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Exhibit 10.2
Caterpillar Inc.
2006 Long-Term Incentive Plan
(Amended
and Restated through Third Amendment)
Section
1.
Establishment, Objectives and Duration
1.1.
Establishment
. Subject to the
approval of the stockholders of Caterpillar Inc., a Delaware
corporation (the “Company”), the Company has
established the Caterpillar Inc. 2006 Long-Term Incentive Plan (the
“Plan”), as set forth herein. The Plan
supersedes and replaces all prior equity and non-equity long-term
incentive compensation plans or programs maintained by the Company;
provided that, any prior plans of the Company shall remain in
effect until all awards granted under such prior plans have been
exercised, forfeited, canceled, expired or otherwise terminated in
accordance with the terms of such grants .
1.2.
Purpose .
The Plan is intended to provide certain present and
future employees and Directors cash-based incentives, stock-based
incentives and other equity interests in the Company thereby giving
them a stake in the growth and prosperity of the Company and
encouraging the continuance of their services with the Company or
its Subsidiaries.
1.3.
Effective Date . The Plan is effective as of the later of
(a) the date the Plan is adopted by the Board or (b) the date the
Company’s stockholders approve the Plan (the “Effective
Date”). The Plan will be deemed to be approved by
the stockholders if it receives the affirmative vote of the holders
of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting duly held in
accordance with the applicable provisions of the Certificate of
Incorporation or Bylaws of the Company.
1.4.
Duration .
The
Plan shall remain in effect, subject to the right of the
Company’s Board of Directors to amend or terminate the Plan
at any time pursuant to Section 16, until all Shares subject to the
Plan shall have been purchased or granted according to the
Plan’s provisions. However, in no event may an
Award be granted under the Plan on or after the tenth anniversary
of the Effective Date. Upon termination of the Plan, no
Awards may be granted but Awards previously granted shall remain
outstanding in accordance with the terms of the Plan and the
applicable Award Document.
Section
2.
Definitions and Construction
When a
word or phrase appears in the Plan with the initial letter
capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the
meaning ascribed to it in this Section unless a clearly
different meaning is required by the context. The
following words and phrases shall have the following
meanings:
2.1. “
Award ”
means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares or
Performance Units.
2.2. “
Award Document ”
means any agreement, contract, or other written instrument that
evidences an Award granted to the Participant under the Plan and
sets forth the terms and provisions applicable to such
Award.
2.3. “
Award Gain ”
means (a) with respect
to a given Option exercise, the product of (X) the excess of the
Fair Market Value of a Share on the date of exercise over the
Option Price times (Y) the number of shares as to which the Option
was exercised at that date, and (b) with respect to any other
settlement of an Award granted to the Participant, the Fair Market
Value of the cash or Shares paid or payable to the Participant
(regardless of any elective deferral pursuant to Section 13) less
any cash or the Fair Market Value of any Shares or property (other
than an Award that would have itself then been forfeitable
hereunder and excluding any payment of tax withholding) paid by the
Participant to the Company as a condition of or in connection such
settlement.
2.4. “
Board ”
.
means the Board of Directors of the Company.
2.5. “
Cause ”
.
means, except as otherwise provided in an Award Document, a willful
engaging in gross misconduct materially and demonstrably injurious
to the Company. For this purpose, “willful”
means an act or omission in bad faith and without reasonable belief
that such act or omission was in or not opposed to the best
interests of the Company.
2.6. “
Change of Control ”
. means the
occurrence of any of the following events: (a) any person becomes
the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 15 percent or more of the combined voting
power of the Company’s then outstanding common stock, unless
the Board by resolution negates the effect of this provision in a
particular circumstance, deeming that resolution to be in the best
interests of Company stockholders; (b) during any period of two
consecutive years, there shall cease to be a majority of the Board
comprised of individuals who at the beginning of such period
constituted the Board; (c) the stockholders of the Company approve
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
representing (either by remaining outstanding or by being converted
into voting securities of the surviving entity) less than fifty
percent of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after
such merger or consolidation; or (d) Company stockholders approve a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of
its assets.
2.7. “
Code ”
. means
the Internal Revenue Code of 1986, as amended from time to time, or
any successor legislation thereto.
2.8. “
Committee ”
.
means the Compensation Committee of the Board, appointed to
administer the Plan, as provided in Section 3.
2.9. “
Company ”
. means
Caterpillar Inc., a Delaware corporation, and any successor to such
entity as provided in Section 18.
2.10. “
Director ”
. means any
individual who is a member of the Board.
