SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Section 240.14a-12
TEREX CORPORATION
(Name of Registrant as Specified in Its Charter)
......................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
(1) Title of each class of securities to which transaction applies:
...........................................................................
(2) Aggregate number of securities to which transaction applies:
...........................................................................
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
...........................................................................
(4) Proposed maximum aggregate value of transaction:
...........................................................................
(5) Total fee paid:
...........................................................................
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2), and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:________________________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party:__________________________________________________________
(4) Date Filed:____________________________________________________________
<PAGE>
TEREX CORPORATION
500 Post Road East, Westport, Connecticut 06880
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2000
The Annual Meeting of Stockholders of Terex Corporation (hereafter, the
"Company") will be held at the Hyatt Regency Greenwich, 1800 East Putnam Avenue,
Old Greenwich, Connecticut, on Thursday, May 11, 2000, at 10:00 a.m., local
time, for the following purposes:
1. To elect seven (7) directors to hold office for one year or until
their successors are duly elected and qualified.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for 2000.
3. To approve the Terex Corporation 2000 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
27, 2000 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 3, 2000
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 11, 2000
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
11, 2000, at the Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old
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 7, 2000 to each stockholder entitled to vote
at the Meeting. As of March 27, 2000, the record date for determining the
stockholders entitled to notice of, and to vote at, the Meeting, the Company had
outstanding 27,577,158 shares of common stock, $.01 par value per share (the
"Common Stock").
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.
Each share of Common Stock is entitled to one vote per share for each
matter to be voted on at the Meeting. 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.
The Company has retained Georgeson Shareholder Communications Inc.
("Georgeson") to aid in the solicitation of proxies for a fee estimated not to
exceed $7,500 plus reimbursement of expenses. Proxy solicitations will be made
primarily by mail, but solicitations may also be made by telephone, via Internet
or by personal interviews conducted by Georgeson or officers or employees of the
Company. All costs of solicitations, including (a) printing and mailing of this
Proxy Statement and accompanying material, (b) fees and expenses of Georgeson,
(c) the reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material to the beneficial owners of the Company's
stock, and (d) supplementary solicitations to submit Proxies, if any, will be
borne by the Company.
<PAGE>
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, seven directors of the Company are to be elected to
hold office until the Company's next Annual Meeting of Stockholders or until
their respective successors are duly elected and qualified. Directors shall be
elected by a plurality of the votes of shares of Common Stock represented at the
Meeting in person or by proxy. Unless marked to the contrary, the Proxies
received by the Company will be voted FOR the election of the seven nominees
listed below, all of whom are presently members of the Board. Each nominee has
consented to being named in this Proxy Statement and to serve as a director if
elected. However, should any of the nominees for director decline or become
unable to accept nomination if elected, it is intended that the Board will vote
for the election of such other person as director as it shall designate. The
Company has no reason to believe that any nominee will decline or be unable to
serve if elected.
The information set forth below has been furnished to the Company by
the nominees and sets forth for each nominee, as of March 1, 2000, 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."
2
<PAGE>
The Board of Directors recommends that the stockholders vote FOR the following
nominees for director.
<TABLE>
<CAPTION>
First Year
Positions and As Company
Name Age Offices with Company Director
<S> <C> <C> <C>
Ronald M. DeFeo 47 Chairman of the Board, President, Chief Executive 1993
Officer, Chief Operating Officer and Director
G. Chris Andersen 61 Director 1992
Don DeFosset 51 Director 1999
William H. Fike 63 Director 1995
Dr. Donald P. Jacobs 72 Director 1998
Marvin B. Rosenberg 59 Director 1992
David A. Sachs 40 Director 1992
</TABLE>
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 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, Headway Corporate Resources, Inc., Compost America Holding Company,
Inc. and GP Strategies Corporation.
Don DeFosset has served as Executive Vice President and Chief Operating
Officer of Dura Automotive Systems, Inc., a global supplier of engineered
systems, since October 1999. Before joining Dura, Mr. DeFosset served as a
Corporate Executive Vice President, President of the Truck Group and a member of
the Office of Chief Executive Officer of Navistar International Corporation from
October 1996 to August 1999. From 1992 to 1996, Mr. DeFosset worked for Allied
Signal Inc. in various positions of increasing responsibility, the last being
President of its Safety Restraint Systems division. Prior to 1992, Mr. DeFosset
spent two years at Mack Trucks and 18 years with Rockwell International
Corporation in various operational assignments in both North America and Europe.
William H. Fike retired earlier this year as the Vice Chairman and
Executive Vice President of Magna International Inc., an automotive parts
manufacturer based in Ontario, Canada. 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 currently
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
Hartmarx Corporation, ProLogis Trust (formerly Security Capital Industrial
Trust), Unicom Corporation and its subsidiary Commonwealth Edison Company, and
CDW Computer Centers, Inc. (Computer Discount Warehouse), Dr. Jacobs previously
served as Chairman of the Public Review Board of Arthur Andersen & Co. and
Chairman of the Board of Amtrak.
Marvin B. Rosenberg retired as Senior Vice President, Secretary and General
Counsel of the Company on December 31, 1997. Mr. Rosenberg served as Senior Vice
President of Terex Corporation from January 1, 1994 until his retirement from
the Company. He also served as Secretary and General Counsel of the Company from
1987 until his retirement from the Company. 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. (collectively,
"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 Evercom, Inc.
The Board met seven times in 1999 at regularly scheduled and special
meetings, including telephonic meetings. All of the directors in office during
1999 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), DeFosset and Jacobs. The Audit Committee met three times during
1999. 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 Board has adopted a written charter for the Audit Committee, which is
attached to this Proxy Statement as Appendix A. All of the members of the Audit
Committee are independent directors as determined pursuant to the listing
standards of the New York Stock Exchange ("NYSE"). See "Audit Committee Report."
The Compensation Committee of the Board of Directors consists of Messrs.
Andersen (chairperson), Fike and Sachs. The Compensation Committee met ten times
during 1999. 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. Fike
(chairperson), Andersen and Jacobs. The Nominating Committee met two times
during 1999. The Nominating Committee recommends nominees to fill vacancies on
the Board of Directors. The Nominating Committee will consider nominees for
election as director who are recommended by the Company's stockholders. For
details on how stockholders may submit nominations for director, see
"Stockholder Proposals."
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,
2000 (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, 2000, pursuant to an exercise of options
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
Wellington Management Company, LLP 2,700,500 (1), (2) 9.79%
75 State Street
Boston, MA 02109
Hartford Capital Appreciation HLS Fund, Inc. 2,000,000 (1), (2) 7.25%
200 Hopmeadow Road
Simsbury, CT 06089
Mellon Financial Corporation 1,723,581 (3) 6.25%
One Mellon Center
Pittsburgh, PA 15258
Mellon Bank, N.A. 1,435,389 (3) 5.20%
One Mellon Center
Pittsburgh, PA 15258
G. Chris Andersen 130,156 (4) *
c/o Andersen, Weinroth & Co., L.P.
1330 Avenue of the Americas, 36th Floor
New York, NY 10019
Ronald M. DeFeo 405,708 (5) 1.46%
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Don DeFosset 3,523 (6) *
c/o Dura Automotive Systems Inc.
2791 Research Drive
Rochester Hills, MI 48309
William H. Fike 67,875 (7) *
15630 Queensferry Drive
Fort Myers, FL 33912
5
<PAGE>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
Dr. Donald P. Jacobs 4,364 *
c/o J.L. Kellogg Graduate School
of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Marvin B. Rosenberg 24,870 *
3228 Pignatelli Crescent
Mt. Pleasant, SC 29466
David A. Sachs 128,678 (8) *
c/o Ares Management, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Filip Filipov 183,602 (9) *
c/o Terex Cranes, Inc.
Hwy 501 East, P.O. Box 260002
Conway, SC 29526-2602
Ernest R. Verebelyi 57,891 *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Eric I Cohen 45,729 (10) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Brian J. Henry 70,127 (11) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
Joseph F. Apuzzo 64,960 (12) *
c/o Terex Corporation
500 Post Road East
Westport, CT 06880
All directors and executive officers 1,256,342 (13) 4.48%
as a group (14 persons)
- ----------------------------------------------------
* Amount owned does not exceed one percent (1%) of the class so owned.
(1) Wellington Management Company, LLP ("WMC") filed a Schedule 13G (a
"Schedule 13G"), dated February 9, 2000, pursuant to Section 13(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
reflecting the beneficial ownership of 2,700,500 shares of Common Stock.
This amount includes all of the shares beneficially owned by Hartford
Capital Appreciation HLS Fund, Inc., an investment advisory client of WMC,
as described below.
(footnotes continued on following page)
6
<PAGE>
(footnotes continued from preceding page)
(2) Hartford Capital Appreciation HLS Fund, Inc. ("Hartford") filed a Schedule
13G, dated February 11, 2000, reflecting the beneficial ownership of
2,000,000 shares of Common Stock. This amount also is included in the
shares beneficially owned by WMC, an investment advisor of Hartford, as
described above.
(3) Mellon Financial Corporation ("MFC") and Mellon Bank, N.A. ("Mellon Bank")
filed a Schedule 13G, dated January 25, 2000, reflecting the beneficial
ownership of 1,723,581 shares of Common Stock by MFC and 1,435,389 shares
by Mellon Bank. MFC's amount includes shares owned by a number of its
direct and indirect subsidiaries, including Mellon Bank. Mellon Bank's
amount includes shares owned by its direct and indirect subsidiaries.
(4) Includes 84,671 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(5) Includes 116,457 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(6) Includes 2,523 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(7) Includes 64,681 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(8) Includes 3,800 shares of Common Stock owned by Mr. Sachs' wife. Mr. Sachs
disclaims the beneficial ownership of such shares. Also includes 82,499
shares of Common Stock issuable upon the exercise of options exercisable
within 60 days. This includes 15,000 shares of Common Stock issuable upon
the exercise of options exercisable within 60 days held by certain trusts
for Mr. Sachs' children, the beneficial ownership of which Mr. Sachs
disclaims.
(9) Includes 67,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(10) Includes 6,250 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(11) Includes 9,750 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
(12) Includes 18,500 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days.
(13) Includes 464,839 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, 2000, 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 47 Chairman of the Board, President, Chief
Executive Officer, Chief Operating Officer
and Director
Filip Filipov 53 President, Terex Lifting
Ernest R. Verebelyi 52 President, Terex Earthmoving
Eric I Cohen 41 Senior Vice President, Secretary and
General Counsel
Joseph F. Apuzzo 44 Chief Financial Officer
Brian J. Henry 41 Vice President, Finance and Business
Development
7
<PAGE>
Name Age Positions and Offices with Company
---- --- ----------------------------------
Steven E. Hooper 46 Vice President, Human Resources
Jack Lascar 45 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.
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 and an associate attorney with that firm from 1983
to 1992.
Joseph F. Apuzzo was appointed Chief Financial Officer of the Company on
October 21, 1999. Mr. Apuzzo previously held the positions of Vice
President-Corporate Finance, 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
Price Waterhouse 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 five
other highest paid executive officers who had 1999 earned qualifying
compensation in excess of $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------
--------------------------
Awards
--------------------------
Other Restricted Securities All Other
Annual Stock Underlying Compen-
Name and Salary Bonus Compen- Awards Options/ Sation
Principal Position Year ($) ($) sation ($)(1) ($)(2) SARS (#) ($)(3)
------------------ ---- ------- ------------ -------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 1999 $600,000 $1,200,000 $ 81,000 $-0- 100,000 $11,612
Chairman, President, Chief 1998 481,249 918,750 34,800 -0- 25,000 18,361
Executive Officer and 1997 418,750 637,500 40,800 -0- 25,000 13,605
Chief Operating Officer
Filip Filipov 1999 360,000 375,000(4) 79,125 1,130,000 -0- 93,444(5)
President, 1998 314,583 490,000 42,100 140,000 (6) 50,000 131,658
Terex Lifting 1997 300,000 350,000 17,000 -0- -0- 31,582
Ernest R. Verebelyi 1999 323,750 475,000 26,353 988,750 -0- 22,006
President, 1998 60,948 75,000 -0- 147,500 (8) 30,000 557
Terex Earthmoving (7) 1997 -0- -0- -0- -0- -0- -0-
Eric I Cohen 1999 230,000 200,000 5,000 706,250 -0- 6,552
Senior Vice President, 1998 210,000 145,000 600 232,188 (10) 20,000 203,178
Secretary and General 1997 -0- -0- -0- -0- -0- -0-
Counsel (9)
Brian J. Henry 1999 200,000 200,000 6,187 706,250 -0- 7,260
Vice President, Finance 1998 184,999 165,000 8,437 247,750 (11) 24,000 7,367
and Business Development 1997 166,667 135,000 1,875 -0- 5,000 6,936
Joseph F. Apuzzo 1999 220,000 175,000 3,750 706,250 -0- 6,575
Chief Financial Officer 1998 175,999 150,000 8,250 282,750 (11) 24,000 8,183
1997 160,000 132,000 250 -0- 5,000 67,912
</TABLE>
- ----------------------
(1) Other Annual Compensation represents the Company's matching contribution to
a deferred compensation plan, which matching contribution is made in Common
Stock.
