Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Caterpillar Inc.
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Statement, if Other Than the Registrant)
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Table of
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Table of
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Caterpillars
reputation is one of our greatest assets. We all share the responsibility
to protect it every day. We have earned our solid reputation by
developing, building and delivering great products and services, and by
acting according to the highest ethical standards. |
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Integrity The Power of Honesty |
Integrity is the foundation of all
we do. It is a constant. Those with whom we work, live and serve can rely
on us. |
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Excellence The Power of Quality |
The power of quality. We set and
achieve ambitious goals. The quality of our products and services reflects
the power and heritage of Caterpillar. |
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Teamwork The Power of Working Together |
We help each other succeed. We are a
team, sharing our unique talents to help those with whom we work, live and
serve. |
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Commitment The Power of Responsibility |
We embrace our responsibilities.
Individually and collectively we make meaningful commitments first to
each other, and then to those with whom we work, live and
serve. |
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Sustainability The Power of
Endurance |
We are committed to building a
better world. Sustainability is part of who we are and what we do every
single day. |
Table of
Contents
TABLE OF
CONTENTS
We are sending you these proxy
materials in connection with Caterpillars solicitation of proxies, on behalf of
its Board of Directors, for the 2017 Annual Meeting of Shareholders (Annual
Meeting). Distribution of these materials is scheduled to begin on May 2, 2017.
Please submit your vote and proxy by telephone, mobile device, Internet, or, if
you received your materials by mail, you can also complete and return your proxy
or voting instruction form by mail.
Table of
Contents
David L.
Calhoun Chairman of the Board |
|
DEAR
FELLOW SHAREHOLDERS,
I am honored to serve your
interests as Caterpillars recently elected non-executive chairman of the
board of directors. Your board has played a very active role in recent
months. Following a thorough and deliberative succession planning process,
the board elected Jim Umpleby as Caterpillars chief executive officer
effective January 1, 2017. Jim has more than 35 years of experience at
Caterpillar, most recently as group president of the Energy &
Transportation business segment and a member of the executive office.
Doug Oberhelman, our chairman and
CEO since 2010, has retired and we want to acknowledge his enormous
contributions to our company over his 41-year career. Doug led our
management team through the most severe business cycle in our history. The
team took extraordinary steps to optimize our manufacturing and
distribution footprint, lower overhead costs, and invest in competitively
differentiated technologies. Over this very challenging period we improved
our competitive position, protected our financial position, and developed
a very capable leadership team for the future.
A leadership transition is an
appropriate time to take a fresh look at our companys strategy. Jim has
brought a diverse management team together to review our strategy and will
report recommendations later this year. Caterpillar remains the worldwide
market leader in an array of businesses with great prospects. We have a
global dealer network that is the envy of our competitors. As our
customers seek greater productivity than ever before, they require
technology solutions to, among other things, make them more efficient, and
increase safety, equipment utilization and performance. Caterpillar is
committed to meeting those needs, and more, for all of our customers. Your
board will be closely involved in this strategy review process to help
ensure our choices create maximum long term value for
shareholders.
Caterpillar is also committed to
good governance and compliance with all regulations and laws, and we have
a very robust system in place to support and monitor our performance on
this commitment, which is reviewed by the board on an annual basis and by
the audit committee at its regularly scheduled meetings. Employee
compliance matters are brought to our attention through the Caterpillar
Office of Business Practices and audit staff reviews. Caterpillars code
of conduct, known as Our Values in Action, is applied consistently across
our global enterprise, acknowledged annually by all employees and
benchmarked against the best in industry. Board members must also read,
understand, and acknowledge our commitment to these Values every year. We
regularly benchmark our corporate governance, compensation, compliance and
other practices against peers and preferences of organizations such as The
Council of Institutional Investors, of which we are a member.
On March 2, 2017, federal law
enforcement authorities executed search warrants at three of our
Peoria-area facilities. The warrants, while also related to export
filings, were connected in part to a matter we previously disclosed
relating to our Switzerland-based subsidiary, CSARL. We take this matter
very seriously, we are cooperating with the government investigation, and
we have a strong team in place to manage this matter. Caterpillar has
retained former U.S. Attorney General William P. Barr and Jim has asked
him to review matters related to the search warrants, take a fresh look at
Caterpillars disputes with the government, get all the facts, and then
help bring these matters to an appropriate resolution.
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Table of
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As part of our leadership transition,
the board separated the roles of chairman and chief executive officer. This
structure allows our new CEO to focus on running the business while, as
non-executive chairman, I ensure the board is providing Jim the resources and
counsel to make our company successful. We believe a strong and independent
board is integral to the long term success of our company. Our move to split the
chair and CEO role at this moment in time demonstrates that commitment. The
board intends to review the appropriateness of this structure on a biannual
basis.
We regularly review the composition and
qualifications of our board, and are delighted that Ray Wilkins, a former
executive of AT&T Inc., joined our board in April 2017. Ray brings a broad
array of leadership and business skills, including communications and
information technology expertise that will serve the emerging needs of our
company and augment the Boards knowledge in these areas.
Shareholder relationships and outreach
are a critical part of the boards oversight. In addition to regular investor
relations engagement, we meet annually with many of our institutional
shareholders.
The board of directors is honored to
represent Caterpillar and our shareholders. We encourage you to vote your shares
at the upcoming annual meeting.
Very truly yours,
David L. Calhoun
Chairman of the Board
Table of
Contents
PROXY
SUMMARY
This summary does not contain all of
the information you should consider. You should read the complete proxy
statement before voting.
ANNUAL MEETING OF SHAREHOLDERS
Time & Date: |
8:00 a.m. - June 14, 2017 |
Place: |
250 Dozer Drive, Athens, Georgia
30606-0701 |
Record Date: |
The close of business on April 17,
2017 |
Admission: |
Please follow the instructions contained in
the Admission Procedure on page 77 |
SHAREHOLDER VOTING MATTERS
PROPOSAL |
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BOARDS VOTING RECOMMENDATION |
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PAGE REFERENCE |
1 |
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Election of thirteen Directors
named in this Proxy Statement |
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FOR each Nominee |
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6 |
2 |
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Ratification of our Independent
Registered Public Accounting Firm |
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FOR |
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21 |
3 |
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Advisory Vote to approve Executive
Compensation |
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FOR |
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23 |
4 |
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Advisory Vote on the Frequency of
Executive Compensation Votes |
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One Year |
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51 |
5 |
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Approve the Amended and Restated
Caterpillar Inc. 2014 Long-Term Incentive Plan |
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FOR |
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51 |
6 |
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Shareholder Proposal Provide a
Report of Lobbying Activities |
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AGAINST |
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60 |
7 |
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Shareholder Proposal Decrease
Percent of Ownership Required to Call Special Shareholder
Meeting |
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AGAINST |
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62 |
8 |
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Shareholder Proposal Provide a
Report of Lobbying Priorities |
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AGAINST |
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63 |
9 |
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Shareholder Proposal Include
Sustainability as a Performance Measure under Executive Incentive
Plans |
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AGAINST |
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65 |
10 |
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Shareholder Proposal Amend the
Companys Compensation Clawback Policy |
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AGAINST |
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67 |
11 |
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Shareholder Proposal Adopt a Permanent Policy that the Chairman
be Independent |
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AGAINST |
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69 |
2 | |
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2017 Proxy Statement |
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Table of
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OUR DIRECTOR
NOMINEES
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DIRECTOR |
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CAT COMMITTEES |
NOMINEE AND PRINCIPAL OCCUPATION |
INDEPENDENT |
AGE |
SINCE |
OTHER PUBLIC COMPANY
BOARDS |
AC |
CC |
PPGC |
David L. Calhoun Independent Chairman Senior Managing Director of The Blackstone Group,
L.P. |
Yes |
59 |
2011 |
Nielsen Holdings PLC The
Boeing Company |
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Daniel M. Dickinson Managing Partner of HCI Equity Partners |
Yes |
55 |
2006 |
None |
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Juan Gallardo Former CEO of Organización CULTIBA, S.A.B. de
C.V. |
Yes |
69 |
1998 |
Grupo Aeroportuario del
Pacifico, S.A.B. de C.V. Grupo
Financiero Santander Mexico, S.A.B. de C.V. Organización CULTIBA, S.A.B. de C.V. |
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Jesse J. Greene, Jr. Instructor at Columbia Business School and former Vice President of
Financial Management and Chief Financial Risk Officer of International
Business Machines Corporation |
Yes |
72 |
2011 |
None |
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Jon M. Huntsman, Jr.
Former United States Ambassador to China and former Governor of
Utah |
Yes |
57 |
2012 |
Chevron Corporation Ford Motor
Company Hilton Worldwide
Holdings Inc. |
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Dennis A. Muilenburg Chairman, President and CEO of The Boeing Company |
Yes |
53 |
2011 |
The Boeing Company |
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William A. Osborn Former Chairman and CEO of Northern Trust
Corporation |
Yes |
69 |
2000 |
Abbott Laboratories
General Dynamics Corporation
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Debra L. Reed Chairman and CEO of Sempra Energy |
Yes |
60 |
2015 |
Halliburton
Company Sempra Energy |
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Edward
B. Rust, Jr. Former Chairman and CEO of State Farm Mutual
Automobile Insurance Company |
Yes |
66 |
2003 |
Helmerich & Payne,
Inc. S&P Global Inc. |
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Susan C. Schwab Professor at the University of Maryland School of Public Policy and
a Strategic Advisor for Mayer Brown LLP; former United States Trade
Representative |
Yes |
62 |
2009 |
FedEx Corporation Marriott
International, Inc. The Boeing Company |
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Jim Umpleby CEO of Caterpillar Inc. |
No |
59 |
2017 |
None |
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Miles D. White
Chairman and CEO of Abbott Laboratories |
Yes |
62 |
2011 |
Abbott Laboratories McDonalds
Corporation |
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Rayford Wilkins, Jr.
Former CEO of Diversified Businesses at
AT&T |
Yes |
65 |
2017 |
Morgan Stanley
Valero Energy Corporation
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AC: Audit
Committee CC:
Compensation
Committee PPGC:
Public Policy and Governance
Committee |
Chair
Member
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2017 Proxy
Statement |
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3 |
Table of
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GOVERNANCE
HIGHLIGHTS
Our commitment to good corporate
governance stems from our belief that a strong governance framework creates
long-term value for our shareholders, strengthens Board and management
accountability and builds trust in the Company and its brand. Our governance
framework includes the following highlights:
BOARD AND GOVERNANCE
INFORMATION |
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BOARD AND GOVERNANCE
INFORMATION |
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Size of Board |
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13 |
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Average Director Tenure |
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7 years |
Number of Independent Directors |
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12 |
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Supermajority Voting Threshold for Mergers |
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No |
Average Age of Directors |
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62 |
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Proxy Access |
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Yes |
Board Meetings Held in 2016 |
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9 |
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Shareholder Action by Written Consent |
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No |
Annual Election of Directors |
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Yes |
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Shareholder Called Special Meetings |
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Yes |
Mandatory Retirement Age |
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72 |
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Poison Pill |
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No |
Women and Minority Board Members |
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38% |
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Code of Conduct for Directors, Officers and
Employees |
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Yes |
Majority Voting in Director Elections |
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Yes |
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Stock Ownership Guidelines for Directors and Executive
Officers |
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Yes |
Separate Chair and CEO |
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Yes |
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Anti-Hedging and Pledging Policies |
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Yes |
Independent
Chair |
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Yes |
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Compensation Recoupment
Policy |
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Yes |
2016 PERFORMANCE
HIGHLIGHTS
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DIVIDEND
PAYMENTS |
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COST
REDUCTION |
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STRONG BALANCE
SHEET |
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$1.8 billion
Our dividend has remained a high
priority throughout this difficult economic cycle and in 2016 we paid $1.8 billion in dividends to
shareholders.
Caterpillar has paid a cash
dividend every year since the Company was formed and has paid a quarterly
dividend since 1933. |
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~$2.3 billion
Period costs and variable
manufacturing costs were $2.3 billion lower in 2016 restructuring and cost reduction actions and lower
incentive pay helped mitigate the impact of lower sales.
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$7.2 billion
Despite significant restructuring
costs, we ended 2016 with $7.168 billion of cash on
the balance sheet and Machinery, Energy & Transportation (ME&T)
debt-to-capital ratio at 41%. |
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4 | |
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2017 Proxy Statement |
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Table of
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100 NE Adams Street
Peoria, Illinois
61629
Phone (309) 675-1000
www.caterpillar.com
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
Date: |
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June 14,
2017 |
Time: |
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8:00
a.m. |
Place: |
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250
Dozer Drive |
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Athens,
GA 30606-0701 |
Record
Date: |
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April 17,
2017 |
MEETING AGENDA: |
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●Elect thirteen director nominees named in this Proxy
Statement
●Ratify our independent registered public accounting firm for
2017
●Approve, by non-binding vote, executive
compensation
●Approve, by non-binding vote, the frequency of executive
compensation votes
●Vote to approve the Amended and Restated 2014 Long-Term
Incentive Plan
●Vote on shareholder proposals
●Any other business that properly comes before the
meeting |
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We encourage shareholders to vote promptly, as this will
save the expense of additional proxy solicitation. You may vote in the
following ways: |
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By Internet
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By Mobile
Device |
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By Telephone |
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By
Mail |
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vote online
at www.caterpillar.com/ proxymaterials |
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scan this QR code to vote with
your mobile device |
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call the number included on
your proxy card or notice |
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mail your signed proxy or
voting instruction form |
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By Order of the Board of
Directors
Christopher M. Reitz
Corporate Secretary
May 2,
2017
Important Notice Regarding the
Availability of Proxy Materials
This Notice of Annual Meeting and
Proxy Statement and the 2016 Annual Report on Form 10-K are available at
www.eproxyaccess.com/cat2017. |
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2017 Proxy Statement |
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5 |
Table of
Contents
PROPOSAL 1
ELECTION OF DIRECTORS
PROPOSAL SNAPSHOT |
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●What am I voting on? |
Shareholders are being asked to
elect thirteen director nominees named in this Proxy Statement for a
one-year term. |
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Voting Recommendation: FOR
the election of each of the Boards director
nominees. |
OVERVIEW OF OUR
BOARD
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GENDER
AND DIVERSITY |
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DIRECTOR AGE |
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DIRECTOR TENURE |
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BOARD
ATTENDANCE
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Board |
9 |
9 |
9 |
9 |
9 |
8 |
9 |
9 |
9 |
7 |
9 |
9 |
8 |
Audit |
11 |
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11 |
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11 |
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11 |
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Compensation &
Human Resources |
7 |
7 |
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7 |
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7 |
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7 |
Public Policy & Governance |
5 |
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5 |
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5 |
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5 |
5 |
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The Boards policy is that directors
should attend the annual shareholder meeting. All directors attended the 2016
shareholder meeting. The independent directors generally meet in executive
session as part of each regularly scheduled Board meeting. Ed Rust, who was
Caterpillars Presiding Director in 2016, presided over the executive sessions
in 2016.
6 | |
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2017 Proxy Statement |
Table of
Contents
BOARD EVOLUTION
SINCE 2011
✓ |
Eight new directors
elected |
✓ |
Full rotation of Board committee
chairs |
✓ |
Independent Chairman
elected |
✓ |
Reallocation of committee
responsibilities |
✓ |
Expanded qualifications and
diversity represented on Board |
DIVERSITY OF SKILLS
AND EXPERTISE
Our independent Board nominees offer a
diverse range of skills and experience in relevant areas.
GLOBAL
EXPERIENCE
As shown by the yellow highlighted
areas in the map below, our independent directors have international experience
that aligns with Caterpillars global presence.
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2017 Proxy Statement |
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7 |
Table of
Contents
The Board has nominated the following
individuals to stand for election for a one-year term expiring at the annual
meeting of shareholders in 2018.
The number of persons comprising the
Caterpillar Board of Directors is currently established as thirteen. If any of
the Boards nominees should become unavailable to serve as a Director prior to
the Annual Meeting, the size of the Board and number of Board nominees will be
reduced accordingly.
DIRECTOR CANDIDATE
BIOGRAPHIES AND QUALIFICATIONS
Directors have been in their current
positions for the past five years unless otherwise noted. Information is as of
April 1, 2017.
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DAVID L. CALHOUN
Senior Managing Director and Head
of Private Equity Portfolio Operations of The Blackstone Group L.P.
(private equity firm) |
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Other current directorships
(2) |
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Age 59 |
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●Nielsen Holdings PLC
●The Boeing Company |
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Other directorships within the last five
years |
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Director Since 2011 |
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●Medtronic, Inc |
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Caterpillar Committee |
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Independent Chairman of the
Board |
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●Compensation |
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Key Qualifications and Skills: |
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Mr. Calhoun was previously
Executive Chair of Nielsen Holdings N.V. (marketing and media information)
(2014-2015). Prior to his position at Blackstone, Mr. Calhoun served as
Chairman of the Executive Board and Chief Executive Officer of The Nielsen
Company B.V. (2006-2013).
The Board believes that Mr.
Calhoun provides valuable insight and perspective into general strategic
and business matters, stemming from his extensive executive and management
experience with Blackstone, Nielsen and GE. Mr. Calhoun also has
significant manufacturing and high-technology industry expertise as
evidenced by his leadership of GEs aircraft engines and transportation
businesses. |
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DANIEL M. DICKINSON
Managing Partner of HCI Equity
Partners (private equity firm) |
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Other current directorships
(0) |
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Age 55 |
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●None
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Other directorships within the last five
years |
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Director Since 2006 |
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●Mistras Group, Inc.
●Progressive Waste Solutions Ltd. |
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Caterpillar Committee |
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Independent |
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●Audit |
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Key Qualifications and Skills: |
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The Board believes that Mr.
Dickinsons experience in mergers and acquisitions, private equity
business and role as an investment banker provides important insights for
evaluating investment opportunities. His significant financial experience,
both in the U.S. and internationally, contributes to the Boards
understanding and ability to analyze complex issues. His experience as a
former director of large, publicly-traded multinational corporations
enables him to provide meaningful input and guidance to the Board and the
Company. |
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JUAN GALLARDO
Former CEO of Organización
CULTIBA, S.A.B. de C.V. (beverage industry) |
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Other current directorships
(3) |
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Age 69 |
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●Grupo Aeroportuario del Pacifico, S.A.B. de
C.V.
●Grupo Financiero Santander Mexico, S.A.B. de
C.V.
●Organización CULTIBA, S.A.B. de C.V. |
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Other directorships within the last five
years |
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Director Since 1998 |
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●Lafarge SA |
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Caterpillar Committee |
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Independent |
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●Public Policy and Governance |
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Key Qualifications and Skills: |
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Mr. Gallardo retired as the CEO
of Organización CULTIBA, S.A.B. de C.V. in 2016. Mr. Gallardo resides in
Mexico where Caterpillar has a presence. The Board believes that Mr.
Gallardos international business experience, particularly in Latin
America and South America, is important for the Companys understanding of
these markets. His extensive background in trade-related issues also
contributes to the Boards expertise. In addition, his experience as a
chief executive officer and director of large, publicly-traded
multinational corporations enables him to provide meaningful input and
guidance to the Board and the Company. |
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8 | |
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2017 Proxy Statement |
Table of
Contents
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JESSE J. GREENE, JR.
Instructor at Columbia Business
School |
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Other current directorships
(0) |
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Age 72 |
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●None |
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Other directorships within the last five
years |
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Director Since 2011 |
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●None |
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Caterpillar Committee |
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Independent |
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●Compensation |
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Key Qualifications and Skills: |
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Mr. Greene is currently an
instructor at Columbia Business School in New York City where he teaches
corporate governance, risk management and other business topics at the
graduate and executive education levels. He was formerly Vice President of
Financial Management and Chief Financial Risk Officer of International
Business Machines Corporation (computer and office equipment).
The Board believes that Mr.
Greenes risk management and information technology experience provides a
unique skill set to the Board. His experience as a chief financial risk
officer and executive of a large, publicly-traded multinational
corporation enables him to provide meaningful input and guidance to the
Board and the Company. |
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JON M. HUNTSMAN, JR.
Former United States Ambassador
to China (2009- 2011) and former Governor of Utah
(2005-2009) |
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Other current directorships
(3) |
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Age 57 |
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●Chevron Corporation
●Ford Motor Company
●Hilton Worldwide Holdings Inc. |
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|
|
Other directorships within the last five
years |
|
Director Since 2012 |
|
|
●Huntsman Corporation |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Public Policy and Governance |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
Caterpillar has a significant
manufacturing presence and dealer network in China. The Board believes
that Mr. Huntsmans extensive knowledge of Asia and international affairs,
operational experience gained as governor of Utah and experience as a
director of other large, publicly-traded multinational corporations
enables him to provide meaningful input and guidance to the Board and the
Company. |
|
|
|
|
|
|
|
|
|
|
|
|
DENNIS A. MUILENBURG
Chairman, President and CEO of
The Boeing Company (aircraft and defense) |
|
|
Other current directorships
(1) |
|
Age 53 |
|
|
●The Boeing Company |
|
|
|
|
Other directorships within the last five
years |
|
Director Since 2011 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Audit |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
Prior to his current position,
Mr. Muilenburg was Vice Chairman, President and Chief Operating Officer of
The Boeing Company (2013-2015). Prior to that, he was Executive Vice
President of The Boeing Company and President and Chief Executive Officer
of Boeing Defense, Space & Security (2009-2013).
The Board believes that Mr.
