TEREX CORPORATION
500 Post Road East, Westport, Connecticut 06880
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999
The Annual Meeting of Stockholders of Terex Corporation (hereafter, the
"Company") will be held at the Hyatt Regency Greenwich, 1800 East Putnam Avenue,
Greenwich, Connecticut, on Wednesday, May 12, 1999, at 10:00 a.m., local time,
for the following purposes:
1. To elect six (6) directors to hold office for one year or until their
successors are duly elected and qualified.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for 1999.
3. To approve the Terex Corporation 1999 Long-Term Incentive Plan.
4. 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 March
29, 1999, 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 VOTE BY TELEPHONE, VIA
INTERNET, OR 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 CAN WITHDRAW THEIR PROXY OR CHANGE THEIR VOTE AT ANY TIME
BEFORE THEIR PROXY IS VOTED BY EXECUTING A LATER-DATED PROXY, BY VOTING IN
PERSON AT THE MEETING, BY TELEPHONE OR VIA INTERNET, OR BY FILING A WRITTEN
REVOCATION WITH THE SECRETARY OF THE COMPANY. IT IS IMPORTANT THAT YOU VOTE
PROMPTLY IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Directors,
Eric I Cohen
Secretary
April 1, 1999
Westport, Connecticut
<PAGE>
TEREX CORPORATION
500 Post Road East
Westport, Connecticut 06880
Proxy Statement for the
Annual Meeting of Stockholders
to be held on May 12, 1999
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 at 10:00 a.m. on May
12, 1999, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Greenwich,
Connecticut, 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 5, 1999, to each stockholder entitled to vote
at the Meeting. As of March 29, 1999, the record date for determining the
stockholders entitled to notice of, and to vote at, the Meeting, the Company had
outstanding 20,854,142 shares of common stock, $.01 par value per share (the
"Common Stock"). Common Stock is entitled to one vote on all matters to be voted
on at the Meeting.
Proxies that are properly executed, returned to the Company and not
revoked, will be voted in accordance with the specifications made. Where no
specifications are given, such Proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the enclosed
form of Proxy will have discretionary authority to vote according to their best
judgment.
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on the other
proposals and will be counted as present for the purposes of determining the
existence of a quorum regarding such items.
Each share of Common Stock is entitled to one vote per share. The
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy is required for the approval of any matters voted upon
at the Meeting, other than the election of directors. The election of directors
will require the affirmative vote of a plurality of the shares of Common Stock
present in person or represented by proxy. A quorum of stockholders is
constituted by the presence, in person or by proxy, of holders of record of
Common Stock representing a majority of the aggregate number of votes entitled
to be cast. Abstentions and broker non-votes will be considered present for
purposes of determining the presence of a quorum. With respect to the election
of directors, abstentions and broker non-votes will not be considered in
determining whether nominees have received the vote of a plurality. With respect
to the other matters to be voted upon at the Meeting, abstentions will have the
effect of a negative vote and broker non-votes will have no effect on the
outcome of the vote.
Proxy solicitations will be made primarily by mail, but solicitations
may also be made by telephone, Internet, 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
<PAGE>
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.
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). Any stockholder also has the right to revoke the Proxy at any time by
executing a later-dated Proxy, by telephone or via the Internet or by written
revocation 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 at or prior to the Meeting, will be voted at the
Meeting.
In order that your shares of Common Stock may be represented at the
Meeting, you are requested to select one of the following methods:
Voting by Mail
o indicate your instructions on the Proxy;
o date and sign the Proxy;
o mail the Proxy promptly in the enclosed envelope; and
o allow sufficient time for the Proxy to be received by the Company prior
to the Meeting.
Voting by Telephone
o use the toll-free number provided in the Proxy; and
o follow the specific instructions provided.
Voting via Internet
o log onto the Company's voting website (www.voteproxy.com) provided in
the Proxy; and
o follow the specific instructions provided.
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, six 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 six nominees listed below, all
of whom 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. In addition, the Board currently consists of seven members and is in
the process of identifying a suitable seventh director. At such time as the
Board identifies a seventh director, it is intended that the Board will elect
such person to the Board as an additional director.
2
<PAGE>
The information set forth below has been furnished to the Company by
the nominees and sets forth for each nominee, as of March 1, 1999, 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 46 Chairman of the Board, President,
Chief Executive Officer, Chief
Operating Officer and Director 1993
G. Chris Andersen 60 Director 1992
William H. Fike 62 Director 1995
Dr. Donald P. Jacobs 71 Director 1998
Marvin B. Rosenberg 58 Director 1992
David A. Sachs 39 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 former 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.
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.
3
<PAGE>
Dr. Donald P. Jacobs 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.
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.
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 seven times in 1998 at regularly scheduled and special
meetings, including telephonic meetings. All of the directors in office during
1998 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 Jacobs. The Audit Committee met two times during 1998.
The Audit Committee assists the Board in fulfilling its oversight
responsibilities by meeting regularly with the Company's independent auditors
and operating and financial management personnel. The Audit Committee reviews
the audit performed by the Company's independent auditors and reports the
results of such audit to the Board. The Audit Committee reviews the Company's
annual financial statements and all material financial reports provided to the
stockholders and reviews the Company's internal auditing, accounting and
financial controls. 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
six times during 1998. 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 met once during
1998. The Nominating Committee recommends nominees to fill vacancies on the
Board of Directors.
4
<PAGE>
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,
1999 (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, 1999, 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.
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
>
Randolph W. Lenz 2,060,578 (1) 9.90%
c/o Equity Merchant Banking
5401 N. Federal Highway
Fort Lauderdale, FL 33308
G. Chris Andersen 129,899 (2) *
821 West Shore Drive
Kinnelon, NJ 07405
Ronald M. DeFeo 318,162 (3) 1.52%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
William H. Fike 66,921 (4) *
c/o Magna International Inc.
26200 Lasher Road, Suite 300
Southfield, MI 48034
Bruce I. Raben 136,831 (5) *
c/o CIBC Wood Gundy
1999 Avenue of the Stars
Suite 2340
Los Angeles, CA 90067
David A. Sachs 105,299 (6) *
c/o Ares Management, L.P.
1999 Avenue of the Stars,
Suite 1900
Los Angeles, CA 90067
Marvin B. Rosenberg 68,597 *
56 Carrie Circle
Fairfield, CT 06432
Filip Filipov 107,870 (7) *
c/o Terex Cranes, Inc.
Hwy 501 East, P.O. Box 260002
Conway, SC 29526-2602
5
<PAGE>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
Ernest R. Verebelyi 12,979 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Eric I Cohen 14,457 (8) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Brian J. Henry 37,284 (9) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Joseph F. Apuzzo 31,899 (10) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and executive officers 1,082,385 (11) 5.20%
as a group (13 persons)
- --------------------------------------------
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Includes (a) 1,647,203 shares of Common Stock directly owned by Mr. Lenz,
and (b) 370,375 shares of Common Stock indirectly owned by Mr. Lenz through
four corporations that he indirectly owns and controls.