(2) On September 9, 1999, grants of Restricted Stock were made under the Terex
Corporation 1996 Long-Term Incentive Plan (the "1996 Plan") to Mr. Filipov
(40,000 shares), Mr. Verebelyi (35,000 shares), Mr. Cohen (25,000 shares),
Mr. Henry (25,000 shares) and Mr. Apuzzo (25,000 shares). The value of the
Restricted Stock granted to such Named Executive Officers set forth in the
table above for 1999 is based on the closing stock price on the NYSE of the
Common Stock of $28.25 per share on September 9, 1999. The value of such
Restricted Stock as of December 31, 1999, based on a closing stock price on
the NYSE of Common Stock of $27.75 per share, was $1,110,000 for Mr.
Filipov, $971,250 for Mr. Verebelyi, $693,750 for Mr. Cohen, $693,750 for
Mr. Henry and $693,750 for Mr. Apuzzo.
(footnotes continued on following page)
9
<PAGE>
(footnotes continued from preceding page)
With respect to each grant of Restricted Stock made to Named Executive
Officers on September 9, 1999, vesting is as follows: one half of the
shares of Restricted Stock awarded in each such grant vests in equal
quarterly increments on each of the first four anniversaries of September
9, 1999; one quarter of the shares of Restricted Stock awarded in each such
grant vests if and when the closing stock price on the NYSE of the Common
Stock equals or exceeds $45.00; and one quarter of the shares of Restricted
Stock awarded in each such grant vests if and when the closing stock price
on the NYSE of the Common Stock equals or exceeds $50.00; provided, that if
the $45.00 and $50.00 vesting events both occur in the same calendar year,
only one grant will vest at such time and the other grant will vest on
January 1 of the following year. Upon the earliest to occur of a change in
control of the Company or the death or disability of the recipient of the
grant, any unvested portion of such Restricted Stock grant shall vest
immediately. Dividends, if any, are paid on Restricted Stock awards at the
same rate as paid to all stockholders.
(3) The amounts shown for 1999 include:
(a) Company matching contributions to a defined contribution plan ($4,800
for each of Mr. DeFeo, Mr. Filipov, Mr. Verebelyi, Mr. Cohen, Mr.
Henry and Mr. Apuzzo);
(b) Company contributions to an employee stock purchase plan ($1,800 for
Mr. DeFeo, $206 for Mr. Filipov, $11,707 for Mr. Verebelyi, $180 for
Mr. Cohen, $720 for Mr. Henry and $360 for Mr. Apuzzo); and
(c) Premiums paid by the Company with respect to term life insurance for
the benefit of the Named Executive Officers ($5,012 for Mr. DeFeo,
$4,938 for Mr. Filipov, $5,499 for Mr. Verebelyi, $1,572 for Mr.
Cohen, $1,740 for Mr. Henry and $1,415 for Mr. Apuzzo).
(4) Includes a one-time special assignment bonus of $50,000 for Mr. Filipov's
efforts in connection with the integration of Cedarapids, Inc. into the
Company.
(5) In addition to the amounts described in footnote (2), the amount shown for
1999 for Mr. Filipov also includes a $60,000 contribution by the Company to
a deferred compensation plan and a $23,500 contribution by the Company to
an employee pension plan.
(6) As part of Mr. Filipov's 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, 1999, based on a closing stock price on the NYSE of Common
Stock of $27.75 per share is $277,500. 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) Mr. Verebelyi commenced employment with the Company on October 22, 1998.
(8) As part of Mr. Verebelyi's long-term incentive compensation, on October 14,
1998, Mr. Verebelyi was granted 10,000 shares of Restricted Stock under the
Company's 1996 Plan. The value of the Restricted Stock granted to Mr.
Verebelyi set forth in the table above for 1998 is based on the closing
stock price on the NYSE of the Common Stock of $14.75 per share on October
14, 1998. The value of such Restricted Stock as of December 31, 1999, based
on a closing stock price on the NYSE of Common Stock of $27.75 per share is
$277,500. The shares of Restricted Stock awarded to Mr. Verebelyi for 1998
become vested to the extent of one-fourth of the shares covered thereby on
each of the first four anniversaries of October 14, 1998. However, upon the
earliest to occur of a change in control of the Company or the death or
disability of Mr. Verebelyi, 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.
(9) Mr. Cohen commenced employment with the Company on January 1, 1998.
(10) As part of Mr. Cohen's long-term incentive compensation, on January 1,
1998, Mr. Cohen was granted 7,500 shares of Restricted Stock, and on
October 8, 1998, Mr. Cohen was granted 5,000 shares of Restricted Stock,
both 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 as of October 8, 1998. The
value of such Restricted Stock as of December 31, 1999, based on a closing
stock price on the NYSE of Common Stock of $27.75 per share is $346,875.
The shares of Restricted Stock awarded to Mr. Cohen for 1998
(footnotes continued on following page)
10
<PAGE>
(footnotes continued from preceding page)
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. 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.
(11) As part of the long-term incentive compensation of Mr. Henry and Mr.
Apuzzo, on May 8, 1998, Mr. Henry and Mr. Apuzzo were each granted 6,000
shares of Restricted Stock, and on October 8, 1998, Mr. Henry was granted
5,000 shares of Restricted Stock and Mr. Apuzzo was granted 7,500 shares of
Restricted Stock, all under the Company's 1996 Plan. The value of the
Restricted Stock granted to Mr. Henry and 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,
1999, based on a closing stock price on the NYSE of Common Stock of $27.75
per share is $305,250 for Mr. Henry and $374,625 for Mr. Apuzzo. The shares
of Restricted Stock awarded to Mr. Henry and Mr. Apuzzo for 1998 become
vested to the extent of one-fourth of the shares covered thereby on each of
the first four anniversaries of May 8, 1998 and October 8, 1998,
respectively. However, upon the earliest to occur of a change in control of
the Company or the death or disability of Mr. Henry or Mr. Apuzzo, any
unvested portion of such Restricted Stock shall vest immediately.
Dividends, if any, are paid on Restricted Stock awards at the same rate as
paid to all stockholders.
Stock Option Grants in 1999
The following table sets forth information on grants of stock options
during 1999 to the Named Executive Officers. The number of stock options granted
to the Named Executive Officers during 1999 is also listed in the Summary
Compensation Table in the column entitled "Securities Underlying Options/SARs."
The exercise price of the options equaled or exceeded the fair market price of
the Common Stock at the time of the grant.
<TABLE>
<CAPTION>
Stock Option/SAR Grants in 1999
Individual Grants
---------------------------------------------------------------------------------------------
Number of
Securities % of Total Potential Realizable Value
Underlying Options Granted Exercise or at Assumed Annual Rates of
Options to Employees in Base Price Expiration Stock Price Appreciation
Name Granted(#) Fiscal Year ($/Sh) Date for Option Term
---- ---------- ----------- ------ ---- ---------------
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 100,000 (1) 49.4% $25.375 2/24/2009 $1,595,820 $4,044,121
Filip Filipov - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
Ernest R. Verebelyi - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
Eric I Cohen - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
Brian J. Henry - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
Joseph F. Apuzzo - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
</TABLE>
- ------------------
(1) These options were granted under the 1996 Plan. Of these options,
40,000 are "incentive stock options" that vest in equal one-quarter
installments on the anniversary date of the grant over a four-year
period, and 60,000 are "non-qualified stock options" that vest in equal
one-third installments on the third, fourth and fifth anniversaries of
the grant date.
11
<PAGE>
Aggregated Option Exercises in 1999 and Year-End Option Values
The table below summarizes options exercised during 1999 and year-end
option values of the Named Executive Officers listed in the Summary Compensation
Table.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1999 and Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End (#) at Year-End ($) (1)
----------------------- ----------------------
Shares
Acquired on Value Realized
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald M. DeFeo 17,554 $413,865 85,747/148,000 $1,469,929/$611,875
Filip Filipov - 0 - - 0 - 67,500/37,500 $1,284,637/$257,812
Ernest R. Verebelyi 5,000 $53,906 0/15,000 $0/$195,000
Eric I Cohen - 0 - - 0 - 5,000/15,000 $59,219/$177,656
Brian J. Henry 2,500 $61,876 8,500/20,500 $90,937/$194,062
Joseph F. Apuzzo - 0 - - 0 - 17,250/21,750 $284,687/$220,312
</TABLE>
- ----------------------
(1) Based on the closing price of the Company's Common Stock on the NYSE on
December 31, 1999 of $27.75.
Long-Term Incentive Plan Awards in 1999
The following table provides information concerning long-term
compensation awards made during 1999 under the Terex Corporation 1999 Long-Term
Incentive Plan ("LTIP") to the Named Executive Officers listed in the Summary
Compensation Table.
Long-Term Incentive Plan--Awards in 1999
Estimated Future
Payouts
Under Non-Stock
Price-Based Plans
------------------
Performance
Number of Shares, Or Other Period
Units or Other Until
Rights Maturation or Maximum
Name (#)(1) Payout ($)(2), (3)
---- ------ -------------- -----------
Ronald M. DeFeo 180,000 5 years $18,000,000
Filip Filipov 60,000 5 years 6,000,000
Ernest R. Verebelyi 45,000 5 years 4,500,000
Eric I Cohen 20,000 5 years 2,000,000
Brian J. Henry 20,000 5 years 2,000,000
Joseph F. Apuzzo 25,000 5 years 2,500,000
- ------------------
(1) Units of participation under the LTIP were granted on May 12, 1999 and vest
fully on December 31, 2003. A unit's incremental value is calculated for
each year of its term, and these incremental values are cumulated to obtain
the unit's cumulative value upon maturity, which is capped at $100.
Incremental unit value is determined annually by calculating the product of
(a) the closing price of a share of Common Stock at the close of the year
prior to the date of grant (for awards made in 1999, $28.5625) multiplied
by (b) 85% of the percentage by which earnings per share for such year
exceeds earnings per share for the year prior to the date of grant. If
earnings per share for any year are not at least 105% of the prior year's
earnings per share, then no incremental unit value is accumulated for such
year.
(2) The maximum cumulative value of a unit of participation under the LTIP is
$100.
(3) No amounts are shown as "target" or "threshold" future payments because no
such payment levels are set or contemplated under the LTIP.
12
<PAGE>
Pension Plans
The Company maintains eight 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,
certain of the Company's foreign subsidiaries maintain defined benefit pension
plans for their employees and/or executives.
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 and Mr.
Filipov, will be credited with service following such date. However,
participants not currently fully vested, including Mr. DeFeo and Mr. Filipov,
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).
Mr. Filipov also participates in a pension plan maintained by PPM S.A., one
of the Company's foreign subsidiaries, 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 this pension. At December 31,
1999, the aggregate amount in Mr. Filipov's PPM S.A. pension was $106,802.
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, effective January 1, 2000, outside directors receive
annually the equity equivalent of $50,000 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). In 1999, directors received an annual equity equivalent of $35,000.
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,
13
<PAGE>
and (iii) the number of shares deferred may not exceed 7,500 (as of January 1,
2000; in 1999, this limit was 5,000 shares) (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). If a director elects to
receive shares of Common Stock currently, then 40% of this annual retainer (or
$20,000) is paid in cash to offset the tax liability related to such election.
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
closing 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 1999 the options were valued at 25% of fair market value of Common
Stock on the date of grant. 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 account. Any committee
retainers that are deferred into the Common Stock account receive a matching 25%
contribution from the Company; Board retainers that are deferred into the Common
Stock account do not receive a matching contribution. 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 approximately 7.38% 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 three-year period commencing January 1, 2000, or, if later,
the first three years of Board service beginning on or after January 1, 2000,
the number of shares of Common Stock that is equal in market value to three
times the annual retainer for Board service ($150,000). Once this ownership
objective is achieved, the director is expected to maintain such minimum
ownership level. The intent is to encourage acquisition and retention of Common
Stock by directors, evidencing the alignment of their interests with the
interests of stockholders. To this end, each new director will receive an award
of 1,000 shares of Common Stock and, as an incentive to retention, a cash
payment equal to 40% of the market value of the shares to defray the income tax
liability related to such award.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Company and Ronald M. DeFeo entered into an Employment and Compensation
Agreement as of January 1, 1999 (the "DeFeo Agreement"). Pursuant to the DeFeo
Agreement, Mr. DeFeo's term of employment with the Company as Chief Executive
Officer, reporting to the Board, extends through December 31, 2001. In the event
of a Change in Control (as such term is defined in the DeFeo Agreement), Mr.