Muilenburg provides valuable insight to the Board on strategic and
business matters, stemming from his experience with large-scale product
development programs and his worldwide supply chain and manufacturing
expertise. |
|
|
|
|
|
|
|
2017 Proxy Statement |
|
|
|
9 |
Table of
Contents
|
|
|
|
|
|
WILLIAM A. OSBORN
Former Chairman and CEO of
Northern Trust Corporation and The Northern Trust Company (financial
services) |
|
|
Other current directorships (2) |
|
Age 69 |
|
|
●Abbott Laboratories
●General Dynamics Corporation |
|
|
|
|
Other directorships within the last five years |
|
Director Since 2000 |
|
|
●Tribune Company |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Audit, Chair |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
The Board believes that Mr.
Osborns financial expertise and experience is valuable to the Board. In
addition, his experience as a chief executive officer and director of
other large, publicly-traded corporations enables him to provide
meaningful input and guidance to the Board and the
Company. |
|
|
|
|
|
|
|
|
|
|
|
|
DEBRA L. REED
Chairman of the Board and CEO of
Sempra Energy (energy infrastructure and utilities) |
|
|
Other current directorships (2) |
|
Age 60 |
|
|
●Halliburton Company
●Sempra Energy
|
|
|
|
|
Other directorships within the last five years |
|
Director Since 2015 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Compensation |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
The power, oil and gas industries
are key end-user markets for Caterpillar products. The Board believes that
Ms. Reeds background provides valuable insights into trends in these
industries. In addition, her experience as a chief executive officer and
director of other large, publicly-traded corporations enables her to
provide meaningful input and guidance to the Board and the
Company. |
|
|
|
|
|
|
|
|
|
|
|
|
EDWARD B. RUST, JR.
Former Chairman and CEO of State
Farm Mutual Automobile Insurance Company (insurance) |
|
|
Other current directorships (2) |
|
Age 66 |
|
|
●Helmerich & Payne, Inc.
●S&P Global Inc. |
|
|
|
|
Other directorships within the last five years |
|
Director Since 2003 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Public Policy and Governance, Chair |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
Mr. Rust retired as Chairman in
2017 and as Chief Executive Officer in 2016 of State Farm Mutual
Automobile Insurance Company.
The Board believes that Mr.
Rusts financial and business experience is valuable to the Board. His
role as a past Chairman of the U.S. Chamber of Commerce, chief executive
officer of a major national corporation and experience as a director of
large, publicly-traded multinational corporations enables him to provide
meaningful input and guidance to the Board and the Company. In addition,
his extensive involvement in education improvement compliments the
Companys culture of social responsibility. |
|
|
|
|
|
|
10 | |
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|
2017 Proxy Statement |
Table of Contents
|
|
|
|
|
|
SUSAN C. SCHWAB
Professor at the University of
Maryland School of Public Policy and a Strategic Advisor for Mayer Brown
LLP (global law firm) |
|
|
Other current directorships
(3) |
|
Age 62 |
|
|
●FedEx Corporation
●Marriott International, Inc.
●The Boeing Company |
|
|
|
|
Other directorships within the last five
years |
|
Director Since 2009 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Public Policy and Governance |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
Prior to her current positions,
Ambassador Schwab held various positions including United States Trade
Representative (member of the Presidents cabinet) and Deputy United
States Trade Representative.
The Board believes that
Ambassador Schwab brings extensive knowledge, insight and experience on
international trade issues to the Board. Her educational experience and
role as the U.S. Trade Representative provide important insights for the
Companys global business model and long-standing support of open trade.
In addition, her experience as a director of large, publicly-traded
multinational corporations enables her to provide meaningful input and
guidance to the Board and the Company. |
|
|
|
|
|
|
|
|
|
|
|
|
JIM UMPLEBY
CEO of Caterpillar
Inc. |
|
|
Other current directorships
(0) |
|
Age 59 |
|
|
●None |
|
|
|
|
Other directorships within the last five
years |
|
Director Since January 2017 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Management |
|
|
●None |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
Prior to his current position,
Mr. Umpleby served as a Group President of Caterpillar Inc. 2013 to 2016)
and before that served as a Vice President of Caterpillar Inc. (2010 to
2013).
The Board believes that Mr.
Umplebys extensive experience and knowledge of the Company, gained in a
wide range of Caterpillar leadership positions in engineering,
manufacturing, marketing, sales and services enables him to provide
meaningful input and guidance to the Board and the
Company. |
|
|
|
|
|
|
|
|
|
|
|
|
MILES D. WHITE
Chairman and CEO of Abbott
Laboratories (pharmaceuticals and biotechnology) |
|
|
Other current directorships
(2) |
|
Age 62 |
|
|
●Abbott Laboratories
●McDonalds Corporation
|
|
|
|
|
Other directorships within the last five
years |
|
Director Since 2011 |
|
|
●None |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Compensation, Chair |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
The Board believes that Mr.
Whites experience as the chief executive officer of a large, complex
multinational company provides important insight to the Board. His skills
include knowledge of cross-border operations, strategy and business
development, risk assessment, finance, leadership development and
succession planning, and corporate governance matters. In addition to his
role as an executive officer, his experience as a director of other large,
publicly-traded multinational corporations enables him to provide
meaningful input and guidance to the Board and the
Company. |
|
|
|
|
|
|
|
2017 Proxy
Statement |
|
|
|
11 |
Table of Contents
|
|
|
|
|
|
RAYFORD WILKINS, JR.
Former Chief Executive Officer of
Diversified Businesses at AT&T (telecommunications) |
|
|
Other current directorships (2) |
|
Age 65 |
|
|
●Morgan Stanley
●Valero Energy Corporation |
|
|
|
|
Other directorships within the last five years |
|
Director Since April
2017 |
|
|
●América Móvil, S.A.B. de C.V. |
|
|
|
|
Caterpillar Committee |
|
Independent |
|
|
●Audit |
|
|
|
Key Qualifications and Skills: |
|
|
|
|
The Board believes that Mr.
Wilkins expertise and oversight experience in the information technology
area is valuable to the Board. In addition, his experience as an executive
officer and director of other large, publicly-traded corporations enables
him to provide meaningful input and guidance to the Board and the Company.
Mr. Wilkins was brought to the attention of the Board through a
professional search firm. |
|
|
|
|
|
|
DIRECTOR COMPENSATION
Compensation for non-employee directors
for 2016 was comprised of the following components:
Cash Retainer: |
|
$150,000 |
Restricted Stock Units (1 year
vesting) |
|
$125,000 |
Stipends: |
|
|
Presiding
Director |
|
$25,000 |
Audit Committee
Chairman |
|
$20,000 |
Compensation
Committee Chairman |
|
$20,000 |
Directors are required to own
Caterpillar common stock equal to five times their annual cash retainer.
Directors have a five-year period from the date of their election or appointment
to meet the target ownership guidelines.
Directors may defer 50 percent or more
of their annual cash retainer and stipend into an interest-bearing account or an
account representing phantom shares of Caterpillar stock.
Directors that joined the Board prior
to 2008 also participate in a Charitable Award Program, under which a donation
of up to $500,000 will be made by the Company, in the directors name, to
charitable organizations selected by the director and $500,000 to the
Caterpillar Foundation. Directors derive no financial benefit from the program.
DIRECTOR COMPENSATION FOR
2016 |
DIRECTOR |
|
FEES EARNED OR PAID IN CASH |
|
RESTRICTED STOCK UNITS1 |
|
ALL
OTHER COMPENSATION2 |
|
TOTAL |
David L. Calhoun |
|
$150,000 |
|
$125,015 |
|
|
$ |
|
|
|
$275,015 |
Daniel M. Dickinson |
|
$150,000 |
|
$125,015 |
|
|
$ |
32,696 |
|
|
$307,711 |
Juan Gallardo |
|
$150,000 |
|
$125,015 |
|
|
$ |
13,051 |
|
|
$288,066 |
Jesse J. Greene, Jr. |
|
$150,000 |
|
$125,015 |
|
|
$ |
2,000 |
|
|
$277,015 |
Jon M. Huntsman, Jr. |
|
$150,000 |
|
$125,015 |
|
|
$ |
|
|
|
$275,015 |
Dennis A. Muilenburg |
|
$150,000 |
|
$125,015 |
|
|
$ |
|
|
|
$275,015 |
William A. Osborn |
|
$170,000 |
|
$125,015 |
|
|
$ |
13,051 |
|
|
$308,066 |
Debra L. Reed |
|
$150,000 |
|
$125,015 |
|
|
$ |
2,100 |
|
|
$277,115 |
Edward B. Rust, Jr. |
|
$175,000 |
|
$125,015 |
|
|
$ |
22,833 |
|
|
$322,848 |
Susan C. Schwab |
|
$150,000 |
|
$125,015 |
|
|
$ |
15,000 |
|
|
$290,015 |
Miles D. White |
|
$170,000 |
|
$125,015 |
|
|
$ |
8,000 |
|
|
$303,015 |
1 As of December 30, 2016, the number of vested and non-vested
options (NQs), RSUs and Phantom Shares held by each individual serving as a
non-employee director during 2016 was: Mr. Calhoun: 12,197 (which consists of
1,672 RSUs and 10,525 Phantom Shares); Mr. Dickinson: 26,101 (which consists of
1,672 RSUs and 24,429 Phantom Shares); Mr. Gallardo: 34,400 (which consists of
5,833 SARs, 1,672 RSUs and 26,895 Phantom Shares); Mr. Greene: 1,672 RSUs; Mr.
Huntsman: 1,672 RSUs; Mr. Muilenburg: 1,672 RSUs; Mr. Osborn: 2,036 (which
consists of 1,672
12 | |
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2017 Proxy Statement |
Table of Contents
RSUs and 364 Phantom Shares); Ms.
Reed: 4,897 (which consists of 1,672 RSUs and 3,225 Phantom Shares); Mr. Rust:
34,083 (which consists of 1,672 RSUs and 32,411 Phantom Shares); Ms. Schwab:
11,091 (which consists of 1,672 RSUs and 9,419 Phantom Shares); and Mr. White:
7,802 (which consists of 1,672 RSUs and 6,130 Phantom Shares). Mr. Calhoun, Mr.
Dickinson, Mr. Gallardo, Ms. Reed, Mr. Rust, Ms. Schwab and Mr. White deferred
100 percent of their 2016 retainer fee into phantom stock in the Directors
Deferred Compensation Plan.
2 All Other Compensation represents amounts paid in connection
with the Caterpillar Foundations Directors Charitable Award Program and the
Caterpillar Political Action Committee Charitable Matching Program (CATPACs
PACMATCH program) and administrative fees associated with the Directors
Charitable Award Program. All outside directors are eligible to participate in
the Caterpillar Foundation Matching Gift Program and eligible directors may
participate in the CATPACs PACMATCH program annually. The Caterpillar
Foundation will match contributions to eligible two year or four year colleges
or universities, arts and cultural institutions and public policy or
environmental organizations, up to a maximum of $2,000 per eligible organization
per calendar year. As part of CATPACs PACMATCH program, Caterpillar Inc. will
contribute to two charities on behalf of eligible members of the Board of
Directors. The annual CATPACs PACMATCH contribution limit is $5,000 so the
match, per person, would not exceed $5,000. The amounts listed represent the
matching contributions as follows: Mr. Dickinson $2,250, Mr. Greene $2,000, Ms.
Reed $2,100, Mr. Rust $13,500, Ms. Schwab $15,000 and Mr. White $8,000. For
directors eligible to participate in the Directors Charitable Award Program,
the amounts represented include the insurance premium and administrative fees.
The premium and administrative fees are as follows: Mr. Dickinson $30,446, Mr.
Gallardo $13,051, Mr. Osborn $13,051 and Mr. Rust $9,333.
BOARD ELECTION AND LEADERSHIP
STRUCTURE
Directors are elected at each annual
meeting to serve for a one-year term. In uncontested elections, directors are
elected by a majority of the votes cast for such director. If an incumbent
director does not receive a greater number of for votes than against votes,
then such director must tender his or her resignation to the Board. In contested
elections, directors are elected by a plurality vote. Directors must retire at
the end of the calendar year in which they reach the age of 72.
On January 1, 2017, Jim Umpleby,
formerly Group President with responsibility for Energy & Transportation,
succeeded Douglas R. Oberhelman as Chief Executive Officer and was appointed as
a member of our Board of Directors. In planning for the succession of Mr.
Oberhelman, the Public Policy and Governance Committee (PPGC) and the Board
carefully reviewed the Boards leadership structure and determined that it would
be appropriate to separate the roles of the Chairman and Chief Executive Officer
and to appoint an independent Chairman. Accordingly, on April 1, 2017 David L.
Calhoun became our independent Chairman.
The Board has no fixed policy on
whether or not to have a non-executive chairman. The Board believes this
determination should be made based on the Companys best interests in light of
the circumstances at the time and experience. The PPGC and the Board believe
that this leadership structure is the most appropriate one for the Company at
this time, as it allows Mr. Umpleby to focus on the day-to-day management of the
business and on executing our strategic priorities, while allowing Mr. Calhoun
to focus on leading the Board, providing its advice and counsel to Mr. Umpleby,
and facilitating the Boards independent oversight of management.
The Board believes it is important to
maintain flexibility as to the Boards leadership structure. The Board will
continue to regularly review its leadership structure and exercise its
discretion in recommending an appropriate and effective framework on a
case-by-case basis, taking into consideration the needs of the Board and the
Company at such time.
DUTIES AND RESPONSIBILITIES OF
CHAIRMAN
● |
Presides at all meetings of the Board. |
● |
Encourages and facilitates active participation of all
directors. |
● |
Serves as a liaison between the independent directors and
the Chief Executive Officer. |
● |
Approves Board meeting materials for distribution. |
● |
Approves Board meeting schedules and agendas. |
● |
Has the authority to call meetings of the directors. |
● |
Leads the Boards annual evaluation of the Chief Executive
Officer. |
● |
Monitors and coordinates with management on corporate
governance issues and developments. |
CORPORATE GOVERNANCE GUIDELINES AND
CODE OF CONDUCT
Our Board has adopted Guidelines on
Corporate Governance Issues (Corporate Governance Guidelines), which are
available on our website at www.caterpillar.com/governance. The guidelines reflect the Boards
commitment to oversee the effectiveness of policy and decision-making both at
the Board and management level, with a view to enhancing shareholder
|
2017 Proxy
Statement |
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|
13 |
Table of Contents
value over the long-term. Caterpillars
code of conduct is called Our Values in Action. Integrity, Excellence, Teamwork,
Commitment and Sustainability are the core values identified in the code and are
the foundation for Caterpillars corporate existence. Our Values in Action apply
to all members of the Board and to management and
employees worldwide. These values embody the high ethical standards that
Caterpillar has upheld since its formation in 1925. Our Values in Action is
available on our website at www.caterpillar.com/code.
BOARD EVALUATION
PROCESS
The Board conducts an annual
self-evaluation to determine whether the Board and its committees are
functioning effectively. In 2016, the Presiding Director contacted each Board
member to solicit their feedback. The Public Policy & Governance Committee
also developed a discussion outline that was
circulated to the Board members in advance of their year-end meeting. The
Presiding Director then led a discussion during the Boards private session.
Each of the committees of the Board followed a similar process.
BOARD COMMITTEES
The Board has three standing
committees: Audit; Compensation; and Public Policy and Governance. Each
committee meets periodically throughout the year, reports its actions and
recommendations to the Board, receives reports from management, annually
evaluates its performance and has the authority to retain outside advisors at
its discretion. The current primary responsibilities of each committee are
summarized below and set forth in more detail in each committees written charter, which can be found on Caterpillars
website at www.caterpillar.com/governance. All committee members are independent
under Company, NYSE and SEC standards applicable to Board and committee service,
and the Board has determined that each member of the Audit Committee is an
audit committee financial expert as defined under SEC rules.
AUDIT COMMITTEE
|
|
|
|
Committee
Members: Daniel M. Dickinson
Dennis A. Muilenburg Rayford Wilkins, Jr. William A. Osborn,
Chair (pictured below)
Number of Meetings in 2016:
11
|
|
|
COMMITTEE ROLES AND RESPONSIBILITIES
●Selects and oversees the independent
auditors
●Involved in selecting the independent auditors lead
audit partner
●Oversees our financial reporting activities, including
our financial statements, annual report and accounting standards and
principles
●Discusses with management the Companys risk assessment
and risk management framework
●Approves audit and non-audit services provided by the
independent auditors
●Reviews the organization, scope and effectiveness of the
Companys internal audit function, disclosures and internal
controls
●Sets parameters for and monitors the Companys hedging
and derivatives practices
●Provides oversight for the Companys ethics and
compliance programs
●Monitors the Companys litigation and tax
compliance
●Discusses information technology systems and related
security |
|
|
|
|
14 | |
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2017 Proxy Statement |
Table of Contents
COMPENSATION COMMITTEE
|
|
|
|
Committee
Members: David L. Calhoun Jesse
J. Greene, Jr. Debra L. Reed Miles D. White, Chair (pictured
below)
Number of Meetings
in 2016:
7
|
|
|
COMMITTEE ROLES AND RESPONSIBILITIES
●Recommends the CEOs compensation to the Board and
establishes the compensation of other executive officers
●Establishes, oversees and administers the Companys
equity compensation and employee benefit plans
●Reviews incentive compensation arrangements to ensure
that incentive pay does not encourage unnecessary risk-taking and reviews
and discusses the relationship between risk management policies and
practices, corporate strategy and executive compensation
●Recommends to the Board the compensation of
directors
●Provides oversight of the Companys diversity and
immigration practices and employee relations
●Furnishes an annual Compensation Committee Report on
executive compensation and approves the Compensation Discussion and
Analysis section in the Companys proxy statement |
|
|
|
|
PUBLIC POLICY AND GOVERNANCE
COMMITTEE
|
|
|
|
Committee
Members: Juan Gallardo Jon M.
Huntsman, Jr. Edward B. Rust, Jr., Chair (pictured below)
Susan C. Schwab
Number of Meetings in 2016:
5
|
|
|
COMMITTEE ROLES AND
RESPONSIBILITIES
●Makes recommendations to the Board regarding the size
and composition of the Board and its committees, and the criteria to be
used for the selection of candidates to serve on the Board
●Discusses and evaluates the qualifications of potential
and incumbent directors and recommends the slate of director candidates to
be nominated for election at the Annual Meeting
●Leads the Board in its annual self-evaluation
process
●Oversees the Companys officer succession
planning
●Oversees the Companys environmental, health and safety
activities and sustainability
●Oversees the corporate governance structure
●Oversees matters of domestic and international public
policy affecting the Companys business, such as trade policy and
international trade negotiations and major global legislative and
regulatory developments
●Annually reviews the Companys charitable and political
contributions and policies
●Oversees investor and community relations
|
|
|
|
|
BOARDS ROLE IN RISK
OVERSIGHT
The Board has oversight for risk
management with a focus on the most significant risks facing the Company,
including strategic, operational, financial and legal compliance risks. The
Boards risk oversight process builds upon managements risk assessment and
mitigation processes, which include an enterprise risk management program,
regular internal management disclosure and compliance committee meetings, code
of business conduct, quality standards and processes, an ethics and compliance
office and comprehensive internal audit
processes. The Boards risk oversight role also includes the selection and
oversight of the independent auditors. The Board implements its risk oversight
function both as a full Board and through delegation to Board committees, which
meet regularly and report back to the full Board. The Board has delegated the
oversight of specific risks to Board committees that align with their functional
responsibilities.
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2017 Proxy
Statement |
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|
15 |
Table of Contents
DIRECTOR NOMINATIONS AND
EVALUATIONS
PROCESS FOR NOMINATING AND EVALUATING
DIRECTORS |
The Public Policy and Governance
Committee (PPGC) solicits and receives recommendations for potential director
candidates from shareholders, management, directors and other sources. In its
assessment of each potential candidate, the PPGC considers each candidates
integrity, honesty, judgment, independence, accountability, willingness to express
independent thought, understanding of the Companys business and other factors
that the PPGC determines are pertinent in light of the current needs of the
Board. Candidates must have successful leadership experience and stature in their primary fields, with a background
that demonstrates an understanding of business affairs as well as the
complexities of a large, publicly-held company. In addition, candidates must
have a demonstrated ability to think strategically and make decisions with a
forward-looking focus and the ability to assimilate relevant information on a
broad range of complex topics. Moreover, candidates must have the ability to
devote the time necessary to meet a directors responsibilities and serve on no
more than four public company boards in addition to the Companys
Board.
DIRECTOR RECRUITMENT PROCESS
|
Candidate Recommendations |
|
PPGC |
|
Board of
Directors |
|
Shareholders |
|
|
from Shareholders, Management,
Directors & Other Sources |
|
Discusses
Reviews Qualifications &
expertise
Board needs
Regulatory requirements
Cognitive
diversity
Interviews
Recommends
Nominees |
|
Discusses
PPGC Recommendations
Analyzes Independence
Selects Nominees |
|
Vote on Nominees at Annual Meeting |
|
|
|
|
|
|
|
|
|
|
The following table summarizes certain
key characteristics of the Companys businesses and the associated
qualifications, skills and experience that the PPGC believes should be
represented on the Board.