(2) Includes 94,671 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(3) Includes 76,081 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(4) Includes 64,681 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(5) Includes 94,701 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(6) Includes 3,300 shares of Common Stock owned by Mr. Sachs' wife. Mr. Sachs
disclaims the beneficial ownership of such shares. Also includes 77,499
shares of Common Stock issuable upon the exercise of options held by Mr.
Sachs, which are exercisable within 60 days.
(7) Includes 45,000 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(footnotes continued on following page)
6
<PAGE>
(footnotes continued from preceding page)
(8) Includes 1,250 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(9) Includes 2,500 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(10) Includes 8,750 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(11) Includes 471,383 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
EXECUTIVE OFFICERS
The following table sets forth, as of March 1, 1999, 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 46 Chairman of the Board, President, Chief Executive
Officer, Chief Operating Officer and Director
Filip Filipov 52 President of Terex Lifting
Ernest R. Verebelyi 51 President of Terex Earthmoving
Eric I Cohen 40 Senior Vice President, General Counsel and Secretary
Joseph F. Apuzzo 43 Vice President-Corporate Finance
Brian J. Henry 40 Vice President-Finance and Business Development
Steven E. Hooper 45 Vice President-Human Resources
Jack Lascar 44 Vice President-Investor Relations and Corporate
Communications
For information regarding Mr. DeFeo, refer to the table listing nominees in
the prior section "Proposal 1: Election of Directors."
Filip Filipov was named President of Terex Lifting on November 1, 1998 and
has served as President and CEO of Terex Cranes since March 1995. Mr. Filipov
served as President and CEO of the Company's Koehring division from 1993 to
1995, and was managing director of Clark Material Handling Company in Germany.
Prior to joining the Company, Mr. Filipov served as divisional president of
Tenneco, Inc., and was Vice President, Construction Equipment Europe at J. I.
Case Co. from 1988 to 1992.
7
<PAGE>
Ernest R. Verebelyi became President of Terex Earthmoving on October 22,
1998. Before joining the Company, Mr. Verebelyi served as Executive Vice
President, Operations of General Signal Corporation. From 1991 to 1996, Mr.
Verebelyi worked for Emerson Electric Company in St. Louis in various
capacities, the last being Executive Vice President. Prior to 1991, Mr.
Verebelyi spent six years with Hussmann Corporation and 14 years with General
Electric in various positions of responsibility.
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 New York City law firm of Robinson Silverman Pearce Aronsohn &
Berman LLP since January 1992.
Joseph F. Apuzzo was appointed Vice President-Corporate Finance of the
Company on September 18, 1998. Mr. Apuzzo previously held the positions of Vice
President-Finance and Controller, and 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 PricewaterhouseCoopers LLP in
various capacities from 1983 until September 1994.
Brian J. Henry was appointed Vice President-Finance and Business
Development on June 1, 1998. Mr. Henry previously held the positions of Vice
President-Finance and Treasurer, and Vice President-Corporate Development and
Acquisitions. Mr. Henry also served as the Company's Director of Investor
Relations. Mr. Henry 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.
Jack Lascar became Vice President, Investor Relations and Corporate
Communications of the Company on May 18, 1998. Prior to joining the Company, Mr.
Lascar was employed at Tenneco, Inc. for 17 years in various positions in the
areas of investor relations and business development. Mr. Lascar served as its
Vice President of Investor Relations from June 1994 to September 1997 and most
recently served as its Vice President of Business Development for Central and
Eastern Europe.
8
<PAGE>
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 1998 earned qualifying compensation in
excess of $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
------------------------------------- --------------------------
Awards
--------------------------
Other Restricted Securities All Other
Annual Stock Underlying Compen-
Name and Salary Bonus Compen- Awards Options/ Sation
Principal Position Year ($) ($) sation ($) ($) SARS (#) ($)
------------------ ---- --------- --------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 1998 $481,249 $918,750 $ * $-0- 25,000 $ 13,625 (2)
Chairman, President, Chief 1997 418,750 637,500 * -0- 25,000 8,025 (3)
Executive Officer and 1996 393,941 360,000 * 1,312,500 (1) 25,000 4,500 (4)
Chief Operating Officer
Filip Filipov 1998 314,583 490,000 * 140,000 (6) 50,000 105,051 (8)
President of 1997 300,000 350,000 * - 0 - - 0 - 28,300 (9)
Terex Lifting 1996 227,083 506,205 (5) * 500,000 (7) - 0 - 4,500 (4)
Eric I Cohen 1998 210,000 145,000 * 232,188 (11) 20,000 201,251 (12)
Senior Vice President, 1997 - 0 - - 0 - * - 0 - - 0 - - 0 -
Secretary and General 1996 - 0 - - 0 - * - 0 - - 0 - - 0 -
Counsel (10)
Brian J. Henry 1998 184,999 165,000 * 247,750 (13) 24,000 - 0 -
Vice President-Finance 1997 166,667 135,000 * - 0 - 5,000 3,360 (4)
and Business Development 1996 165,000 75,000 * 60,000 (14) - 0 - 4,500 (4)
Joseph F. Apuzzo 1998 175,999 150,000 * 282,750 (15) 24,000 6,675 (17)
Vice President-Corporate 1997 160,000 132,000 * - 0 - 5,000 63,635 (18)
Finance 1996 145,833 75,000 * 60,000 (16) 5,000 4,375 (4)
</TABLE>
- ----------------------
* The Named Executive Officers did not receive perquisites and other
personal benefits, securities or property equal to or in excess of
$50,000 or 10 percent of the total annual salary and bonus reported for
the Named Executive Officers.
(1) As part of Mr. DeFeo's 1996 long-term incentive compensation, on March 31,
1997, Mr. DeFeo was granted 100,000 shares of Restricted Stock (as defined
in the "Compensation Committee Report" below) under the Terex Corporation
Long Term Incentive Plan (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 the
grant. The value of Mr. DeFeo's Restricted Stock as of December 31, 1998,
based on a closing stock price on the NYSE of
(footnotes continued on following page)
9
<PAGE>
(footnotes continued from preceding page)
Common Stock of $28.5625 per share, is $2,856,250. 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. As of March 1, 1999, all of the 100,000 shares
of Restricted Stock have vested.
(2) The amount listed above for Mr. DeFeo constitutes $4,800 of the Company's
matching contribution to a defined contribution plan account and $8,825 of
the Company's contribution to an employee stock purchase plan.
(3) The amount listed above for Mr. DeFeo constitutes $4,800 of the Company's
matching contribution to a defined contribution plan account and $3,225 of
the Company's contribution to an employee stock purchase plan.
(4) Company's matching contribution to defined contribution plan account.
(5) Pursuant to the terms of Mr. Filipov's then compensation arrangements with
the Company, Mr. Filipov's annual bonus was equal to a percentage of net
income (after certain adjustments) of the Company division or subsidiary
for which he had 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 PPM S.A. and PPM Crane, Inc. subsidiaries.