DeFeo's term of employment would continue until the later of 12 months after
such Change in Control or December 31, 2000.
14
<PAGE>
Under the DeFeo Agreement, Mr. DeFeo is to receive an initial annual base
salary of $600,000, subject to increase by the Board, as well as annual bonuses
and long-term incentive compensation during his term of employment in accordance
with any plan or plans established by the Company. The Company also agrees to
use its best efforts to have Mr. DeFeo elected as a member and Chairman of the
Board during the term of the DeFeo Agreement.
If Mr. DeFeo's employment with the Company is terminated by the Company
without Cause, by Mr. DeFeo for Good Reason, or within one year following a
Change in Control (each as defined in the DeFeo Agreement), or if the Company
elects not to extend the DeFeo Agreement at the end of its term, Mr. DeFeo is to
receive, in addition to his salary, bonus and other compensation earned through
the time of such termination, (i) two times his base salary, (ii) two times the
average of his annual bonuses for the two calendar years preceding termination,
(iii) continuing insurance coverage for up to two years from termination, and
(iv) immediate vesting of unvested stock options and stock grants with a period
of one year following termination to exercise his options. The cash portion of
this payment is spread over a 13-month period following the date of termination,
except in the case of a Change in Control, in which event the cash portion is to
be paid in a lump sum.
The DeFeo Agreement requires Mr. DeFeo to keep certain information of the
Company confidential during his employment and thereafter. The DeFeo Agreement
also contains an agreement by Mr. DeFeo not to compete with the business of the
Company during his term of employment with the Company and for a period of 12
months thereafter.
The Company and Filip Filipov entered into a Contract of Employment as of
September 1, 1999 (the "Filipov Agreement"). The term of the Filipov Agreement
runs through August 31, 2004. Pursuant to the Filipov Agreement, Mr. Filipov
agrees to continue managing the Company's lifting business and to take on other
special assignments from time to time. The Filipov Agreement provides for an
annual salary of $360,000 for Mr. Filipov, eligibility for stock option grants
and restricted stock awards and a performance bonus scheme with a target of 75%
of base compensation. As part of the Filipov Agreement, Mr. Filipov agrees not
to compete with the business of the Company through August 31, 2004. The Filipov
Agreement contains certain provisions requiring Mr. Filipov to keep certain
information of the Company confidential during his employment and thereafter.
Mr. Filipov or the Company may terminate the Filipov Agreement on two
years' notice, and Mr. Filipov also may be terminated by the Company at any time
for cause. In addition, Mr. Filipov has the right under the Filipov Agreement to
continue his service to the Company on a part-time consulting basis for a period
of 36 months following notice to the Company. Mr. Filipov would receive 60% of
his base salary as consideration for such services and would be allowed to
receive and contribute to certain Company benefits.
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 1999
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.
15
<PAGE>
Compensation Committee Report
Executive Compensation Philosophy
---------------------------------
The objectives of the Company's executive compensation program are to (i)
attract and retain executives with the skills critical to the long-term success
of the Company, (ii) motivate and reward individual and team performance in
attaining business objectives and maximizing stockholder value and (iii) link a
significant portion of compensation to appreciation in the price of the
Company's stock, so as to align the interests of the executive officers with
those of the stockholders.
To meet these objectives, the total compensation program is designed to be
competitive with the programs of other corporations of comparable revenue size
in industries with which the Company competes for customers and executives and
to be fair and equitable to both the employee and the Company. Consideration is
given to the employee's overall responsibilities, professional qualifications,
business experience, job performance, technical expertise and career potential
and the combined value of these factors to the Company's long-term performance
and growth.
Executive Compensation Program
------------------------------
Each year the Compensation Committee (the "Committee"), which is comprised
entirely of outside directors, determines the compensation arrangements for the
Company's executive officers, including the individuals whose compensation is
detailed in this Proxy Statement. The executive compensation program has three
principal components: salary, short-term incentive compensation (annual bonus)
and long-term incentive compensation, each of which is described below. While
the components of compensation are considered separately, the Committee takes
into account the full compensation package afforded by the Company to the
individual executive.
Salary
------
Salary is determined by evaluating the responsibilities of the position
held, the individual's past experience, current performance and the competitive
marketplace for executive talent. Salary ranges for the Company's executive
officers compare to salary ranges of executives at companies of similar size, as
reported in data available to the Committee.
Annual Bonus
------------
In addition to salary, each executive officer is eligible for an annual
bonus under the Company's general executive bonus plan. As discussed below, the
bonus of the Chief Executive Officer (the "CEO") is determined under a different
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 Committee believes
that bonuses paid to these individuals, including those whose compensation is
reported in the Summary Compensation Table, reflect the level of achievement of
Company goals and individual performance goals during 1999.
Long-Term Incentive Compensation
--------------------------------
The purpose of long-term awards, currently in the form of stock options,
grants of Common Stock including Restricted Stock, and grants under the LTIP, 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, Common Stock
and LTIP grants, the Committee bases its decision on the individual's
performance and potential to improve stockholder value and on the relationship
of equity and objective performance goals to the other components of the
individual's compensation.
16
<PAGE>
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 1999, the Committee retained an outside
consultant and also considered information relating to comparable companies.
In appraising the CEO's performance during 1999, the Committee noted that
the Company's net sales for the year increased by 50.6%, operating profit
increased by 46.1% 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 issuance of $100 million of 8-7/8%
Senior Subordinated Notes (the proceeds of which were used to pay off other
indebtedness and for acquisitions), the sale of 5.5 million shares of Common
Stock for net proceeds to the Company of approximately $163 million and the
establishment of a $450 million credit facility (used to fund the acquisitions
of Powerscreen International plc and Cedarapids, Inc.). During 1999 the Company
also completed seven acquisitions, including the acquisitions of Powerscreen
International plc and Cedarapids, Inc. Near-term cost savings were achieved for
these acquisitions, and the Company anticipates long-term opportunities for
growth from these acquisitions. Also, during 1999 the Company successfully
resolved long-standing issues with the Securities and Exchange Commission
("SEC") and the Internal Revenue Service ("IRS") on terms favorable to the
Company and secured large contracts from Rio Tinto and Cleveland Cliffs while
completing its Coal India contract on budget and ahead of schedule.
Under the 1998 annual incentive compensation plan, which was approved by
stockholders in 1998, Mr. DeFeo earned a formula bonus for 1999, based on his
achievement of predetermined performance goals, reflecting quantitative business
criteria, equal in amount to 150% of his salary for 1999, or $900,000. 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 $300,000 to recognize his special
achievements for 1999, including, among other things, improvement in the
Company's capital structure, completion of seven acquisitions (including the
acquisitions of Powerscreen International plc and Cedarapids, Inc.), successful
resolution of long-standing issues with the SEC and the IRS on terms favorable
to the Company, securing of large contracts from Rio Tinto and Cleveland Cliffs,
the completion of the Coal India contract on budget and ahead of schedule,
significant quality initiatives with emphasis on customer satisfaction, and
strengthening the Company's management team. In further recognition of Mr.
DeFeo's performance, the Committee granted him an option for the purchase of
100,000 shares of Common Stock, 40,000 of these options in the form of
"incentive stock options" vesting in equal one-quarter installments over a
four-year period, and 60,000 of these options in the form of "non-qualified
stock options" vesting in equal one-third installments on the third, fourth and
fifth anniversaries of the date of grant. As further compensation for Mr.
DeFeo's efforts on behalf of the Company and its stockholders, the Committee
granted him 180,000 units of participation under the Company's LTIP.
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.
17
<PAGE>
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 and LTIP were submitted to and approved by
stockholders at the Company's 1998 meeting and 1999 meeting, respectively, so
that amounts earned thereunder by certain employees will qualify as
performance-based.
COMPENSATION COMMITTEE
G. CHRIS ANDERSEN
WILLIAM H. FIKE
DAVID A. SACHS
Performance Graph
The following stock performance graph is intended to show the Company's
stock performance compared with that of comparable companies. The stock
performance graph shows the change in market value of $100 invested in the
Company's Common Stock, the Standard & Poor's 500 Stock Index and the Standard &
Poor's Diversified Machinery Index (the "Index") for the period commencing
December 31, 1994 through December 31, 1999. The stock performance graph also
shows the change in market value of $100 invested in the Company's Common Stock
when compared to a "peer group" index used in the Company's proxy statement for
the 1999 annual meeting of stockholders (the "Peer Group"). The cumulative total
stockholder return assumes dividends are reinvested. The stockholder return
shown on the graph below is not indicative of future performance.
The "Index" consists of the following companies, which are in similar lines
of business as the Company: Caterpillar, Inc., Deere & Company, Dover
Corporation, Ingersoll-Rand Company, Milacron Inc., NACCO Industries, Inc., and
The Timken Company. The "Peer Group" consists of the following companies:
Caterpillar, Inc., Deere & Company, Harnischfeger Industries, Inc.,
Ingersoll-Rand Company, JLG Industries, Inc., The Manitowoc Company and NACCO
Industries, Inc. The Company is changing from use of the Peer Group to use of
the Index for a number of reasons. These reasons include the Company's belief
that the companies making up the Index are more comparable to the Company than
those included in the Peer Group as a result of the Company's acquisitions in
1999 and resulting diversification; the fact that the majority of the companies
to which the Company is comparable compare themselves to the Index, thus making
the Company's comparison to the Index consistent with industry practice; and the
Company's understanding that the performance of the Index, unlike that of the
Peer Group, is a publicly available measurement prepared by an independent third
party that stockholders may access more easily than the performance of the Peer
Group. The companies in the indices are weighted by market capitalization.
18
<PAGE>
[Graphic - Graph illustrating Cumulative Total Return using the data below:
Source Georgeson Shareholder Communications Inc.]
-----------------------------------------------------------------------------
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
-----------------------------------------------------------------------------
Terex Corp. $100 $68 $145 $336 $408 $396
-----------------------------------------------------------------------------
S&P 500(R) $100 $138 $169 $226 $290 $351
-----------------------------------------------------------------------------
Old Custom Composite Index $100 $126 $161 $213 $182 $204
(7 Stocks)
-----------------------------------------------------------------------------
S&P(R)Machinery $100 $123 $154 $203 $169 $200
(Diversified) Index
-----------------------------------------------------------------------------
Source Georgeson Shareholder Communications Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 2, 2000, Terex made a loan to Ronald M. DeFeo, the Chairman, Chief
Executive Officer, President and Chief Operating Officer of the Company, in the
amount of $3 million. The loan bears interest at 9% per annum and matures on
March 31, 2005. The loan is full recourse to Mr. DeFeo and is secured by shares
of Common Stock owned by Mr. DeFeo and by payment of amounts earned by Mr. DeFeo
under the LTIP. The terms of the loan require prepayment by Mr. DeFeo of some or
all of the loan's outstanding balance upon the occurrence of certain events,
including Mr. DeFeo's ceasing to be employed by the Company for any reason
(including death or disability), Mr. DeFeo's failing to pay any amounts due
under the loan, the attainment of certain Common Stock price targets and the
payment to Mr. DeFeo of amounts under the LTIP.
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 a consulting fee of $125,000 for services provided in 1999.
19
<PAGE>
The agreement also provided 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. Mr. Rosenberg's consulting agreement
with the Company expired at the end of 1999.
Certain former executive officers and former and current directors of the
Company, including Marvin B. Rosenberg, were named along with the Company in an
investigation initiated by the SEC. This investigation was completed in 1999.
Certain former executive officers and former and current directors of the
Company, including Mr. Rosenberg, are named along with the Company in an ongoing
private litigation initiated by Fruehauf Trailer Corporation, a former
subsidiary of the Company. The Company expended approximately $304,000 for legal
fees and expenses in 1999 with respect to these matters, which included the
defense of Mr. Rosenberg and the former executive officers and directors of the
Company. The Company is unable to separately determine the portion of these fees
and expenses allocable to Mr. Rosenberg individually.