BUSINESS
CHARACTERISTICS |
|
QUALIFICATIONS, SKILLS AND
EXPERIENCE |
●The Company is a global manufacturer with products sold
around the world. |
|
●Manufacturing or logistics experience
●Broad international exposure |
●Technology and customer and product support services are
becoming increasingly important. |
|
●Technology experience
●Customer and product support
experience |
●The Companys businesses undertake numerous transactions
in many countries and in many currencies. |
|
●Diversity of race, ethnicity, gender, cultural
background or professional experience
●High level of financial literacy
●Mergers and acquisitions experience |
●Demand for many of the Companys products is tied to
conditions in the global commodity, energy, construction and
transportation markets. |
|
●Experience in the evaluation of global economic
conditions
●Knowledge of commodity, energy, construction or
transportation markets |
●The Companys businesses are impacted by regulatory
requirements and policies of various governmental entities around the
world. |
|
●Governmental and international trade
expertise |
●The Boards responsibilities include understanding and
overseeing the various risks facing the Company and ensuring that
appropriate policies and procedures are in place to effectively manage
risk. |
|
●Risk oversight/management expertise
●Relevant executive experience
●Cybersecurity
experience |
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Table of Contents
The Board values diversity of talents,
skills, abilities and experiences and believes that Board diversity of all types
provides significant benefits to the Company. Although the Board has no specific
diversity policy, the PPGC considers the diversity of the Board and potential
director candidates in selecting new director candidates.
NOMINATIONS FROM
SHAREHOLDERS |
The PPGC considers unsolicited
inquiries and director nominees recommended by shareholders in the same manner
as nominees from all other sources. Recommendations should be sent to the
Corporate Secretary at 100 NE Adams Street, Peoria, Illinois 61629. Shareholders
may nominate a director candidate to serve on the Board by following the procedures described in our bylaws. Deadlines
for shareholder nominations for Caterpillars 2018 annual meeting of
shareholders are included in the Shareholder Proposals and Director Nominations
for the 2018 Annual Meeting section on page 73.
DIRECTOR INDEPENDENCE
DETERMINATIONS
The Companys Corporate Governance
Guidelines establish that no more than two non-independent directors may serve
on the Board at any point in time. A director is independent if he or she has
no direct or indirect material relationship with the Company or with senior
management of the Company and their respective affiliates. Annually, the Board
makes an affirmative determination regarding the independence of each director
based upon the recommendation of the PPGC and in
accordance with the standards in the Companys Corporate Governance Guidelines,
which are available on our website at www.caterpillar.com/governance.
Applying these standards, the Board
determined that each of the directors met the independence standards except Jim
Umpleby, who is a current employee of the Company.
COMMUNICATION WITH THE
BOARD
Shareholders, employees and all other
interested parties may communicate with any of our directors, our Board as a
group, our independent directors as a group or any Board committee as a group by
email or regular mail:
|
|
|
|
BY EMAIL send an email to
Directors@CAT.com |
BY MAIL mail to Caterpillar Inc. c/o Corporate Secretary
100 NE Adams Street Peoria, Illinois 61629 |
|
|
All communications regarding personal
grievances, administrative matters, the conduct of the Companys ordinary
business operations, billing issues, product or service related inquiries, order
requests and similar issues will be directed to the appropriate individual
within the Company. The Chairman has instructed the Corporate Secretary to
consult with him if he is unsure who should receive the communication. If a
legitimate communication is sent, you will receive a written acknowledgement
from the Corporate Secretarys office confirming receipt of your
communication.
Contacting
Caterpillar. While the Board oversees
management, it does not participate in day-to-day management functions or
business operations. If you wish to submit questions or comments relating to
these matters, please use the Contact Us form on our website at
www.caterpillar.com/contact, which will help direct your message to the
appropriate area of our Company.
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Table of
Contents
INVESTOR
OUTREACH
We conduct an annual governance review
and shareholder outreach throughout the year to ensure that management and the
Board understand and consider the issues that matter most to our shareholders
and reflect the insights and perspectives of our many stakeholders.
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WHO PARTICIPATES IN THE
INVESTOR OUTREACH PROGRAM? |
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IN WHAT TYPES OF
ENGAGEMENT DOES THE COMPANY PARTICIPATE? |
|
|
●Board of
Directors
●Senior
Management
●Investor
Relations
●Corporate
Secretary |
|
|
●Investor
conferences
●One-on-one
meetings
●Earnings
calls
●Investor and analyst
calls |
|
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|
AWARDS AND
RECOGNITIONS
Third parties regularly recognize our
employees innovation, leadership and workplace satisfaction. We are pleased to
highlight some of these 2016 awards here.
SOCIAL RESPONSIBILITY AND
SUSTAINABILITY |
|
CORPORATE REPUTATION AND
LEADERSHIP |
●Dow Jones
Sustainability Index World and North America
●United Way
Worldwides Global Corporate Leadership Program
●Golden Peacock Award
for Sustainability (India)
●AmCham Cares Award
American Chamber of Commerce in Singapore (Singapore)
●Top 10 Companies for
Contribution of Fortune Global 500 (China)
●2016 China
Philanthropic Enterprise of the Year (China)
●2016 China CSR Award
(China)
●2016 Best Partner
Award of Foreign-Invested Enterprises (China)
●China Baosteel
Environmental Award China Environmental Protection Foundation
(China)
●Poverty Alleviation
Ambassador Award China Foundation for Poverty Alleviation
(China) |
|
●Worlds Most Admired
Companies Fortune Magazine
●ANNY Excellence in
Analytics Award International Institute for
Analytics
●Best Global Brands
Top 100 Interbrand
●Top 50 Best
Companies To Interview For Glassdoor
●Top 10 Employer
Woman Engineer Magazine
●Top 150 Global
Licensors Global License
●Top 25 Noteworthy
Companies DiversityInc
●Top 50 Employer
CAREERS & the disABLED Magazine
●Dedicated to STEM
Diversity Diversity in Action
●Leading Disability
Employer National Organization on Disability
●U.S. Military
Friendly® Employer
●Best Industry to
Work For in Brazil Você S/A Magazine (Brazil)
●Top 5 Best Companies
to Work For in Brazil Época Magazine (Brazil)
●Top 10 Best
Companies to Work For in Brazil (Perkins - Brazil)
●The UKs Most
Popular Graduate Recruiters 2016/17 (United Kingdom)
●Top 100
Undergraduate Employers (United Kingdom)
●Family Friendly
Employer (Mexico)
●#2 Great Place to
Work (Panama)
●#3 Great Place to
Work (Central
America) |
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SUSTAINABILITY
Caterpillar has set aspirational goals
for its operations and product stewardship. We believe these standards affirm
our determination to lead our industry to a more sustainable future. You can
track our progress towards achieving these goals by visiting our website
www.caterpillar.com/sustainability.
POLITICAL
CONTRIBUTIONS AND LOBBYING
The actions that governments take can
impact the Company, our employees, customers, and shareholders. It is important
for government leaders to understand the impact of such actions. For this
reason, the Company participates in the political process and advocates in a
responsible and constructive manner on issues that advance the Companys goals
and protect shareholder value.
To promote transparency and good
corporate citizenship, the Company provides voluntary disclosure relating to the
political contribution activities of the Company and its political action
committee, its engagement in public policy issues and global issues of
importance to the Company, including detailed information on the Companys
position with respect to such issues. This information is disclosed on our
website
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Table of
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www.caterpillar.com/contributions and
includes an itemized list of organizations and individuals that received
political contributions from Caterpillar or the Caterpillar Political Action
Committee. It also includes a summary of some of the public policy issues
important to the Company that may cause us to engage in public advocacy.
Caterpillars political and advocacy
activities, at both the state and federal levels, are managed by the Vice
President, Global Government & Corporate Affairs who coordinates and
reviews with senior management the legislative
and regulatory priorities that are significant to the Companys business and
shareholders, as well as related advocacy activities. To ensure appropriate
Board oversight of political activities, the Boards Public Policy and
Governance Committee receives regular briefings on the Companys legislative and
regulatory priorities, the Companys political spending and trade association
expenditures as well as the activities of Caterpillars Political Action
Committee.
RELATED PARTY
TRANSACTIONS
Caterpillar has a written process
governing the approval of transactions with the Company that are expected to
exceed $120,000 in any calendar year in which any director, executive officer or
their immediate family members will have a material interest. Under the process,
all such transactions must be approved in advance by the PPGC.
Prior to entering into such a
transaction, the director or officer must submit the details of the proposed
transaction to the Companys Chief Legal Officer, including whether the related
person or his or her immediate family member has or will have a direct or indirect interest (other than solely as a result
of being a director or a less than 10 percent beneficial owner of an entity
involved in the transaction). The Chief Legal Officer will then submit the
matter to the PPGC for its consideration.
The Board concluded that each director,
other than Mr. Umpleby, is independent. In reaching this determination the Board
considered, with respect to Ms. Reed, ordinary course business between Sempra
Energy and Caterpillar involving the purchase or sale of equipment, engines and
energy.
20 | |
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PROPOSAL 2
RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL SNAPSHOT |
|
●What am I voting on? |
The Board seeks an indication
from shareholders of their approval or disapproval of the Audit
Committees appointment of PricewaterhouseCoopers as the Companys
independent auditor for 2017. |
|
Voting
Recommendation: FOR the
ratification of our independent registered public accounting
firm. |
The Audit Committee is directly
responsible for the appointment, compensation, retention and oversight of the
Companys independent auditor. PricewaterhouseCoopers has been our independent
auditor since 1925. The Audit Committee believes that the retention of
PricewaterhouseCoopers to serve as the Companys independent auditor is in the
best interests of the Company and its shareholders. If the appointment of
PricewaterhouseCoopers is not approved by the shareholders, the Audit Committee
will consider whether it is appropriate to select another independent
auditor.
Representatives of
PricewaterhouseCoopers will be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so. The representatives
will also be available to respond to questions at the meeting.
AUDIT FEES AND
APPROVAL PROCESS
The Audit Committee pre-approves all
audit and non-audit services to be performed by the independent auditors in
compliance with the Sarbanes-Oxley Act and the SEC rules regarding auditor
independence. The policies and procedures are detailed as to the particular
service and do not delegate the Audit Committees responsibility to management.
The policies and procedures address any service provided by the independent
auditors and any audit or audit-related services to be provided by any other
audit service provider. The pre-approval process includes an annual and interim
component.
Annually, not later than February of
each year, management and the independent auditors jointly submit a service
matrix of the types of audit and non-audit services that management may wish to
have the independent auditor perform for the year. The service matrix
categorizes the types of services by audit,
audit-related, tax and all other services. Management and the independent
auditors jointly submit an annual pre-approval limits request. The request lists
aggregate pre-approval limits by service category. The request also lists known
or anticipated services and associated fees. The Audit Committee approves or
rejects the pre-approval limits and each of the listed services on the service
matrix.
During the course of the year, the
Audit Committee chairman has the authority to pre-approve requests for services
that were not approved in the annual pre-approval process. However, all
services, regardless of fee amounts, are subject to restrictions on the services
allowable under the Sarbanes-Oxley Act and SEC rules regarding auditor
independence. In addition, all fees are subject to ongoing monitoring by the
Audit Committee.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FEE INFORMATION
Fees for professional services provided
by our independent auditor included the following (in millions):
|
|
|
2016 |
|
2015 |
Audit Fees1 |
|
|
$ |
33.3 |
|
$ |
32.0 |
Audit-Related Fees2 |
|
|
|
1.2 |
|
|
1.3 |
Tax Compliance Fees3 |
|
|
|
0.4 |
|
|
0.4 |
Tax Planning And Consulting Fees4 |
|
|
|
0.1 |
|
|
0.2 |
All Other Fees5 |
|
|
|
0.1 |
|
|
19.8 |
|
TOTAL |
|
$ |
35.1 |
|
$ |
53.7 |
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Table of
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1 Audit Fees principally includes audit and review of
financial statements (including internal control over financial reporting),
statutory and subsidiary audits, SEC registration statements, comfort letters
and consents.
2 Audit-Related Fees
principally includes attestation services requested by management, accounting
consultations, pre- or post- implementation reviews of processes or systems and
audits of employee benefit plan financial statements. Total fees paid directly
by the benefit plans, and not by the Company, were $0.6 million in 2016 and $1.0
million in 2015 and are not included in the amounts shown
above.
3 Tax Compliance Fees includes, among other things, statutory
tax return preparation and review and advice on the impact of changes in local
tax laws.
4 Tax Planning and
Consulting Fees includes, among other things, tax planning and advice and
assistance with respect to transfer pricing issues.
5 All Other Fees
consist principally of strategy consulting services provided by Booz &
Company, which was acquired by PricewaterhouseCoopers in 2014 and renamed
Strategy&. The Company stopped engaging Strategy& in
2015.
ANONYMOUS REPORTING OF ACCOUNTING
CONCERNS
The Audit Committee has established a
means for the anonymous reporting (where permitted by law) of (i) suspected or
actual violations of the code of conduct, our enterprise policies or applicable
laws, including those related to accounting practices, internal controls or
auditing matters and procedures; (ii) theft or fraud of any amount; (iii)
insider trading; (iv) performance and execution of contracts; (v) conflicts of
interest; (vi) violations of securities and antitrust laws; and (vii) violations
of the Foreign Corrupt Practices Act.
Any employee, supplier, customer,
shareholder or other interested party can submit a report via the following
methods:
●Direct Telephone: 309-494-4393
(English only)
●Call Collect Helpline:
770-582-5275 (language translation available)
●Confidential Fax:
309-494-4818
●Email:
BusinessPractices@CAT.com
●Internet:
www.caterpillar.com/obp
AUDIT COMMITTEE
REPORT
The Audit Committee is composed of four
directors, all of whom meet the independence standards contained in the NYSE
Listed Company rules, SEC rules and Caterpillars Guidelines on Corporate
Governance Issues, and operates under a written charter adopted by the Board of
Directors.
Management is responsible for the
Companys internal controls and the financial reporting process.
PricewaterhouseCoopers, acting as independent auditor, is responsible for
performing an independent audit of the Companys consolidated financial
statements and internal control over financial reporting in accordance with
standards established by the Public Company Accounting Oversight Board
(PCAOB).
The Audit Committee has discussed with
the Companys independent auditor the overall scope and execution of the
independent audit and has reviewed and discussed the audited financial
statements with management. The Audit Committee also discussed with the
independent auditors other matters required by PCAOB auditing standards.
The independent auditors provided to
the Audit Committee the written communications required by applicable standards
of the PCAOB regarding the independent accountants communications with the
Audit Committee concerning independence, and the Audit Committee discussed the
independent auditors independence with management and the auditors. The Audit
Committee also considered whether the provision of other non-audit services by
the Companys independent auditors to the Company is compatible with maintaining
independence.
The Audit Committee concluded that the
independent auditors independence had not been impaired.
Based on the reviews and discussion
referred to above, the Audit Committee recommended to the Board that the audited
consolidated financial statements be included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2016.
By the members of the Audit Committee as
of April 1, 2017 consisting of:
|
|
|
Daniel M. Dickinson |
William A. Osborn |
Dennis A. Muilenburg |
|
(Chairman) |
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2017 Proxy Statement |
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PROPOSAL 3
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
PROPOSAL SNAPSHOT |
|
●What am I voting on? |
Shareholders are being asked to
approve, on an advisory basis, the compensation of named executive
officers as disclosed in this proxy statement. |
|
Voting
Recommendation: FOR proposal |
On an annual basis, and in compliance
with Section 14A of the Securities Exchange Act of 1934, shareholders are being
asked to vote on the following advisory resolution:
RESOLVED, that the compensation of
Caterpillars named executive officers as described under Compensation
Discussion and Analysis, the compensation tables and the narrative discussion
associated with the compensation tables in Caterpillars proxy statement for its
2017 Annual Meeting of Shareholders is hereby APPROVED.
This vote is advisory and therefore not
binding on Caterpillar, the Compensation Committee (Committee) or the Board. The
Board and the Committee value the opinion of Caterpillars shareholders, and to
the extent there is any significant vote against Caterpillars named executive
officer compensation, the Board will consider the reasons for such a vote, and
the Committee will evaluate whether any actions are necessary to address those
concerns.
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Table of
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COMPENSATION
DISCUSSION & ANALYSIS
EXECUTIVE
SUMMARY
I. |
Governance and Pay for
Performance Philosophy |
|
II. |
Compensation Program
Structure |
|
III. |
Business Performance and
Results |
|
IV. |
Pay Outcomes Demonstrate
Alignment with Company Performance |
I.
GOVERNANCE AND PAY FOR PERFORMANCE
PHILOSOPHY |
The Compensation and Human Resources
Committee (the Committee) believes the executive compensation program at
Caterpillar should be structured to align the interests of executives and
shareholders. The program should seek to reward value creation at all stages of
our business cycle, and provide an increasing percentage of performance-based
compensation at higher levels of executive responsibility.
Beginning in 2015, we significantly
expanded our ongoing shareholder outreach program. The feedback received through
this engagement led us to make changes to our executive compensation program for
our senior leadership team including the following:
Annual Incentive |
|
Long-Term
Incentive |
|
|
|
●The maximum payout
opportunity of awards in the Annual Incentive Plan (AIP) for Named
Executive Officers (NEOs) decreased from 200 percent of target to 150
percent of target.
●In years
when the Companys forecasted operating profit is below prior years
actual results:
(i) NEO annual incentive opportunity is reduced, and (ii) AIP payouts are
capped at target. |
|
●The proportion of Performance-Based Restricted Stock Units
(PRSUs) increased from 1/3 to 1/2 of the total long-term target incentive
value.
●The
sizing of long-term incentive grant values is based on relative 1, 3 and
5-year Total Shareholder Return (TSR) as compared to the S&P
Industrials, Compensation Peer Group and Competitor Peer Group that the
Committee has determined compete directly with the
Company. |
These changes were well
received by our shareholders, and support for our advisory vote on our
executive compensation at our 2016 Annual Meeting, commonly referred to as
the say on pay vote, was approximately 93%, up from 65% support in the
prior year. After considering the 2016 say on pay results, the Committee
determined that the Companys executive compensation philosophy,
compensation objectives and compensation elements continued to be
appropriate and did not make any specific changes to the Companys
executive compensation program in response to the 2016 say on pay
vote. |
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Say on Pay Support |
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93% |
65% |
96% |
|
|
|
2016 |
2015 |
2014 |
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Table of
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In 2016, we continued our shareholder
outreach effort, reaching out to the holders of approximately half of our
outstanding shares, to discuss various matters including governance, executive
compensation, sustainability and operational performance. In these meetings, our
shareholders generally expressed a continued positive view with respect to our
executive compensation program.
The Committee engages in an ongoing review
of the Companys executive compensation program to evaluate whether the program
supports the Companys compensation philosophy and objectives, and is closely
aligned with the Companys business objectives. In connection with this ongoing
review, and based on feedback received through our shareholder outreach program,
the Committee continues to implement and maintain what it believes are best
practices for executive compensation, each of which reinforces the Companys
compensation philosophy. Below is a summary of those practices.
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Robust stock ownership and retention
guidelines (6x base salary for our CEO and 3x base salary for each of the
other NEOs)
Robust benchmarking
process
Rigorous Committee oversight of incentive
metrics, goals and pay/performance relationship
Clawback Policy
Limited executive
perquisites
Strict anti-hedging and anti-pledging
policies
Independent compensation consultant
|
No individual change-in-control
agreements
No tax gross-ups on change-in-control
benefits
No backdating, re-pricing or granting of
option awards
retroactively |
II. COMPENSATION PROGRAM
STRUCTURE |
We are committed to developing and
implementing an executive compensation program that directly aligns the
interests of the NEOs with the long-term interests of shareholders. To that end,
the objectives of the Companys executive compensation program are to attract
and retain talented executive officers and to incent NEOs to improve Company
performance and provide strategic leadership over the long term. The majority of
targeted annual compensation for our NEOs is equity-based, vests over multiple
years and is tied directly to long-term value creation for shareholders. NEO
compensation is comprised of three primary components:
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✚ |
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✚ |
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Long-Term Incentive |
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Annual Incentive |
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Base
Salary |
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|
Competitive pay to attract and
retain talented executives |
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An opportunity to earn an annual
cash award based on the Companys financial performance and high-priority
business initiatives |
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A mix of PRSUs and stock options to
align management with long-term shareholder interests |
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25 |
Table of
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Approximately 91 percent of our CEOs 2016
targeted annual total
compensation was variable and/or at-risk
compensation, including 50 percent of long-term incentives in the form of
PRSUs.
CEO Compensation Elements
|
91% of total compensation is variable and
at-risk |
|
|
9% |
16% |
37.5% |
37.5% |
Salary |
AIP |
Options |
PRSUs |
|
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|
50% of long-term incentives have
performance-based vesting
conditions |
III. BUSINESS PERFORMANCE AND
RESULTS |
Our key financial and business results for
2016 included the following:
Cost Structure |
|
Dividend Payments and
History
Paid $1.8 billion in dividends in
2016. Caterpillar has paid higher dividends to its shareholders for 23
consecutive years, and since 2007, the Companys cash dividend has more
than doubled. Caterpillar has paid a cash dividend every year since the
Company was formed and has paid a quarterly dividend since
1933. |
|
●In 2016, Machinery, Energy &
Transportation (ME&T) period costs and variable manufacturing costs
were $2.3 billion less than 2015. |
|
|
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|
Strong Balance Sheet and Cash
Flow |
|
|
●In 2016, ME&T operating cash
flow was $3.9 billion and we maintained positive cash flow after capital
expenditures (CAPEX) and dividends.
●Enterprise cash on hand at the
end of the year was $7.2 billion.