2.11. “
Disability ”
. means,
unless otherwise provided for in an employment, change of control
or similar agreement in effect between the Participant and the
Company or a Subsidiary or in an Award Document, (a) in the case of
an Employee, the Employee qualifying for long-term disability
benefits under any long-term disability program sponsored by the
Company or Subsidiary in which the Employee participates, and (b)
in the case of a Director, the inability of the Director to engage
in any substantial gainful business activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death, or which has lasted or can be expected
to last for a continuous period of not less than 12 months, as
determined by the Committee, based upon medical
evidence.
2.12. “
Effective Date ”
. means
the date specified in Section 1.3.
2.13. “
Employee ”
. means
any employee of the Company or any Subsidiary.
2.14. “
Exchange Act ”
. means the
Securities Exchange Act of 1934, as amended from time to time, or
any successor act thereto.
2.15. “
Fair Market Value ”
. means, as of
any given date, the fair market value of a Share on a particular
date determined by such methods or procedures as may be established
from time to time by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of a Share as of
any date shall be the mean between the high and low prices at which
the Share is traded on the New York Stock Exchange for that date
or, if no prices are reported for that date, the prices on the next
preceding date for which prices were
reported. Notwithstanding the foregoing, unless
otherwise determined by the Committee, for purposes of Section
6.5(d) of the Plan, Fair Market Value means the actual price at
which the Shares used to acquire Shares are sold.
2.16. “
Family Member ”
means any (a) child; (b) stepchild; (c) grandchild; (d) parent; (e)
stepparent; (f) grandparent; (g) spouse; (h) former spouse; (i)
sibling; (j) niece; (k) nephew; (l) mother-in-law; (m)
father-in-law; (n) son-in-law; (o) daughter-in-law; (p)
brother-in-law; or (q) sister-in-law of the Participant (including
adoptive relationships). Family Member also shall mean
any person sharing in the Participant’s household (other than
a tenant or an employee).
2.17. “
Good Reason ”
.
means, except as otherwise provided in an Award Document, the
occurrence of any of the following circumstances (unless such
circumstances are fully corrected by the Company before a
Participant’s termination of employment):
(a)
the
Company’s assignment of any duties materially
inconsistent with the Participant’s position within the
Company, or which have a significant adverse alteration in the
nature or status of the responsibilities of the
Participant’s employment; or
(b)
a
material reduction by the Company in the Participant’s
annual base salary, unless such reduction is part of a
compensation reduction program affecting all similarly
situated management employees.
2.18. “
Incentive Stock Option ”
. or
“
ISO ”
means the right to purchase Shares pursuant terms and conditions
that provide that such right will be treated as an incentive stock
option within the meaning of Code Section 422, as described in
Section 6.
2.19. “
Long Service Separation ”
means, except as otherwise provided in an Award Document, a
termination of employment with the Company or a Subsidiary after
the attainment of age 55 and the completion of ten or more years of
service with the Company and/or its Subsidiaries.
2.20. “
Named Executive Office r”
. means
a Participant who is one of the group of covered employees as
defined in the regulations promulgated under Code Section 162(m),
or any successor provision or statute.
2.21. “
Nonqualified Stock Option ”
. or
“
NQSO ”
. means the
right to purchase Shares pursuant to terms and conditions that
provide that such right will not be treated as an Incentive Stock
Option, as described in Section 6.
2.22. “
Option ”
. means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Section 6.
2.23. “
Option Price ”
. means
the per share price of a Share available for purchase pursuant to
an Option.
2.24. “
Participant ”
. means an Employee, prospective Employee, Director,
beneficiary or any other person who has outstanding an Award
granted under the Plan, and includes those former Employees and
Directors who have certain post-termination rights under the terms
of an Award granted under the Plan.
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2.25. “
Performance-Based Exception ”
. means
the exception for performance-based compensation from the tax
deductibility limitations of Code Section 162(m).
2.26. “
Performance Period ”
. means
the time period during which performance goals must be achieved
with respect to an Award, as determined by the
Committee.
2.27. “
Performance Share ”
. means an
Award granted to a Participant, as described in Section
9.
2.28. “
Performance Unit ”
. means
an Award granted to a Participant, as described in Section
9.
2.29. “
Period of Restriction ”
. means the
period during which the transfer of Shares of Restricted Stock is
limited in some way, and the Shares are subject to a substantial
risk of forfeiture, as provided in Section 8.
2.30. “
Permitted Transferee ”
means any one or more of the following: (a) Family Members; (b) a
trust in which the Participant and/or Family Members have more than
fifty percent of the beneficial interest; (c) a foundation in which
the Participant and/or Family Members control the management of the
assets; or (d) any other entity in which the Participant and/or
Family Members own more than fifty percent of the voting
interests.