(6) As part of Mr. Filipov's 1998 long-term incentive compensation, on October
8, 1998, Mr. Filipov was granted 10,000 shares of Restricted Stock under
the Company's 1996 Plan. The value of the Restricted Stock granted to Mr.
Filipov set forth in the table above for 1998 is based on the closing stock
price on the NYSE of Common Stock of $14.00 per share as of October 8,
1998, the date of the grant. The value of such Restricted Stock as of
December 31, 1998, based on a closing stock price on the NYSE of Common
Stock of $28.5625 per share, is $285,625. The shares of stock awarded to
Mr. Filipov for 1998 become vested to the extent of one-fourth of the
shares covered thereby on each of the first four anniversaries of October
8, 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 paid to all stockholders.
(7) 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, 1998, based
on a closing stock price on the NYSE of Common Stock of $28.5625 per share,
is $1,428,125. The shares of Restricted Stock awarded to Mr. Filipov for
1996 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 each of January
2, 1998 and 1999; 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.
(footnotes continued on following page)
10
<PAGE>
(footnotes continued from preceding page)
(8) The amount listed above for Mr. Filipov constitutes $100,000 reimbursements
and payments relating to prior years, $4,800 of the Company's matching
contribution to a defined contribution plan account and $251 of the
Company's contribution to an employee stock purchase plan.
(9) Includes $23,500 paid by PPM S.A., a wholly owned subsidiary of the Company
on behalf of Mr. Filipov under his PPM S.A. pension fund and $4,800
constituting the Company's matching contribution to defined contribution
plan account. The amounts paid by PPM S.A. listed above as "All Other
Compensation" paid to Mr. Filipov were computed by using the exchange rate
of 5.95 to convert the French francs paid into US dollars.
(10) Mr. Cohen commenced employment with the Company on January 1, 1998.
(11) As part of Mr. Cohen's 1998 long-term incentive compensation, on January 1,
1998, Mr. Cohen was granted 7,500 shares of Restricted Stock, and on
October 8, 1998 was granted 5,000 shares of Restricted Stock under the
Company's 1996 Plan. The value of the Restricted Stock granted on January
1, 1998 is based on the closing stock price on the NYSE of the Common Stock
of $21.625 as of January 2, 1998. The value of the Restricted Stock granted
on October 8, 1998 is based on the closing stock price on the NYSE of the
Common Stock of $14.00 per share as of October 8, 1998, the date of the
grant. The value of such Restricted Stock as of December 31, 1998, based on
a closing stock price on the NYSE of Common Stock of $28.5625 per share is
$357,031.25. The shares of Restricted Stock awarded to Mr. Cohen for 1998
become vested to the extent of one-fourth of the shares covered thereby on
each of the first four anniversaries of January 1, 1998 and October 8,
1998, respectively. Accordingly, 1,875 of the shares awarded became vested
on January 1, 1999; however, upon the earliest to occur of a change in
control of the Company or the death or disability of Mr. Cohen, 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.
(12) The amount listed above for Mr. Cohen constitutes $195,101 paid to Mr.
Cohen in connection with his relocation to Westport, Connecticut, pursuant
to the Company's executive relocation program, $4,800 of the Company's
matching contribution to a defined contribution plan account and $1,620 of
the Company's contribution to an employee stock purchase plan.
(13) As part of Mr. Henry's long-term incentive compensation, on May 8, 1998,
Mr. Henry was granted 6,000 shares of Restricted Stock, and on October 8,
1998 was granted 5,000 shares of Restricted Stock under the Company's 1996
Plan. The value of the Restricted Stock granted to Mr. Henry set forth in
the table above for 1998, is based on the closing stock price on the NYSE
of the Common Stock of $29.625 and $14.00 per share on May 8, 1998 and
October 8, 1998, respectively. The value of such Restricted Stock as of
December 31, 1998, based on a closing stock price on the NYSE of Common
Stock of $28.5625 per share is $314,187.50. The shares of Restricted Stock
awarded to Mr. Henry for 1998 become vested to the extent of one-fourth of
the shares covered thereby on each of the first four anniversaries of May
8, 1998 and October 8, 1998, respectively. However, upon the earliest to
occur of a change in control of the Company or the death or disability of
Mr. Henry, 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.
(footnotes continued on following page)
11
<PAGE>
(footnotes continued from preceding page)
(14) As part of Mr. Henry's long-term incentive compensation, on February 27,
1997, Mr. Henry was granted 5,000 shares of Restricted Stock under the
Company's 1994 Plan. The value of the Restricted Stock granted to Mr. Henry
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 the grant. The value of the Restricted Stock as of December 31,
1998, based on the closing stock price on the NYSE of Common Stock of
$28.5625 per share, is $142,812.50. The shares of Restricted Stock awarded
to Mr. Henry 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, 1,250 shares became vested on each of February
27, 1998 and 1999; however, upon the earliest to occur of a change in
control of the Company or the death or disability of Mr. Henry, 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.
(15) As part of Mr. Apuzzo's long-term incentive compensation, on May 8, 1998,
Mr. Apuzzo was granted 6,000 shares of Restricted Stock, and on October 8,
1998 was granted 7,500 shares of Restricted Stock under the Company's 1996
Plan. The value of the Restricted Stock granted to Mr. Apuzzo set forth in
the table above for 1998, is based on the closing stock price on the NYSE
of the Common Stock of $29.625 and $14.00 per share on May 8, 1998 and
October 8, 1998, respectively. The value of such Restricted Stock as of
December 31, 1998, based on a closing stock price on the NYSE of Common
Stock of $28.5625 per share is $385,593.75. The shares of Restricted Stock
awarded to Mr. Apuzzo for 1998 become vested to the extent of one-fourth of
the shares covered thereby on each of the first four anniversaries of May
8, 1998 and October 8, 1998, respectively. However, upon the earliest to
occur of a change in control of the Company or the death or disability of
Mr. Apuzzo, 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.
(16) As part of Mr. Apuzzo's long-term incentive compensation, on February 27,
1997, Mr. Apuzzo was granted 5,000 shares of Restricted Stock under the
Terex Corporation 1994 Long Term Incentive Plan (the "1994 Plan"). The
value of the Restricted Stock granted to Mr. Apuzzo set forth in the table
above for 1997 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 the grant.
The value of the Restricted Stock as of December 31, 1998, based on the
closing stock price on the NYSE of Common Stock of $28.5625 per share, is
$142,812.50. The shares of Restricted Stock awarded to Mr. Apuzzo for 1997
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, 1,250 shares became vested on each of February 27, 1998 and
1999; however, upon the earliest to occur of a change in control of the
Company or the death of disability of Mr. Apuzzo, 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.
(17) The amount listed above for Mr. Apuzzo constitutes $4,800 of the Company's
matching contribution to a defined contribution plan account and $1,875 of
the Company's contribution to an employee stock purchase plan.