●ME&T debt-to-capital ratio
was 41 percent, within the targeted range of 30 to 45 percent.
|
|
Sales and Revenues |
|
2016 Sales and Revenues By
Segment |
($ in millions) |
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Table of
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IV. PAY OUTCOMES DEMONSTRATE
ALIGNMENT WITH COMPANY PERFORMANCE |
In addition to the financial highlights
noted above, the Companys stock price increased 36.5% in 2016 and TSR for 2016
was 42%. Notwithstanding this increase in shareholder value and the
accomplishments noted above, it was a challenging year for our business due to,
among other things, continued weak global commodity prices and economic weakness
in many countries. The challenges in our business were reflected in the
resulting pay decisions made for our CEO and the other NEOs, consistent with the
Committees pay-for-performance philosophy. Compensation outcomes for 2016
included the following items which adversely affected the compensation of our
NEOs:
|
|
●No adjustments were made to NEO base salaries in
2016 |
|
|
●Because 2016 planned operating profit was below 2015 actual
operating profit, the Committee determined that 2016 was a down year for
purposes of 2016 AIP design.
●Each NEOs annual incentive opportunity was reduced by 20.9 percent
in 2016, to reflect the same proportionate reduction in planned 2016
operating profit versus 2015 actual operating profit
results.
●Payouts for 2016 AIP were capped at the target level with no
upside opportunity.
●Actual annual incentive awards for 2016 paid out, on average, at
less than 30% of target. |
|
|
●Based on the Committees review of the Companys 1, 3 and 5-year
relative TSR in early 2016, the 2016 equity grants to the NEOs were sized
at approximately the 25th percentile of the compensation peer
group.
●The long-term cash incentive award for the 2014-2016 cycle paid out
at approximately 56% of target.
●None of the PRSUs granted for the 2015-2017 performance period
vested in 2016 and, based on aggregate performance in 2015 and 2016, are
trending significantly below target. |
In 2016, our CEOs compensation was
substantially below target level in the aggregate as well as for each component
of compensation other than base salary. This reduction reflects the very weak
market conditions that the Company faced in 2016 and not an operating shortfall
in the judgement of the Committee.
|
CEO Compensation |
* Target Value Includes: Salary of
$1,600,008, annual incentive of $2,800,000; and LTI grant of $9,273,300. Total
Target value: $13,673,308.
** Actual Value Includes: Salary of
$1,600,008, annual incentive of
$518,000; and LTI grant of $8,268,000.
Total Actual value: $10,386,008.
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Table of
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COMPENSATION DISCUSSION &
ANALYSIS
2016 NAMED EXECUTIVE
OFFICERS |
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|
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Douglas R.
Oberhelman Chairman and Chief Executive Officer
(CEO) |
|
|
Douglas R. Oberhelman retired from
the role of CEO on December 31, 2016 and remained the Executive Chairman
until his retirement from the Company on March 31, 2017. In 2016, Mr.
Oberhelman improved the operational execution of the Company by continuing
to focus on:
●Cost Management: ME&T period costs and variable
manufacturing costs were $2.3 billion lower than 2015
●Employee Safety: sixth consecutive year of improving
employee safety
●Product Quality: improved product quality and
reliability metrics for machines
●Market Position: machine market share saw gains over the
previous 2 years |
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Bradley M.
Halverson Group President,
Corporate Services and Chief Financial Officer (CFO)
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Bradley M. Halverson is Group
President and Chief Financial Officer with responsibilities for Corporate
Services and Financial Products Division. In 2016, Mr.
Halverson:
●Maintained a strong financial position for the Company
through the continuing cyclical decline in key end markets
●Provided strategic leadership in connection with the
Companys cost reduction actions
●Delivered Return On Equity in line with plan for the
Companys captive finance company, Caterpillar Financial
Services
●Managed credit metrics within long-term ranges despite
weak end markets |
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Robert B.
Charter Group President, Customer
& Dealer Support
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Robert B. Charter is Group
President with responsibility for Customer & Dealer Support. In 2016
Mr. Charter:
●Led Caterpillars growing aftermarket business in
partnership with the various business units and dealers
●Maintained aftermarket performance despite challenging
end markets such as oil and gas and mining
●Improved inventory management including deploying
systems utilized across the Global Caterpillar Dealer
network |
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Jim Umpleby Group President, Energy &
Transportation
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Jim Umpleby became CEO on January
1, 2017. Prior to his role as CEO, Mr. Umpleby was Group President with
responsibility for Energy & Transportation. In a challenging year with
declining sales in key end markets, Energy & Transportation delivered
the following results:
●Achieved strong profit pull through and cash flow due to
aggressive cost management
●Made key acquisitions in 2016 in both Oil & Gas and
Rail businesses focusing on digital technologies and customer
connectivity
●Improved quality and safety in 2016 |
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David P.
Bozeman Senior Vice
President, Caterpillar Enterprise System Group
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David P. Bozeman served as Senior
Vice President of the Caterpillar Enterprise System Group until his
departure on December 31, 2016. Under Mr. Bozemans leadership,
Caterpillar strengthened critical order-to-delivery processes while
empowering enterprise support groups to improve the Companys worldwide
manufacturing and supply chain capabilities. During his tenure, the
Company:
●Executed the global deployment of Lean
Transformation
●Established the Engineered Value Chain
methodology
●Reinforced foundation capabilities of Product Source
Planning, Sales & Operations Planning, Global Supply Network, Capacity
Planning and New Production Introduction |
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Table of
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THE COMPENSATION
COMMITTEE
The Committee is responsible for the
executive compensation program design and decision-making process for NEO
compensation. The Committee regularly reviews the Companys executive
compensation practices, including the methodologies for setting NEO total
compensation, the goals of the program and the underlying compensation
philosophy. The Committee also considers the recommendations and market data
provided by its independent compensation consultant and makes decisions, as it
deems appropriate, on executive compensation based on its assessment of
performance and achievement of Company goals. The Committee also exercises its
judgment as to what is in the best interests of the Company and its
shareholders. The responsibilities of the Committee are described more fully in
its charter, which is available at www.caterpillar.com/governance.
COMPENSATION
CONSIDERATIONS
The Committee, with the support of
management and the independent compensation consultant, considers many aspects
of the Companys financial and operational performance when making executive
compensation decisions.
In setting compensation levels for 2016,
the Committee considered many factors including, but not limited to:
●Long-term shareholder value creation
●The cyclical nature of the business
●Performance relative to financial guidance provided
throughout the year
●Enterprise and Business Unit operational
performance
●Performance relative to peers and
competitors
●Historic absolute and relative performance
●Key areas management can influence over the short and
long term
●Retention of management talent
●Skills, experience and tenure of executive
incumbents |
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INDEPENDENT COMPENSATION
CONSULTANT
The Committee retained Meridian
Compensation Partners, LLC as its independent compensation consultant. Meridian
provides executive and director compensation consulting services to the
Committee, including advice regarding the design and implementation of
compensation programs, market information, regulatory updates and analyses and
trends on executive compensation and benefits. Interactions between Meridian and
management are generally limited to discussions on behalf of the Committee or as
required to compile information at the Committees direction. During 2016,
Meridian did not provide any other services to the Company. Based on these
factors, its own evaluation of Meridians independence pursuant to the
requirements approved and adopted by the SEC and NYSE, and information provided
by Meridian, the Committee has determined that the work performed by Meridian
does not raise any conflicts of interest.
BENCHMARKING COMPENSATION TO
PEERS
2016 Compensation Peer
Group The Committee regularly assesses the
market competitiveness of the Companys executive compensation programs based on
peer group data. The 2016 Compensation Peer Group was established based on the
following criteria:
● |
Total revenue and market
capitalization of the peer companies relative to
Caterpillar; |
● |
Competitors and industry
segment; |
● |
Global presence with a significant
portion of revenue coming from non-U.S.
operations; |
● |
Geographic
footprint |
2016 COMPENSATION PEER
GROUP* |
3M Company |
|
E.I. du Pont de Nemours
and Company |
|
Honeywell International
Inc. |
Archer-Daniels-Midland
Company |
|
Emerson Electric
Co. |
|
Intel
Corporation |
Alcoa Inc. |
|
FedEx
Corporation |
|
Johnson Controls,
Inc. |
The Boeing
Company |
|
Fluor
Corporation |
|
Paccar Inc. |
Cisco Systems,
Inc. |
|
Ford Motor
Company |
|
Procter & Gamble
Company |
Coca-Cola
Company |
|
General Dynamics
Corporation |
|
Raytheon
Company |
Cummins Inc. |
|
General Electric
Company |
|
United Technologies
Corporation |
Deere &
Company |
|
Halliburton
Company |
|
|
* The 2016 peer group was modified from
2015 to add Paccar Inc. and remove Parker-Hannifin Corporation and Illinois Tool
Works, Inc.
Benchmarking
Methodology To account for differences in
the size of the compensation peer group companies, market data is statistically
adjusted, using a regression analysis, by the Committees independent
compensation consultant allowing for a comparison of the compensation levels to
similarly-sized companies. Each element of our NEOs compensation is then
targeted to the median of the peer group. To the extent an NEOs total actual
compensation exceeds the peer group median, it is due to outstanding
performance, critical skills, experience and
tenure. If an NEOs compensation is below the median, it is generally due to
underperformance against relevant metrics or reflective of an individual who is
newer in his or her role.
2016 Competitor Peer
Group For 2016, the Committee also assessed
the market competitiveness of the Companys executive compensation programs
against a group of competitors that it deems to compete directly with the
Company. The Committee noted that although the Companys peer group described
above is an appropriate benchmark for executive compensation at other similarly
sized companies, the peer group data does not always provide useful comparisons
to other companies that might be experiencing similar business conditions. To
that end, and consistent with its pay-for-performance philosophy, the Committee
further sought to compare the Companys business performance with that of its
competitors by establishing a Competitor Peer Group.
The Committee formed the 2016 Competitor
Peer Group (along with the 2016 Compensation Peer Group) to assess relative
performance when sizing long-term incentive awards. The 2016 Competitor Peer
Group was established based on the following criteria:
● |
Compete in the same markets as the
Company; |
● |
Offer similar products and services
as the Company; or |
● |
Serve the same, or similar,
industries and end-users as the Company
|
2016 COMPETITOR PEER GROUP |
Cummins Inc. |
Deere &
Company |
Hitachi Construction
Machinery Co., Ltd. |
Joy Global
Inc. |
Komatsu Ltd. |
Sany Heavy Equipment
International Holdings Company Limited |
Volvo AB |
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ROLE OF EXECUTIVE OFFICERS IN
DETERMINING EXECUTIVE COMPENSATION
The Board, excluding the CEO, all of whom
are independent directors, annually conducts the CEOs performance evaluation.
Prior to the Boards evaluation of the CEOs performance and its approval of CEO
compensation, the Committee makes a preliminary compensation recommendation to
the Board based on the Committees initial evaluation and performance review of
the CEO. Additionally, for each NEO, the CEO presents a performance evaluation
and makes compensation recommendations to the Committee.
On December 31, 2016, Mr. Oberhelman
retired from the role of CEO and remained the Executive Chairman until his
retirement on March 31, 2017. Mr. Umpleby was promoted to the position of CEO
effective January 1, 2017. In early 2017, NEO performance was reviewed and
discussed by the Compensation Committee with Mr. Umpleby. These performance
evaluations factored into the compensation decisions made by the Committee and,
in the case of Messrs. Oberhelman and Umpleby, by the independent members of the
Board.
EXECUTIVE COMPENSATION AND RISK
MANAGEMENT
Each year, the Committee assesses the
Companys risk profile relative to the executive compensation program and
confirms that the Companys compensation programs and policies do not create or
encourage excessive risks that are reasonably likely to have a material adverse
impact on the Company. Also, the Committee has concluded that the total
compensation structure for senior leadership does not inappropriately emphasize
short-term stock price performance at the expense of longer-term value creation.
In particular, long-term incentive awards, as a significant portion of total
compensation, and stock ownership guidelines which NEOs are required to maintain
pre- and post-retirement (6x base salary for our CEO and 3x base salary for each
of the other NEOs), are structured to align managements compensation with
principles of risk management by maintaining a focus on the long term
performance of the Company.
COMPONENTS OF EXECUTIVE
COMPENSATION |
NEOs receive a mix of fixed and variable
compensation with a focus on long-term and performance-based
components.
CEO
9% |
16% |
75% |
Salary |
Annual
Incentive* |
Long-term
Incentive* |
Average of Other NEOs
13% |
15% |
72% |
Salary |
Annual
Incentive* |
Long-term
Incentive* |
* At target
BASE SALARY
Base salary is the only fixed component of
NEO compensation. The Committee targets the base salary midpoint at the
size-adjusted median level of the peer group. Each NEOs base salary is
determined by the individuals level of responsibility and historic performance
with reference to the market median. Annual increases, if any, are based on
achievement of individual and Company objectives, contributions to Caterpillars performance and culture, leadership
accomplishments and a comparison to those in comparable positions at peer
companies.
Mr. Oberhelmans base salary had not
increased since 2012 and remained in line with the median base salary of CEOs in
the Companys 2016 compensation peer group. Additionally, there were no changes
to salary levels for any of the NEOs in 2016. Upon his promotion to the position
of CEO, Mr. Umplebys 2017 salary was set at $1.2 million which
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is below the peer group median. In
setting Mr. Umplebys base salary, the Board took into consideration several
factors including market data of other recently appointed CEOs relative to peer
group medians. Other NEOs base salaries are at
or below the peer group median primarily due to the relatively recent promotions
of some of these individuals to their current roles.
ANNUAL INCENTIVE
2016 ANNUAL INCENTIVE
PLAN DESIGN
The Companys AIP is designed to
provide each NEO with an annual cash payout based on the short-term performance
of the Company and each NEOs respective businesses. The AIP places the majority
of each NEOs target annual cash compensation at risk and aligns the interests
of executives and shareholders.
The 2016 AIP design provided that an
incentive pool would be funded based on the Companys profit after taxes, with
actual payouts based on achieving financial and operational performance measures
that were established by the Committee in February 2016. Also, beginning in
2016, the Committee modified the AIP design to more closely align pay outcomes
with business performance by comparing the Companys annual forecasted operating
profit to the prior years actual operating profit. Based on this comparison,
the Committee annually determines whether the current year will be an up year
or down year versus the prior years actual operating profit
results.
Up Year
If the operating profit forecast is above
the prior
years actual operating profit results |
|
Threshold performance level will be set at no less than 87 percent of the operating
profit target. |
Business Plan |
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|
|
The payout for achievement of the
maximum performance level will be capped
at 150 percent of the target award
opportunity, down from 200 percent in prior years. |
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Achievement of the target level
operating profit performance goal will result in a payout of
100 percent of the target award opportunity. |
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|
Performance at threshold will
result in a payout of 50
percent of the target award opportunity
for the year.
Performance below threshold will
result in no annual incentive
payout under the program with respect
to this measure.
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Down Year
If the operating profit forecast
is below the prior years actual operating profit results, target incentive
award opportunity for each NEO will be reduced in proportion to the
decline in the operating profit |
|
Threshold
performance level will be set at no
less than 87 percent of the operating profit target. |
Business Plan |
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|
In a down year, there will be
no upside opportunity above the target level. |
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Performance at threshold will
result in a payout of 50 percent
of the reduced target award opportunity
for the year.
Performance below threshold will
result in no annual incentive
payout under the program with respect
to this
measure.
|
In addition to operating profit performance,
a portion of each NEOs annual incentive will be based on operational
performance measures related to their
responsibilities, such as cost reduction, machine PINS (market position),
aftermarket parts sales, Financial Products Division Return on Equity (FPD
ROE) and inventory performance, all of which are subject to the same
design above. |
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Consistent with this design process,
after reviewing the Companys 2016 business plan, the Committee determined that
2016 would be a down year, as operating profit was forecasted to be 20.9%
below 2015 actual operating profit. As a result, each NEOs target AIP
opportunity was reduced by 20.9% and the AIP payout was capped at target with no
additional upside.
2016 ANNUAL INCENTIVE
PERFORMANCE MEASURES
At its February 2016 meeting, the
Committee approved the performance measures described below to be used for
determining actual payouts under the AIP. For all NEOs, the largest portion
(ranging from 50 percent to 80 percent) of their 2016 AIP opportunity was based
on Enterprise Operating Profit and the Operating Profit After Capital Charge
(OPACC) of each NEOs respective businesses. The remaining portion of each NEOs
annual incentive award opportunity was determined based on the achievement of
specific operational goals, such as cost reduction, Percent of Industry Sales
(PINS), aftermarket parts sales, FPD ROE and inventory performance.
When establishing the performance
targets for 2016, the Committee reviewed the Companys business plan and
historical performance, management recommendations and feedback provided by the
Committees independent compensation consultant. The Committee set the targets
for each of the performance measures at levels that were designed to be
reasonably achievable with strong management performance. Maximum performance
levels were designed to be difficult to achieve in light of historical
performance and the Companys business forecast at the time the measures were
approved. The performance measures were also weighted according to the Companys
business priorities and the responsibilities of each NEO. The chart below
summarizes the performance measures, weightings and results for the 2016 AIP for
each NEO.
In early 2017, the results for each
performance measure noted above were converted into a performance factor and
reviewed by the Committee. Each performance factor was multiplied by the
respective weightings for each NEO to obtain a final weighted performance factor
which was then used to determine actual incentive payments for each of the
NEOs.
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Description of Performance
Measures
|
PERFORMANCE MEASURE |
|
DEFINITION |
|
RATIONALE |
|
|
|
|
|
|
|
|
Enterprise Operating
Profit |
|
Operating Profit measures the
overall profitability of all of Caterpillars operations (including
ME&T and Financial Products) before taxes, interest and other
non-operating items. For AIP purposes, the Enterprise Operating Profit
metric will be calculated as Caterpillar Consolidated Operating Profit
excluding restructuring. |
|
The Committee approved Operating
Profit as the primary corporate performance measure in order to incent
management with respect to the overall profitability of the Company. The
Committee believes that Operating Profit is an important corporate metric
for shareholders to be able to assess the financial health of the Company
and track its progress towards profit targets, particularly in a declining
revenue environment. |
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|
|
|
|
Operating Profit After Capital
Charge (OPACC) |
|
For each reportable segment,
OPACC is calculated as operating profit (excluding short-term incentive
compensation expense and restructuring costs) less the capital charge. In
2016, the capital charge was calculated as the average monthly net
accountable assets multiplied by a pre-tax capital charge rate of 13
percent. |
|
OPACC is designed to measure how
productively and efficiently the Companys assets are being utilized by
examining the relationship between the value of the Companys assets and
the operating profit that those assets generate. An increase in OPACC
means that the Companys management is utilizing assets more efficiently
to generate shareholder value, which the Committee views as key to
Caterpillars long-term success. |
|
|
|
|
|
|
|
Financial Products Division
Return on Equity (FPD ROE) |
|
FPD ROE is calculated by dividing
the full year profit (after tax) by the average of the monthly accountable
equity balances, excluding the impact of interest costs and equity changes
associated with differences in planned vs. actual dividends. Dividends are
payments of retained earnings from Caterpillar Financial Services
Corporation and Caterpillar Financial Insurance Services, the Companys
wholly owned finance and insurance subsidiaries, to Caterpillar.
|
|
The Committee approved this
measure to drive accountability for and performance of Caterpillars
Financial Products Division, including appropriate oversight of risk
management, portfolio quality and financial return
expectations. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Industry Sales
(PINS) |
|
PINS capture dealer sales
(including deliveries to dealer rental operations) as a percentage of
industry sales. Due to the competitively sensitive nature of this measure,
the threshold, target and result levels have all been indexed and reported
as such. |
|
The Committee approved PINS as a
performance measure in order to incent improvements in the Companys
competitive position in the markets it serves. |
|
|
|
|
|
|
|
Parts Sales |
|
Parts Sales is measured using
Caterpillar branded parts orders. This metric uses actual Caterpillar
branded parts orders (at actual price levels), as reported from the Dealer
Parts Orders Reporting System as compared to plan (at price levels when
the plan was finalized). The metric is based on, and reported as, a
percentage above or below plan. Due to the competitively sensitive nature
of this measure, the threshold, target and result levels have all been
indexed and reported as such. |
|
The Committee approved this
measure because increasing Caterpillar branded parts sales is an important
aspect of the corporate strategy. Aftermarket support is important to our
customers and parts are a material component of that support. Aftermarket
support is one of the main reasons why customers buy Caterpillar products
and is a key differentiator in the global market. |
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Cost
Reduction |
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Cost reduction is calculated as
2015 ME&T total period costs less 2016 ME&T total period costs.
Total period costs include the sum of ME&T period cost of sales,
selling general & administrative (SG&A) expenses and Research
& Development expenses and excludes restructuring charges,
mark-to-market losses for pension and postemployment benefits and the
year-over-year impact of changes in currency rates. |
|
The Committee approved Cost
Reduction as a performance measure in order to focus management on
reducing costs during a period of significant and sustained revenue
decline. The Committee believes that a focus on cost reduction is
important for the current profitability of the Company as well as
positioning the Company for improved profitability in the future.