2.31. “
Plan ”
. means the
Caterpillar Inc. 2006 Long-Term Incentive Plan, as set forth
herein.
2.32. “
Restricted Stock ”
. means
an Award granted to a Participant pursuant to
Section 8.
2.33. “
Section 16 Officer ”
means any Employee who is considered an officer of the Company for
purposes of Section 16 of the Exchange Act.
2.34. “
Share ”
or
“
Shares ”
. means
shares of common stock of the Company.
2.35. “
Stock Appreciation Right ”
or
“
SAR ”
. means an
Award, granted alone or in connection with a related Option,
designated as an SAR, pursuant to the terms of Section
7.
2.36. “
Subsidiary ”
. means any
corporation, partnership, joint venture, affiliate, or other entity
in which the Company is at least a majority-owner of all issued and
outstanding equity interests or has a controlling
interest.
2.37. “
Tandem SAR ”
. means a SAR
that is granted in connection with a related Option pursuant to
Section 7, the exercise of which shall require forfeiture of the
right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly
be forfeited).
2.38. “
Non-Tandem SAR ”
. means
a SAR that is granted independently of any Options, as described in
Section 7.
Section
3.
Administration
3.1.
Plan Administration . The
Committee, or any other committee appointed by the Board, shall
administer the Plan. The Committee or other committee
appointed to administer the Plan shall consist of not less than two
non-Employee Directors of the Company, within the meaning of Rule
16b-3 of the Exchange Act and not less than two outside directors,
within the meaning of Code Section 162(m). The Board
may, from time to time, remove members from, or add members to, the
Committee. Members of the Board shall fill any vacancies
on the Committee. Acts of a majority of the Committee at
a meeting at which a quorum is present, or acts reduced to or
approved in writing by unanimous consent of the members of the
Committee, shall be valid acts of the Committee.
Page 4
3.2.
Authority of the Committee .
Except as limited by law or by the Certificate of
Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select
Employees, prospective Employees and Directors who shall
participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent
with the Plan; construe and interpret the Plan and any agreement or
instrument entered into under the Plan; establish, amend, or waive
rules and regulations for the Plan’s administration; and
amend the terms and conditions of any outstanding Award to the
extent such terms and conditions are within the sole discretion of
the Committee as provided in the Plan and subject to Section
16. Further, the Committee shall make all other
determinations, which may be necessary or advisable for the
administration of the Plan. As permitted by law, the
Committee may delegate the authority granted to it
herein.
3.3.
Electronic Administration . The Committee may, in its
discretion, utilize a system for complete or partial electronic
administration of the Plan and may replace any written documents
described in the Plan with electronic counterparts, as
appropriate.
3.4.
Decisions Binding . All
determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders and resolutions of
the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, Participants,
and their estates and beneficiaries.
Section
4.
Shares Subject to the Plan and Maximum Awards
4.1.
Shares
Available for Awards .
(a)
The
Shares available for Awards may be either authorized and
unissued Shares or Shares held in or acquired for the treasury
of the Company. The aggregate number of Shares that
may be issued or used for reference purposes under the Plan or
with respect to which Awards may be granted shall not exceed
twenty million (20,000,000) Shares, subject to adjustment as
provided in Section 4.3. In addition, seventeen
million six hundred thousand (17,600,000) Shares authorized
but unissued pursuant to the Caterpillar Inc. 1996 Stock
Option and Long-Term Incentive Plan shall be reserved and
available for grant under the Plan. Notwithstanding
the foregoing, the aggregate number of Shares with respect to
which ISOs may be granted shall not exceed the number
specified above, and provided further, that up to an aggregate
of twenty percent (20%) of the authorized Shares under the
Plan may be issued with respect to Awards of Restricted Stock
and up to an aggregate of twenty percent (20%) of the
authorized Shares under the Plan may be issued with respect to
Awards of Performance Shares.
(b)
Upon:
(i) a payout of a Non-Tandem
SAR or Tandem SAR in the form of cash ;
(ii)
a
cancellation, termination, expiration, forfeiture, or lapse
for any reason (with the exception of the termination of a
Tandem SAR upon exercise of the related Options, or the
termination of a related Option upon exercise of the
corresponding Tandem SAR) of any Award; or
(iii)
payment
of an Option Price or payout of any Award with previously
acquired Shares or by withholding Shares which otherwise would
be acquired on exercise or issued upon such
payout,
Page 5
the
number of Shares underlying any such Award that were not
issued as a result of any of the foregoing actions shall again
be available for the purposes of Awards under the
Plan. In addition, in the case of any Award granted
in substitution for an award of a company or business acquired
by the Company or a Subsidiary, Shares issued or issuable in
connection with such substitute Award shall not be counted
against the number of Shares reserved under the Plan, but
shall be available under the Plan by virtue of the
Company’s assumption of the plan or arrangement of the
acquired company or business.
