proxy statement. The executive compensation
program has three principal components: salary, short-term incentive
compensation (annual bonus) and long-term incentive compensation, each of
which is described below. While the components of compensation are
considered separately, the Committee takes into account the full compensation
package afforded by the Company to the individual executive.
Salary
Salary is determined by evaluating the responsibilities of the position held,
the individual's past experience, current performance and the competitive
marketplace for executive talent. Salary ranges for the Company's executive
officers compare to salary ranges of executives at companies of similar size,
as reported in data available to the Committee.
Annual Bonus
In addition to salary, each executive officer is eligible for an annual
bonus, payable under the 1988 Plan, the 1994 Plan or the 1996 Plan. Bonuses
are paid for attainment of (i) Company operating profit and cash flow goals
established annually and (ii) specific performance goals established for each
executive officer at the beginning of the fiscal year. The bonus opportunity
is up to 50% (or, for extraordinary performance, more than 50%) of salary if
Company and individual goals are attained. As stated in footnote (12) to the
Summary Compensation Table with respect to Mr. Filipov, bonuses may be based
on the profitability or other specific performance goals of the particular
division or subsidiary for which an executive officer has responsibility.
The Committee believes that bonuses paid to the individuals whose
compensation is reported in the Summary Compensation Table reflect the level
of achievement of Company goals and individual performance goals during 1997.
Long-Term Incentive Compensation
The purpose of long-term awards, currently in the form of stock options and
grants of Common Stock including Restricted Stock, is to align the interests
of the executive officers with the interests of the stockholders.
Additionally, long-term awards offer executive officers an incentive for the
achievement of superior performance over time and foster the retention of key
management personnel. In determining stock option and Common Stock grants,
the Committee bases its decision on the individual's performance and
potential to improve stockholder value and on the relationship of equity to
the other components of the individual's compensation.
CEO Compensation
The compensation of the Chief Executive Officer ("CEO") is determined
pursuant to the principles stated above. Specific consideration is given to
the CEO's responsibilities and experience in the industry and the
compensation package of chief executive officers of comparable companies.
Based on these factors and on the Company's financial performance in 1996,
the Committee set the CEO's salary for 1997 at $425,000. In order to
determine an appropriate overall level of compensation for Mr. DeFeo for the
year, the Committee retained an outside consultant and also considered
information relating to comparable companies.
In appraising the CEO's performance during 1997, the Committee noted that the
Company's sales for the year increased by 24%, operating profit doubled and
substantial progress was made in all segments of the business. At the same
time, the CEO significantly advanced the goal of improving the Company's
capital structure through a public offering of 5 million shares of Common
Stock and negotiation of refinancing of the Company's high-cost debt to
provide greater liquidity, financial flexibility and estimated savings of
approximately $25 million per year. Also, an important acquisition, of O&K
Mining GmbH, negotiated in 1997, should promote near-term cost savings
through consolidation of facilities as well as long-term opportunities for
growth.
The Committee recognized that, since becoming CEO in 1994, Mr. DeFeo has been
the driving force in successfully transforming Terex and positioning the
Company for the future. For all of the foregoing reasons, the Committee
awarded Mr. DeFeo a bonus of $637,500 for 1997. Two-thirds of this amount,
or $425,000, was based on achievement of the Company's financial goals for
the year; one-third of the amount, or $212,500, reflected his special
achievements, including restructuring the Company. In further recognition of
Mr. DeFeo's performance, the Committee granted him an option for the purchase
of 25,000 shares of Common Stock.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code ("Code") limits to $1 million a
year the deduction that a publicly held corporation may take for compensation
paid to each of its chief executive officer and four other most highly
compensated employees unless the compensation is "performance-based."
Performance-based compensation must be based on the achievement of
preestablished, objective performance goals under a plan approved by
stockholders. The Committee believes that circumstances in 1997 warrant the
nondeductibility of the small portion of Mr. DeFeo's compensation for the
year that exceeds $1 million.