(18) Represents $58,555 paid to Mr. Apuzzo in connection with his residence
relocation pursuant to the Company's executive relocation program, $4,800
relating to the Company's matching contribution to a defined contribution
plan account and $280 of the Company's contribution to an employee stock
purchase plan.
12
<PAGE>
Stock Option Grants in 1998
The following table sets forth information on grants of stock options
under the Company's 1988 Incentive Stock Option plan covering key management
employees (the "1988 Plan"), as well as under the Company's 1994 Plan and the
Company's 1996 Plan during 1998 to the Named Executive Officers. The number of
stock options and SARs granted to the Named Executive Officers during 1998 is
also listed in the Summary Compensation Table in the column entitled "Securities
Underlying Options/SARs." The exercise price of the options equaled or exceeded
the fair market price of the Common Stock at the time of the grant. Options
granted under the 1988 Plan vest ratably over three years from the date of
grant. Options granted under the 1994 Plan and under the 1996 Plan vest ratably
over four years from the date of grant, unless otherwise indicated.
Stock Option/SAR Grants in 1998
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------------------------
Number of
Securities % of Total Potential Realizable Value
Underlying Options Granted Exercise or at Assumed Annual Rates of
Options to Employees in Base Price Expiration Stock Price Appreciation
Name Granted(#)(1) Fiscal Year ($/Sh) Date for Option Term
-------------- ---------------- ------------- ----------- -------------------------
5%($) 10%($)
--------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 25,000 5.5% $22.750 3/4/03 $ 157,135 347,228
Filip Filipov 25,000 11.1% $29.625 5/7/03 204,621 452,159
25,000 $14.000 10/8/08 220,113 557,810
Eric I Cohen 5,000 4.4% $21.625 1/1/08 67,999 172,323
15,000 $14.000 10/8/08 132,068 334,686
Brian J. Henry 9,000 5.3% $29.625 5/7/08 167,679 424,932
15,000 $14.000 10/8/08 132,068 334,686
Joseph F. Apuzzo 9,000 5.3% $29.625 5/7/08 167,679 424,932
15,000 $14.000 10/8/08 132,068 334,686
</TABLE>
- ------------------
(1) The options listed above were granted under the 1996 Plan and vest by
25% on the anniversary date of the grant over a four-year period.
However, the options granted to Mr. DeFeo on March 4, 1998 at $22.75
per share, and the options granted to Mr. Filipov on May 7, 1998 at
$29.625 per share, are a combination of time and performance-based
vesting and have a five year term from the date of grant.
13
<PAGE>
Aggregated Option Exercises in 1998 and Year-End Option Values
The table below summarizes options exercised during 1998 and year-end
option values of the Named Executive Officers listed in the Summary Compensation
Table.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1998 and Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End (#) at Year-End ($)(1)
Shares Value Realized
Name Acquired on
Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
----- ------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ronald M. DeFeo - 0 - - 0 - 57,331/73,677 $1,155,797/$720,959
Filip Filipov - 0 - - 0 - 45,000/60,000 $1,016,200/$591,250
Eric I Cohen - 0 - - 0 - 0/20,000 $0/$253,125
Brian J. Henry 9,500 182,671 1,250/27,750 $20,703/$280,546
Joesph F. Apuzzo - 0 - - 0 - 7,500/31,500 $164,531/$364,843
- -----------------------
</TABLE>
(1) Based on the closing price of the Company's Common Stock on the NYSE on
December 31, 1998 of $28.5625.
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, Terex
Equipment Limited ("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
for Mr. Filipov (assuming full vesting).
14
<PAGE>
Mr. Filipov also participates in the PPM 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, nonemployee directors receive an annual retainer, as described below.
All directors of the Company are reimbursed for travel, lodging and related
expenses incurred in attending Board and committee meetings.
The compensation program for outside directors is designed 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 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). 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 reduced the
grant-date price of the Common Stock at 25% of fair market value. Options vest
immediately upon grant and have a five-year term.
In addition, 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 Company's director compensation 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
15
<PAGE>
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.
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 Filip 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 at the discretion of management. The
term of the contract expires on December 31, 1999.
The Company has agreed with Ernest Verebelyi that in the event of a
termination of his employment after a change in ownership of the Company, the
Company will provide for a continuance of his base salary for a period of 18
months, and in the event of a termination of his employment without cause, the
Company will provide for a continuance of his base salary for a period of 12
months.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board, recommending compensation for
executive officers, including the Named Executive Officers, during 1998
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.
16
<PAGE>
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, other than the Chief
Executive Officer (the "CEO"), 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 each year. The bonus opportunity is up to 50% (or, for
extraordinary performance, more than 50%) of salary if Company and individual
goals are attained. The Committee believes that bonuses paid to these
individuals, whose compensation is reported in the Summary Compensation Table,
reflect the level of achievement of Company goals and individual performance
goals during 1998.
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. Upon approval of the proposed LTIP, which is
being submitted to stockholders for approval at this meeting, the Company will
have available a long-term compensation vehicle linking rewards to the
achievement of objective performance goals.
CEO Compensation
The compensation of the 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. In order to determine an appropriate overall
level of compensation for Mr. DeFeo for 1998, the Committee retained an outside
consultant and also considered information relating to comparable companies.
In appraising the CEO's performance during 1998, the Committee noted that
the Company's net sales for the year increased by 46%, operating profit
increased by 71% 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 the refinancing of the Company's former
bank credit facility and 13-1/4% Senior Secured Notes to provide greater
liquidity, financial flexibility and estimated interest savings of approximately
$25 million per year. During 1998, the Company also completed eight
acquisitions, including O&K Mining GmbH. Near-term cost savings through
consolidation of facilities as well as long-term opportunities for growth were
achieved for each of these acquisitions. Also, during 1998 the Company secured
the Coal India truck order and attracted several new key members of senior
management.
17
<PAGE>
Under the 1998 annual incentive plan, which was approved by stockholders in
1998, Mr. DeFeo earned a formula bonus for 1998, based on his achievement of
predetermined performance goals, reflecting quantitative business criteria,
equal in amount to 100% of his salary for 1998, or $481,250. The Committee also
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 an
additional discretionary bonus of $437,500 to reflect his special achievements
for 1998, including, among other things, completion of eight acquisitions
(including O&K Mining GmbH), refinancing of the Company's high-cost debt and
obtaining the Coal India order, a major truck sale. In further recognition of
Mr. DeFeo's performance, the Committee granted him an option for the purchase of
25,000 shares of Common Stock having a five-year term and vesting on the earlier
of (i) four and one-half years from the date of issuance or (ii) the date on
which the average trading price of the Common Stock on the NYSE for 15
consecutive days equals or exceeds $40 per share.
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.
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 any year, the Company's 1998 annual
incentive compensation plan was submitted to and approved by stockholders at the
Company's 1998 meeting, so that amounts earned thereunder by certain employees
will qualify as performance-based. For the same reason, the proposed LTIP is
being submitted to stockholders for approval at this meeting.