4.2.
Individual Participant Limitations .
Unless and until the Committee determines that an Award
to a Named Executive Officer shall not be designed to comply with
the Performance-Based Exception, the following rules shall apply to
grants of such Awards under the Plan:
(a)
Subject
to adjustment as provided in Section 4.3, the maximum
aggregate number of Shares (including Options, SARs,
Restricted Stock and Performance Shares to be paid out in
Shares) that may be granted in any one fiscal year to a
Participant shall be 800,000 Shares.
(b)
Except
as otherwise provided in Section 7.5(b) regarding SAR
exercise, the maximum aggregate cash payout (including
Performance Units and Performance Shares paid out in cash)
with respect to Awards granted in any one fiscal year that may
be made to any Participant shall be $5 million.
4.3.
Adjustments in Authorized Shares .
In the event of any change in corporate capitalization,
such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the
definition of such term in Code Section 368) or any partial or
complete liquidation of the Company, an adjustment shall be made in
the number and class of Shares available for Awards, the number and
class of and/or price of Shares subject to outstanding Awards
granted under the Plan and the number of Shares set forth in
Sections 4.1 and 4.2, to prevent dilution or enlargement of
rights. Such adjustment shall be made in a manner
determined by the Committee, in its sole discretion, to be
appropriate and equitable; provided, however, that (a) no such
adjustment shall cause an increase in the fair value of an Award
for purposes of Statement of Financial Accounting Standards No. 123
(revised 2004) or any successor thereto; and (b) the number of
Shares subject to any Award shall always be a whole number by
rounding any fractional Share (up or down) to the nearest whole
Share.
Section
5.
Eligibility and Participation
5.1.
Eligibility . Persons eligible
to participate in the Plan include all current and future Employees
(including officers), persons who have been offered employment by
the Company or a Subsidiary (provided that such prospective
Employee may not receive any payment or exercise any right relating
to an Award until such person begins employment with the Company or
Subsidiary), and Directors, as determined by the
Committee.
5.2.
Participation . Subject to the
provisions of the Plan, the Committee shall determine and
designate, from time to time, the Employees, prospective Employees,
and Directors to whom Awards shall be granted, the terms of such
Awards, and the number of Shares subject to such
Award.
Page 6
5.3.
Foreign Participants . In order to assure the
viability of Awards granted to Participants employed in foreign
countries, the Committee may provide for such special terms as it
may consider necessary or appropriate to accommodate differences in
local law, tax policy, or custom. Moreover, the
Committee may approve such supplements to, or amendments,
restatements, or alternative versions of the Plan as it may
consider necessary or appropriate for such purposes without thereby
affecting the terms of the Plan as in effect for any other purpose;
provided, however, that no such supplements, amendments,
restatements, or alternative versions shall increase the share
limitations contained in Section 4 of the Plan.
Section
6.
Stock Options
6.1.
Grant of
Options .
(a)
Option Grant . Subject to the
terms and provisions of the Plan, Options may be granted to one or
more Participants in such number, upon such terms and provisions,
and at any time and from time to time, as determined by the
Committee, in its sole discretion. The Committee may
grant either Nonqualified Stock Options or (in the case of Options
granted to Employees) Incentive Stock Options, and shall have
complete discretion in determining the number of Options of each
granted to each Participant, subject to the limitations of Section
4. Each Option grant shall be evidenced by a resolution
of the Committee approving the Option grant.
(b)
Award Document . All Options
shall be evidenced by an Award Document. The Award
Document shall specify the Option Price, the term of the Option,
the number of Shares subject to the Option, and such other
provisions as the Committee shall determine, and which are not
inconsistent with the terms and provisions of the
Plan. The Award Document shall also specify whether the
Option is to be treated as an ISO within the meaning of Code
Section 422. If such Option is not designated as an ISO,
such Option shall be a NQSO.
6.2.
Option Price . The Committee
shall designate the Option Price for each Share subject to an
Option under the Plan, provided that such Option Price shall not be
less than 100% of the Fair Market Value of Shares subject to an
Option on the date the Option is granted, and which Option Price
may not be subsequently changed by the Committee except pursuant to
Section 4.3. With respect to a Participant who owns,
directly or indirectly, more than 10% of the total combined voting
power of all classes of the stock of the Company or any Subsidiary,
the Option Price of Shares subject to an ISO shall be at least 110%
of the Fair Market Value of such Shares on the ISO’s grant
date.