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Net Inventory Days on
Hand |
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Total Enterprise Net Inventory
Days on Hand for the sum of Production and Finished, Aftermarket Parts and
Expanded Mining Parts, as reported in the Board reporting scorecard. Net
Inventory Days on Hand will be calculated as 360 days divided by
annualized rolling inventory turns, with inventory levels calculated net
of customer advance payments. |
|
During this period of sustained
revenue decline, the Committee wanted a greater emphasis placed on
improvement of inventory turns and the positive cash flow impact that such
an improvement would drive across the enterprise. |
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2016 ANNUAL INCENTIVE
PAYMENTS
As described above, the 2016 AIP design provided that an incentive pool would be funded based on the Company’s profit
after taxes, with actual payouts based on achieving the financial and operational performance measures established by the
Committee in February 2016. Based on the Company’s 2016 reported profit after tax, the incentive pool did not fund, in
part due to the impact of several significant items on profit (including restructuring costs, mark-to-market losses for pension
and other postemployment benefits, a goodwill impairment charge and a state deferred tax valuation allowance). In order to
more adequately reflect the Company’s core operating performance, the Committee, consistent with its authority, exercised
its discretion to exclude these items and based on this adjusted profit after tax performance, approved the 2016 incentive
payments as follows:
|
TARGET OPPORTUNITY |
|
DOWN YEAR REDUCTION |
|
REVISED OPPORTUNITY |
|
|
SALARY |
|
|
|
WEIGHTED PERFORMANCE FACTOR |
|
|
|
PAYOUT |
Oberhelman |
175% |
- |
20.9% |
= |
138.4% |
|
X |
$ |
1,600,008 |
|
X |
|
0.2339 |
|
= |
|
$518,126 |
Halverson |
115% |
- |
20.9% |
= |
91.0% |
|
X |
$ |
786,312 |
|
X |
|
0.3000 |
|
= |
|
$214,592 |
Charter |
115% |
- |
20.9% |
= |
91.0% |
|
X |
$ |
729,768 |
|
X |
|
0.4357 |
|
= |
|
$289,258 |
Umpleby |
115% |
- |
20.9% |
= |
91.0% |
|
X |
$ |
825,636 |
|
X |
|
0.2926 |
|
= |
|
$219,773 |
Bozeman |
100% |
- |
20.9% |
= |
79.1% |
|
X |
$ |
698,904 |
|
X |
|
0.1000 |
|
= |
|
$ 55,283 |
LONG-TERM INCENTIVE
2016 DESIGN AND SIZING OF
GRANT
Beginning in 2015, NEO long-term
incentive (LTI) awards were comprised of two forms of equity PRSUs and
time-vested non-qualified stock options (Options). Consistent with its
pay-for-performance philosophy and in order to further align executives with
shareholders, in 2016, the Committee revised the weighting of these elements to
deliver one-half of the total LTI value in PRSUs and one-half in Options. For the 2016 grant, the Committee selected ROE as
the PRSU performance measure as it aligns management with shareholders by
measuring and rewarding profitability relative to shareholders investment in
the business. The ROE target level was designed to be reasonably achievable with
strong management performance. The PRSUs cliff vest at the end of the 2016-2018
performance period based on average ROE over the full three-year
period.
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In February 2016, the Committee granted
LTI awards that were initially sized at the 25th percentile of the benchmarked
LTI values for the Companys compensation peer group. The Committee viewed this
level of LTI sizing as appropriate in view of the Companys 1, 3 and 5-year
relative TSR and financial performance at the end of 2015. The Committee further
adjusted the LTI awards to reflect the individual performance of each NEO. The
Committees process for sizing LTI grant values for NEOs is as
follows:
|
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|
1 |
|
Benchmarking the median LTI value for
the Companys compensation peer group. |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
2 |
|
Review and consideration of financial
results; 1, 3 and 5-year TSR (vs the S&P Industrials, Compensation
Peer Group and Competitor Peer Group); operational performance;
market conditions and strategy execution. |
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
Adjust award values to reflect
individual performance including consistency of performance against goals,
leadership contributions, time in role and other relevant factors. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 2017 PRSUs
Beginning in 2015, the Committee
elected to award NEOs a portion of their LTI grant in the form of PRSUs, the
vesting of which is determined over a three-year performance period. For the
2015 grant, one-third of the PRSUs are eligible to vest annually based on three
annual 18% ROE hurdles. In addition, any PRSUs that do not vest based on the
annual performance hurdle have the opportunity to vest based on the achievement
of a three-year average ROE of 18% during the performance period. In setting
this ROE hurdle, the Committee considered the Companys historical ROE
performance, current business conditions and long-term business outlook which
accounted for several financial and operational factors, including share
repurchases.
In each of 2015 and 2016, the Company
failed to achieve the 18% ROE performance hurdle and, accordingly, none of the
PRSUs have vested to date. In light of these results during the first two years
of the performance period, the Company believes that the likelihood of achieving
a three-year average ROE of 18% or greater has substantially decreased.
Beginning in 2016, the Committee adjusted the vesting terms of future PRSU
grants to remove the annual vesting feature and instead to provide for cliff
vesting of the entire grant at the end of the three-year performance period
subject to achieving the applicable ROE hurdle.
STRATEGIC PERFORMANCE PLAN
(SPP)
Prior to 2015, NEOs received cash
awards under the Companys SPP, with the ultimate amounts determined based on a
three-year performance cycle. The 2014 2016 SPP performance cycle was the
final SPP cycle in which the current NEOs participated. For the 2014 2016 SPP
cycle, the Committee established threshold,
target and maximum payout levels as well as the two performance measures noted
below. The Committee also established the target opportunity for each NEO at the
time the performance cycle was established.
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2014 2016
PERFORMANCE PERIOD
The 2014-2016 performance period
concluded in 2016 with a weighted-average performance factor well below target
at 0.5551. The measures in this performance cycle were established in February
2014 and were comprised of two components Earnings Per Share (EPS) and
Relative
TSR (versus
S&P Industrials). Performance with respect to both measures was well below
target. In its evaluation of the 2014 2016 SPP performance measures and
results, the Committee noted the impact of a goodwill impairment charge and the
effect of an accounting principle change impacting the accounting for pension
and other postemployment benefits. The Committee
viewed the goodwill impairment charge as neither indicative of the Companys
underlying performance nor that of the NEOs and acknowledged the impact of the
accounting change was not contemplated when the 2014-2016 SPP was developed.
Accordingly, the Committee excluded the impact of these expenses from EPS when
evaluating and certifying the results below. Had the Committee not excluded
these items, the overall payout factor for the 2014 2016 performance period
would have been 0.4449, still substantially below target.
PERFORMANCE
MEASURE |
|
WEIGHTING |
|
THRESHOLD (30%
PAYOUT) |
|
TARGET (100%
PAYOUT) |
|
MAXIMUM (200%
PAYOUT) |
|
RESULTS |
|
PAYOUT FACTOR |
EPS1 |
|
75% |
|
$3.50 |
|
$5.85 |
|
$7.02 |
|
$4.52 |
|
0.6028 |
Relative TSR vs. S&P Industrials |
|
25% |
|
25th Percentile |
|
55th Percentile |
|
75th Percentile |
|
30th Percentile |
|
0.4120 |
|
|
|
|
|
|
|
|
Overall Weighted Factor: |
|
0.5551 |
1 Average of 2014-2016 actual EPS excluding restructuring and
goodwill impairment. Results exclude the effect of an accounting principle
change effective January 1, 2016 impacting the accounting for pension and other
postemployment benefits.
2014 2016 PERFORMANCE PERIOD
PAYMENTS
NEO |
|
TARGET OPPORTUNITY |
|
|
|
FINAL FACTOR |
|
|
|
PAYOUT |
Oberhelman |
|
$4,275,000 |
|
X |
|
0.5551 |
|
= |
|
$2,373,053 |
Halverson |
|
$1,150,000 |
|
X |
|
0.5551 |
|
= |
|
$638,365 |
Charter1 |
|
$953,435 |
|
X |
|
0.5551 |
|
= |
|
$529,252 |
Umpleby |
|
$1,150,000 |
|
X |
|
0.5551 |
|
= |
|
$638,365 |
Bozeman |
|
$750,000 |
|
X |
|
0.5551 |
|
= |
|
$416,325 |
1 Mr. Charter was a Vice President during the first year of the
performance period with a target opportunity of 90% of his base salary. For 2015
and 2016 Mr. Charter was a Group President with a target opportunity expressed
as a flat dollar amount of $1,150,000. Mr. Charters blended target opportunity
is reflected in the chart above.
OTHER
COMPENSATION, BENEFITS AND
CONSIDERATIONS |
2017 CEO COMPENSATION
Jim Umpleby became Chief Executive
Officer on January 1, 2017. Douglas R. Oberhelman retired from the role of CEO
on December 31, 2016 but remained the Executive Chairman until his retirement
from the Company on March 31, 2017. Mr. Umplebys 2017 base salary, AIP target
opportunity and LTI award value were set below that of Mr. Oberhelman in
recognition of Mr. Oberhelmans tenure in the role. The following chart shows
Mr. Umplebys compensation effective January 1, 2017. Additionally, Mr. Umpleby
will participate in generally the same perquisites and benefit plans as Mr.
Oberhelman as described in more detail below. Mr. Oberhelman was paid his current
salary until his retirement on March 31, 2017. Mr. Oberhelman is not eligible
for AIP or LTI in 2017 as Executive Chairman.
COMPENSATION
COMPONENT |
|
2017 VALUE |
Salary |
|
$1,200,000 |
Annual Incentive |
|
150% of salary |
Long-Term
Incentive |
|
Approximately 80% of the peer group
median |
|
2017 Proxy
Statement |
|
|
|
37 |
Table of
Contents
DEPARTURE OF DAVID P.
BOZEMAN
Mr. Bozeman served as an executive
officer of the company through December 31, 2016. Mr. Bozemans position was
eliminated in connection with the Companys ongoing restructuring efforts, and in
consideration for his service to the Company, as well as a release of claims in
favor of the Company, Mr. Bozeman was provided a severance payment of
$2,300,000. In addition, the Committee approved the accelerated, pro-rata
vesting of 666 shares of restricted stock units and 96,359 stock options
previously granted to Mr. Bozeman and a 12-month post-separation exercise
period. The Committee also approved continued, pro-rata vesting of his
outstanding 2015-2017 and 2016-2018 PRSUs, with the level determined based on
actual performance during the respective performance periods.
TRANSITION PAYMENT FOR ROBERT B.
CHARTER
To assist with the continued costs
associated with Mr. Charters relocation from Singapore to the United States and
to help ensure that Mr. Charter remains in the same approximate financial
position as he would have been absent his required international relocation, the
Committee approved a transition payment of $500,000, which was paid to Mr.
Charter in 2016. In approving this payment, the Committee considered the adverse
income tax consequences to Mr. Charter, an Australian citizen, associated with
his required relocation as well as the benefit programs in which Mr. Charter was
previously eligible to participate as compared to the Companys other NEOs. The
Committee also noted that providing this final payment was more cost effective
to the Company than placing Mr. Charter as an International Service Employee in
Peoria, Illinois which customarily includes housing, mobility premiums, home
leave and tax allowances.
POST-TERMINATION AND CHANGE IN
CONTROL BENEFITS
The Companys change in control
provisions are subject to a double trigger, and when both a change in control
and involuntary termination of employment without cause occur, provide
accelerated vesting and maximum payouts under the incentive plans, as described
further below.
Except for customary provisions in
employee benefit plans and as required by applicable law, the NEOs do not have
any pre-existing executive severance packages or contracts; however, the
Committee will consider the particular facts and circumstances of an NEOs
separation to determine whether payment of any severance or other benefit to
such NEO is appropriate. Change in control benefits are provided under the
Companys long-term and annual incentive plans and represent customary
provisions for these types of plans and have no direct correlation with other
compensation decisions. There is no cash severance or other benefits for a
termination related to change in control beyond what is provided for under the
long-term and annual incentive plans. Additional information is disclosed in
the Potential Payments Upon Termination or Change in Control section on page
48 of this proxy statement.
In the event of a qualifying
termination of employment following a change in control, maximum payouts are
provided under the long-term incentive plan and annual incentive
plan.
● |
The long-term plan allows for the
maximum performance level to be paid under each open plan cycle of the
long-term cash plan. |
● |
All unvested stock options, stock
appreciation rights, PRSUs and restricted stock units vest
immediately. |
● |
Stock options and stock
appreciation rights remain exercisable over the normal life of the
grant. |
● |
The annual incentive plan allows
for the target award opportunity, prorated based on the individuals time
of employment from the beginning of the performance period through the
later of: (1) the change in control or (2) termination of employment.
|
38 | |
|
|
|
2017 Proxy Statement |
Table of
Contents
RETIREMENT AND OTHER
BENEFITS
In addition to the annual and long-term
components of compensation, NEOs participate in health and welfare benefit plans
generally available to employees to provide competitive benefits.
The defined contribution and defined
benefit retirement plans available to the NEOs are also available to many U.S.
Caterpillar management and salaried employees. Under the defined benefit pension
plans, the benefit is calculated based on years of service and final average
monthly earnings. All of the NEOs participate in the U.S. retirement plans
described in the following table, except as otherwise provided below.
PLAN TYPE |
TITLE |
DESCRIPTION |
|
PENSION |
Retirement Income Plan
(RIP) |
Defined benefit pension plan
under which benefit amounts are not offset for any Social Security
benefits. RIP was closed to new entrants, effective January 1, 2011. All
U.S.-based NEOs, except Mr. Charter who participates in the Companys
Australian-based defined benefit pension plan, participate in this plan
and, except for Mr. Bozeman, subject to the Companys right to amend or
terminate the plan, continue to earn benefits under RIP until the earlier
of separation or December 31, 2019. Based on his hire date, Mr. Bozemans
RIP benefit was frozen effective January 1, 2011. |
|
Supplemental Retirement Plan
(SERP) |
Non-qualified defined benefit
pension plan that works in tandem with RIP. SERP provides additional
pension benefits if the NEOs benefit is limited due to the compensation
and annual benefit limits imposed on RIP by the tax code. SERP also pays a
benefit that would otherwise have been paid under RIP but for (1) the
NEOs deferral of compensation under SDCP, SEIP or DEIP and (2) exclusions
of lump sum discretionary awards and variable base pay from RIP earnings.
As with RIP, SERP was closed to new entrants effective January 1, 2011.
Subject to the Companys right to amend or terminate the plan, all
U.S.-based NEOs, except Messrs. Bozeman and Umpleby, continue to earn SERP
benefits until the earlier of separation or December 31, 2019. Based on
Mr. Bozemans hire date, his SERP benefit was frozen effective January 1,
2011. Mr. Umpleby participates in a Solar Turbines Incorporated sponsored
non-qualified defined benefit pension plan, which is similar to SERP.
Subject to the Companys right to amend or terminate the plan, Mr. Umpleby
continues to earn benefits until the earlier of separation or December 31,
2019. |
|
|
|
|
|
SAVINGS |
Caterpillar 401(k) Plans |
All U.S.-based NEOs, except for
Mr. Bozeman, are eligible to participate in the Caterpillar 401(k) Savings
Plan under which the Company matches 50 percent of the first 6 percent of
the NEOs eligible pay contributed to the savings plan. Prior to his
separation from the Company and based on his hire date, Mr. Bozeman
participated in the Caterpillar 401(k) Retirement Plan, under which the
Company matches 100 percent of the first 6 percent of eligible pay
contributed to the retirement plan, and the Company makes an annual
non-elective contribution equal to 3%, 4% or 5% of eligible pay based on
the employees age and years of service with the Company. |
|
Supplemental
Deferred Compensation Plan (SDCP) |
All U.S.-based NEOs who are
eligible to participate in a Caterpillar 401(k) plan are eligible to
participate in SDCP, which provides the opportunity to make deferrals of
base salary in excess of the limits imposed on the 401(k) Savings Plan and
the 401(k) Retirement Plan by the Internal Revenue Code and to elect
deferrals from the AIP and the SPP. Under the terms of SDCP, participants
are eligible to earn matching contributions and annual non-elective
contributions based on formulas applicable to them in the Caterpillar
401(k) plans. |
|
Supplemental (SEIP) and
Deferred (DEIP) Employees Investment Plan |
All U.S.-based NEOs hired prior
to March 25, 2007 were previously eligible to participate in SEIP and
DEIP. These plans were closed in March 2007. Compensation deferred into
SEIP and DEIP prior to January 1, 2005, remains in these
plans. |
|
|
|
|
|
|
2017 Proxy Statement |
|
|
|
39 |
Table of Contents
LIMITED PERQUISITES
The Company provides NEOs a limited
number of perquisites that the Committee believes are reasonable and consistent
with the overall compensation program and those commonly provided in the
marketplace. The Committee annually reviews the levels of perquisites provided
to the NEOs which include, among other things, home security systems and (in the
case of the CEO) limited personal use of the Company aircraft and ground
transportation. These perquisites are provided to attract and retain talented
executive officers, to provide for adequate security and safety of our
executives and to allow the NEOs to devote additional time to Caterpillar
business. Costs associated with these perquisites are included in the 2016 All
Other Compensation Table on page 42.
At the discretion of the Committee,
certain benefits may be continued for the CEO upon retirement. On December 13,
2016, the Committee approved the following retirement benefits for Mr.
Oberhelman effective April 1, 2017: (1) office space and related IT,
administrative and travel agent support at the Companys facility located in
Edwards, Illinois; and (2) continued home security for a period not to exceed
five years from the date of Mr. Oberhelmans retirement.
CLAWBACK POLICY
Under the Companys compensation
clawback policy, the Board may require reimbursement of any bonus or incentive
compensation awarded to an officer or cancel unvested restricted or deferred
stock awards previously granted to the officer if all of the following
apply:
● |
The amount of the bonus,
incentive compensation or stock award was calculated based on the
achievement of certain financial results that were subsequently the
subject of a restatement; |
● |
The officer engaged in
intentional misconduct that caused or partially caused the need for the
restatement; and |
● |
The amount of the bonus,
incentive compensation or stock award that would have been awarded to the
officer had the financial results been properly reported would have been
lower than the amount actually awarded. |
TAX IMPLICATIONS: DEDUCTIBILITY OF
NEO COMPENSATION
Under Section 162(m) of the Internal
Revenue Code, generally NEO compensation over $1.0 million for any year is not
deductible for United States income tax purposes. However, performance-based
compensation is exempt from the deduction limit if certain requirements are met.
One of the goals of the Committee is to structure compensation to take advantage
of this exemption under Section 162(m) to the extent practicable. However, the
Committee may elect to provide compensation outside those requirements when
necessary to achieve its compensation objectives.
COMPENSATION COMMITTEE
REPORT
The Compensation Committee has reviewed
and discussed the Compensation Discussion & Analysis (CD&A) included in
this proxy statement with management and is satisfied that the CD&A fairly
and completely represents the philosophy, intent and actions of the Committee
with regard to executive compensation. Based on
such review and discussion, we recommend to the Board that the CD&A be
included in this proxy statement and the Companys Annual Report on Form 10-K
for filing with the SEC.
By the members of the Compensation
Committee consisting of:
|
|
|
|
Miles D. White (Chairman) |
David L. Calhoun |
Jesse J. Greene, Jr. |
Debra L. Reed
|
40 | |
|
|
|
2017 Proxy Statement |
Table of Contents
EXECUTIVE
COMPENSATION TABLES
In years before 2015, long-term
incentive compensation design was based on two components a rolling three-year
cash plan and market based stock option grants. Beginning in 2015, the Committee
revised the long-term incentive plan, eliminating the cash portion and replacing
it with PRSUs.
While the Committee believes PRSUs are
better aligned with shareholder interests going forward, NEOs pay in 2016
includes results of the legacy 2014-2016 performance-based cash plan as well as
PRSUs granted in 2016. SEC executive compensation
disclosure rules require the grant date fair value of PRSUs to be reported in
the year of grant in the Stock Awards column below, rather than after the
completion of the three-year performance period that commenced in 2016. Because
the payment for the 2014-2016 performance-based cash plan is also included in
the Non-Equity Incentive Plan Compensation column, the Summary Compensation
Table in effect double counts the NEOs long-term incentive compensation for
2016. This is the final year for this legacy performance-based cash plan for the
NEOs listed below.
2016 SUMMARY
COMPENSATION TABLE
NAME AND PRINCIPAL POSITION |
|
YEAR |
|
SALARY |
|
BONUS1 |
|
STOCK AWARDS2 |
|
OPTION AWARDS3 |
|
NON-EQUITY INCENTIVE
PLAN COMPENSATION4 |
|
CHANGE IN PENSION
VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS5 |
|
ALL
OTHER COMPENSATION6 |
|
SEC TOTAL |
|
SEC TOTAL WITHOUT CHANGE
IN PENSION VALUE7 |
Douglas R.
Oberhelman |
|
2016 |
|
$ |
1,600,008 |
|
$ |
|
|
$ |
3,577,816 |
|
$ |
7,218,819 |
|
|
$ |
2,891,179 |
|
|
|
$ |
3,658 |
|
|
|
$ |
181,034 |
|
|
$ |
15,472,514 |
|
$ |
15,468,856 |
Chairman & CEO |
|
2015 |
|
$ |
1,600,008 |
|
$ |
|
|
$ |
3,031,479 |
|
$ |
9,959,588 |
|
|
$ |
822,804 |
|
|
|
$ |
2,091,814 |
|
|
|
$ |
398,144 |
|
|
$ |
17,903,837 |
|
$ |
15,812,023 |
|
|
2014 |
|
$ |
1,600,008 |
|
$ |
|
|
$ |
|
|
$ |
8,377,481 |
|
|
$ |
4,913,288 |
|
|
|
$ |
1,998,805 |
|
|
|
$ |
241,866 |
|
|
$ |
17,131,448 |
|
$ |
15,132,643 |
Bradley M.