In July and August 1999, the Company entered in a $500 million bank credit
facility (the "1999 facility") with a syndicate of lenders. Ares Leveraged
Investment Fund L.P. ("Ares") and Ares Leveraged Investment Fund II, L.P. ("Ares
II"), affiliates of David A. Sachs, a director of the Company, participated as
lenders under the 1999 facility for the amount of $14 million. Ares and Ares II
also received a fee of $24,536 for participating as lenders under the 1999
facility. On March 6, 1998, the Company entered in a $500 million bank credit
facility (the "1998 facility") with a syndicate of lenders. Ares participated as
a lender under the 1998 facility for the amount of $15 million and received a
fee of $18,750 for such participation. Ares, Ares II, and Ares III CLO Ltd.,
another affiliate of Mr. Sachs, currently hold approximately $35 million of the
Company's debt under the 1999 facility and the 1998 facility. Participation by
Ares and Ares II as lenders under the 1999 facility and by Ares under the 1998
facility was made in the ordinary course of their business and on the same terms
as all other lenders under the Company's 1999 and 1998 facilities. 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.
The Company intends that all transactions with affiliates are to be 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.
See "Audit Committee Report." All of the transactions with affiliates described
above have been reviewed and approved by the Board and/or the Audit Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and each person who is the beneficial owner of more than 10%
of the Company's outstanding equity securities, to file with the SEC and the
NYSE initial reports of ownership and changes in ownership of equity securities
of the Company. Specific due dates for these reports have been established by
the SEC and the Company is required to disclose in this Proxy Statement any
failure to file such reports by the prescribed dates during 1999. 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.
20
<PAGE>
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, 1999.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board has reviewed and discussed the Company's
audited financial statements with the management of the Company. The Audit
Committee has discussed with PricewaterhouseCoopers LLP, the Company's
independent auditors, the matters required to be discussed by Statement on
Auditing Standards 61. The Audit Committee also has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees) and has
discussed with PricewaterhouseCoopers LLP the independence of such independent
accounting firm.
Based on its review and discussions referred to in the preceding paragraph,
the Audit Committee recommended to the Board that the audited financial
statements for the Company's fiscal year ended December 31, 1999 be included in
the Company's Annual Report on Form 10-K for the Company's fiscal year ended
December 31, 1999.
AUDIT COMMITTEE
DAVID A. SACHS
DON DEFOSSET
DR. DONALD P. JACOBS
PROPOSAL 2: INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP has audited the consolidated
financial statements of the Company for 1999. The Board of Directors desires to
continue the service of this firm for 2000. 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, 2000. 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 2000.
21
<PAGE>
PROPOSAL 3: APPROVAL OF THE TEREX CORPORATION
2000 INCENTIVE PLAN
General
Stockholders are being asked to approve the Terex Corporation 2000
Incentive Plan (the "2000 Plan"). A copy of the 2000 Plan is attached to this
Proxy Statement as Appendix B. The following description of the 2000 Plan is
qualified in its entirety by reference to the 2000 Plan attached to this Proxy
Statement as Appendix B.
The purpose of the 2000 Plan is to assist the Company in attracting and
retaining selected individuals to serve as directors, officers, consultants,
advisors and employees of the Company and its subsidiaries and affiliates who
will contribute to the Company's success and to achieve long-term objectives
which will inure to the benefit of all stockholders of the Company through the
additional incentive inherent in the ownership of the Common Stock. The 2000
Plan authorizes the granting of (i) options ("Options") to purchase shares of
Common Stock ("Shares"), (ii) stock appreciation rights ("SARs"), (iii) stock
purchase awards, (iv) restricted stock awards and (v) performance awards.
The Board of Directors adopted the 2000 Plan on March 8, 2000, subject to
stockholder approval, and directed that the 2000 Plan be submitted to the
stockholders of the Company for their approval. Approval of the 2000 Plan will
require the affirmative vote of a majority of the shares of Common Stock present
in person or by proxy at the Meeting.
Common Stock Authorized
The maximum number of Shares that may be the subject of awards under the
2000 Plan is 2,000,000. Shares covered by any unexercised portions of terminated
Options, Shares forfeited by participants and Shares subject to any awards that
are otherwise surrendered by a participant without receiving any payment or
other benefit with respect thereto may again be subject to new awards under the
2000 Plan. In the event the purchase price of an Option is paid in whole or in
part through the delivery of Shares, the number of Shares issuable in connection
with the exercise of the Option shall not again be available for the grant of
awards under the 2000 Plan. Shares subject to Options, or portions thereof, with
respect to which SARs are exercised are not again available for the grant of
awards under the 2000 Plan.
No participant may be granted awards for more than 750,000 Shares under the
2000 Plan. The Shares to be issued or delivered under the 2000 Plan are
authorized and unissued Shares, or issued Shares that have been acquired by the
Company, or both. As of March 27, 2000, the closing price of a Share of Common
Stock on the NYSE was $14.8125.
2000 Plan Administration
The 2000 Plan provides that a committee (the "Plan Committee") of the Board
of Directors, consisting of not fewer than two members who are non-employee
directors and outside directors, shall administer the 2000 Plan. The Board may
remove from, add members to, or fill vacancies in the Plan Committee. The Plan
Committee is authorized, subject to the provisions of the 2000 Plan, to
establish such rules and regulations as it may deem appropriate for the proper
administration of the 2000 Plan. Subject to the provisions of the 2000 Plan, the
Plan Committee shall have authority, in its sole discretion, to grant awards
under the 2000 Plan, to interpret the provisions of the 2000 Plan and, subject
to the requirements of applicable law, to prescribe, amend, and rescind rules
and regulations relating to the 2000 Plan or any award thereunder as it may deem
necessary or advisable. The Plan Committee may delegate to the Chairman of the
Board and/or the Chief Executive Officer of the Company the right to grant
awards under the 2000 Plan on such terms and conditions as the Plan Committee
may from time to time establish.
22
<PAGE>
Eligibility
Officers, employees, consultants, advisors and directors of the Company or
any of its subsidiaries or affiliates as the Plan Committee shall select from
time to time are eligible to receive awards under the 2000 Plan. As of December
31, 1999, up to approximately 6,700 people would be eligible to participate
under the terms of the 2000 Plan.
Stock Option Awards
Options granted under the 2000 Plan may be "Incentive Stock Options"
meeting requirements of Section 422 of the Code or "Non-Qualified Stock Options"
that do not meet such requirements. Only employees of the Company or its
subsidiaries or affiliates may receive Incentive Stock Options under the 2000
Plan.
The Committee may grant Options to purchase Shares at a price per share not
less than 100% of the fair market value of such Share on the date of grant of
such Option. For so long as the Common Stock is listed on the NYSE, fair market
value is the closing price of a Share on the NYSE on the trading day immediately
preceding the date of the award. The exercise price of any Option granted under
the 2000 Plan cannot be reduced below its original exercise price without the
approval of the Company's stockholders. The term of each Option will be
determined by the Plan Committee, but generally will not exceed ten years from
the date of grant.
The exercise price for Options can be paid in cash, certified check or bank
check. In addition, with the consent of the Plan Committee, the exercise price
can also be paid by promissory note, by delivering previously acquired Shares or
through delivering irrevocable instructions to a broker to pay to the Company an
amount of Shares having a fair market value equal to the exercise price.
Options are not transferable except by will or the laws of descent and
distribution and may generally be exercised only by the participant (or his
guardian or legal representative) during his or her lifetime, provided, however,
that nonqualified stock options may, under certain circumstances, be
transferable to family members and trusts for the benefit of the participant or
his family members.
SARs
The 2000 Plan provides that SARs may be granted in connection with the
grant of Options. Each SAR must be associated with a specific Option and must be
granted at the time of grant of such Option. An SAR is exercisable only to the
extent the related Option is exercisable. Upon the exercise of an SAR, the
recipient is entitled to receive from the Company, without the payment of any
cash (except for any applicable withholding taxes), up to, but no more than, an
amount in cash or Shares equal to the excess of (A) the fair market value of one
Share on the date of such exercise over (B) the exercise price of any related
Option, multiplied by the number of Shares in respect of which such SAR shall
have been exercised. Upon the exercise of an SAR, the related Option, or the
portion thereof in respect of which such SAR is exercised, will terminate. Upon
the exercise of an Option granted in tandem with an SAR, such tandem SAR will
terminate.
Stock Purchase Awards
The 2000 Plan also permits the grant of stock purchase awards. Participants
who are granted a stock purchase award are provided with a stock purchase loan
made by the Company to enable them to pay the purchase price for the Shares
acquired pursuant to the award. A stock purchase loan will have a term of years
to be determined by the Plan Committee and may be used only for the purchase of
Shares pursuant to a stock purchase award. The purchase price of Shares acquired
23
<PAGE>
with a stock purchase loan is the fair market value of the Shares on the date of
the award. The interest rate on a stock purchase loan will be determined by the
Plan Committee.
The 2000 Plan provides that up to 100% of the stock purchase loan may be
forgiven subject to such terms and conditions as the Plan Committee shall
determine. A participant may prepay a stock purchase loan at any time without
penalty. At the end of the stock purchase loan term, the unpaid balance of the
stock purchase loan will be due and payable. Stock purchase loans will be
secured by a pledge to the Company of the Shares purchased pursuant to the stock
purchase award and such loans will be recourse or non-recourse to a participant,
as determined from time to time by the Plan Committee.
In the event that a participant with an outstanding stock purchase loan
terminates employment with the Company because of death or disability, or in the
event of a Change in Control of the Company (as defined below), the remaining
unpaid balance of such loan shall be forgiven. In the event of any other
termination of employment, the participant shall be required to repay the entire
outstanding stock purchase loan, unless otherwise determined by the Plan
Committee.
Restricted Stock Awards
The Company may grant restricted stock awards under the 2000 Plan. Such a
grant gives a participant the right to receive Shares, subject to a risk of
forfeiture based upon certain conditions, such as performance standards, length
of service or other criteria as the Plan Committee may determine. Until all
restrictions are satisfied, lapsed or waived, the Company will maintain custody
over the restricted Shares but the participant will be able to vote the Shares
and will be entitled to all distributions paid with respect to the Shares, as
provided by the Plan Committee. During such restrictive period, the restricted
Shares may not be sold, assigned, transferred, pledged or otherwise encumbered,
other than by will or the laws of descent and distribution. If a participant
terminates employment with the Company prior to expiration of the forfeiture
period, the participant forfeits all rights to the Shares.
Performance Awards
The Plan Committee may grant, either alone or in addition to other awards
granted under the 2000 Plan, performance awards based upon a participant's job
performance. Performance awards entitle the participant to receive cash,
Options, SARs, stock purchase awards, restricted stock awards, or any other form
of property as the Plan Committee shall determine, if such participant achieves
the measures of performance or other criteria established by the Plan Committee
in its absolute discretion.
The Plan Committee may designate certain performance awards as "Qualifying
Performance Awards" intended to qualify for a tax deduction under the Code. With
respect to Qualifying Performance Awards, the Plan Committee shall establish
targets only in terms of certain specified objective measures: Share price,
earnings per Share, total shareholder return, return on equity, return on
investment, cost control, working capital, cash flow management, operating
income, gross or operating margins, cash flow margins, revenue growth,
management development, succession planning, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, net income,
market share, customer satisfaction or employee satisfaction. The maximum amount
of Qualifying Performance Awards that may be granted to any participant with
respect to each calendar year (whether or not then vested) cannot exceed
$5,000,000. Qualifying Performance Awards shall be made in a manner that
satisfies Section 162(m) of the Code.
Transferability
Generally, no unvested award under the 2000 Plan may be transferred other
than by will or the laws of descent and distribution.
24
<PAGE>
Termination of Employment
Except with respect to stock purchase awards, in the event of the
termination of employment of a participant for any reason (other than by reason
of death, disability or Change in Control of the Company), the participant will
have six months from such termination to exercise any awards vested at that
time, provided, however, that in no instance may the term of an award, as so
extended, exceed the maximum term of such award. Except for stock purchase
awards, in the event a participant dies or is disabled while employed by the
Company, any unvested awards shall immediately vest and any awards granted to
such participant not previously expired or exercised shall be exercisable within
one year after death or disability, unless earlier terminated pursuant to its
terms, provided, however, that if the term of such award would expire by its
terms within 12 months after such death or disability, the term shall be
extended until 12 months after such death or disability, provided further,
however, that in no instance may the term, as so extended, exceed the maximum
term of such award.
Change in Control
Except for stock purchase awards, in the event of a Change in Control of
the Company, any unvested awards granted to a participant shall immediately vest
and such participant shall have the unqualified right to exercise any awards
which have not been previously exercised or expired within three years after
such Change in Control of the Company. If the term of such awards would expire
by its terms within three years after such Change in Control of the Company, the
term of such awards shall be extended until three years after such Change in
Control of the Company, provided further, however, that in no instance may the
term of the awards, as so extended, exceed the maximum term of such awards.