In order to reduce or eliminate the amount of compensation that would not
qualify for a tax deduction, should the compensation of the CEO or any other
executive officer exceed $1 million in 1998 or a subsequent year, the Board
of Directors is recommending that stockholders approve a new annual incentive
compensation plan, so that amounts earned thereunder by certain employees
will qualify as performance-based. This plan is described under the heading
below, "Proposal 5: Approval of the Annual Incentive Compensation Plan."
COMPENSATION COMMITTEE
G. CHRIS ANDERSEN
WILLIAM H. FIKE
DAVID A. SACHS
Performance Graph
The following is a stock performance graph which shows the change in market
value of $100 invested in the Company's Common Stock, Standard & Poor's 500
Stock Index and a "Peer Group" index for the period commencing December 31,
1992 through December 31, 1997. The cumulative total stockholder return
assumes dividends are reinvested. The "Peer Group" consists of the following
companies, which are in similar lines of business as the Company
(manufacturing of telescopic mobile cranes aerial work platforms, utility
aerial devices, off-highway trucks and high capacity surface mining trucks):
Caterpillar, Inc., Deere & Company, Harnischfeger Industries, Inc., Ingersoll
Rand Company, JLG Industries, Inc., The Manitowoc Company and NACCO
Industries, Inc. The companies in the indices are weighted by market
capitalization. The stockholder return shown on the graph below is not
indicative of future performance.
The vertical axis of the line graph is scaled from $0.00 at the origin
extending upwards to $400.00, marked in increments of $50.00. The horizontal
axis begins with the year 1992 at the origin extending to the right through
the year 1997, marked in one year increments. The value of an assumed
initial investment of $100.00 in the Company's stock, in the S&P 500, and in
the Peer Group is plotted for each year on the horizontal axis using the data
listed below.
Name 1992 1993 1994 1995 1996 1997
Terex Corporation 100.00 67.90 69.14 46.91 100.00 232.10
Standard & Poor's 100.00 110.09 111.85 153.80 189.56 252.82
500
Peer Group 100.00 156.30 165.45 208.92 266.22 354.32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 28, 1995, Randolph W. Lenz retired as Chairman of the Board
and a Director of the Company. Mr. Lenz remains the Company's principal
stockholder. As of March 1, 1998, he beneficially owned, directly or
indirectly, approximately 10% of the outstanding Common Stock of the Company.
In connection with his retirement, the Company (acting upon the
recommendations of a committee comprised of its independent directors and
represented by independent counsel) and Mr. Lenz entered into a retirement
agreement providing certain benefits to Mr. Lenz and the Company. The
agreement provides, among other things, for a five-year consulting engagement
requiring Mr. Lenz to make himself available to the Company to provide
consulting services for certain portions of his time. Mr. Lenz, or his
designee, received a fee for consulting services which included payments in
an amount, and a rate, equal to his 1995 base salary of $486,000 until
December 31, 1996. The agreement also provided for the (i) granting of a
five-year $1.8 million loan bearing interest at 6.56% per annum which is
subject to being forgiven in increments over the five-year term of the
agreement upon certain conditions, and (ii) equity grants having a maximum
potential of 200,000 shares of the Company's Common Stock conditioned upon
the Company achieving certain financial performance objectives in the future.
Mr. Lenz received 33,333 shares of the Company's Common Stock on January 24,
1997, pursuant to the agreement. Mr. Lenz also agreed not to compete with
the Company, to vote his shares of the Company's Common Stock in the manner
recommended by the Company's Board of Directors and not to acquire any
additional shares of the Company's Common Stock.
On May 16, 1995, the U.S. Department of Labor (hereinafter, the "DOL")
wrote a letter to Randolph W. Lenz in which it alleged that at the time he
was a fiduciary of the Company's retirement plans, Mr. Lenz violated various
provisions of the Employee Retirement Income Security Act of 1974, as amended
(hereinafter, "ERISA") in making certain investments which may have been
imprudent and by possibly engaging in prohibited transactions under ERISA.