COMPENSATION COMMITTEE
G. CHRIS ANDERSEN
WILLIAM H. FIKE
DAVID A. SACHS
18
<PAGE>
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, 1993
through December 31, 1998. 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, tower 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.
Comparison of Five-Year Cumulative Total Return *
Terex Corporation, Standard & Poors 500 And Peer Group
(Performance Results Through 12/31/98)
[Graph depicting following information: The vertical axis of the graph is scaled
from $0 at the origin extending upwards to $450, marked in increments of $50.
The horizontal axis begins with the year 1993 at the origin extending to the
right through the year 1998, marked in one year increments. The value of an
assumed initial investment of $100.00 in 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 1993 1994 1995 1996 1997 1998
Terex Corporation 100.00 101.82 69.09 147.27 341.82 415.46
Standard & Poors 500 100.00 101.60 139.71 172.18 229.65 294.87
Peer Group 100.00 105.85 133.66 170.32 226.69 192.31
Source: Value Line, Inc.
19
<PAGE>
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, 1999, he beneficially owned, directly or indirectly,
approximately 9.9% 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 the
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.
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 received a consulting fee equal to his
base salary in 1997 of $250,000 for services provided in 1998 and will receive a
consulting fee of $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.
The Company, a director and certain former 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 1998,
the Company incurred $301,000 of legal fees and expenses on behalf of the
Company, Randolph W. Lenz, David J. Langevin and Marvin B. Rosenberg.
On March 6, 1998, the Company entered in a $500 million bank credit
facility (the "bank credit facility") 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 Company's bank credit facility for
the amount of $15 million. Ares also received a fee of $18,750 for participating
as a lender under the Company's bank credit facility. Participation by Ares as a
lender under the Company's bank credit facility was made in the ordinary course
of Ares' business and on the same terms as all other lenders under the Company's
bank credit facility. In addition, Ares purchased $10,000,000 principal amount
of the Company's 8-7/8% Series C Senior Subordinated Notes issued on March 6,
1999. The purchase by Ares of the 8-7/8% Series C Senior Subordinated Notes was
made in the ordinary course of Ares' business and on the same terms as all other
purchasers of such Notes.
Canadian Imperial Bank of Commerce, an affiliate of CIBC Oppenheimer Corp.
of which Bruce I. Raben, a director of the Company, is a managing director, is a
lender with a commitment of up to $49.4 million and a Co-Documentation Agent.
Canadian Imperial Bank of Commerce received a fee of $675,000 for acting a
Co-Documentation Agent under the Company's bank credit facility. Participation
by Canadian Imperial Bank of Commerce as a lender under the Company's bank
credit facility was made in the ordinary course of its business and on the same
terms as all other lenders under the Company's bank credit facility. In
addition, CIBC Oppenheimer Corp. was retained by the Company in connection with
the offering of the Company's (i) $150 million 8-7/8% Senior Subordinated Notes
on March 31, 1998, for which CIBC was paid a fee of $500,000 and (ii) $100
million 8-7/8% Series C Senior Subordinated Notes on March 9, 1999, for which
CIBC was paid a fee of $375,000.
20
<PAGE>
On January 1, 1998, Eric I Cohen joined the Company as Senior Vice
President, General Counsel and Secretary. Pursuant to the Company's executive
relocation plan, on July 1, 1998, the Company made a non-interest bearing bridge
loan to Mr. Cohen in the amount of $414,000 to enable him to purchase a new home
pending the sale of his previous residence. Mr. Cohen repaid the bridge loan in
full on August 24, 1998.
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Secutrities Exchange Act of 1934 ("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 Securities and Exchange Commission ("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 1998. 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, 1998, except that
the Company has been advised that Mr. Raben filed a transaction required to be
filed on Form 4 for December 1998 on his Form 5 filed on February 9, 1999, and
Mr. Hooper filed transactions required to be filed on Form 4 for August 1998 and
September 1998 on his Form 5 filed on February 8, 1999.
PROPOSAL 2: INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has audited the consolidated
financial statements of the Company for 1998. The Board of Directors desires to
continue the service of this firm for 1999. Accordingly, the Board of Directors
recommends to the stockholders ratification of the retention of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending December 31, 1999. If the stockholders do not approve
PricewaterhouseCoopers LLP as the Company's independent accountants, the Board
of Directors will reconsider its selection.
Representatives of PricewaterhouseCoopers 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 PricewaterhouseCoopers LLP as independent accountants for 1999.
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PROPOSAL 3: APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN
The Board of Directors submits to stockholders for approval the Terex
Corporation 1999 Long-Term Incentive Plan (the "LTIP"). The Board of Directors
believes that it is in the best interest of the Company and the stockholders to
adopt a plan that provides incentive compensation for key executives responsible
for the success of the Company and that can help to attract talented new
executives. Compensation payable under the LTIP is based on long-term corporate
performance and is tied to an increase in stockholder value.
The Company is seeking stockholder approval of the LTIP in order to comply
with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") in order for compensation paid under the LTIP to be
deductible by the Company irrespective of the $1 million limit imposed by that
Section. The LTIP is designed so that all compensation payable thereunder will
be fully deductible by the Company.
Stockholders are requested in this Proposal 3 to approve the LTIP to be
effective January 1, 1999. If the stockholders fail to approve this Proposal 3,
awards under the LTIP made after the Meeting will not qualify as
performance-based compensation and, in some circumstances, the Company may be
denied a business expense deduction for compensation paid under the LTIP. The
affirmative vote of the holders of a majority of the shares present in person or
represented by proxy and voting at the meeting will be required to approve the
LTIP.
The following summary of the material features of the LTIP is qualified in
its entirety by the terms of the LTIP as filed with the SEC.
Plan Administration
The LTIP will be administered by the Compensation Committee (the
"Committee"), which has full power and authority to determine which key
employees of the Company will receive awards under the LTIP, to interpret and
construe the terms of the LTIP and to make all determinations it deems necessary
in the administration of the LTIP, including any determination with respect to
the establishment and achievement of long-term performance goals.
Eligibility
Participation in the LTIP will be limited to key employees of the Company
designated by the Committee. Currently, it is intended that there will be
approximately ten key employees who will participate in the LTIP, including the
executive officers named in the Executive Officers section.
Award of Units
The LTIP provides for the award of participation units ("Units") to key
employees as determined by the Committee. Units may be awarded as of the first
day of any calendar year through 2008. Generally, Units vest and become
exercisable after a term of five years from the date of their award. A maximum
of 2,000,000 Units may be awarded under the LTIP, and no more than 800,000 Units
may be awarded to any one participant.
Vesting of Units
Each Unit will fully vest after five years from the date of award in
accordance with a schedule determined by the Committee at the time of award,
except that, if earlier, a Unit will become fully vested upon attainment of the
Unit's Maximum Cumulative Unit Value (as defined below) or upon termination of a
participant's employment with the Company (a) by the Company without Cause after
a Change in Control (both as defined in the LTIP), or (b) by reason of death or
disability.