6.3.
Term of Options . Each Option
granted to a Participant shall expire at such time as the Committee
shall determine at the time of grant, but in no event shall be
exercisable later than the 10th anniversary of the grant
date. Notwithstanding the foregoing, with respect to
ISOs, in the case of a Participant who owns, directly or
indirectly, more than 10% of the total combined voting power of all
classes of the stock of the Company or any Subsidiary, no such ISO
shall be exercisable later than the fifth
anniversary of the grant date.
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6.4.
Exercise of Options . Options granted
under this Section 6 shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall
in each instance approve, which need not be the same for each grant
or for each Participant, and shall be set forth in the applicable
Award Document. Notwithstanding the preceding sentence,
the Fair Market Value of Shares to which ISOs are exercisable for
the first time by any Participant during any calendar year (under
all plans of the Company and its Subsidiaries) may not exceed
$100,000. Any ISOs that become exercisable in excess of
such amount shall be deemed NQSOs to the extent of such
excess. If the Award Document does not specify the time
or times at which the Option shall first become exercisable, such
an Option shall become fully vested and exercisable by the
Participant on the third anniversary of the grant
date.
6.5.
Payment . Options granted
under this Section 6 shall be exercised by the delivery of a notice
of exercise to the Company (or its designated agent(s)), setting
forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the
Shares. The Option Price upon exercise of any Option
shall be payable to the Company in full either:
(a)
in cash
or its equivalent, or
(b)
by
tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option
Price, or
(c)
by
cashless exercise through delivery of irrevocable instructions
to a broker to promptly deliver to the Company the amount of
proceeds from a sale of shares having a Fair Market Value
equal to the purchase price.
6.6.
Termination of Employment or Service as a Director
.
The
Committee, in its sole discretion, shall set forth in the
applicable Award Document the extent to which a Participant shall
have the right to exercise the Option or Options following
termination of his or her employment with the Company or any
Subsidiary or following termination of his or her service as a
Director. Such provisions need not be uniform among all
Options issued pursuant to the Plan, and may reflect distinctions
based on the reasons for such termination, including, but not
limited to, termination for Cause or for Good Reason, or reasons
relating to the breach or threatened breach of restrictive
covenants. Subject to Section 15, in the event that
a Participant’s Award Document does not set forth such
provisions, the following provisions shall apply:
(a)
Long
Service Separation, Death or Disability . If a
Participant’s employment with the Company and/or any
Subsidiary or service as a Director terminates by reason of
Long Service Separation, death or Disability, to the extent
that the Option is not exercisable, all Shares covered by his
or her Options shall immediately become fully vested and shall
remain exercisable until the earlier of (i) the remainder of
the term of the Option, or (ii) 60 months from the date of
such termination. In the case of the
Participant’s death, the Participant’s beneficiary
or estate may exercise the Option.
(b)
Termination
for Cause . If a
Participant’s employment with the Company and/or any
Subsidiary or service as a Director terminates for Cause, all
Options granted to such Participant shall expire immediately
and all rights to purchase Shares (vested or nonvested) under
the Options shall cease upon such termination.
Page 8
(c )
Other
Termination . If a
Participant’s employment with the Company and/or any
Subsidiary or service as a Director terminates for any reason other
than Long Service Separation, death, Disability, or for Cause, all
Options shall remain exercisable until the earlier of (i) the
remainder of the term of the Option, or (ii) 60 days from the date
of such termination. In such circumstance, the Option
shall only be exercisable to the extent that it was exercisable as
of such termination date and shall not be exercisable with respect
to any additional Shares.
6.7.
Restrictions on Shares . The Committee
may impose such restrictions on any Shares acquired pursuant to the
exercise of an Option granted under this Section 6 as it may deem
advisable, including, without limitation, restrictions under
applicable Federal securities laws, under the requirements of any
stock exchange or market upon which such Shares are then listed
and/or traded, and under any blue sky or state or foreign
securities laws applicable to such Shares.
6.8.
Transferability
of Options .
(a)
Incentive
Stock Options . No ISO
granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than
by will or by the laws of descent and
distribution. Further, all ISOs granted to a
Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
(b)
Nonqualified
Stock Options . NQSOs may only
be transferred in accordance with this Section
6.8(b).
(i) Except
as otherwise provided in paragraph (ii) below or in an Award
Document, no NQSO shall be assignable or transferable by a
Participant other than by will, by the laws of descent and
distribution or pursuant to a Domestic Relations Order (as
such term is defined in Section 414(p)(1)(B) of the
Code).
(ii) NQSOs
(whether vested or unvested) held by (A) Participants who are
Section 16 O
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