For the purposes of the 2000 Plan, a Change in Control of the Company
occurs: (i) upon the sale of all or substantially all of the Company's assets;
(ii) if the Company merges or consolidates with another corporation, and as a
result either the Company is not the surviving corporation or less than 51% of
the outstanding voting securities of the surviving corporation are owned by the
shareholders of the Company immediately prior to such merger or consolidation;
(iii) upon the liquidation or dissolution of the Company; (iv) if any person or
group acquires a majority in interest (more than 50%) of the voting power of the
Shares of the Company, or (v) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (which includes any new directors whose nomination for
election by such Board of Directors was approved by a vote of at least 66 2/3%
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company.
Amendment and Termination
The Board of Directors may amend or modify the 2000 Plan, subject to any
required stockholder approval. However, the Board may not amend the 2000 Plan to
increase the number of Shares that may be the subject of awards under the 2000
Plan (other than for antidilution adjustments) without the approval of the
Company's stockholders.
The 2000 Plan will terminate by its terms and without any further action on
March 8, 2010. No awards may be made after that date under the 2000 Plan,
although awards outstanding under the 2000 Plan on such date will remain valid
in accordance with their terms.
25
<PAGE>
Antidilution Adjustments
The number of Shares authorized to be issued under the 2000 Plan and
subject to outstanding awards (and the grant or exercise price thereof) may be
adjusted to prevent dilution or enlargement of rights in the event of any
dividend or other distribution, recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
capitalization change.
Federal Income Tax Consequences of Options
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the 2000 Plan based on federal income
tax laws currently in effect. This summary is not intended to be exhaustive and
does not describe state, local or foreign tax consequences.
Tax Consequences to Participants
Non-Qualified Stock Options. In general: (i) no income will be recognized
by an optionee at the time a Non-Qualified Stock Option is granted; (ii) at the
time of exercise of a Non-Qualified Stock Option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the Shares and the fair market value of the Shares if they
are non-restricted on the date of exercise; and (iii) at the time of sale of
Shares acquired pursuant to the exercise of a Non-Qualified Stock Option, any
appreciation (or depreciation) in the value of the Shares after the date of
exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long the Shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. For purposes
of the alternative minimum tax, however, the difference between the option price
and the fair market value of the Common Stock on the date of exercise is an
adjustment in computing the optionee's alternative minimum taxable income. If
Shares are issued to an optionee pursuant to the exercise of an Incentive Stock
Option and no disposition of the Shares is made by the optionee within two years
after the date of grant or within one year after the transfer of the Shares to
the optionee (such disposition, a "Disqualifying Disposition"), then upon the
sale of the Shares any amount realized in excess of the option price will be
taxed to the optionee as long-term capital gain and any loss sustained will be a
long-term capital loss.
If Shares acquired upon the exercise of an Incentive Stock Option are
disposed of in a Disqualifying Disposition, then the optionee generally will
recognize ordinary income in the year of disposition in an amount equal to any
excess of the fair market value of the Shares at the time of exercise (or, if
less, the amount realized on the disposition of the Shares in a sale or
exchange) over the option price paid for the Shares.
Special Rules Applicable to Directors and Officers. In limited
circumstances where the sale of Common Stock that is received as the result of a
grant of an award could subject a director or an officer to suit under Section
16(b) of the Exchange Act, the tax consequences to the director of officer may
differ from the tax consequences described above.
26
<PAGE>
Tax Consequences to the Company or Subsidiary
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, (i) such deduction is reasonable in amount,
constitutes an ordinary and necessary business expense, is not subject to the
$1,000,000 annual compensation limitation set forth in Section 162(m) of the
Code and does not constitute an "excess parachute payment" within the meaning of
Section 280G of the Code, and (ii) any applicable withholding obligations are
satisfied.
Recommendation
The Board of Directors believes that the approval of the 2000 Plan is in
the best interests of the Company and its stockholders because the 2000 Plan
will enable the Company to provide competitive equity incentives to directors,
officers, consultants, advisors, and employees to enhance the profitability of
the Company and increase stockholder value.
The Board of Directors recommends that the stockholders vote FOR approval of the
Terex Corporation 2000 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 2001 Annual Meeting of Stockholders must be
received at the Company's offices at 500 Post Road East, Westport, Connecticut
06880, no later than December 4, 2000. 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. Accordingly, to nominate a candidate for election as a director at the
Company's 2001 annual meeting, notice must be given between February 10, 2001
and March 12, 2001. 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.
27
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS
The Company's 1999 Annual Report, which includes the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 as filed with
the SEC and the Company's financial statements for that fiscal year, 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 3, 2000
Westport, Connecticut
28
<PAGE>
Appendix A
TEREX CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") is a committee of the Board of Directors
(the "Board") of Terex Corporation (the "Company"). Its primary function is to
assist the Board in fulfilling its oversight responsibilities. The Audit
Committee charter is intended to comply with the applicable requirements of the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange
(the "NYSE").
The Audit Committee shall be responsible for overseeing the Company's financial
reporting process (including the system of internal control) and monitoring the
objectivity of the Company's internal and independent auditors. This includes a
review of the scope and results of the independent auditors' annual examination,
the internal audit activity of the Company, and other pertinent auditing and
internal control matters in conjunction with management and the independent and
internal auditors.
The independent auditor for the Company is ultimately accountable to the Board
and Committee of the Company, and the Committee and Board have the ultimate
authority and responsibility to select, replace and, where appropriate, nominate
the independent auditor to be proposed for shareholder approval in any proxy
statement.
The Committee is responsible for ensuring that the independent auditor submit on
a periodic basis to the Committee a formal written statement delineating all
relationships between the auditor and the Company, and the Committee is
responsible for actively engaging in a dialogue with the independent auditor
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditor and for recommending
that the Board take appropriate action in response to the independent auditors'
report to satisfy itself of the independent auditors' independence.
The Committee shall be composed of at least three directors, all of whom have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company. The Board may waive this
requirement in the case of one of the members of the Committee, as and to the
extent permitted by the SEC and the NYSE.
Each member of the Committee shall be financially literate, as such
qualification is interpreted by the Board in its business judgment, or must
become financially literate within a reasonable period of time after his or her
appointment to the Committee.
At least one member of the Committee must have accounting or related financial
management expertise, as the Board interprets such qualifications in its
business judgment.
In meeting its responsibilities, the Committee shall:
1. Provide an avenue of communication for the internal auditors and the
independent auditors with the Board of Directors.
2. Review and update the Committee's charter annually.
3. Recommend to the Board the annual appointment of the independent auditors,
subject to ratification by the stockholders of the Company.
Approve the annual compensation for audit services performed by the
independent auditors.
4. Review and concur in the appointment, reassignment, or discharge of the
director of internal auditing.
5. Confirm and monitor the independence of the internal auditor and the
independent auditors, including a review of management consulting services
and related fees provided by the independent auditors.
29
<PAGE>
6. Consider, in consultation with the independent auditors and the director of
internal auditing, the annual audit scope and plan.
7. Consider and discuss with the independent auditors and the director of
internal auditing the adequacy of the Company's internal accounting
controls, including computerized information system controls and security.
8. Review the following items with management and the independent auditors at
the completion of the annual examination and prior to issuance of the
financial statements:
a. The Company's annual financial statements and related footnotes.
b. The results of the independent auditors' audit of the financial
statements and the report thereon.
c. Any significant changes required in the independent auditors' audit
plan.
d. Any serious difficulties or disputes between management and the
independent auditors encountered during the course of the audit.
e. Any material weakness in internal controls and recommendations of the
independent auditors and internal auditing, together with management's
responses thereto.
9. Discuss with management and the independent auditors the interim financial
reports of the Company filed with the SEC.
10. Meet with the director of internal auditing, the independent auditors, and
management in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately with the
Committee.
11. Report Committee actions to the Board with such recommendations as the
Committee may deem appropriate.
12. Review related party transactions.
13. The Committee shall include a report in the Company's annual proxy
statement stating whether the Committee:
a. Reviewed and discussed the audited financial statements with
management.
b. Discussed with the independent auditors the matters requiring
discussion by SAS 61.
c. Received the written disclosures and letter from the independent
auditors required by Independence Standards Board Standard No. 1, and
discussed with the independent auditors their independence.
d. Based on the above, recommended to the full Board that the audited
financial statements be included in the Company's Annual Report on
Form 10-K.
The Committee shall meet three to four times during the year, for the purposes
described above and any other related purposes as needed.
The Committee will perform such other functions as assigned by law, the rules of
the NYSE, the Company's charter or bylaws, or the Board of Directors.
30
<PAGE>
APPENDIX B
TEREX CORPORATION 2000 INCENTIVE PLAN
Terex Corporation (the "Company") hereby establishes and
adopts the following 2000 Incentive Plan (the "Plan").
RECITALS
WHEREAS, the Company desires to encourage high levels of
performance by those individuals who are key to the success of the Company, to
attract new individuals who are highly motivated and who will contribute to the
success of the Company and to encourage such individuals to remain as directors,
officers, employees, consultants and/or advisors of the Company and its
subsidiaries and affiliates by increasing their proprietary interest in the
Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the
Plan embodied herein to authorize the granting of incentive awards through
grants of stock options, grants of stock appreciation rights, grants of share
purchase awards, grants of restricted share awards and grants of performance
awards to those individuals whose judgment, initiative and efforts are, have
been or are expected to be responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes
and adopts the following Plan and agrees to the following provisions:
ARTICLE I
DEFINITIONS
1.1. "Award" shall include a grant of an Option, a grant of a stock
appreciation right, a grant of a Share Purchase Award, a grant of a Restricted
Share Award, a grant of a Performance Award or any other award made under the
terms of the Plan.
1.2. "Cause" shall mean: (i) conviction in a court of law of, or guilty
plea or no contest plea to, a felony charge or a misdemeanor charge involving
moral turpitude, (ii) willful, substantial and continued failure to perform
duties, (iii) willful engagement in conduct that is demonstrably and materially
injurious to the Company, (iv) entry by a court or quasi-judicial governmental
agency of the United States or a political subdivision thereof of an order
barring an Employee from serving as an officer or director of a public company,
(v) gross negligence resulting in material economic harm to the Company, or (vi)
a breach by an Employee of any agreement between such Employee and the Company.
For the purposes of clauses, (ii), (iii) and (v) of this definition, no act or
failure to act shall be deemed "willful" or "gross negligence" (x) if caused by
a Disability or (y) unless done, or omitted to be done, not in good faith or
without reasonable belief that such act or omission was in the best interest of
the Company.
1.3. A "Change in Control of the Company" shall mean:
(i) the sale, assignment, lease, transfer or conveyance (in
one transaction or a series of transactions) of all or
substantially all of the Company's assets;
(ii) the Company shall be merged or consolidated with
another corporation, and as a result of such merger or
consolidation either (a) the Company is not the continuing or
surviving corporation or (b) less than 51% of the outstanding
voting securities of the surviving or resulting corporation shall
be owned directly or indirectly in the aggregate by the
shareholders of the Company immediately prior to such merger or
consolidation;
(iii) the liquidation or dissolution of the Company or the
adoption of a plan by the stockholders of the Company relating to
the dissolution or liquidation of the Company;
31
<PAGE>
(iv) the acquisition by any person or group (as such term is
used in Section 13(d)(3) of the Exchange Act) of a direct or
indirect majority in interest (more than 50%) of the voting power
of the Shares of the Company by way of purchase, merger or
consolidation or otherwise, or
(v) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors of the Company (which includes any new directors whose
nomination for election by such Board of Directors was approved
by a vote of at least 66 2/3% of the directors then still in
office who were either directors at the beginning of such period
or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Board of Directors of the Company.
For purposes of this Section 1.3, the term "person" shall mean any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof, or any other entity.
For purposes of Section 1.3, the rules of Section 318(a) of the Code
and the regulations issued thereunder shall be used to determine stock
ownership.
1.4. "Code" means the Internal Revenue Code of 1986, as now or
hereafter amended.
1.5. "Committee" means the committee established pursuant to Section
4.2.
1.6. "Directors" means the members of the Board of Directors of the
Company.
1.7. "Disability" means a Participant's inability to engage in any
substantial gainful activity because of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted, or can be expected to last, for a continuous period of twelve (12)
months or longer.
1.8. "Employee" means all employees of the Company or of a subsidiary
or affiliate of the Company participating in the Plan, including officers
of the Company who are also directors of the Company.
1.9. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.10. "Fair Market Value" shall have the meaning set forth in Section
10.2.
1.11. "Non-Employee Director" is a Director who is a "Non-Employee
Director" within the meaning of Rule 16b-3(b)(3)(i) of the Exchange Act.
1.12. "Option" means options to purchase Shares.
1.13. "Outside Director" is a Director who is an "outside director"
within the meaning of Section 162(m)(4)(C)(i) of the Code.