As of January 31, 1997, the DOL and Mr. Lenz entered into a settlement
agreement which obligated Mr. Lenz to pay certain amounts to the Terex
Corporation Master Retirement Plan Trust and to the DOL. During 1997, In
connection with the DOL investigation and settlement, the Company incurred
expenses (including legal fees) of $12,305.
On December 31, 1997, Marvin B. Rosenberg retired as Senior Vice
President, Secretary and General Counsel of the Company. In connection with
his retirement, the Company and Mr. Rosenberg entered into an agreement
providing certain benefits to Mr. Rosenberg and the Company. Pursuant to the
agreement, Mr. Rosenberg received an award of 5,000 shares of Common Stock in
consideration of his years of service to the Company and will receive a
consulting fee equal to his base salary in 1997 of $250,000 for services
provided in 1998 and $125,000 for services provided in 1999. The agreement
also provides for a two-year consulting engagement requiring Mr. Rosenberg to
make himself available to the Company to provide consulting services for a
certain portion of his time.
In 1997, the Company invested $200,000 in Monon Tractor Corp. ("Monon"),
a company which was reorganizing after declaring bankruptcy. Subsequesnt to
the initial investment, the Company was required to make a investment in
Monon. As aresult, the Company elected not to continue its investment in
Monon and not to make the additional required investment. G. Chris Andersen,
a director of the Company and another partner of Andersen Weinroth & Co.,
L.P., an affiliate of Mr. Andersen, acquired the Company's investment in
Monon for the amount invested by the Company and assumed the Company's
obligations to make additional investments in Monon.
The Company, certain directors and executive officers of the Company,
and KCS, a Connecticut limited partnership principally owned by Randolph W.
Lenz, with whom the Company prior to January 1, 1994, had a management
contract to provide administrative, financial, marketing, technical, real
estate and legal services to the Company, are named parties in a private
investigation initiated by the Securities and Exchange Commission. During
1997, the Company incurred $199,141 of legal fees and expenses on behalf of
Randolph W. Lenz, David J. Langevin and Marvin B. Rosenberg.
The Company has previously publicly announced that it entered in a new
$500 million bank credit facility (the "New Bank Credit Facility") on March
6, 1998 with a syndicate of lenders. Ares Leverage Investment Fund L.P.
("Ares"), an affiliate of David A. Sachs, a director of the Company,
participated as a lender under the New Bank Credit Facility for the amount of
$15 million. Ares also received a fee of $18,750 for participating as a
lender under the New Bank Credit Facility. Participation by Ares as a lender
under the New Bank Credit Facility was made in the ordinary course of Ares'
business and on the same terms as all other lenders under the New Bank Credit
Facility.
Canadian Imperial Bank of Commerce, an affiliate of CIBC Openheimer
Corp. of which Bruce I Raben, a director of the Company, is a managing
director, is a lender with a commitment of up to $37.5 million and a Co-
Documentation Agent under the New Bank Credit Facility. Canadian Imperial
Bank of Commerce received a fee of $675,000 for acting a Co-Documentation
Agent under the New Bank Credit Facility. Participation by Canadian Imperial
Bank of Commerce as a lender under the New Bank Credit Facility was made in
the ordinary course of its business and on the same terms as all other
lenders under the New Bank Credit Facility. In addition, CIBC Openheimer
Corp. was retained by the Company in connection with the offering of the
Company's $150 million Senior Subordinated Notes on March 31, 1998. CIBC was
paid $500,000 as an underwriting discount.
The Company intends that all transactions with affiliates are on terms
no less favorable to the Company than could be obtained in comparable
transactions with an unrelated person. The Board will be advised in advance
of any such proposed transaction or agreement and will utilize such
procedures in evaluating their terms and provisions as are appropriate in
light of the Board's fiduciary duties under Delaware law. In addition, the
Company has an Audit Committee consisting solely of independent directors.