Halverson |
|
2016 |
|
$ |
786,312 |
|
$ |
|
|
$ |
1,080,269 |
|
$ |
2,179,625 |
|
|
$ |
852,957 |
|
|
|
$ |
231,289 |
|
|
|
$ |
96,250 |
|
|
$ |
5,226,702 |
|
$ |
4,995,413 |
Group President &
CFO |
|
2015 |
|
$ |
786,312 |
|
$ |
|
|
$ |
1,127,963 |
|
$ |
3,705,673 |
|
|
$ |
244,440 |
|
|
|
$ |
2,293,173 |
|
|
|
$ |
90,933 |
|
|
$ |
8,248,494 |
|
$ |
5,955,321 |
|
|
2014 |
|
$ |
755,202 |
|
$ |
|
|
$ |
|
|
$ |
2,392,921 |
|
|
$ |
1,501,537 |
|
|
|
$ |
595,014 |
|
|
|
$ |
42,294 |
|
|
$ |
5,286,968 |
|
$ |
4,691,954 |
Robert B. Charter |
|
2016 |
|
$ |
729,768 |
|
$ |
500,000 |
|
$ |
984,692 |
|
$ |
1,986,744 |
|
|
$ |
818,510 |
|
|
|
$ |
189,327 |
8 |
|
|
$ |
247,311 |
|
|
$ |
5,456,352 |
|
$ |
5,267,025 |
Group President |
|
2015 |
|
$ |
729,768 |
|
$ |
300,000 |
|
$ |
1,046,232 |
|
$ |
3,437,148 |
|
|
$ |
190,994 |
|
|
|
$ |
845,918 |
|
|
|
$ |
541,566 |
|
|
$ |
7,091,626 |
|
$ |
6,245,708 |
Jim Umpleby |
|
2016 |
|
$ |
825,636 |
|
$ |
|
|
$ |
1,166,657 |
|
$ |
2,353,971 |
|
|
$ |
858,138 |
|
|
|
$ |
62,688 |
|
|
|
$ |
27,097 |
|
|
$ |
5,294,187 |
|
$ |
5,231,499 |
Group President |
|
2015 |
|
$ |
815,805 |
|
$ |
|
|
$ |
1,264,698 |
|
$ |
4,154,987 |
|
|
$ |
247,726 |
|
|
|
$ |
2,582,073 |
|
|
|
$ |
83,085 |
|
|
$ |
9,148,374 |
|
$ |
6,566,301 |
|
|
2014 |
|
$ |
755,202 |
|
$ |
|
|
$ |
|
|
$ |
2,527,089 |
|
|
$ |
1,847,136 |
|
|
|
$ |
1,484,122 |
|
|
|
$ |
57,772 |
|
|
$ |
6,671,321 |
|
$ |
5,187,199 |
David P. Bozeman |
|
2016 |
|
$ |
698,904 |
|
$ |
|
|
$ |
1,412,362 |
9 |
$ |
2,324,923 |
10 |
|
$ |
471,608 |
|
|
|
$ |
|
|
|
|
$ |
2,393,163 |
|
|
$ |
7,300,960 |
|
$ |
7,300,960 |
Senior Vice President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The amount reported for 2016 represents a lump sum
discretionary bonus authorized by the Committee relating to Mr. Charters
required relocation from Singapore to the United States.
2 The amounts
reported in this column represent PRSUs granted in 2016 under the Caterpillar
Inc. 2014 Long-Term Incentive Plan (LTIP) and are valued based on the aggregate
grant date fair value computed in accordance with FASB ASC Topic 718, assuming
the highest level of performance is achieved for the PRSUs, which at the time of
grant reflected the probable level of achievement. Assumptions made in the
calculation of these amounts are included in Note 2 Stock-based compensation
to the Companys consolidated financial statements for the fiscal year ended
December 31, 2016, included in the Companys Form 10-K filed with the SEC on
February 15, 2017.
3 The amounts reported
in this column represent Non-qualified Stock Options (NQs) granted under the
LTIP that are valued based on the aggregate grant date fair value computed in
accordance with FASB ASC Topic 718. Assumptions made in the calculation of these
amounts are included in Note 2 Stock-based compensation to the Companys
consolidated financial statements for the fiscal year ended December 31, 2016,
included in the Companys Form 10-K filed with the SEC on February 15,
2017.
4 The amounts in this column reflect the following cash annual
incentive payments for 2016: Mr. Oberhelman $518,126; Mr. Halverson $214,592;
Mr. Charter $289,258; Mr. Umpleby $219,773; Mr. Bozeman $55,283 ; and the
following cash incentive payments for the 2014-2016 performance cycle: Mr.
Oberhelman $2,373,053; Mr. Halverson $638,365; Mr. Charter $529,252; Mr. Umpleby
$638,365; and Mr. Bozeman $416,325.
5 Because NEOs do not
receive preferred or above market earnings on compensation deferred into
SDCP, SEIP and/or DEIP, the amount shown represents only the change between the
actuarial present value of each NEOs total accumulated pension benefit between
December 31, 2015 and December 31, 2016. The amount assumes the pension benefit
is payable at each NEOs earliest unreduced retirement age based upon the NEOs
current pensionable earnings.
|
2017 Proxy Statement |
|
|
|
41 |
Table of Contents
6 All Other Compensation for 2016 is detailed in a separate
table appearing below.
7 To demonstrate how
year over year changes in pension value impact total compensation, as determined
under SEC rules, we have included this column to show total compensation without
pension value changes. The amounts reported in this column are calculated by
subtracting the change in pension value reported in the Change in Pension Value
and Nonqualified Deferred Compensation Earnings column, from the amounts
reported in the SEC Total column. The amounts reported in this column differ
from, and are not a substitute for, the amounts reported in the SEC Total
column.
8 The amount reported for Mr. Charter has been converted to
U.S. dollars using the exchange rate in effect on December 31, 2016 (1
Australian dollar = 0.72355 U.S. dollar).
9 For Mr. Bozeman this
amount also includes the incremental fair value associated with modifications to
his outstanding restricted stock unit and performance-based restricted stock
unit awards in 2016 totaling $732,778. As noted in the Compensation Discussion
& Analysis, in 2016, the vesting terms of certain equity awards were
modified in connection with his separation from the
Company.
10 For Mr. Bozeman this
amount also includes the incremental fair value associated with modifications to
his outstanding stock option awards in 2016 totaling $953,725. As noted in the
Compensation Discussion & Analysis, in 2016, the vesting terms of certain
equity awards were modified in connection with his separation from the Company.
2016 ALL OTHER
COMPENSATION TABLE
NAME |
MATCHING CONTRIBUTIONS 401(K) |
|
MATCHING CONTRIBUTIONS SDCP |
|
CORPORATE AIRCRAFT/ TRANSPORTATION1 |
|
HOME SECURITY2 |
|
OTHER |
|
TOTAL ALL OTHER COMPENSATION |
Douglas R. Oberhelman |
|
$ |
7,950 |
|
|
|
$ |
40,050 |
|
|
|
$ |
87,125 |
|
|
|
$ |
45,909 |
|
|
$ |
|
|
|
|
$ |
181,034 |
|
Bradley M. Halverson |
|
$ |
7,950 |
|
|
|
$ |
15,639 |
|
|
|
$ |
8,742 |
|
|
|
$ |
63,919 |
|
|
$ |
|
|
|
|
$ |
96,250 |
|
Robert B. Charter |
|
$ |
7,950 |
|
|
|
$ |
13,943 |
|
|
|
$ |
9,652 |
|
|
|
$ |
2,353 |
|
|
$ |
213,413 |
3 |
|
|
$ |
247,311 |
|
Jim Umpleby |
|
$ |
7,872 |
|
|
|
$ |
16,819 |
|
|
|
$ |
|
|
|
|
$ |
2,406 |
|
|
$ |
|
|
|
|
$ |
27,097 |
|
David P. Bozeman |
|
$ |
15,817 |
|
|
|
$ |
76,803 |
|
|
|
$ |
|
|
|
|
$ |
543 |
|
|
$ |
2,300,000 |
4 |
|
|
$ |
2,393,163 |
|
1 The value of personal aircraft usage reported above is based
on Caterpillars incremental cost per flight hour, including the weighted
average variable operating cost of fuel, oil, aircraft maintenance, landing and
parking fees, related ground transportation, catering and other smaller variable
costs. Mr. Oberhelman and the Company have a time-sharing lease agreement,
pursuant to which certain costs associated with personal flights are reimbursed
by Mr. Oberhelman to the Company in accordance with the
agreement.
2 Amounts reported for
home security represent the cost provided by an outside security provider for
hardware and monitoring service. The incremental cost associated with the home
security services is determined based upon the amounts paid to the outside
service provider.
3 Mr. Charter was
previously an International Service Employee (ISE) based in Singapore. The
amount reported represents Company paid taxes pursuant to the Companys tax
equalization policy for ISEs. This policy is intended to ensure the Companys
ISEs are in the same approximate financial position as they would have been if
they lived in their home country during the time of their international
service.
4 The amount reported
represents a severance payment authorized by the Committee in connection with
Mr. Bozemans separation from service from the Company.
42 | |
|
|
|
2017 Proxy Statement |
Table of Contents
GRANTS OF
PLAN-BASED AWARDS IN 2016
|
|
|
|
ESTIMATED FUTURE
PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS1 |
|
ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS2 |
|
ALL
OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK
OR UNITS (#) |
|
ALL OTHER OPTION
AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS3 (#) |
|
EXERCISE OR BASE PRICE
OF
OPTION AWARDS ($/SHARE) |
|
GRANT DATE FAIR VALUE OF
STOCK AND OPTION AWARDS
($)4 |
NAME |
|
GRANT DATE |
|
THRESHOLD ($) |
|
TARGET ($) |
|
MAXIMUM ($) |
|
TARGET (#) |
|
|
|
|
Douglas R. Oberhelman |
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
55,290 |
|
|
|
|
|
|
$ |
|
|
|
$ |
3,577,816 |
|
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349,749 |
|
|
$ |
74.77 |
|
|
$ |
7,218,819 |
|
|
AIP5 |
|
$ |
1,107,406 |
|
$ |
2,214,811 |
|
$ |
2,214,811 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
Bradley M. Halverson |
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
16,694 |
|
|
|
|
|
|
$ |
|
|
|
$ |
1,080,269 |
|
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,602 |
|
|
$ |
74.77 |
|
|
$ |
2,179,625 |
|
|
AIP5 |
|
$ |
357,634 |
|
$ |
715,269 |
|
$ |
715,269 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
Robert B. Charter |
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
15,217 |
|
|
|
|
|
|
$ |
|
|
|
$ |
984,692 |
|
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,257 |
|
|
$ |
74.77 |
|
|
$ |
1,986,744 |
|
|
AIP5 |
|
$ |
331,917 |
|
$ |
663,833 |
|
$ |
663,833 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
Jim Umpleby |
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
18,029 |
|
|
|
|
|
|
$ |
|
|
|
$ |
1,166,657 |
|
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,049 |
|
|
$ |
74.77 |
|
|
$ |
2,353,971 |
|
|
AIP5 |
|
$ |
371,049 |
|
$ |
742,097 |
|
$ |
742,097 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
David P. Bozeman |
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
10,502 |
|
|
|
|
|
|
$ |
|
|
|
$ |
679,584 |
|
|
03/07/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,434 |
|
|
$ |
74.77 |
|
|
$ |
1,371,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10,502 |
|
|
|
|
|
|
|
|
|
|
$ |
732,7786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,434 |
|
|
|
|
|
|
$ |
953,7257 |
|
|
AIP5 |
|
$ |
138,208 |
|
$ |
276,417 |
|
$ |
276,417 |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
1 The amounts reported in this column represent estimated
potential awards under the 2016 AIP. There was no maximum payout opportunity as
the 2016 AIP design capped potential payments at target.
2 The amounts
reported in this column represent estimated potential awards under the LTIP.
PRSUs were granted on March 7, 2016 under the LTIP for the 2016-2018 performance
period. PRSUs vest over a three-year performance period with 100 percent of the
grant to vest on the third anniversary of the grant date, subject to the
Companys achievement of an average ROE performance hurdle during the three-year
performance period. The amounts reported in the target column reflect the number
of PRSUs that would vest if the Companys average ROE performance during the
three-year performance period meets or exceeds the ROE performance hurdle. There
is no threshold or maximum payout opportunity with respect to these
PRSUs.
3 Amounts reported represent stock options granted under the
LTIP. The exercise price for all stock options granted to the NEOs is the
closing price of Caterpillar stock on the grant date ($74.77). All stock
options granted to the NEOs will vest in one-third increments on each of the
first through third year anniversaries of the date of grant. The actual
realizable value of the options will depend on the fair market value of
Caterpillar stock at the time of exercise.
4 The amounts shown do
not reflect realized compensation by the NEO. As reported in this column, the
value of PRSUs granted in 2016 under the LTIP are based on the aggregate grant
date fair value computed in accordance with FASB ASC Topic 718, assuming the
highest level of performance is achieved for the PRSUs, which at the time of the
grant reflected the probable level of achievement.
5 The 2016
AIP estimates are based upon each executives base salary for 2016. The actual
payout was based on the achievement of corporate and business unit performance
metrics. Please refer to page 33 of the CD&A for a detailed explanation of
the various performance metrics. For the 2016 AIP, the threshold amount was
earned if at least 50 percent of the targeted performance level was achieved.
The target amount was earned if at least 100 percent or greater of the targeted
performance level was achieved, with a plan cap set at $15 million. The cash
payouts for the 2016 plan year are included in the column Non-Equity Incentive
Plan Compensation of the 2016 Summary Compensation
Table.
6 This amount represents the value of the modification to
outstanding restricted stock unit and performance-based restricted stock unit
awards in connection with Mr. Bozemans separation from the Company and does not
reflect a new equity grant.
7 This amount represents
the value of the modification to outstanding stock options in connection with
Mr. Bozemans separation from the Company and does not reflect a new equity
grant.
|
2017 Proxy Statement |
|
|
|
43 |
Table of Contents
OUTSTANDING EQUITY
AWARDS AT 2016 FISCAL YEAR END
|
|
|
|
OPTION AWARDS |
|
STOCK
AWARDS |
|
|
|
|
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED SARs/OPTIONS |
|
SAR
/ OPTION EXERCISE PRICE |
|
SAR
/ OPTION EXPIRATION DATE1 |
|
NUMBER OF SHARES
OR UNITS OF STOCK THAT
HAVE NOT VESTED2 |
|
MARKET VALUE OF
SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED3 |
|
EQUITY INCENTIVE PLAN
AWARDS: |
NAME |
|
GRANT DATE |
|
EXERCISABLE |
|
UNEXERCISABLE |
|
|
|
|
|
NUMBER
OF UNEARNED SHARES, UNITS
OR OTHER RIGHTS THAT
HAVE NOT VESTED4 |
|
MARKET OR PAYOUT VALUE
OF UNEARNED SHARES, UNITS
OR OTHER RIGHTS THAT
HAVE NOT VESTED5 |
Douglas R. Oberhelman |
|
03/03/2008 |
|
60,000 |
|
|
|
|
$ |
73.20 |
|
|
03/03/2018 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/02/2009 |
|
166,252 |
|
|
|
|
$ |
22.17 |
|
|
03/02/2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/01/2010 |
|
272,282 |
|
|
|
|
$ |
57.85 |
|
|
03/01/2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2011 |
|
226,224 |
|
|
|
|
$ |
102.13 |
|
|
03/07/2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/05/2012 |
|
275,000 |
|
|
|
|
$ |
110.09 |
|
|
03/05/2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/04/2013 |
|
281,090 |
|
|
|
|
$ |
89.75 |
|
|
03/04/2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/03/2014 |
|
|
|
283,790 |
|
|
$ |
96.31 |
|
|
03/03/2024 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
02/27/2015 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
39,131 |
6 |
|
|
$ |
3,629,009 |
|
|
|
03/02/2015 |
|
137,926 |
|
275,850 |
|
|
$ |
83.00 |
|
|
03/02/2025 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2016 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
55,290 |
7 |
|
|
$ |
5,127,595 |
|
|
|
03/07/2016 |
|
|
|
349,749 |
|
|
$ |
74.77 |
|
|
03/07/2026 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Bradley M. Halverson |
|
03/07/2011 |
|
22,696 |
|
|
|
|
$ |
102.13 |
|
|
03/07/2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/05/2012 |
|
21,416 |
|
|
|
|
$ |
110.09 |
|
|
03/05/2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/04/2013 |
|
79,976 |
|
|
|
|
$ |
89.75 |
|
|
03/04/2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/03/2014 |
|
|
|
81,061 |
|
|
$ |
96.31 |
|
|
03/03/2024 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
02/27/2015 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
14,560 |
6 |
|
|
$ |
1,350,294 |
|
|
|
03/02/2015 |
|
51,318 |
|
102,636 |
|
|
$ |
83.00 |
|
|
03/02/2025 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2016 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
16,694 |
7 |
|
|
$ |
1,548,202 |
|
|
|
03/07/2016 |
|
|
|
105,602 |
|
|
$ |
74.77 |
|
|
03/07/2026 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
832 |
8 |
|
|
$ |
77,160 |
|
|
|
|
|
|
$ |
|
|
Robert B. Charter |
|
03/07/2011 |
|
23,379 |
|
|
|
|
$ |
102.13 |
|
|
03/07/2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/05/2012 |
|
20,534 |
|
|
|
|
$ |
110.09 |
|
|
03/05/2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/04/2013 |
|
25,369 |
|
|
|
|
$ |
89.75 |
|
|
03/04/2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/03/2014 |
|
|
|
27,045 |
|
|
$ |
96.31 |
|
|
03/03/2024 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
02/27/2015 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
13,505 |
6 |
|
|
$ |
1,252,454 |
|
|
|
03/02/2015 |
|
47,600 |
|
95,198 |
|
|
$ |
83.00 |
|
|
03/02/2025 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2016 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
15,217 |
7 |
|
|
$ |
1,411,225 |
|
|
|
03/07/2016 |
|
|
|
96,257 |
|
|
$ |
74.77 |
|
|
03/07/2026 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Jim Umpleby |
|
03/01/2010 |
|
6,781 |
|
|
|
|
$ |
57.85 |
|
|
03/01/2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2011 |
|
22,696 |
|
|
|
|
$ |
102.13 |
|
|
03/07/2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/05/2012 |
|
21,416 |
|
|
|
|
$ |
110.09 |
|
|
03/05/2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/04/2013 |
|
79,976 |
|
|
|
|
$ |
89.75 |
|
|
03/04/2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/03/2014 |
|
|
|
85,606 |
|
|
$ |
96.31 |
|
|
03/03/2024 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
02/27/2015 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
16,325 |
6 |
|
|
$ |
1,513,981 |
|
|
|
03/02/2015 |
|
57,541 |
|
115,080 |
|
|
$ |
83.00 |
|
|
03/02/2025 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2016 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
18,029 |
7 |
|
|
$ |
1,672,009 |
|
|
|
03/07/2016 |
|
|
|
114,049 |
|
|
$ |
74.77 |
|
|
03/07/2026 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
832 |
8 |
|
|
$ |
77,160 |
|
|
|
|
|
|
$ |
|
|
44 | |
|
|
|
2017 Proxy Statement |
Table of Contents
|
|
|
|
OPTION AWARDS |
|
STOCK
AWARDS |
|
|
|
|
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED SARs/OPTIONS |
|
SAR
/ OPTION EXERCISE PRICE |
|
SAR
/ OPTION EXPIRATION DATE1 |
|
NUMBER OF SHARES
OR UNITS OF STOCK THAT
HAVE NOT VESTED2 |
|
MARKET VALUE OF
SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED3 |
|
EQUITY INCENTIVE PLAN
AWARDS: |
NAME |
|
GRANT DATE |
|
EXERCISABLE |
|
UNEXERCISABLE |
|
|
|
|
|
NUMBER
OF UNEARNED SHARES, UNITS
OR OTHER RIGHTS THAT
HAVE NOT VESTED4 |
|
MARKET OR PAYOUT VALUE
OF UNEARNED SHARES, UNITS
OR OTHER RIGHTS THAT
HAVE NOT VESTED5 |
David P. Bozeman |
|
03/02/2009 |
|
4,950 |
|
|
|
|
$ |
22.17 |
|
|
03/02/2019 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/01/2010 |
|
57,642 |
|
|
|
|
$ |
57.85 |
|
|
03/01/2020 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2011 |
|
23,379 |
|
|
|
|
$ |
102.13 |
|
|
03/07/2021 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/05/2012 |
|
21,416 |
|
|
|
|
$ |
110.09 |
|
|
03/05/2022 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/04/2013 |
|
27,083 |
|
|
|
|
$ |
89.75 |
|
|
03/04/2023 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/03/2014 |
|
50,872 |
|
|
|
|
$ |
96.31 |
|
|
03/03/2024 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
02/27/2015 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
9,204 |
6 |
|
$ |
853,579 |
|
|
|
03/02/2015 |
|
59,474 |
|
|
|
|
$ |
83.00 |
|
|
03/02/2025 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
03/07/2016 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
10,502 |
7 |
|
$ |
973,955 |
|
|
|
03/07/2016 |
|
18,454 |
|
|
|
|
$ |
74.77 |
|
|
03/07/2026 |
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
1 Stock options granted in 2014 are exercisable three years
after the grant date. Stock options granted in 2015 and 2016 are exercisable in
one-third increments on each of the first through third year anniversaries of
the date of grant. Stock options expire 10 years from the grant date for an
active employee.