1.14. "Participant" means a person who receives an Award under the
Plan.
1.15. "Performance Awards" means cash bonuses or other Awards under
the Plan, including Options, Share Purchase Awards, Restricted Share Awards
and stock appreciation rights, based on performance measures.
1.16. "Qualifying Performance Awards" means Performance Awards which
the Committee intends to qualify for a tax deduction under the Code.
1.17. "Restricted Shares" shall have the meaning set forth in Section
8.1.
32
<PAGE>
1.18. "Restricted Share Awards" means Shares subject to restrictions
on their transfer, conditions of forfeitability, or any other limitations
or restrictions as determined by the Committee.
1.19. "Shares" means shares of Common Stock, par value $.01, of the
Company.
1.20. "Share Purchase Awards" shall have the meaning set forth in
Section 7.1.
ARTICLE 2
PURPOSE OF THE PLAN
2.1 Purpose. The purpose of the Plan is to assist the Company in
attracting and retaining selected individuals to serve as directors,
officers, consultants, advisors and Employees of the Company and its
subsidiaries and affiliates who will contribute to the Company's success
and to achieve long-term objectives which will inure to the benefit of all
stockholders of the Company through the additional incentive inherent in
the ownership of the Company's Shares. Options granted under the Plan will
be either "incentive stock options," intended to qualify as such under the
provisions of Section 422 of the Code, or "nonqualified stock options." For
purposes of the Plan, the term "subsidiary" shall mean "subsidiary
corporation," as such term is defined in Section 424(f) of the Code, and
"affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
ARTICLE 3
SHARES SUBJECT TO AWARDS
3.1. Number of Shares. Subject to the adjustment provisions of Section
10.11 hereof, the maximum number of Shares that may be delivered pursuant
to all Awards granted under this Plan shall be 2,000,000 Shares. This
aggregate Share limit, as adjusted, shall constitute and be referred to as
the "Share Limit." For purposes of this Section 3.1, the Shares that shall
be counted toward the Share Limit shall include all Shares:
(1) issued or issuable pursuant to Options that have been or may be
exercised;
(2) issued or issuable pursuant to Share Purchase Awards; and
(3) issued as, or subject to issuance as, a Restricted Share Award.
3.2. Shares Subject to Terminated Awards. The Shares covered by any
unexercised portions of terminated or expired Options granted under the
Plan, Shares covered by a Restricted Share Award that is forfeited as
provided in the Plan and Shares subject to any Awards which are otherwise
surrendered by the Participant without receiving any payment or other
benefit with respect thereto may again be subject to new Awards under the
Plan. In the event the exercise price of an Option is paid in whole or in
part through the delivery of Shares, the number of Shares issuable in
connection with the exercise of the Option shall not again be available for
the grant of Awards under the Plan. Shares subject to Options, or portions
thereof, which have been surrendered in connection with the exercise of
stock appreciation rights shall not again be available for the grant of
Awards under the Plan.
3.3. Character of Shares. Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.
3.4. Limitations on Grants to Individual Participant. Subject to
adjustments pursuant to the provisions of Section 10.11 hereof, the number
of Shares which may be granted hereunder to any Employee during any fiscal
year under all forms of Awards shall not exceed 750,000 Shares.
33
<PAGE>
ARTICLE 4
ELIGIBILITY AND ADMINISTRATION
4.1. Awards to Employees and Directors. (a) Participants shall consist
of such key officers, employees, consultants, advisors and directors of the
Company or any of its subsidiaries or affiliates as the Committee shall
select from time to time, provided, however, that an Option that is
intended to qualify as an "incentive stock option" may be granted only to
an individual that is an Employee. The Committee's designation of a
Participant in any year shall not require the Committee to designate such
person to receive Awards or grants in any other year. The designation of a
Participant to receive Awards or grants under one portion of the Plan shall
not require the Committee to include such Participant under other portions
of the Plan.
(b) No Option which is intended to qualify as an "incentive stock
option" may be granted to any Employee who, at the time of such grant,
owns, directly or indirectly (within the meaning of Sections 422(b)(6) and
424(d) of the Code), Shares possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
of its subsidiaries or affiliates, unless at the time of such grant, (i)
the exercise price is fixed at not less than 110% of the Fair Market Value
of the Shares subject to such Option, determined on the date of the grant,
and (ii) the exercise of such Option is prohibited by its terms after the
expiration of five years from the date such Option is granted.
4.2. Administration. (a) The Plan shall be administered by a committee
(the "Committee") consisting of not fewer than two Directors as designated
by the Directors. The Directors may remove from, add members to, or fill
vacancies in the Committee. Each member of the Committee shall be a
Non-Employee Director and an Outside Director, except that if the Directors
determine that (i) the Plan cannot or need not satisfy the requirements of
Rule 16b-3 of the Exchange Act (such that grants of Awards are not or need
not be exempt from Section 16(b) of the Exchange Act), then there may be
less than two members of the Committee and the members of the Committee
need not be Non-Employee Directors or (ii) they no longer want the Plan to
comply with the requirements of Section 162(m) of the Code and the
regulations thereunder or the Plan need not comply with such requirements,
then there may be less than two members of the Committee and the members of
the Committee need not be Outside Directors. The Compensation Committee of
the Board of Directors of the Company shall comprise the Committee under
the Plan so long as the members of the Compensation Committee meet the
requirements set forth in this clause (a).
(b) The Committee is authorized, subject to the provisions of the
Plan, to establish such rules and regulations as it may deem appropriate
for the conduct of meetings and proper administration of the Plan. All
actions of the Committee shall be taken by majority vote of its members.
Subject to the requirements of Section 16(b) of the Exchange Act and
Section 162(m) of the Code (in each case to the extent applicable), the
Committee in its discretion may delegate to the Chairman of the Board
and/or Chief Executive Officer of the Company the right to grant Awards
under the Plan on such terms and conditions as the Committee may from time
to time establish.
(c) Subject to the provisions of the Plan, the Committee shall have
authority, in its sole discretion, to grant Awards under the Plan, to
interpret the provisions of the Plan and, subject to the requirements of
applicable law, including (if applicable) Rule 16b-3 of the Exchange Act,
to prescribe, amend, and rescind rules and regulations relating to the Plan
or any Award thereunder as it may deem necessary or advisable. All
decisions made by the Committee pursuant to the provisions of the Plan
shall be final, conclusive and binding on all persons, including the
Company, its stockholders, Directors and Employees, and other Plan
Participants.
34
<PAGE>
ARTICLE 5
OPTIONS
5.1. Grant of Options. The Committee shall determine, within the
limitations of the Plan, those key individuals and the Directors and
Employees to whom Options are to be granted under the Plan, the number of
Shares that may be purchased under each such Option and the exercise price
of each such Option, and shall designate such Options at the time of the
grant as either "incentive stock options" or "nonqualified stock options";
provided, however, that Options granted to Employees of an affiliate (that
is not also a subsidiary) or to non-employees of the Company may only be
"nonqualified stock options."
5.2. Share Option Agreements; etc. All Options granted pursuant to the
Plan (a) shall be authorized by the Committee and (b) shall be evidenced in
writing by stock option agreements ("Share Option Agreements") in such form
and containing such terms and conditions as the Committee shall determine
which are not inconsistent with the provisions of the Plan, and, with
respect to any Share Option Agreement granting Options which are intended
to qualify as "incentive stock options," are not inconsistent with Section
422 of the Code. Granting of an Option pursuant to the Plan shall impose no
obligation on the recipient to exercise such Option. Any individual who is
granted an Option pursuant to the Plan may hold more than one Option
granted pursuant to the Plan at the same time and may hold both "incentive
stock options" and "nonqualified stock options" at the same time. To the
extent that any Option does not qualify as an "incentive stock option"
(whether because of its provisions, the time or manner of its exercise or
otherwise) such Option or the portion thereof which does not so qualify
shall constitute a separate "nonqualified stock option."
5.3. Option Exercise Price. Subject to Section 4.1(b), the exercise
price per each Share purchasable under any Option granted pursuant to the
Plan shall not be less than 100% of the Fair Market Value of such Share on
the date of the grant of such Option.
5.4. Other Provisions. Options granted pursuant to this Article 5
shall be made in accordance with the terms and provisions of Article 10
hereof and any other applicable terms and provisions of the Plan.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1. Grant and Exercise. Share appreciation rights may be granted in
conjunction with all or part of any Option granted under the Plan provided
such rights are granted at the time of the grant of such Option. A "stock
appreciation right" is a right to receive cash or Shares, as provided in
this Article 6, in lieu of the purchase of a Share under a related Option.
A stock appreciation right or applicable portion thereof shall terminate
and no longer be exercisable upon the termination or exercise of the
related Option, and a stock appreciation right granted with respect to less
than the full number of Shares covered by a related Option shall not be
reduced until, and then only to the extent that, the exercise or
termination of the related Option exceeds the number of Shares not covered
by the stock appreciation right. A stock appreciation right may be
exercised by the holder thereof in accordance with Section 6.2 by giving
written notice thereof to the Company and surrendering the applicable
portion of the related Option. Upon giving such notice and surrender, the
holder shall be entitled to receive an amount determined in the manner
prescribed in Section 6.2. Options which have been so surrendered, in whole
or in part, shall no longer be exercisable to the extent the related stock
appreciation rights have been exercised.
6.2. Terms and Conditions. Share appreciation rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the
Plan, as shall be determined from time to time by the Committee, including
the following:
(a) Share appreciation rights shall be exercisable only at such time
or times and to the extent that the Options to which they relate shall be
exercisable in accordance with the provisions of the Plan.
35
<PAGE>
(b) Upon the exercise of a stock appreciation right, a holder shall be
entitled to receive up to, but no more than, an amount in cash or whole
Shares equal to the excess of the then Fair Market Value of one Share over
the exercise price per Share specified in the related Option multiplied by
the number of Shares in respect of which the stock appreciation right shall
have been exercised. The holder of a stock appreciation right shall specify
in his written notice of exercise, whether payment shall be made in cash or
in whole Shares. Each stock appreciation right may be exercised only at the
time and so long as a related Option, if any, would be exercisable or as
otherwise permitted by applicable law.
(c) Upon the exercise of a stock appreciation right, the Option or
part thereof to which such stock appreciation right is related shall be
deemed to have been exercised for the purpose of the Share Limit.
(d) With respect to stock appreciation rights granted in connection
with an Option that is intended to be an "incentive stock option," the
following shall apply: (i) no stock appreciation right shall be
transferable otherwise than by will or by the laws of descent and
distribution, and stock appreciation rights shall be exercisable, during
the holder's lifetime, only by the holder; and (ii) stock appreciation
rights granted in connection with an Option may be exercised only when the
Fair Market Value of the Shares subject to the Option exceeds the exercise
price at which Shares can be acquired pursuant to the Option.
ARTICLE 7
STOCK PURCHASE AWARDS
7.1. Grant of Share Purchase Awards. The term "Share Purchase Award"
means the right to purchase Shares of the Company and to pay for such
Shares through a loan made by the Company to an Employee (a "Purchase
Loan") as set forth in this Article 7.
7.2. Terms of Purchase Loans. (a) Purchase Loan. Each Purchase Loan
shall be evidenced by a promissory note. The term of the Purchase Loan
shall be for a period of years as determined by the Committee, and the
proceeds of the Purchase Loan shall be used exclusively by the Participant
for purchase of Shares from the Company at a purchase price equal to their
Fair Market Value on the date of the Share Purchase Award.
(b) Interest on Purchase Loan. A Purchase Loan shall be non-interest
bearing or shall bear interest at whatever rate the Committee shall
determine (but not in excess of the maximum rate permissible under
applicable law), payable in a manner and at such times as the Committee
shall determine. Those terms and provisions as the Committee shall
determine shall be incorporated into the promissory note evidencing the
Purchase Loan.
(c) Forgiveness of Purchase Loan. Subject to Section 7.4 hereof, the
Company may forgive the repayment of up to 100% of the principal amount of
the Purchase Loan, subject to such terms and conditions as the Committee
shall determine and set forth in the promissory note evidencing the
Purchase Loan. A Participant's Purchase Loan can be prepaid at any time,
and from time to time, without penalty.