One of the responsibilities of the Audit Committee is to review related party
transactions.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and each person who is the beneficial owner of more than
10% of the Company's outstanding equity securities, to file with the SEC and
the NYSE initial reports of ownership and changes in ownership of equity
securities of the Company. Specific due dates for these reports have been
established by the SEC and the Company is required to disclose in this Proxy
Statement any failure to file such reports by the prescribed dates during
1997. Officers, directors and greater than 10% beneficial owners are
required by SEC regulation to furnish the Company with copies of all reports
filed with the SEC pursuant to Section 16(a) of the Exchange Act.
To the Company's knowledge, based solely on review of the copies of
reports furnished to the Company and written representations that no other
reports were required, all filings required pursuant to Section 16(a) of the
Exchange Act applicable to the Company's officers, directors and greater than
10% beneficial owners were complied with during the year ended December 31,
1997, except that the Company has been orally advised that Mr. Lenz filed a
Form 4 due for February 1997 on May 6, 1997, a Form 4 due for April 1997 on
June 5, 1997 and a Form 4 due for May 1997 on July 11, 1997.
PROPOSAL 2: INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP audited the consolidated financial
statements of the Company for 1997. The Board of Directors desires to
continue the service of this firm for 1998. Accordingly, the Board of
Directors recommends to the stockholders ratification of the retention of
Price Waterhouse LLP as the Company's independent accountants for the fiscal
year ending December 31, 1998. If the stockholders do not approve Price
Waterhouse LLP as the Company's independent accountants, the Board of
Directors will reconsider its selection.
Representatives of Price Waterhouse LLP are expected to be present at
the Meeting with the opportunity to make a statement if they desire to do so,
and they are expected to be available to respond to appropriate questions.
The Board of Directors recommends that the stockholders vote FOR the
ratification of Price Waterhouse LLP as independent accountants for 1998.
<PAGE>
PROPOSALS 3 AND 4:APPROVAL OF AMENDMENTS TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
THE COMPANY IS AUTHORIZED TO ISSUE TO 150,000,000 AND TO INCREASE THE NUMBER
OF SHARES OF PREFERRED STOCK THE COMPANY IS AUTHORIZED TO ISSUE TO
50,000,000 SHARES
Proposed Amendments
The Company's stockholders are being requested to approve an amendment
to the Company's Restated Certificate of Incorporation (the "Certificate"),
the full text of which is set forth in Exhibit A to this Proxy Statement, (i)
increasing the number of authorized shares of Common Stock from 30,000,000 to
150,000,000 ("Proposal 3") and (ii) increasing the number of authorized
shares of Preferred Stock from 10,000,000 to 50,000,000 ("Proposal 4"). The
Company's stockholders may separately vote for, against or abstain with
respect to Proposals 3 and 4. If Proposals 3 and 4 are approved, the
Company's authorized capital stock will consist of 150,000,000 shares of
Common Stock and 50,000,000 shares of Preferred Stock. The Company has no
present intention to issue any of the shares of Common stock or Preferred
Stock being authorized hereby.
As of April 6, 1998, the Company has available only approximately 8,000
shares of Common Stock and 10,000,000 shares of Preferred Stock authorized
for issuance, and, accordingly, management and the Board of Directors believe
an increase in the number of shares of both common Stock and Preferred Stock
authorized to be issued is prudent. The shares of Common Stock and Preferred
Stock to be authorized pursuant to the amendment would be available for
possible future public offerings of equity, stock dividends or splits,
financing and acquisition transactions, management incentives and employee
benefit plans and other corporate purposes. The additional shares available
for issuance would give the Company greater flexibility and allow shares of
Common Stock and Preferred Stock to be issued without the delay of a special
stockholders' meeting. The shares of Common Stock and Preferred Stock would
be available for issuance without further action of the stockholders unless
such action is required by applicable law or the rules of any stock exchange
on which the Company securities may be listed.