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Value of Units
The value of an outstanding Unit (the "Incremental Unit Value") at any time
depends on the extent of increase in the Company's Earnings Per Share (as
defined below) from year to year. For purposes of the LTIP, Earnings Per Share
for any year is the Company's Earnings (as defined in the LTIP) divided by the
number of shares of common stock used to determine the Company's earnings per
share for that year, as reported in the Company's audited consolidated financial
statements for the year; provided, however, that for 1999, Earnings Per Share
will be based on Earnings for the period April 1, 1999 through December 31,1999
on an annualized basis.
The Incremental Unit Value for any year is equal to the product of (i) the
Unit's Measuring Price (as defined below) and (ii) 85 percent of the percentage
by which Earnings Per Share for the year exceeds Base Year EPS (as defined in
the LTIP). The Measuring Price for each Unit awarded is the closing price of the
common stock as reported on the New York Stock Exchange on the last day of the
year preceding award of the Unit. The Measuring Price for Units granted during
1999 is $28.56. For Units awarded thereafter, Base Year EPS will be equal to
Earnings Per Share for the immediately preceding year.
A Unit's Incremental Unit Value for each of the five years from the date of
award is cumulated to obtain the Unit's cumulative value ("Cumulative Unit
Value"), which is capped at an amount determined by the Committee when the Unit
is awarded (the "Maximum Cumulative Unit Value").
Payment of Units
A Unit that becomes vested shall thereupon be exercised. Upon exercise, a
participant will receive the Unit's Cumulative Unit Value (but not more than the
Maximum Cumulative Unit Value). Except upon a Change in Control, when payment
must be made entirely in cash, not less than 40 percent of the amount due will
be paid in cash, and the balance will be paid in cash or in shares of common
stock or both, as determined by the Committee in its discretion.
Amount Payable upon Change in Control
In respect of a Unit that becomes vested by reason of termination of a
participant's employment without Cause within one year following a Change in
Control, the amount payable will be the Unit's Maximum Cumulative Unit Value.
Termination of Units
A Unit will expire upon the earlier of (a) its exercise or (b) termination
of the participant's employment with the Company; provided, however, that upon
termination (i) by the Company without Cause, (ii) by reason of death or
disability or (iii) for any other reason specifically approved in advance by the
Committee, the term of the Unit will be extended for a period of 14 months from
the date of termination.
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Amendment and Termination of LTIP
The Committee may amend or terminate the LTIP 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 Section 162(m) of the Code or is otherwise required by law.
The Board of Directors recommends that the stockholders vote FOR approval of the
Terex Corporation 1999 Long-Term Incentive 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 2000 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, 1999. All proposals must meet the requirements
set forth in the rules and regulations of the SEC in order to be eligible for
inclusion in the proxy statement for that meeting.
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.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, 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 be addressed to the Company's Secretary.
STOCKHOLDERS ARE URGED TO VOTE THEIR PROXIES WITHOUT DELAY. A PROMPT RESPONSE
WILL BE GREATLY APPRECIATED.
By Order of the Board of Directors
Eric I Cohen
Secretary
April 1, 1999
Westport, Connecticut
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TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at www.voteproxy.com and follow the on-screen
instructions. Have your control number available when you access the web page.
-----------------------
YOUR CONTROL NUMBER IS ---------> | |
-----------------------
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THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TEREX CORPORATION
The undersigned hereby appoint Ronald M. DeFeo and Eric I Cohen, and either
one of them, proxies with power of substitution to act, by unanimous vote, or if
only one votes or acts then by that one to vote for the undersigned at the
Annual Stockholders' Meeting of Terex Corporation, to be held at 10:00 A.M.,
local time, the Hyatt Regency Greenwich, 1800 Putnam Avenue, Greenwich,
Connecticut, and any adjournment thereof, as follows:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE DIRECTORS NOMINATED IN ITEM 1, FOR THE RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS IN ITEM 2, FOR APPROVAL OF THE TEREX CORPORATION 1999
LONG-TERM INCENTIVE PLAN IN ITEM 3 AND IN THE DISCRETION OF THE BOARD OF
DIRECTORS IN CONNECTION WITH ITEM 4. PLEASE MARK BOX OR X .
1. ELECTION OF DIRECTORS: Ronald M. DeFeo, G. Chris Andersen, William H. Fike,
Dr. Donald P. Jacobs, Don DeFosset, Marvin B. Rosenberg, David A. Sachs
FOR all WITHHOLD (INSTRUCTION: To withhold authority to vote
nominees AUTHORITY for an individual nominee, write that
listed to vote for all nominee's name on the space provided below.)
above nominees listed above
[ ] [ ] ___________________________________
2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF THE TEREX CORPORATION 1999 LONG-TERM INCENTIVE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date, sign and mail this
card in the enclosed envelope.
4. Upon such other business as may properly come before the
meeting or any adjournments, hereby revoking any proxy
heretofore given.
-----------------------------------------
(Stockholder's Signature)
-----------------------------------------
(Stockholder's Signature)
Dated ______________________________, 1999
Please sign exactly as name
appears above. When signing
as attorney, executor,
administrator, trustee,
etc., use full title. If
stock is held jointly, each
owner must sign.
1999 ANNUAL MEETING
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY.
2
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APPENDIX
April 1, 1999
TEREX CORPORATION
1999 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of the 1999 Long-Term Incentive Plan (the "Plan") is to promote the
interests of Terex Corporation (the "Company") and its stockholders by (i)
helping the Company to attract and retain outstanding management, (ii)
stimulating management's efforts on behalf of the Company by giving participants
a direct interest in the performance of the Company and (iii) suitably rewarding
participants' contributions to the success of the Company.
The Company intends that certain performance-based compensation payable under
the Plan will qualify for deduction under Section 162(m) of the Internal Revenue
Code of 1986, as amended, and expects that all compensation paid under the Plan
will be fully deductible.
ARTICLE II
DEFINITIONS
2.1 Award Certificate: A written instrument evidencing the award of Units
to a Participant.
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2.2 Base Year EPS: Earnings Per Share for the Year immediately preceding
the date of an award of Units.
2.3 Beneficiary: The person or persons designated by a Participant, in
accordance with Section 9.1, to receive any amount payable under the Plan upon
the Participant's death.
2.4 Board: The Board of Directors of the Company.
2.5 Change in Control: "Change In Control," as defined in the Participant's
employment agreement with the Company, or, absent an agreement defining Change
in Control, (i) consummation of an acquisition by any person (as such term is
defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) of 40 percent or more of the combined voting power of the Company's
then outstanding securities; (ii) a change in the composition of the Board
occurring within a rolling two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors ("Incumbent Directors" shall
mean directors who either (x) are members of the Board as of the Effective Date
or (y) are elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such
election or nomination, but shall not include an individual not otherwise an
Incumbent Director whose election or nomination is in connection with an actual
or threatened proxy contest relating to the election of directors to the Board;
(iii) consummation of a complete liquidation or dissolution of the Company or a
merger, consolidation or sale of all or substantially all of the Company's
assets (collectively, a "Business Combination") other than a Business
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Combination (x) in which the stockholders of the Company receive more than 80
percent of the combined voting power of the voting securities of the company
resulting from the Business Combination, (y) at least a majority of the board of
directors of the resulting corporation were Incumbent Directors and (z) after
which no individual, entity or group (excluding any corporation resulting from
the Business Combination or any employee benefit plan of such corporation or of
the Company) owns 20 percent or more of the combined voting power of the
securities of the resulting corporation, who did not own such securities
immediately before the Business Combination.