7.3. Security for Loans. (a) Stock Power and Pledge. Purchase Loans
granted to Participants shall be secured by a pledge of the Shares acquired
pursuant to the Share Purchase Award. Such pledge shall be evidenced by a
pledge agreement (the "Pledge Agreement") containing such terms and
conditions as the Committee shall determine. Purchase Loans shall be
recourse or nonrecourse with respect to a Participant, as determined from
time to time by the Committee. The share certificates for the Shares
purchased by a Participant pursuant to a Share Purchase Award shall be
issued in the Participant's name, but shall be held by the Company as
security for repayment of the Participant's Purchase Loan together with a
stock power executed in blank by the Participant (the execution and
delivery of which by the Participant shall be a condition to the issuance
of the Share Purchase Award). The Participant shall be entitled to exercise
all rights applicable to such Shares, including, but not limited to, the
right to vote such Shares and the right to receive dividends and other
distributions made with respect to such Shares; provided, however, that any
Shares distributed as a dividend or otherwise with respect to such Shares
shall be subject to the same restrictions as such Shares and held by the
Company as security for repayment of the Participant's Purchase Loan as
provided in this Section 7.3. When the Purchase Loan and any accrued but
unpaid interest thereon has been repaid or otherwise satisfied in full, the
Company shall deliver to the Participant the share certificates for the
Shares purchased by a Participant under the Share Purchase Award.
36
<PAGE>
(b) Release and Delivery of Share Certificates During the Term of the
Purchase Loan. The Company shall release and deliver to each Participant
certificates for Shares purchased by a Participant pursuant to a Share
Purchase Award, in such amounts and on such terms and conditions as the
Committee shall determine, which shall be set forth in the Pledge
Agreement.
(c) Release and Delivery of Share Certificates Upon Repayment of the
Purchase Loan. The Company shall release and deliver to each Participant
certificates for the Shares purchased by the Participant under the Share
Purchase Award and then held by the Company, provided the Participant has
paid or otherwise satisfied in full the balance of the Purchase Loan and
any accrued but unpaid interest thereon. In the event the balance of the
Purchase Loan is not repaid, forgiven or otherwise satisfied within 90 days
after (i) the date repayment of the Purchase Loan is due (whether in
accordance with its term, by reason of acceleration or otherwise), or (ii)
such longer time as the Committee, in its discretion, shall provide for
repayment or satisfaction, the Company shall retain those Shares then held
by the Company in accordance with the Pledge Agreement.
(d) Recourse Purchase Loans. Notwithstanding Sections 7.3(a), (b) and
(c) above, in the case of a recourse Purchase Loan, the Committee may make
a Purchase Loan on such terms as it determines, including without
limitation not requiring a pledge of the acquired Shares.
7.4. Termination of Employment. (a) Termination of Employment by Death
or Disability; Change in Control of the Company; Termination of Employment
Without Cause. In the event of a Participant's termination of employment by
reason of death or Disability, or in the event of a Change of Control of
the Company, the remaining unpaid amount (principal and interest) of any
outstanding Purchase Loan shall be forgiven in whole as of the date of such
occurrence.
(b) Other Termination of Employment. Subject to Section 7.4(a) above,
in the event of a Participant's termination of employment for any reason,
the Participant shall repay to the Company the entire balance of the
Purchase Loan and any accrued but unpaid interest thereon, which amounts
shall become immediately due and payable, unless otherwise determined by
the Committee.
7.5. Restrictions on Transfer. No Share Purchase Award or Shares
purchased through such an Award and pledged to the Company as collateral
security for the Participant's Purchase Loan (and accrued and unpaid
interest thereon) may be otherwise pledged, sold, assigned or transferred
(other than by will or by the laws of descent and distribution).
ARTICLE 8
RESTRICTED STOCK AWARDS
8.1. Restricted Share Awards. (a) Grant. A grant of Shares made
pursuant to this Article 8 is referred to as a "Restricted Share Award."
The Committee may grant to any Employee an amount of Shares in such manner,
and subject to such terms and conditions relating to vesting,
forfeitability and restrictions on delivery and transfer (whether based on
performance standards, periods of service or otherwise) as the Committee
shall establish (such Shares, "Restricted Shares"). The terms of any
Restricted Share Award granted under this Plan shall be set forth in a
written agreement (a "Restricted Share Agreement") which shall contain
provisions determined by the Committee and not inconsistent with this Plan.
The provisions of Restricted Share Awards need not be the same for each
Participant receiving such Awards.
(b) Issuance of Restricted Shares. As soon as practicable after the
date of grant of a Restricted Share Award by the Committee, the Company
shall cause to be transferred on the books of the Company, Shares
registered in the name of the Company, as nominee for the Participant,
evidencing the Restricted Shares covered by the Award; provided, however,
such Shares shall be subject to forfeiture to the Company retroactive to
37
<PAGE>
the date of grant, if a Restricted Share Agreement delivered to the
Participant by the Company with respect to the Restricted Shares covered by
the Award is not duly executed by the Participant and timely returned to
the Company. All Restricted Shares covered by Awards under this Article 8
shall be subject to the restrictions, terms and conditions contained in the
Plan and the Restricted Share Agreement entered into by and between the
Company and the Participant. Until the lapse or release of all restrictions
applicable to an Award of Restricted Shares, the share certificates
representing such Restricted Shares shall be held in custody by the Company
or its designee.
(c) Shareholder Rights. Beginning on the date of grant of the
Restricted Share Award and subject to execution of the Restricted Share
Agreement as provided in Sections 8.1(a) and (b), the Participant shall
become a stockholder of the Company with respect to all Shares subject to
the Restricted Share Agreement and shall have all of the rights of a
stockholder, including, but not limited to, the right to vote such Shares
and the right to receive distributions made with respect to such Shares;
provided, however, that any Shares distributed as a dividend or otherwise
with respect to any Restricted Shares as to which the restrictions have not
yet lapsed shall be subject to the same restrictions as such Restricted
Shares and shall be represented by book entry and held as prescribed in
Section 8.1(b).
(d) Restriction on Transferability. None of the Restricted Shares may
be assigned or transferred (other than by will or the laws of descent and
distribution), pledged or sold prior to lapse or release of the
restrictions applicable thereto.
(e) Delivery of Shares Upon Release of Restrictions. Upon expiration
or earlier termination of the forfeiture period without a forfeiture and
the satisfaction of or release from any other conditions prescribed by the
Committee, the restrictions applicable to the Restricted Shares shall
lapse. As promptly as administratively feasible thereafter, subject to the
requirements of the Plan, the Company shall deliver to the Participant or,
in case of the Participant's death, to the Participant's beneficiary, one
or more stock certificates for the appropriate number of Shares, free of
all such restrictions, except for any restrictions that may be imposed by
law.
8.2. Terms of Restricted Shares. (a) Forfeiture of Restricted Shares.
Subject to Section 8.2(b), all Restricted Shares shall be forfeited and
returned to the Company and all rights of the Participant with respect to
such Restricted Shares shall terminate unless the Participant continues in
the service of the Company as an Employee until the expiration of the
forfeiture period for such Restricted Shares and satisfies any and all
other conditions set forth in the Restricted Share Agreement. The Committee
in its sole discretion, shall determine the forfeiture period (which may,
but need not, lapse in installments) and any other terms and conditions
applicable with respect to any Restricted Share Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything contained in
this Article 8 to the contrary, the Committee may, in its sole discretion,
waive the forfeiture period and any other conditions set forth in any
Restricted Share Agreement under appropriate circumstances (including the
death, Disability or retirement of the Participant or a material change in
circumstances arising after the date of an Award) and subject to such terms
and conditions (including forfeiture of a proportionate number of the
Restricted Shares) as the Committee shall deem appropriate.
ARTICLE 9
PERFORMANCE AWARDS
The Committee may grant, either alone or in addition to other Awards
granted under the Plan, Performance Awards to such Participants as the Committee
authorizes on such terms as the Committee may from time to time establish. With
respect to Qualifying Performance Awards, the Committee shall establish targets
only in terms of one or more of the following objective measures: Share price,
earnings per Share, total shareholder return, return on equity, return on
investment, cost control, working capital, cash flow management, operating
income, gross or operating margins, cash flow margins, revenue growth,
management development, succession planning, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, net income,
market share, customer satisfaction or employee satisfaction. If the Committee
does not desire the Performance Award to qualify for a tax deduction, the
measures of performance or other criteria for such Performance Awards shall be
established by the Committee in its absolute discretion. Performance Awards,
including Qualifying Performance Awards, may be paid in cash, by grant of
38
<PAGE>
Options, Share Purchase Awards, Restricted Share Awards, stock appreciation
rights or any other form of property as the Committee shall determine.
Performance Awards shall entitle the Participant to receive up to a maximum of
100% of the Performance Award if the measures of performance established by the
Committee are met. The Committee shall determine the times at which Performance
Awards are to be made and all conditions of such awards. Performance Awards
shall be subject to any applicable federal, state or local withholding tax
requirements. The maximum amount of Qualifying Performance Awards that may be
granted to any Participant with respect to each calendar year (whether or not
then vested) cannot exceed $5,000,000. Qualifying Performance Awards shall be
made in a manner that satisfies Section 162(m) of the Code.
ARTICLE 10
GENERALLY APPLICABLE PROVISIONS
10.1. Option Period. Subject to Section 4.1(b), the period for which an
Option is exercisable shall not exceed ten years from the date such Option is
granted, provided, however, in the case of an Option that is not intended to be
an "incentive stock option," the Committee may prescribe a period in excess of
ten years. After the Option is granted, the option period may not be reduced,
subject to expiration due to termination of employment or a Change in Control of
the Company.
10.2. Fair Market Value. If the Shares are listed or admitted to trading on
a securities exchange registered under the Exchange Act, the "Fair Market Value"
of a Share as of a specified date shall mean the per Share closing price of the
Shares for the day immediately preceding the date as of which Fair Market Value
is being determined (or if there was no reported closing price on such date, on
the last preceding date on which the closing price was reported) reported on the
principal securities exchange on which the Shares are listed or admitted to
trading. If the Shares are not listed or admitted to trading on any such
exchange but are listed as a national market security on the NASDAQ Stock
Market, Inc. ("NASDAQ"), traded in the over-the-counter market or listed or
traded on any similar system then in use, the Fair Market Value of a Share shall
be the last sales price for the day immediately preceding the date as of which
the Fair Market Value is being determined (or if there was no reported sale on
such date, on the last preceding date on which any reported sale occurred)
reported on such system. If the Shares are not listed or admitted to trading on
any such exchange, are not listed as a national market security on NASDAQ and
are not traded in the over-the-counter market or listed or traded on any similar
system then in use, but are quoted on NASDAQ or any similar system then in use,
the Fair Market Value of a Share shall be the average of the closing high bid
and low asked quotations on such system for the Shares on the date in question.
If the Shares are not publicly traded, Fair Market Value shall be determined by
the Committee in its sole discretion using appropriate criteria, including
without limitation the respective values of other companies comparable to the
Company in terms of product lines, markets, profitability, growth rates, and
other considerations. The Committee may, in its sole discretion, seek the advice
of outside experts in connection with any such determination. An Option shall be
considered granted on the date the Committee acts to grant the Option or such
later date as the Committee shall specify.
10.3. Exercise of Awards. Vested Awards granted under the Plan shall be
exercised by the Participant thereof (or by his executors, administrators,
guardian or legal representative, as provided in Sections 10.6 and 10.7) as to
all or part of the Shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of Shares to be purchased or
stock appreciation rights to be exercised, accompanied by payment of the full
purchase price for the Shares being purchased or exercise price for the stock
appreciation rights being exercised. Full payment of such purchase price or
exercise price shall be made at the time of exercise and shall be made (i) in
cash or by certified check or bank check, (ii) with the consent of the
Committee, by delivery of a promissory note in favor of the Company upon such
terms and conditions as determined by the Committee, (iii) with the consent of
Committee, by tendering previously acquired Shares (valued at Fair Market Value,
as determined by the Committee as of the date of tender), (iv) if the Shares are
traded on a national securities exchange, NASDAQ or quoted on a national
quotation system sponsored by the National Association of Securities Dealers,
Inc. and the Committee authorizes exercise through the delivery of irrevocable
instructions to a broker, to deliver promptly to the Company an amount of Shares
having a Fair Market Value equal to the purchase price, or (v) with the consent
of the Committee, any combination of (i), (ii), (iii) and (iv); provided,
however, that payment may not be pursuant to (iii) above unless the Participant
shall have owned the Shares being tendered in payment for a period of at least
39
<PAGE>
six months prior to the date of exercise of the Option or stock appreciation
right. In connection with a tender of previously acquired Shares pursuant to
clause (iii) above, the Committee, in its sole discretion, may permit the
Participant to constructively exchange Shares already owned by the Participant
in lieu of actually tendering such Shares to the Company, provided that adequate
documentation concerning the ownership of the Shares to be constructively
tendered is furnished in form satisfactory to the Committee. The notice of
exercise, accompanied by such payment, shall be delivered to the Company at its
principal business office or such other office as the Committee may from time to
time direct, and shall be in such form, containing such further provisions
consistent with the provisions of the Plan, as the Committee may from time to
time prescribe. In no event may any Award granted hereunder be exercised for a
fraction of a Share. The Company shall effect the transfer of Shares purchased
pursuant to an Award as soon as practicable, and, within a reasonable time
thereafter, such transfer shall be evidenced on the books of the Company. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date of such issuance.