Effect of the Amendments
The proposed amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock and
Preferred Stock may be viewed as having the possible effect of diluting the
stock ownership of current stockholders, as well as discouraging, under
certain circumstances, an unsolicited attempt by another person or entity to
acquire control of the Company. Although the Board of Directors has no
present intention of doing so, the Company's authorized but unissued Common
Stock and Preferred Stock could be issued in one or more transactions which
would make a takeover of the Company more difficult or costly, and less
likely. Moreover, authorized share of Common Stock and Preferred Stock can
be implemented to allow for the issuance of rights to purchase such shares,
with such rights having terms designated to encourage potential acquirers of
the Company to negotiate with the Company's Board of Directors. Such
issuances could also enhance the ability of officers and directors to retain
their positions. The amendment is not being proposed in response to any
effort of which the Company is aware to obtain control of the Company, nor is
the Board of Directors currently proposing to the stockholders any anti-
takeover measures.
The Board of Directors recommends that the stockholders vote FOR
approval of the proposed amendments to increase the number of shares of
Common Stock the Company is authorized to issue to 150,000,000 shares and FOR
approval of the proposed amendment to increase the number of shares of
Preferred Stock the Company is authorized to issue to 50,000,000 shares.
PROPOSAL 5: APPROVAL OF THE ANNUAL INCENTIVE COMPENSATION PLAN
The Board of Directors submits to the stockholders for approval the
Terex Corporation Annual Incentive Compensation Plan (the "Annual Plan").
The Board of Directors believes that it is in the best interest of the
Company and the stockholders to adopt a plan that provides for incentive
compensation in the form of an annual bonus to key executives responsible for
the success of the Company and that can help to attract and retain
outstanding executives. Compensation payable under the Annual Plan is based
on annual corporate performance.
The Company is seeking stockholder approval of the Annual Plan in order
to comply with the requirements of Section 162(m) of the Code, so that
certain compensation paid under the Annual Plan will be deductible by the
Company irrespective of the statutory $1 million limit. The Annual Plan is
designed so that all compensation payable thereunder will be fully
deductible. The Annual Plan is intended to be effective as of January 1,
1998, and is subject to stockholder approval. In the event that the Annual
Plan is not approved by stockholders, the Company's existing annual bonus
plan will continue in effect.
The following summary of the material features of the Annual Plan is
qualified in its entirety by the terms of the Annual Plan as filed with the
Securities and Exchange Commission.
Eligibility
Participation in the Annual Plan will be limited to key employees of the
Company designated by the Compensation Committee of the Board (the
"Committee"). Currently, the Chief Executive Officer has been designated by
the Committee to participate in the Annual Plan. Employees who are not
designated to participate in the Annual Plan may be entitled to incentive
compensation in the discretion of the Committee.
Plan Administration
The Annual Plan will be administered by the Committee, which has full
power and authority to determine which key employees of the Company will
receive awards under the Annual Plan, to set performance goals and bonus
targets as of the commencement of any fiscal year, to interpret and construe
the terms of the Annual Plan and to make all determinations it deems
necessary in the administration of the Annual Plan, including any
determination with respect to the achievement of performance goals and the
application of such achievement to the bonus targets.
Bonus Formula
The Annual Plan is designed to pay an annual bonus equal to a percentage
of certain bonus targets, based on the degree of achievement of predetermined
performance goals with respect to specific business criteria. The Annual
Plan sets out quantitative and qualitative categories of business criteria
upon which performance goals will be based. The business criteria measures
within each category are assigned weightings based upon their relative degree
of importance as determined by the Committee.
In the quantitative category, one or more of the following business
criteria may be used as performance measures: (i) net sales, (ii) operating
earnings, (iii) income before any extraordinary items, (iv) net income, (v)
earnings per share (fully diluted), (vi) working capital, (vii) return on
capital and (viii) return on equity. Quantitative criteria used to measure
the performance of a participant employed in a business unit (i.e.,
subsidiary or division) of the Company may be based in whole or in part on
results for the fiscal year of such business unit. In the qualitative
category, the business criteria relate to individual performance, taking into
account individual goals and objectives. Compensation paid under the Annual
Plan that is intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Code will be based solely on quantitative
criteria.