2.6 Code: The Internal Revenue Code of 1986, as amended from time to time.
2.7 Committee: The Compensation Committee of the Board, which is comprised
solely of two or more "outside directors" within the meaning of Section 162(m)
of the Code.
2.8 Common Shares: Shares of common stock ($.01 par value) of the Company.
2.9 Company: Terex Corporation and consolidated subsidiaries, a Delaware
corporation, or any successor thereto.
2.10 Cumulative Unit Value: The amount determined in accordance with
Section 7.2.
2.11 Disability: Disability, as defined in a Participant's employment
agreement with the Company, or, absent an agreement, in the Company's group
disability insurance contract.
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2.12 Earnings: For any Year, the consolidated income of the Company
prepared in accordance with generally accepted accounting principles, as
reported in the Company's audited consolidated financial statements for that
Year, adjusted on an after-tax basis (a) to exclude (i) in its entirety any item
of nonrecurring gain or loss in excess of $2,000,000, including writedowns of
items included in operating income, (ii) all extraordinary gains and losses and
(iii) any accruals for this Plan and (b) to add back write-offs required in
connection with any acquisition in the Year of such acquisition; provided,
however, that, for any Year, earnings will be adjusted to include a charge for
income taxes at the estimated effective tax rate without regard to the
availability of any net operating loss carryforward.
2.13 Earnings Per Share: For any Year, Earnings divided by the number of
Common Shares used to determine the Company's diluted earnings per share for
that Year, as reported in the Company's audited consolidated financial
statements for the Year; provided, however, that for the Year ending December
31,1999, Earnings per Share shall be based on Earnings for the period April 1,
1999 through December 31, 1999 on an annualized basis (i.e., multiplied by
133%).
2.14 Effective Date: The effective date of the Plan, which is January 1,
1999.
2.15 Incremental Unit Value: The amount determined in accordance with
Section 7.1.
2.16 Maximum Cumulative Unit Value: For all Units awarded as of the
beginning of any Year, the amount determined by the Committee for those Units
when they are awarded.
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2.17 Measuring Price: For each Unit awarded, the closing price of a Common
Share as reported on the New York Stock Exchange on the last day of the Year
preceding the date as of which the Unit is awarded.
2.18 Participant: A key employee of the Company designated by the Committee
to participate in the Plan.
2.19 Plan: Terex Corporation Long-Term Incentive Plan, as herein set forth
and as it may be amended from time to time.
2.20 Term of the Plan: The period commencing on the Effective Date and
ending five years after the final award of Units (but in no event later than
December 31, 2013), in accordance with Section 5.1, or on such earlier date as
the Maximum Cumulative Unit Value of such Units may be achieved.
2.21 Termination Without Cause: Termination of a Participant's employment
by the Company without "Cause," as defined in the Participant's employment
agreement with the Company, or, absent an agreement defining Cause, termination
of the Participant's employment by the Company for any reason other than (i)
continuing and material failure to fulfill his or her employment obligations or
willful misconduct or gross neglect in the performance of such duties, (ii)
commission of fraud, misappropriation or embezzlement in the performance of such
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duties or (iii) conviction of a felony, which, as determined in good faith by
the Board, constitutes a crime that may result in material harm to the Company.
2.22 Unit: A unit of participation in the Plan awarded to a Participant in
accordance with Article V.
2.23 Valuation Date: The last day of any Year.
2.24 Year: The calendar year, which is the fiscal year of the Company.
ARTICLE III
ADMINISTRATION
3.1 The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum. Committee decisions and determinations
shall be made by a majority of its members present at a meeting at which a
quorum is present, and they shall be final. The actions of the Committee with
respect to the Plan shall be binding on all affected Participants. Any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a vote at a meeting
duly called and held. The Committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.
3.2 The Committee shall have full authority, subject to the provisions of
the Plan (i) to select Participants and determine the extent and terms of their
participation; (ii) to adopt, amend and rescind such rules and regulations as,
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in its opinion, may be advisable in the administration of the Plan, (iii) to
construe and interpret the Plan, the rules and regulations adopted thereunder
and any notice or Award Certificate given to a Participant; and (iv) to make all
other determinations that it deems necessary or advisable in the administration
of the Plan.
3.3 The Committee may employ attorneys, consultants, accountants or other
persons as it deems necessary for the proper administration of the Plan and may
rely on the advice, opinions or valuations of any such persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation taken or made in good faith by the Committee with respect to the
Plan or any award hereunder, and all members of the Committee shall be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
3.4 In the event of any stock split, stock dividend, reclassification,
recapitalization or other change that affects the character or amount of
outstanding Common Shares and Earnings Per Share, the Committee shall make such
adjustments in the number of Units (whether authorized or outstanding and
unexercised), the Measuring Price or both as shall, in the sole judgment of the
Committee, be equitable and appropriate in order to make the value of such
Units, as nearly as may be practicable, equivalent to the value of Units
outstanding and unexercised immediately prior to such change. In no event,
however, shall any such adjustment give any Participant any additional benefits.
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3.5 The Committee shall be precluded from increasing compensation payable
under the Plan to a Participant, including acceleration of payment and increase
of any amount payable, unless specifically provided for by the Plan.
ARTICLE IV
PARTICIPATION
4.1 Only key employees of the Company who, in the Committee's judgment,
will have a significant impact on the success of the business shall be eligible
to participate in the Plan. The Committee, in its sole discretion, shall select
the Participants.
4.2 In selecting Participants and in determining the number of Units to be
awarded to each Participant for any Year, the Committee shall take into account
such factors as the individual's position, experience, knowledge,
responsibilities, advancement potential and past and anticipated contributions
to Company performance.
ARTICLE V
AWARD OF UNITS
5.1 Subject to adjustment as provided in Section 3.4, a maximum of
2,000,000 Units may be awarded under the Plan. A Participant who has been
awarded Units may be awarded additional Units in any subsequent Year, and new
Participants may be awarded Units, both in the discretion of the Committee;
provided, however, that no Units shall be awarded after 2008.
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5.2 Units shall be awarded solely by the Committee and shall be evidenced
by an Award Certificate, as provided in Article X.
5.3 Subject to adjustment as provided in Section 3.4, the maximum number of
Units awarded to any one individual shall not exceed 800,000 during the Term of
the Plan.
ARTICLE VI
TERM AND VESTING OF UNITS
6.1 Each Unit shall have a term of five years from the date of award,
subject to earlier termination (i) as provided in Article XI or (ii) upon
attainment before five years of the Unit's Maximum Cumulative Unit Value.