2 The amounts shown
include the portion of any prior RSU grants that were not vested as of December
31, 2016.
3 The market value of
the non-vested RSUs is calculated using the closing price of Caterpillar common
stock on December 30, 2016 ($92.74 per share).
4 The amounts
shown include the portion of any prior PRSU grants that were not vested as of
December 31, 2016.
5 The market value of
the non-vested PRSUs is calculated using the closing price of Caterpillar common
stock on December 30, 2016 ($92.74 per share).
6 Represents the
PRSUs that are scheduled to vest in one-third increments on February 27, 2016,
February 27, 2017 and February 27, 2018 based on the Companys achievement of an
annual ROE performance hurdle or, PRSUs that do not vest based on the annual
performance hurdle, but may vest based on the achievement of an average ROE
performance hurdle over the three-year performance cycle. For 2016, the Company
did not achieve the ROE performance hurdle and, accordingly, none of the PRSUs
vested based on 2016 performance. The number of PRSUs reported in this table
assumes the aggregate ROE performance hurdle is achieved for the three-year
performance cycle.
7 Represents the PRSUs
that are scheduled to vest on March 7, 2019 based on the Companys achievement
of an average ROE performance hurdle over the three-year performance period. The
number of PRSUs reported in this table assumes the aggregate ROE performance
hurdle is achieved for the three-year performance period.
8 These RSUs
are scheduled to vest on May 1, 2017.
2016 OPTION
EXERCISES AND STOCK VESTED
|
|
OPTION
AWARDS1 |
|
STOCK AWARDS2 |
NAME |
|
NUMBER OF SHARES ACQUIRED ON
EXERCISE |
|
VALUE REALIZED ON
EXERCISE |
|
NUMBER OF SHARES ACQUIRED ON
VESTING |
|
VALUE REALIZED ON
VESTING |
Douglas R. Oberhelman |
|
|
30,570 |
|
|
|
$ |
2,497,520 |
|
|
|
|
|
|
|
$ |
|
|
Bradley M. Halverson |
|
|
3,912 |
|
|
|
$ |
323,402 |
|
|
|
834 |
|
|
|
$ |
64,506 |
|
Robert B. Charter |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
Jim Umpleby |
|
|
6,722 |
|
|
|
$ |
622,996 |
|
|
|
834 |
|
|
|
$ |
64,506 |
|
David P. Bozeman |
|
|
|
|
|
|
$ |
|
|
|
|
1,000 |
|
|
|
$ |
77,345 |
|
1 Upon exercise, option holders may surrender shares to pay the
option exercise price and satisfy income tax withholding requirements. The
amounts shown are gross amounts.
2 Upon vesting of the
RSUs, shares are surrendered to satisfy income tax withholding requirements. The
amounts shown are gross amounts.
|
2017 Proxy Statement |
|
|
|
45 |
Table of Contents
2016 PENSION BENEFITS
NAME |
|
PLAN
NAME1 |
|
NUMBER OF YEARS OF CREDITED
SERVICE2 |
|
PRESENT VALUE
OF ACCUMULATED BENEFIT3 |
Douglas R. Oberhelman |
|
RIP |
|
|
35.00 |
|
|
|
$ |
3,033,881 |
|
|
|
SERP |
|
|
35.00 |
|
|
|
$ |
24,220,406 |
|
Bradley M. Halverson |
|
RIP |
|
|
28.83 |
|
|
|
$ |
2,086,918 |
|
|
|
SERP |
|
|
28.83 |
|
|
|
$ |
4,581,907 |
|
Robert B. Charter |
|
CatSuper Plan |
|
|
27.67 |
|
|
|
$ |
3,529,420 |
|
Jim Umpleby |
|
RIP |
|
|
25.00 |
|
|
|
$ |
1,817,177 |
|
|
|
Solar MRO |
|
|
25.00 |
|
|
|
$ |
11,018,453 |
|
David P. Bozeman |
|
RIP |
|
|
2.17 |
|
|
|
$ |
46,008 |
|
|
|
SERP |
|
|
2.17 |
|
|
|
$ |
20,915 |
|
1 Caterpillar Inc. Retirement Income Plan (RIP) is a
noncontributory U.S. qualified defined benefit pension plan and the Supplemental
Retirement Plan (SERP) is a U.S. non-qualified pension plan. The total benefit
formula across both plans is 1.5 percent for each year of service (capped at 35
years) multiplied by the final average earnings during the highest five of the
final ten years of employment. Final average earnings include base salary and
annual incentive compensation, including amounts deferred. The employees annual
retirement income benefit under the qualified plan is restricted by the Internal
Revenue Code limitations, and the excess benefits are paid from SERP. SERP is
not funded. Mr. Charter participates in the Caterpillar of Australia PTY LTD
Retirement Plan (CatSuper Plan), a defined benefit plan. The total benefit
formula in the plan is 17.5 percent for each year of service multiplied by final
average salary during the highest three of the final ten years of employment.
Final average salary for this plan includes base salary and annual incentive
compensation, including amounts deferred, without any limitation on the dollar
amounts covered. The plan formula produces a lump sum amount. Mr. Umpleby
participated in the Solar Turbines Incorporated Retirement Plan (Solar RP)
through December 31, 2014, and participates in the Solar Turbines Incorporated
Managerial Retirement Objective Plan (Solar MRO) because he was originally hired
by Solar Turbines Incorporated, a wholly owned subsidiary of Caterpillar. The
Solar RP was merged into RIP as of January 1, 2015; however, all benefit and
eligibility provisions of Solar RP remain unchanged. The Solar RP is a
noncontributory U.S. qualified defined benefit pension plan and the Solar MRO is
a U.S. non-qualified pension plan. The total benefit formula for the Solar RP is
60 percent of final average salary prorated for years of service less than 25
minus 65 percent of the monthly Social Security benefit. Final average salary is
the average base salary for the highest consecutive 36 month period during the
120 month period prior to retirement. Amounts payable under both Solar RP and
Solar MRO are based upon a maximum of 25 years of service. Mr. Umpleby meets the
early retirement eligibility requirement of age 55. The Solar MRO provides a
benefit under the same benefit formula and includes base salary and annual
incentive pay. The employees annual retirement income benefit under the Solar
RP is restricted by the Internal Revenue Code limitations and the excess
benefits are paid from the Solar MRO. The Solar MRO is not funded. Mr. Bozeman
participates in RIP and SERP calculated based on the Pension Equity Formula
which produces a single lump sum benefit based on salary and service. The
employees annual retirement income benefit under the qualified plan is
restricted by the Internal Revenue Code limitations, and the excess benefits are
paid from SERP. SERP is not funded.
2 Mr. Oberhelman, Mr. Halverson and Mr. Bozeman participate in
RIP and SERP. Mr. Oberhelman has more than 35 years of service with the Company.
Amounts payable under both RIP and SERP are based upon a maximum of 35 years of
service. All RIP participants may receive their benefit immediately following
termination of employment after reaching early retirement eligibility, or may
defer benefit payments until any time between early retirement age and normal
retirement age. SERP and Solar MRO participants receive their benefit six months
after their retirement date. Normal retirement age is defined as age 65 with
five years of service. For RIP and SERP participants, early retirement is
defined as: any age with 30 years of service, age 55 with 15 years of service or
age 60 with 10 years of service. If a participant elects early retirement,
benefits are reduced by four percent per year, before age 62. In 2015, Mr.
Oberhelman and the Company agreed to amend the Companys SERP to provide that if
Mr. Oberhelman terminates employment prior to age 65, his benefit under the SERP
will be reduced for early retirement. Prior to the amendment, Mr. Oberhelman was
entitled to an unreduced benefit under the SERP for any retirement after
attainment of age 62. As current RIP and SERP participants, Mr. Oberhelman is
eligible for early retirement, with a four percent reduction per year under age
65 in SERP and a four percent reduction per year under age 62 in RIP, while Mr.
Halverson is eligible for early retirement, with a four percent reduction per
year under age 62 in both plans. Mr. Charter, who participates in the CatSuper
Plan, is currently vested in a benefit attributable to 18.75 years of his
service. He also has a benefit under the same plan formula based on an
additional 8.92 years of service which will vest if he remains employed with the
Company until age 55. This additional benefit would result in a $1,626,317
increase in his accumulated pension value once fully vested. Normal retirement
in the CatSuper Plan is defined as age 65 and early retirement is available at
age 55, with no reduction to the lump sum earned. Mr. Umpleby, who participates
in the Solar RP and Solar MRO, has more than 25 years of service with the
Company and meets the early retirement eligibility requirement of age 55 with at
least 10 years of service. Early retirement benefits paid under Solar RP and
Solar MRO have a three percent reduction per year under age 62. The Solar RP was
merged into RIP as of January 1, 2015; however, all benefit and eligibility
provisions of Solar RP remain unchanged. Mr. Bozeman participates in RIP and
SERP calculated based on the Pension Equity Formula (PEP) which produces a
single lump sum benefit based on salary and service. The lump sum benefit is
equal to Final Average Monthly Earnings, annualized and multiplied by the sum of
percentages from a table based on credited service and vesting service.
Multipliers range from 4% times years and months of credited service for 0-5
years of vesting service to 9% times years and months of credited service for
vesting service in excess of 20 years. Following separation from service, a PEP
participant may elect immediate distribution of the benefit, as a single lump
sum or monthly annuity actuarially equivalent in amount to the single lump sum
determined by formula.
3
The amount in this column represents
the actuarial present value for each NEOs accumulated pension benefit on
December 31, 2016. For each NEO, it assumes benefits are payable at each NEOs
earliest unreduced retirement age based upon current level of pensionable
income. Present value factors use an interest rate of 3.97 percent and the
RP-2014 separate annuitant and non-annuitant mortality table adjusted with a
load factor of 99.4 percent using Projection Scale MP-2014 prior to 2006 then
Scale MP-2016 in years 2006 and beyond which are SERPs year-end disclosure
assumptions at December 31, 2016. The amount reported for Mr. Charter has been
converted to U.S. dollars using the exchange rate in effect on December 31, 2016
(1 Australian dollar = 0.72355 U.S. dollar).
46 | |
|
|
|
2017 Proxy Statement |
Table of Contents
2016 NONQUALIFIED DEFERRED
COMPENSATION
NAME |
|
PLAN NAME1 |
|
EXECUTIVE CONTRIBUTIONS IN 20162 |
|
REGISTRANT CONTRIBUTIONS IN
20162 |
|
AGGREGATE EARNINGS IN 20163 |
|
AGGREGATE BALANCE AT
12/31/164 |
Douglas R.
Oberhelman |
|
SDCP |
|
|
$ |
80,100 |
|
|
|
$ |
40,050 |
|
|
|
$ |
1,239,978 |
|
|
|
$ |
4,308,984 |
|
|
|
SEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
287,494 |
|
|
|
$ |
980,618 |
|
|
|
DEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
539,682 |
|
|
|
$ |
1,951,822 |
|
Bradley M.
Halverson |
|
SDCP |
|
|
$ |
31,279 |
|
|
|
$ |
15,639 |
|
|
|
$ |
367,585 |
|
|
|
$ |
1,287,511 |
|
|
|
SEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
1,337 |
|
|
|
$ |
4,559 |
|
|
|
DEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
25,296 |
|
|
|
$ |
86,291 |
|
Robert B. Charter |
|
SDCP |
|
|
$ |
27,886 |
|
|
|
$ |
13,943 |
|
|
|
$ |
1,132 |
|
|
|
$ |
42,961 |
|
Jim Umpleby |
|
SDCP |
|
|
$ |
33,638 |
|
|
|
$ |
16,819 |
|
|
|
$ |
484,167 |
|
|
|
$ |
2,384,883 |
|
|
|
SEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
2,353 |
|
|
|
$ |
32,591 |
|
|
|
DEIP |
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
306,161 |
|
|
|
$ |
2,665,759 |
|
David P. Bozeman |
|
SDCP |
|
|
$ |
15,551 |
|
|
|
$ |
76,803 |
|
|
|
$ |
166,201 |
|
|
|
$ |
1,015,649 |
|
1 The Supplemental Deferred Compensation Plan (SDCP) is a
non-qualified deferred compensation plan adopted in March 2007 with a
retroactive effective date of January 1, 2005, which effectively replaced the
Supplemental Employees Investment Plan (SEIP) and Deferred Employees
Investment Plan (DEIP).
2 SDCP allows eligible U.S. employees, including all NEOs, to
voluntarily defer a portion of their base salary and annual incentive pay into
the plan and receive a Company matching contribution. SPP pay may also be
deferred, but does not qualify for any Company matching contributions. Amounts
deferred by executives in 2016 for base salary, annual incentive pay and/or
long-term cash incentive payouts are included in the 2016 Summary Compensation
Table. Matching and/or annual non-elective contributions in non-qualified
deferred compensation plans made by Caterpillar in 2016 are also included in the
2016 All Other Compensation Table under the Matching Contributions SDCP
column. SDCP participants may elect a lump sum payment, or an installment
distribution payable for up to 15 years after separation.
3 Aggregate earnings comprise interest, dividends, capital
gains and appreciation/depreciation of investment results. The investment
choices available to the participant mirror those of the Companys 401(k)
plan.
4 Amounts in this column include the following amounts that
were previously reported in the Summary Compensation Table for the years
20142016 as follows: Mr. Oberhelman $829,791; Mr. Halverson $301,690; Mr.
Charter $41,829; Mr. Umpleby $354,520 and Mr. Bozeman $92,354.
|
2017 Proxy
Statement |
|
|
|
47 |
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION
OR CHANGE IN CONTROL
Except for customary provisions in
employee compensation plans and as required by law, there are no pre-existing
severance or change in control agreements with the NEOs.
The following is a summary of the
compensation that would become payable under the existing compensation plans if
an NEOs employment had terminated on December 31, 2016 in each of the following
scenarios:
● |
Voluntary Separation, including
retirement that does not qualify as Long-Service
Separation |
● |
Long-Service Separation
(separation after age 55 with 5 or more years of Company service effective
with the 2011 equity grant, and age 55 with 10 or more years of service
for prior year grants) |
● |
Termination for
Cause |
● |
Termination without Cause or for
Good Reason within one year following a change in control (Termination
following CIC) |
EQUITY AWARDS |
|
|
|
Voluntary Separation |
|
● |
Stock Options and SARs: Vested awards are exercisable
until the earlier of the expiration date or 60 days from the separation
date; unvested awards are forfeited |
|
|
● |
PRSUs and RSUs: Unvested awards are
forfeited |
Long-Service Separation |
|
● |
Stock Options and SARs granted prior to 2016: Vest and
are exercisable until the earlier of the expiration date or 60 months from
the separation date |
|
|
● |
Stock Options and SARs granted in 2016: Vest and become
immediately exercisable for the remaining term of the award |
|
|
● |
RSUs: Accelerated vesting; Chairmans RSU Awards granted
prior to May 2014 are not eligible for Long-Service Separation
treatment |
|
|
● |
PRSUs: Remain outstanding and vest if and to
the extent performance goals are achieved |
Termination for Cause |
|
● |
Stock Options and SARs: Vested but unexercised awards and
unvested awards are forfeited |
|
|
● |
PRSUs and RSUs: Unvested awards are
forfeited |
Termination following CIC |
|
● |
Stock Options and SARs: Vest and become immediately
exercisable for remaining term of the award |
|
|
● |
PRSUs and RSUs: Accelerated vesting of outstanding
awards |
|
ANNUAL INCENTIVE
PLAN |
|
|
|
Voluntary Separation |
|
● |
Payment is forfeited |
Long-Service Separation |
|
● |
Payment for a pro-rated service period based
on actual results |
Termination for Cause |
|
● |
Payment is forfeited |
Termination following CIC |
|
● |
Payment for a pro-rated service period assuming
achievement of target opportunity |
|
STRATEGIC PERFORMANCE
PLAN |
|
|
|
Voluntary Separation |
|
● |
Payment is forfeited |
Long-Service Separation |
|
● |
Payment for a pro-rated service period based
on actual results |
Termination for Cause |
|
● |
Payment is forfeited |
Termination following CIC |
|
● |
Payment for entire performance period assuming
achievement of maximum opportunity |
The 2016 Nonqualified Deferred
Compensation table on page 47 describes unfunded, non-qualified deferred
compensation plans that permit the deferral of salary, bonus and short-term cash
performance awards by NEOs. These plans also provide for matching and/or annual
non-elective contributions by the Company. NEOs
are eligible to receive the amount in their deferred compensation accounts
following termination under any termination scenario unless the NEO elected to
further defer the payment as permitted by the plans.
48 | |
|
|
|
2017 Proxy Statement |
Table of Contents
The Company is not obligated to provide
any special severance payments to any NEOs.
DEPARTURE OF DAVID P.
BOZEMAN
Mr. Bozeman served as an executive
officer of the company through December 31, 2016. Mr. Bozemans position was
eliminated in connection with the Companys ongoing restructuring efforts, and in
consideration of his service to the Company, as well as a release of claims in
favor of the Company, Mr. Bozeman was provided a severance payment of
$2,300,000. In addition, the Committee approved the accelerated, pro-rata vesting of 666 shares of restricted stock units and
96,359 stock options previously granted to Mr. Bozeman and a 12-month
post-separation exercise period. The Committee also approved continued, pro-rata
vesting of his outstanding 2015-2017 and 2016-2018 PRSUs, with the level
determined based on actual performance during the respective performance
periods.
POST RETIREMENT BENEFITS FOR DOUGLAS
R. OBERHELMAN
At the discretion of the Committee,
certain benefits may be continued for the CEO upon retirement. On December 13,
2016, the Committee approved the following retirement benefits for Mr.
Oberhelman effective April 1, 2017: (1) office space and related IT,
administrative and travel agent support at the
Companys facility located in Edwards, Illinois; and (2) continued home security
for a period not to exceed five years from the date of Mr. Oberhelmans
retirement. The annual cost of these continued benefits is estimated to be
approximately $165,447.
TERMS AND POTENTIAL PAYMENTS
CHANGE IN CONTROL
The following tabular information
quantifies certain payments that would become payable under existing plans and
arrangements if the NEOs employment had terminated on December 31, 2016. The
information is provided relative to the NEOs
compensation and service levels as of the date specified. If applicable, they
are based on the Companys closing stock price on December 30, 2016.
|
2017 Proxy
Statement |
|
|
|
49 |
Table of Contents
POTENTIAL PAYMENTS UPON TERMINATION
OR CHANGE IN CONTROL
|
|
|
|
EQUITY AWARDS |
|
INCENTIVE |
|
|
|
|
|
NAME |
|
TERMINATION
SCENARIO |
|
STOCK OPTIONS/ SARS1 |
|
PRSUs/RSUs2 |
|
SHORT-TERM INCENTIVE3 |
|
LONG-TERM
INCENTIVE4 |
|
POST TERMINATION BENEFITS |
|
TOTAL |
Douglas R. Oberhelman |
|
Voluntary Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Long-Service Separation |
|
$ |
10,315,168 |
|
$ |
5,127,595 |
|
|
$ |
2,800,014 |
|
|
$ |
|
|
|
|
$ |
18,242,777 |
|
|
Termination for Cause |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination following
CIC |
|
$ |
10,315,168 |
|
$ |
5,127,595 |
|
|
$ |
5,600,028 |
|
|
$ |
|
|
|
|
$ |
21,042,791 |
Bradley M. Halverson |
|
Voluntary Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Long-Service Separation |
|
$ |
3,397,180 |
|
$ |
1,625,361 |
|
|
$ |
904,259 |
|
|
$ |
|
|
|
|
$ |
5,926,800 |
|
|
Termination for Cause |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination following
CIC |
|
$ |
3,397,180 |
|
$ |
1,625,361 |
|
|
$ |
1,808,518 |
|
|
$ |
|
|
|
|
$ |
6,831,059 |
Robert B. Charter |
|
Voluntary Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Long-Service Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination for Cause |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination following
CIC |
|
$ |
3,120,591 |
|
$ |
1,411,225 |
|
|
$ |
1,678,466 |
|
|
$ |
|
|
|
|
$ |
6,210,282 |
Jim Umpleby |
|
Voluntary Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Long-Service Separation |
|
$ |
3,730,789 |
|
$ |
1,749,169 |
|
|
$ |
938,176 |
|
|
$ |
|
|
|
|
$ |
6,418,134 |
|
|
Termination for Cause |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination following
CIC |
|
$ |
3,730,789 |
|
$ |
1,749,169 |
|
|
$ |
1,876,352 |
|
|
$ |
|
|
|
|
$ |
7,356,310 |
David P. Bozeman |
|
Voluntary Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Long-Service Separation |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination for Cause |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
Termination following CIC |
|
$ |
2,141,726 |
|
$ |
1,035,720 |
|
|
$ |
698,904 |
|
|
$ |
|
|
|
|
$ |
3,876,350 |
1 For valuation purposes, as of December 30, 2016, when the
closing price of Caterpillar common stock was $92.74, the 2015 and 2016 grants
were in the money while the 2014 option exercise price was higher than the
year-end closing price thus the 2014 grant was underwater. The 2014, 2015 and
2016 grants were not fully vested as of December 31, 2016.
2 The valuation shown is based upon the number of PRSUs and RSUs
that would vest multiplied by the closing price of Caterpillar common stock on
December 30, 2016, which was $92.74 per share.