The performance goals with respect to each category of business criteria
are established by the Committee at the commencement of each fiscal year. No
annual bonus for any fiscal year will be paid unless the Company's Earnings
(as defined below) equal at least 85% of budgeted Earnings for that year, as
set by the Board of Directors or a committee thereof responsible for setting
the Company's budget. Earnings, with respect to any fiscal year, means the
Company's income before income, faxes and extraordinary items, determined in
accordance with generally accepted accounting principles, as reported in the
Company's audited consolidated financial statements for such fiscal year.
Bonus Targets
Annual bonus targets are expressed as a percentage of current salary
with respect to each category of business criteria applied. The Committee
determines the target percentages annually for each individual participating
in the Annual Plan at the commencement of the fiscal year.
Bonus Payments
At the end of any fiscal year for which a bonus may be earned, the
Committee determines each participant's level of achievement of the
performance goals. The percentage of achievement is then applied to the
bonus targets to determine the amount of bonus for each participant.
However, the maximum bonus that any individual may receive for any fiscal
year is an amount equal to 200% of his or her bonus target for the year.
The Annual Plan allows participants to defer receipt of bonuses when the
Committee chooses to offer a deferral option. When deferral is available,
each participant must choose the amount to be deferred prior to the year in
which the bonus may be earned. Deferred amounts are paid when a participant
terminates employment with the Company, either in a lump sum or in a series
of up to 15 installments, as he or she elects. Deferred amounts represent a
general unfunded obligation of the Company and will be credited with interest
at a rate determined by the Committee from time to time.
Termination and Amendment
The Committee may amend or terminate the Annual Plan at any time,
provided that no amendment will be effective prior to approval by the
Company's stockholders to the extent such approval is required to preserve
deductibility of compensation paid pursuant to the Annual Plan under Section
162(m) of the Code or otherwise required by law.
New Plan Benefits
Because the payment of a bonus under the Annual Plan for any fiscal year
is contingent on the achievement of performance goals as of the end of the
fiscal year, the Company cannot determine the amounts that will be payable or
allocable for fiscal year 1998 or in the future.
If the Annual Plan and the Committee's designated performance goals and
bonus target for Mr. DeFeo for 1998 had been in place during 1997, and if he
had achieved 110% of these goals, Mr. DeFeo would have earned a bonus of
$450,000.
The Board of Directors recommends that the stockholders vote FOR approval of
the Terex Corporation Annual Incentive Compensation Plan.
PROPOSAL 6: APPROVAL OF AN AMENDMENT TO THE 1996 PLAN TO INCREASE THE NUMBER
OF SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE FOR ISSUANCE
General
The Board of Directors adopted the 1996 Terex Corporation Long-Term
Incentive Plan (the "1996 Plan") on December 13, 1995, and the stockholders
ratified the 1996 Plan on May 15, 1996. The purpose of the 1996 Plan is to
(a) advance the interests of the Company and its stockholders by providing
incentives and rewards to those employees who are in a position to contribute
to the long-term growth and profitability of the Company and to outside
directors, (b) assist the Company and its subsidiaries and affiliates in
attracting, retaining and motivating highly qualified employees and outside
directors for the successful conduct of their business and (c) make the
Company's compensation program competitive with those of primary competitors.
The 1996 Plan authorizes the granting of (i) options ("Stock Option Awards")
to purchase shares of Common Stock, (ii) shares of Common Stock, including
Restricted Stock ("Stock Awards"), and (iii) bonus awards, included
Restricted Stock, based upon a participant's job performance ("Performance
Awards"). Subject to adjustment as described below under "Adjustments," the
aggregate number of shares of Common Stock which may currently be optioned or
granted under the 1996 Plan may not exceed 1,000,000 shares.