10.4. Non-Transferability of Awards. Except as provided in Section 10.12,
no unvested Award or Award subject to a forfeiture period shall be assignable or
transferable by the Participant, other than by will or the laws of descent and
distribution.
10.5. Termination of Employment. Except with respect to Share Purchase
Awards covered by Section 7.4, in the event of the termination of employment of
a Participant or the termination or separation from service of an advisor or
consultant or a Director (who is a Participant) for any reason (other than by
reason of death, Disability or Change in Control of the Company as provided
below), the term of any Awards granted to such Participant under this Plan and
not previously exercised or expired, to the extent vested on the date of or as a
result of such termination, shall expire six (6) months after the date of such
termination or separation, provided, however, that in no instance may the term
of an Award, as so extended, exceed the maximum term established pursuant to
Section 4.1(b)(ii) or 10.1 above.
10.6. Death. Except for Share Purchase Awards covered by Section 7.4, in
the event a Participant dies while employed or otherwise engaged by the Company
or any of its subsidiaries or affiliates or during his term as a Director of the
Company or any of its subsidiaries or affiliates, as the case may be, (i) any
unvested Awards granted to such Participant under the Plan shall immediately
vest and (ii) any Awards granted to such Participant not previously expired or
exercised shall be exercisable by the estate of such Participant or by any
person who acquired such Option by bequest or inheritance, at any time within
one year after the death of such Participant, unless earlier terminated pursuant
to its terms, provided, however, that if the term of such Option would expire by
its terms within twelve (12) months after such Participant's death, the term of
such Option shall be extended until twelve (12) months after such Participant's
death, provided further, however, that in no instance may the term of the
Option, as so extended, exceed the maximum term established pursuant to Section
4.1(b)(ii) or 10.1 above.
10.7. Disability. Except for Share Purchase Awards covered by Section 7.4,
the event of the termination of employment of a Participant or the separation
from service of a Director (who is a Participant) due to Disability, (i) any
unvested Awards granted to such Participant shall immediately vest and (ii) such
Participant, or his guardian or legal representative, shall have the unqualified
right to exercise any Awards which have not been previously exercised or expired
at any time within one year after such termination or separation, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Award would expire by its terms within twelve (12) months after such termination
or separation, the term of such Award shall be extended until twelve (12) months
after such termination or separation, provided further, however, that in no
instance may the term of the Award, as so extended, exceed the maximum term
established pursuant to Section 4.1(b)(ii) or 10.1 above.
10.8. Change in Control of the Company. Except for Share Purchase Awards
covered by Section 7.4, in the event of a Change in Control of the Company, (i)
any unvested Awards granted to a Participant shall immediately vest and (ii)
such Participant shall have the unqualified right to exercise any Awards which
have not been previously exercised or expired within three (3) years after such
Change in Control of the Company, provided, however, that if the term of such
Awards would expire by its terms within three (3) years after such Change in
Control of the Company, the term of such Awards shall be extended until three
(3) years after such Change in Control of the Company, provided further,
40
<PAGE>
however, that in no instance may the term of the Awards, as so extended, exceed
the maximum term established pursuant to Section 4.1(b)(ii) or 10.1 above.
10.9. Six-Month Holding Period. Notwithstanding anything to the contrary in
the Plan, each Option (or the Shares underlying the Option) granted to an
individual who is subject to Section 16 of the Exchange Act, must be held by
such individual for a combined period of at least six (6) months from the date
the Option is granted (or until such earlier date as satisfies any legal
requirement for exemption under Rule 16b-3 of the Exchange Act and as satisfies
all other applicable law); provided that the sale, transfer or other disposition
of any Shares underlying any such Option shall be permitted within such period
to the extent the sale, transfer or other disposition is exempt under Rule 16b-3
of the Exchange Act and all other applicable law.
10.10 Amendment and Modification of the Plan. The Board of Directors of the
Company may, from time to time, alter, amend, suspend or terminate the Plan as
it shall deem advisable, subject to any requirement for stockholder approval
imposed by applicable law or any rule of any stock exchange or quotation system
on which Shares are listed or quoted; provided that the Board of Directors may
not, without the approval of the Company's stockholders, (a) amend the Plan to
increase the number of Shares that may be the subject of Awards under the Plan
(except for adjustments pursuant to Section 10.11) or (b) amend the exercise
price of any Option granted to an amount lower than the exercise price of such
Option on the date of grant. In addition, no amendments to, or termination of,
the Plan shall in any way impair the rights of a Participant under any Award
previously granted without such Participant's consent.
10.11. Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Awards
have been or may be issued under the Plan, such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as the Committee may deem
equitable, adjust any or all of (i) the number and type of Shares that
thereafter may be made the subject of Awards, (ii) the number and type of Shares
subject to outstanding Awards, and (iii) the grant or exercise price with
respect to any Award, or, if deemed appropriate, make provision for a cash
payment to the holder of any outstanding Award; provided, in each case, that
with respect to "incentive stock options," no such adjustment shall be
authorized to the extent that such adjustment would cause such options to
violate Section 422(b) of the Code or any successor provision; and provided
further, that the number of Shares subject to any Award denominated in Shares
shall always be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination involving the
Company (each, a "Reorganization"), the Committee may cause any Award
outstanding as of the effective date of the Reorganization to be canceled in
consideration of a cash payment or alternate Award made to the holder of such
canceled Award equal in value to the fair market value of such canceled Award.
The determination of fair market value shall be made by the Committee, as the
case may be, in its sole discretion.
10.12. Other Provisions. Notwithstanding anything in this Plan to the
contrary, if the Board of Directors determines that the Plan cannot, or that an
Award need not, satisfy the requirements of Rule 16b-3 of the Exchange Act (such
that grants of Awards are not or need not be exempt from Section 16(b) of the
Exchange Act), then the Committee shall have the authority to waive or modify
those provisions of the Plan which are intended to satisfy such Rule 16b-3
requirements. In addition, the Committee may allow a Participant who has been
granted "nonqualified stock options" and any stock appreciation rights granted
in tandem therewith to transfer any or all of such Options (along with any
tandem stock appreciation rights) to a Family Member (defined below) in whole or
in part and in such circumstances, and under such conditions as specified by the
Committee. An Award that is transferred to a Family Member pursuant to the
preceding sentence (i) may not be subsequently transferred otherwise than by
will or by the laws of descent and distribution and (ii) remains subject to the
terms of this Plan and the Award agreement. "Family Member" means, solely to the
extent provided for in Securities Act Form S-8, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
41
<PAGE>
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee's household (other than a tenant or employee), a trust in
which these persons have more than 50% of the beneficial interest, a foundation
in which these persons (or the employee) control the management of assets, and
any other entity in which these persons (or the employee) own more than 50% of
the voting interests or as otherwise defined in Securities Act Form S-8. The
Company shall cooperate with a Participant's transferee and the Company's
transfer agent in effectuating any transfer permitted pursuant to this Section
10.12.
ARTICLE 11
MISCELLANEOUS
11.1. Tax Withholding. The Company shall have the right to make all
payments or distributions made pursuant to the Plan to a Participant (or
permitted transferee) net of any applicable federal, state and local withholding
taxes arising as a result of the grant of any Award, exercise of an Option or
stock appreciation rights or any other event occurring pursuant to this Plan.
The Company shall have the right to withhold from such Participant (or permitted
transferee) such withholding taxes as may be required by law, or to otherwise
require the Participant (or permitted transferee) to pay such withholding taxes.
If the Participant (or permitted transferee) shall fail to make such tax
payments as are required, the Company or its subsidiaries or affiliates shall,
to the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Participant (or permitted transferee)
or to take such other action as may be necessary to satisfy such withholding
obligations. In satisfaction of the requirement to pay withholding taxes, the
Participant (or permitted transferee) may make a written election, which may be
accepted or rejected in the discretion of the Committee, to have withheld a
portion of the Shares then issuable to the Participant (or permitted transferee)
pursuant to the Plan, having an aggregate Fair Market Value equal to the
withholding taxes.
11.2. Right of Discharge Reserved. Nothing in the Plan nor the grant of an
Award hereunder shall confer upon any Employee, Director or other individual the
right to continue in the employment or service of the Company or any subsidiary
or affiliate of the Company or affect any right that the Company or any
subsidiary or affiliate of the Company may have to terminate the employment or
service of (or to demote or to exclude from future Awards under the Plan) any
such Employee, Director or other individual at any time for any reason. Except
as specifically provided by the Committee, the Company shall not be liable for
the loss of existing or potential profit from an Award granted in the event of
termination of an employment or other relationship even if the termination is in
violation of an obligation of the Company or any subsidiary or affiliate of the
Company to the Employee or Director.
11.3. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
subsidiary or affiliate of the Company. Any income or gain realized pursuant to
Awards under the Plan constitutes a special incentive payment to the Participant
and shall not be taken into account, to the extent permissible under applicable
law, as compensation for purposes of any of the employee benefit plans of the
Company or any subsidiary or affiliate of the Company except as may be
determined by the Committee or by the Directors or directors of the applicable
subsidiary or affiliate of the Company.
11.4. Severability. If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan shall
be held unlawful or otherwise invalid or unenforceable, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.
11.5. Gender and Number; Definition of Company. In order to shorten and to
improve the understandability of the Plan document by eliminating the repeated
usage of such phrases as "his or her" and any masculine terminology herein shall
42
<PAGE>
also include the feminine, and the definition of any term herein in the singular
shall also include the plural except when otherwise indicated by the context. In
addition, the term Company as used herein shall include subsidiaries and
affiliates of Terex Corporation where the context makes such inclusion
appropriate.
11.6. Governing Law. The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Delaware and
construed accordingly.
11.7. Effective Date of the Plan; Termination of the Plan. (a) The Plan
shall be effective on the date of the approval of the Plan by the holders of a
majority of the Shares present in person or by proxy at a duly constituted
meeting of the stockholders; provided, however, that the adoption of the Plan is
subject to such stockholder approval within 12 months after the date of adoption
of the Plan by the Board of Directors. The Plan shall be null and void and of no
effect if the foregoing condition is not fulfilled and in such event any Award
made under and pursuant to this Plan shall, notwithstanding any of the preceding
provisions of the Plan, be null and void and of no effect.
(b) Awards may be granted under the Plan at any time and from time to time
after the effective date of the Plan and on or prior to March 8, 2010, on which
date the Plan will terminate except as to Awards then outstanding under the
Plan. Such outstanding Awards shall remain in effect and unimpaired until they
have been exercised or have terminated or expired.
11.8. Captions. The captions in this Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
43
<PAGE>
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the Annual Meeting of Stockholders,
you can ensure that your shares are represented at the meeting by completing,
signing and returning your proxy card below.
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
TEREX CORPORATION
May 11, 2000
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 ------------>[__________________]
1
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TEREX CORPORATION
2000 ANNUAL MEETING
The undersigned hereby appoints 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, on May 11, 2000, at the Hyatt Regency Greenwich, 1800 East
Putnam Avenue, Old Greenwich, Connecticut, and any adjournment or postponement
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 2000
INCENTIVE PLAN IN ITEM 3 AND IN THE DISCRETION OF THE BOARD OF DIRECTORS IN
CONNECTION WITH ITEM 4.
Please mark your votes as in this example. [X]
The Board of Directors recommends a vote FOR the election as directors of
the named nominees and FOR Items 2 and 3.
1. ELECTION OF DIRECTORS: NOMINEES: Ronald M. DeFeo, G. Chris Andersen, Don
DeFosset, William H. Fike, Dr. Donald P.
Jacobs, Marvin B. Rosenberg, David A. Sachs
FOR all WITHHOLD (INSTRUCTION: To withhold authority
nominees AUTHORITY to vote for an individual nominee,
listed at right to vote for all write that nominee's name on the
nominees listed at right space provided below.)
[ ] [ ]
___________________________________
2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF THE TEREX CORPORATION 2000 INCENTIVE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY.
4. Upon such other business as may properly come before the
meeting or any adjournments or postponements, hereby
revoking any proxy heretofore given.
-----------------------------------------
(Stockholder's Signature)
-----------------------------------------
(Stockholder's Signature)
Dated ______________________________, 2000
Please sign exactly as your name appears above and date. When
signing as attorney, executor, administrator, trustee, guardian
or as an officer signing for a corporation, please give your full
title. If stock is held jointly, each owner must sign.
2
<PAGE>