Notwithstanding the foregoing, the term of Units awarded as of the Effective
Date shall terminate on December 31, 2003, subject to earlier termination as
aforesaid. Units shall be deemed to be awarded as of the Effective Date or the
first day of any subsequent Year through 2008, as the case may be.
6.2 Each Unit shall become fully vested on the fifth Valuation Date
following the date of its award in accordance with a vesting schedule determined
by the Committee at the time of award; provided, however, that no portion of any
Unit shall vest prior to the third Valuation Date following the Unit's award.
Notwithstanding the foregoing, a Unit shall become fully vested, if earlier than
the fifth Valuation Date following its award, upon (i) attainment of its Maximum
Cumulative Unit Value, (ii) a Participant's Termination Without Cause before a
Change in Control, (iii) a Participant's Termination Without Cause within one
year following a Change in Control or (iv) termination of a Participant's
employment with the Company by reason of death or Disability.
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ARTICLE VII
DETERMINATION OF VALUE OF A UNIT
7.1 For any Year, the Incremental Unit Value of a Unit shall be equal to
the product of the Measuring Price multiplied by .85 of the percentage by which
Earnings Per Share for the Year exceeds Base Year EPS. Notwithstanding the
foregoing, in the event that for any Year (i) Base Year EPS exceeds Earnings Per
Share or (ii) Earnings Per Share is less than 105 percent of Earnings Per Share
for the immediately preceding Year, the Incremental Unit Value for the Year
shall be zero. The Committee shall notify each Participant of the Incremental
Unit Value of his or her Units for each Year as soon as practicable after the
Valuation Date for the Year.
7.2 The Incremental Unit Value of each Unit for any Year shall be cumulated
with the Incremental Unit Value of the Unit for all prior Years from the date of
the Unit's award. The cumulative amount thus determined shall be the then
Cumulative Unit Value of such Unit.
ARTICLE VIII
EXERCISE AND PAYMENT OF UNITS
8.1 A Unit may be exercised, to the extent that it is vested in accordance
with Section 6.2 above, at any time prior to becoming fully vested; provided,
however, that a partially vested Unit that is exercised shall be cancelled and
its nonvested portion forfeited. Except as provided in Article XI below, a Unit
that is fully vested in accordance with Section 6.2 above, shall thereupon be
exercised.
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8.2 In order to exercise a partially or fully vested outstanding Unit, a
Participant (i) shall give written notice of exercise to the Secretary of the
Company, specifying the number of Units being exercised, and (ii) shall deliver
his or her Award Certificate to the Secretary of the Company, who shall endorse
thereon a notation of such exercise and return the same to the Participant. The
date of exercise of a Unit shall be the date on which the Company receives the
required documentation. Upon exercise, the Participant shall be entitled to
receive the Cumulative Unit Value of the vested portion of the Units being
exercised, determined as of the concurrent or immediately preceding Valuation
Date, but not in excess of the Maximum Cumulative Unit Value.
8.3 Payment of the amount due under the Plan shall be made not later than
five days following the date of exercise of any Unit or the date of such other
event as shall entitle the Participant to payment; provided, however, that,
before any payment may be made, the Committee must certify in writing that all
performance criteria under the Plan have been met. Except upon Termination
Without Cause within one year following a Change in Control, when payment shall
be made solely in a cash lump sum, not less than 40 percent of any amount due
shall be paid in cash, and the balance shall be paid in cash or Common Shares or
both, as determined by the Committee in its discretion.
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ARTICLE IX
LIMITS ON TRANSFERABILITY OF UNITS
9.1 Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount or any Common Shares payable under the Plan upon his or her death. A
Participant may, from time to time, revoke or change his or her Beneficiary
designation without the consent of any previously designated Beneficiary by
filing a new designation with the Committee. The last such designation received
by the Committee shall be controlling; provided, however, that no designation,
or change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant's death, and in no event shall it be
effective as of a date prior to such receipt. If at the date of a Participant's
death, there is no designation of a Beneficiary in effect for the Participant,
or if no Beneficiary survives to receive any amount payable under the Plan by
reason of the Participant's death, the Participant's estate shall be treated as
the Beneficiary for purposes of the Plan.
9.2 A Unit may be exercised only by the Participant to whom it was awarded,
except in the event of the Participant's death, when a Unit may be exercised by
his or her Beneficiary. Except as provided in Section 9.1, a Participant may not
transfer, assign, alienate or hypothecate any benefits under the Plan.
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ARTICLE X
AWARD CERTIFICATE
10.1 Promptly following the making of an award, the Company shall deliver
to the recipient an Award Certificate, specifying the terms and conditions of
the Unit. This writing shall be in such form and contain such provisions not
inconsistent with the Plan as the Committee shall prescribe.
ARTICLE XI
TERMINATION OF UNITS
11.1 An outstanding Unit awarded to a Participant shall be canceled and all
rights with respect thereto shall expire upon the earlier to occur of (i) its
exercise as provided in Section 8.1 or (ii) termination of the Participant's
employment with the Company; provided, however, that if such termination occurs
pursuant to clause (ii),(iii) or (iv) of Section 6.2 above, or for any other
reason specifically approved in advance by the Committee, the term of such Unit
shall continue for a period of 14 months from the date of termination (the
"Extended Term"). For purposes of this Section 11.1, the Cumulative Unit Value
of such Unit shall be determined as of the Valuation Date concurrent with or
immediately preceding the end of the Extended Term or any earlier exercise date,
whichever is applicable. A Unit whose term is continued for an Extended Term
shall be deemed to be automatically exercised as of the last Valuation Date
within the Extended Term, unless sooner exercised by the Participant or his or
her legal representative.
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11.2 Nothing contained in Section 11.1 shall be deemed to extend the term
of any Unit beyond the end of the Term of the Plan.
ARTICLE XII
TERMINATION AND AMENDMENT OF THE PLAN
12.1 The Company reserves the right to amend or terminate the Plan at any
time, by action of the Committee, but no such amendment or termination shall
adversely affect the rights of any Participant with respect to outstanding Units
held by the Participant without his or her written consent. No amendment will be
effective prior to approval by the Company's stockholders to the extent such
approval is required to preserve the deductibility of compensation paid pursuant
to Section 162(m) of the Code or is otherwise required by law.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Nothing in the Plan, nor the award of any Unit, shall confer on any
Participant a right to continue in the employment of the Company or affect any
right of the Company to terminate a Participant's employment.
13.2 The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to principles of conflict of
laws.
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13.3 The Company shall be authorized to withhold from any award or payment
it makes under the Plan to a Participant the amount of withholding taxes due
with respect to such award or payment and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes.
13.4 Nothing in the Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval as may be
necessary, and such arrangements may be either generally applicable or
applicable only in specific cases.
13.5 Participants shall not be required to make any payment or provide any
consideration for awards under the Plan other than the rendering of services.
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