The 1996 Plan provides that a committee (the "Committee") of the Board
of Directors consisting of two or more members thereof who are non-employee
directors, shall administer the 1996 Plan and has provided the Committee with
the flexibility to respond to changes in the competitive and legal
environments, thereby protecting and enhancing the Company's current and
future ability to attract and retain directors and officers and other key
employees and consultants.
Since Ronald M. DeFeo joined the Company in 1992, Mr. DeFeo has
recruited several new senior executives, and under the direction of this
management team, the Company has successfully implemented a series of
strategic initiatives which have significantly improved the operating profit
and capital structure of the Company, which have transformed the Company and
significantly increased stockholder value. The achievements of the
management of the Company are also recognized in the industry. Accordingly,
in order to retain existing management, as well as attract additional quality
management and be able to compensate executions of businesses that may be
acquired, the Board of Directors of the Company is in the process of
considering a management incentive program for 1998 and subsequent years
which will provide management with long-term motivation to remain in the
employ of the Company and continue to increase stockholder value, thereby
aligning management's interests with those of the stockholders of the
Company. While this new incentive program is currently in the formulation
stage and the terms of this program have not been determined, there is a high
likelihood that it will include the granting of Stock Awards and/or Stock
Option Awards. To ensure that there are sufficient shares available under
the 1996 Plan to enable the Company to achieve the objectives set forth
above, the Company proposes to increase the aggregate number of shares of
Common Stock available to be optioned or granted under the 1996 Plan from
1,000,000 to 2,000,000.
Description of the Proposed Amendment to the 1996 Plan
Shares Available
To ensure that there are sufficient shares available under the
1996 Plan to enable the Company to achieve the objectives of the
1996 Plan, the Company has proposed that Section 5.2 of the 1996
Plan be amended to provide that the current aggregate number of
shares of Common Stock (including Restricted Stock, if any)
available to be optioned or granted shall be increased from
1,000,000 shares to 2,000,000 shares.
The Board of Directors recommends that the stockholders vote FOR approval of
the proposed amendment to the 1996 Plan.
OTHER BUSINESS
The Board does not know of any other business to be brought before the
Meeting. In the event any such matters are brought before the Meeting, the
persons named in the enclosed Proxy will vote the Proxies received by them as
they deem best with respect to all such matters.
STOCKHOLDER PROPOSALS
All proposals of stockholders intended to be included in the proxy
statement to be presented at the 1999 Annual Meeting of Stockholders must be
received at the Company's offices at 500 Post Road East, Westport,
Connecticut 06880, no later than December 15, 1998.
In addition, the Bylaws of the Company provide that in order for a
stockholder to nominate a candidate for election as a director at an annual
meeting of stockholders or propose business for consideration at such a
meeting, notice must be given to the Secretary of the Company no more than 90
days nor less than 60 days prior to the first anniversary of the preceding
year's annual meeting. The fact that the Company may not insist upon
compliance with these requirements should not be construed as a waiver by the
Company of its right to do so at any time in the future.
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, including financial statements, is being mailed to
stockholders of the Company with this Proxy Statement. The Annual Report
does not constitute a part of the Proxy Solicitation materials. Stockholders
may, without charge, obtain copies of the Company's Annual Report on Form 10-
K filed with the SEC. Requests for this report should also be addressed to
the Company's Secretary.
STOCKHOLDERS ARE URGED TO FORWARD THEIR PROXIES WITHOUT DELAY. A PROMPT
RESPONSE WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
Eric I Cohen
Secretary
April _, 1998
Westport, Connecticut
<PAGE>
EXHIBIT A
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The proposed amendment to the Restated Certificate of Incorporation of the
Company (the "Certificate") replaces Section 4(a) of the Certificate with a
new Section 4(a) which shall read as follows:
ARTICLE IV
(a) The aggregate number of shares which the corporation shall have the
authority to issue is 200,000,000 consisting of (i) 150,000,000 shares
designated as Common Stock, par value $.01 per share ("Common Stock"), and
(iii) 50,000,000 shares designated as Preferred Stock, par value $.01 per
share ("Preferred Stock").