3 The plan provisions limit the payout to a maximum of $15.0
million in any single year. Amounts shown for Termination following CIC
represent the maximum payout available under AIP for all NEOs.
4 In years before 2015, long-term incentive compensation design
was based on two components a rolling three-year cash plan and market-based
stock option grants. Beginning in 2015, the Committee revised the long-term
incentive plan, eliminating the cash portion for NEOs and replacing it with
stock-settled PRSUs. There are no amounts shown for termination following CIC as
there are no longer any outstanding rolling three-year cash plan performance
periods for the NEOs listed.
COMPENSATION RISK
The Compensation Committee regularly
reviews the Companys compensation policies and practices, including the risks
created by the Companys compensation plans. In addition, the Company also
conducted a review of its compensation plans and related risks to the Company.
The Company reviewed its analysis with the Committee and the Committees
independent compensation consultant, and the Committee concluded the
compensation plans reflected the appropriate compensation goals and philosophy.
Based on this review and analysis, the Company has concluded that any risks
arising from the Companys compensation policies and practices are not
reasonably likely to have a material adverse effect on the Company.
50 | |
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PROPOSAL 4 ADVISORY VOTE ON THE
FREQUENCY OF EXECUTIVE COMPENSATION VOTES
PROPOSAL SNAPSHOT |
|
●What am I voting on? |
Shareholders are being asked to
indicate whether they prefer an advisory vote on executive compensation
every one, two or three years. |
|
Voting Recommendation: ONE
YEAR |
The Dodd-Frank Act requires Caterpillar
shareholders to vote, on an advisory or non-binding basis, on how frequently
they would like to cast an advisory vote on the compensation of the Companys
named executive officers. By voting on this proposal, shareholders may indicate
whether they would prefer an advisory vote on named executive officer
compensation once every one, two or three years.
The Board believes that conducting
advisory vote on executive compensation on an annual basis is appropriate for
Caterpillar and its shareholders at this time. However, the Board intends to
hold say-on-pay votes in the future in accordance with the alternative that
receives the most shareholder support.
PROPOSAL 5 APPROVE THE AMENDED AND
RESTATED 2014 LONG-TERM INCENTIVE PLAN
PROPOSAL SNAPSHOT |
|
●What am I voting on? |
Shareholders are being asked to
approve changes to the long-term incentive plan, including increasing the
number of shares authorized for issuance under the plan. |
|
Voting Recommendation:
FOR
proposal |
INTRODUCTION
On April 12, 2017, the Board approved
an amendment and restatement of the Caterpillar Inc. 2014 Long-Term Incentive
Plan (as amended and restated, the 2014 LTIP) The amendment and restatement
increases the total number of shares available for issuance under the 2014 LTIP
from 38,800,000 to 74,800,000, modifies the permitted performance measures and
increases the annual award limits applicable to non-employee directors. The
Board approved the 2014 LTIP subject to approval by the Companys shareholders.
If the 2014 LTIP is not approved by shareholders, the Company will continue to
operate the 2014 LTIP pursuant to its current provisions.
Purpose of the amendment and
restatement. The Board approved the 2014 LTIP
to increase the number of shares available for future issuances and approve the
other changes described above.
As of March 31, 2017, 11,434,997 shares
of the Companys common stock remained available for issuance under the 2014
LTIP. The amendment and restatement increases the aggregate number of shares
reserved for issuance under the 2014 LTIP from 38,800,000 to 74,800,000.
Accordingly, if the 2014 LTIP is approved, approximately 47,434,997 shares of
the Companys Common Stock will be available for issuance under the 2014 LTIP.
Under the terms of the 2014 LTIP, this number may be increased to the extent
that shares subject
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Table of Contents
to awards previously granted under the
2014 LTIP are not issued because of the expiration, termination, cancellation of
forfeiture of an award or the settlement of an award in cash.
Given the limited number of shares that
currently remain available under the 2014 LTIP, our Board and management believe
it is important that the 2014 LTIP be approved in order to maintain the
Companys ability to attract and retain key personnel and continue to provide
them with strong incentives to contribute to the Companys future
success.
Approval of the 2014 LTIP will also
constitute re-approval, for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended (Code), of the material terms of the performance
measures contained in the 2014 LTIP (described below) that are to be used in
connection with awards under the 2014 LTIP that are intended to qualify
as performance-based compensation for purposes
of Section 162(m). One of the conditions for compensation to be considered
performance-based under Section 162(m) is that the material terms under which
such compensation will be paid (the class of eligible employees, performance
criteria and the per-person maximums) be disclosed to and approved by
shareholders every five years.
The 2014 LTIP allows us to grant equity
and cash incentive awards to our executive officers, employees, non-employee
Board members and other service providers. We believe that a comprehensive
incentive compensation program serves as a necessary and significant tool to
attract and retain key employees, encourage participants to contribute
materially to the growth of Caterpillar and align the interests of our
participants with those of our shareholders.
As of March 31, 2017:
Total Stock Options and Stock Appreciation Rights
Outstanding |
|
32,582,965 |
Total Restricted Stock Units Outstanding |
|
2,617,032 |
Total Performance-Based Restricted Stock Units
Outstanding |
|
1,162,951 |
Weighted-Average Exercise Price of Stock Options and Stock
Appreciation Rights Outstanding |
|
$84.73 |
Total Shares Available for Grant under the 2014 Long Term
Incentive Plan |
|
11,434,997 |
Weighted-Average Remaining
Term of Stock Options and Stock Appreciation Rights Outstanding |
|
6.34
years |
As of the record date, April 17, 2017,
total common stock outstanding was 589,157,050.
PRINCIPAL FEATURES OF THE 2014
LTIP
The 2014 LTIP includes features that
take into account our shareholders interests, including:
● |
The 2014 LTIP provides for a
variety of equity and equity-based awards, including stock options, stock
appreciation rights, stock, restricted stock, restricted stock units, and
stock- or cash-based performance awards. The breadth of awards available
under the 2014 LTIP provides the Compensation and Human Resources
Committee (Committee) the flexibility to structure appropriate incentives
and respond to market-competitive changes in compensation
practices. |
● |
The 2014 LTIP uses fungible
share counting, that is, for each share of stock issued in connection
with a stock award, restricted stock award, restricted stock unit,
performance share or other similar full-value award, we will reduce the
number of shares available for future issuance by 2.75 shares, and for
each share of stock issued in connection with an option or stock-settled
stock appreciation right, by one share. |
● |
There is no evergreen
provision. |
● |
There are limitations on the number of shares
and the value of any cash-based award that may be granted or paid to any participant under the 2014 LTIP in any
fiscal year or performance period. |
● |
Repricing of options and stock
appreciation rights is prohibited without shareholder
approval. |
● |
Discounted options and stock
appreciation rights are prohibited. |
● |
Shares repurchased on the open
market with proceeds from the exercise of stock options will not be
returned to the share reserve. |
● |
There is no single trigger
vesting for awards that continue or are assumed in connection with a
change in control. However, upon a participants qualifying termination of
employment within two years following a change in control, outstanding
awards will vest in full (i.e. double trigger). |
● |
Awards are subject to forfeiture
upon violation of non-solicitation and confidentiality
provisions. |
● |
Awards are subject to forfeiture
and clawback in connection with misconduct that results in a restatement
of financial statements. |
● |
No dividends or dividend
equivalents will be paid on performance-based awards unless the
performance goals are satisfied. |
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● |
The 2014 LTIP includes a series
of performance criteria which the Committee may use in establishing
specific targets to be attained as a condition to the vesting of
restricted stock awards, restricted stock units, performance shares or
other stock-based or cash-based incentive awards under the plan so as to
qualify the compensation attributable to those awards as performance-based
compensation for purposes of Section 162(m) of the Code. This statutory
provision generally disallows an income tax deduction to publicly held
companies for compensation which exceeds $1 million per individual within
a designated executive officer group,
unless that compensation is tied to the attainment of certain performance
milestones established by an independent compensation committee under a
shareholder-approved plan. Shareholder approval of the 2014 LTIP will also
be considered approval of the material terms of the performance criteria
under the 2014 LTIP. The Committee will retain discretion to determine the
structure of all awards made pursuant the 2014 LTIP, including whether
such awards comply with the applicable requirements for performance-based
compensation under Section 162(m) of the
Code. |
SUMMARY DESCRIPTION OF 2014
LTIP
The following is a summary of the
principal features of the 2014 LTIP. The summary, however, is not a complete
description of all the terms of the 2014 LTIP and is qualified in its entirety
by reference to the complete text of the 2014 LTIP attached to this Proxy
Statement as Appendix A. To the extent there is a conflict between this summary
and the actual terms of the 2014 LTIP, the terms of the 2014 LTIP will govern.
Awards to be made under the 2014 LTIP will be entirely in the discretion of the
Committee and are therefore not currently determinable.
Administration |
The Committee has the exclusive
authority to administer the 2014 LTIP with respect to awards made to our
executive officers. The Committee also has the authority to make awards to
all other eligible individuals.
The Committee may at any time
appoint a secondary committee of one or more directors to have separate
but concurrent authority with the Committee to make awards to such other
eligible individuals. The Committee may also delegate authority to one or
more officers of Caterpillar with respect to awards to such other
individuals. The term plan administrator, as used in this summary,
means the Committee and any delegates, to the extent they are acting
within the scope of their administrative authority under the 2014
LTIP. |
|
|
Eligibility |
Persons that are or are expected
to become officers or employees, non-employee directors, consultants and
independent contractors of the Company or one of our subsidiaries are
eligible to participate in the 2014 LTIP. Historically, the Committee has
selected only management level employees to receive equity grants. Our
twelve non-employee directors receive equity grants pursuant to our
director compensation program. Approximately 2,100 management-level
employees received equity grants in the 2017 annual equity grant cycle,
which occurred on March 6, 2017. |
|
|
Share Reserve |
Subject to capitalization
adjustments described below, approximately 47,434,997 million shares of
common stock will initially be reserved for issuance under the 2014 LTIP.
The shares of common stock issuable under the 2014 LTIP may be drawn from
shares of our authorized but unissued common stock or from treasury shares
(including shares of our common stock that we purchase on the open market
or in private transactions). |
|
|
Fungible Share
Counting |
The number of shares of common
stock reserved for issuance under the 2014 LTIP shall be reduced: (i) on a
1-for-1 basis for each share of common stock subject to an option or
stock-settled stock appreciation right, and (ii) by a fixed ratio of 2.75
shares of common stock for each share of common stock issued pursuant to a
stock award, restricted stock award, restricted stock unit, performance
share or other full-value award. |
|
|
Individual Limits |
Subject to capitalization
adjustments, no participant in the 2014 LTIP may receive: (i) options or
stock appreciation rights in any fiscal year for more than 800,000 shares
of our common stock, (ii) performance-based restricted stock, restricted
stock unit or performance awards for shares of our common stock having a
fair market value on the grant date of more than $20 million for each
12-month period in the performance period or (iii) performance-based cash
awards for more than $20 million for each 12-month period in the
performance period. |
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Reuse of Shares |
Shares subject to any outstanding
awards under the 2014 LTIP that are not issued because of the expiration,
termination, cancellation or forfeiture of an award or the settlement of
an award in cash will be added back to the number of shares reserved for
issuance under the 2014 LTIP and will accordingly be available for
subsequent issuance as follows:
●one share for each share of common stock subject to an
option or stock appreciation right and
●2.75 shares for each share of common stock subject to a
full-value award.
Should the exercise price of an
option or stock appreciation right or any withholding taxes upon such
exercise be paid in shares of our common stock (whether by delivery or
withholding of shares), then the number of shares reserved for issuance
under the 2014 LTIP will be reduced by the gross number of shares for
which that option or stock appreciation right is exercised (including the
shares delivered or withheld in connection with the exercise), and not by
the net number of new shares issued under the exercised option or stock
appreciation right.
Should shares of common stock be
withheld by us in satisfaction of the withholding taxes incurred in
connection with the exercise, issuance or vesting of a full-value award,
or should the participant pay such withholding taxes by delivering shares
of our common stock, then the number of shares of common stock available
for issuance under the 2014 LTIP will be reduced by the net number of
shares issuable pursuant to that award, as calculated after any such share
withholding or delivery so that the shares withheld by us or delivered by
the participant for withholding of such taxes in connection with such
full-value awards will again be available for issuance under the 2014
LTIP.
Shares repurchased on the open
market with the proceeds of the exercise price of options will not be
available for issuance under the 2014 LTIP. However, shares subject to
awards settled in cash will again be available in the ratios described
above. |
AWARDS
Under the 2014 LTIP, eligible persons
may be granted options, stock appreciation rights, stock awards, restricted
stock awards, restricted stock units and stock or cash-based performance awards.
One or more of these awards may also be structured as Section 162(m) awards. The
plan administrator will have complete discretion to determine which eligible
individuals are to receive awards, the type of awards to be granted, the time or
times when those awards are to be granted, the number of shares subject to each
such grant, the vesting and issuance schedule (if any) to be in effect for the
grant, the exercise price or other consideration for the shares, the maximum
term for which the granted option or stock appreciation right is to remain
outstanding and the status of any granted option as either an incentive stock
option or a nonqualified option under the federal tax laws, subject to the
following provisions.
Stock Options and Stock Appreciation
Rights |
The exercise price of a stock
option will not be less than one hundred percent of the fair market value
of the option shares on the grant date and no option will have a term in
excess of ten years, except that the term of a nonqualified option will
continue if the option would otherwise expire during a blackout period in
which trading in our stock is restricted.
A stock appreciation right will
allow the holder to exercise that right as to a specific number of shares
of common stock and receive in exchange an appreciation distribution in an
amount equal to the excess of (i) the fair market value of the shares of
common stock as to which the right is exercised over (ii) the aggregate
base price in effect for those shares. The base price per share may not be
less than the fair market value per share of common stock on the date the
stock appreciation right is granted, and the right may not have a term in
excess of ten years, except that the term of a stock appreciation right
will continue if the stock appreciation right would otherwise expire
during a blackout period in which trading in our stock is restricted.
Stock appreciation rights may also be granted in tandem with options; such
tandem stock appreciation rights will provide the holders with the right
to surrender their options for an appreciation distribution in an amount
equal to the excess of (i) the fair market value of the vested shares of
common stock subject to the surrendered option over (ii) the aggregate
exercise price payable for those shares. The applicable award agreement
will specify whether the appreciation distribution on any exercised stock
appreciation right will be paid in cash or in shares of common
stock. |
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Repricing/Cash-Out |
The plan administrator may not
implement any of the following repricing or cash-out programs without
obtaining shareholder approval: (i) a reduction in the exercise price or
base price of any previously granted option or stock appreciation right,
(ii) a cancellation of any previously granted option or stock appreciation
right in exchange for another option or stock appreciation right with a
lower exercise price or base price or (iii) a cancellation of any
previously granted option or stock appreciation rights in exchange for
cash or another award if the exercise price of the option or the base
price of the stock appreciation right exceeds the fair market value of a
share of our common stock on the date of such cancellation, in each case
other than in connection with a change in control or the capitalization
adjustment provisions in the 2014 LTIP. |
|
|
Stock Awards, Restricted Stock
Awards, Restricted Stock Units and Performance Shares |
Stock awards may be issued
subject to performance or service vesting requirements or as fully vested
shares. The number of fully-vested shares granted under the 2014 LTIP is
limited to (i) awards to non-employee directors, (ii) awards to newly
hired employees, (iii) awards made in lieu of a cash bonus and (iv) awards
for shares that, in the aggregate, do not exceed five percent of the total
number of shares initially available under the 2014 LTIP (2,371,750
shares). Restricted stock units will entitle an award recipient to receive
shares (or cash) upon the attainment of designated performance goals or
the completion of a prescribed service period or upon the expiration of a
designated time period following the vesting of those units.
Performance awards may be
denominated and paid in shares of our common stock or in cash, with
vesting tied to the attainment of performance objectives over a specified
performance period, and any service vesting or other conditions all as
established by the plan administrator.
Stock awards may provide for the
payment of dividends or dividend equivalents, provided that no dividends
or dividend equivalents will be paid on performance-based awards unless
the applicable performance goals are satisfied. |
|
|
Section 162(m) Awards and
Performance Goals |
In order to meet the requirements
of Section 162(m) of the Code, which permits compensation attributable to
certain types of awards under the 2014 LTIP to qualify as
performance-based compensation that is not subject to the $1 million
limitation on the income tax deductibility of the compensation paid to
each of our named executive officers (other than our principal financial
officer) the plan administrator may grant Section 162(m) awards so that
those awards will vest only upon the achievement of certain
pre-established performance goals on one or more of the following
criteria:
(i) attainment by a share of
common stock of a specified fair market value for a specified period of
time, (ii) cash flow from operations, (iii) cash flow margin or free cash
flow, (iv) cash flow per share, (v) earnings of the Company before or
after taxes and/or interest, (vi) earnings before interest, taxes,
depreciation, and/or amortization (EBITDA), (vii) EBITDA margin, (viii)
economic value added, (ix) expense levels or cost reduction goals, (x)
gross profit or margin, (xi) increase in shareholder value, (xii) interest
expense, (xiii) inventory, (xiv) market share, (xv) net assets, (xvi) net
cash provided by operations, (xvii) net operating profits after taxes,
(xviii) operating expenses, (xix) operating income, (xx) operating margin,
(xxi) operating profit after capital charge (OPACC), (xxii) percent of
dealer deliveries (PODD), (xxiii) percent of industry sales (PINS), (xxiv)
percent of parts sales (POPS), (xxv) percent of parts sales Caterpillar
branded (POPS-C), (xxvi) pretax income, (xxvii) price-to-earnings growth,
(xxviii) price realization, (xxix) primary or fully-diluted earnings per
share or profit per share, (xxx) profit after tax, (xxxi) return on
assets, (xxxii) return on equity, (xxxiii) return on invested capital,
(xxxiv) return on investments, (xxxv) return on sales, (xxxvi) revenues,
(xxxvii) sales, (xxxviii) total cash flow, (xxxix) total shareholder
(shareholder) return and (xl) strategic business criteria consisting of
one or more objectives based on meeting specified goals relating to (A)
acquisitions or divestitures, (B) business expansion, (C) realized
production system benefits, (D) cost targets, (E) customer acquisition,
(F) customer satisfaction, (G) diversity and inclusion, (H) efficiency,
(I) inventory turns, (J) realized lean benefits, (K) management of
employment practices and employee benefits, (L) market penetration, (M)
purchasing material costs, (N) quality and quality audit scores, (O)
reductions in errors and omissions, (P) reductions in lost business, (Q)
supervision of litigation and information technology, (R) sustainability
or (S) realized 6 Sigma benefits. |
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Each such goal may be expressed
on an absolute or relative basis and may include comparisons based on
current internal targets, the past performance of the Company (including
the performance of one or more subsidiaries, divisions, or operating
units) or the past or current performance of other companies (or a
combination of such past and current performance). In addition to the
ratios specifically listed above, performance goals may include
comparisons relating to capital (including, but not limited to, the cost
of capital), shareholders equity, shares outstanding, assets or net
assets, sales, or any combination thereof. The applicable performance
measures may be applied on a pre- or post-tax basis and may be established
or adjusted in accordance with Section 162(m) of the Code to include or
exclude objectively determinable components of any performance measure,
including, without limitation, special charges such as restructuring or
impairment charges, debt refinancing costs, extraordinary or noncash
items, unusual, nonrecurring, infrequently occurring or one-time events
affecting the Company or its financial statements or changes in law or
accounting principles. The Committee, in its sole discretion, may amend or
adjust the performance measures or other terms and conditions of an
outstanding award in recognition of any permitted adjustment events, which
in the case of an award that is intended to qualify as performance-based
compensation under Section 162(m) of the Code, will be exercised in
accordance with the requirements of Section 162(m). The Committee has the
discretion to determine the structure of all awards under the 2014 LTIP,
including whether such awards comply with the applicable requirements for
performance-based compensation under Section 162(m) of the Code and to
grant cash-based awards outside of the 2014 LTIP that may not qualify as
performance-based compensation under Section 162(m) of the
Code.
Shareholder approval of the 2014
LTIP will also constitute approval of the material terms of the
performance criteria under the 2014 LTIP for purposes of establishing the
specific vesting targets for one or more awards under the 2014 LTIP that
are intended to qualify as performance-based compensation under Section
162(m) of the Code. However, not all awards granted under the 2014 LTIP
may be structured to qualify as such performance-based compensation and
there is no guarantee that the exemption would be available for
performance-based awards granted under the 2014 LTIP in any particular
circumstance. To maintain flexibility in compensating our executives, the
Committee reserves the right to use its judgment to grant or approve
awards or compensation that is nondeductible when the Committee believes
such awards or compensation is
appropriate. |
GENERAL PROVISIONS APPLICABLE TO ALL
AWARDS
Change in Control and Vesting
Acceleration |
A change in control will be
deemed to occur if (i) there are certain changes in the composition of our
Board of Directors, (ii) any person or group of related persons becomes
directly or indirectly the beneficial owner of more than twenty percent of
the total combined voting power of our stock, (iii) we are acquired in a
merger or (iv) our shareholders approve a complete liquidation,
dissolution or sale of substantially all of our assets.
If, upon a change of control, the
existing awards remain outstanding or are replaced with substantially
equivalent awards of a successor, then the existing or substitute awards
will remain governed by their respective terms; provided, however, that if
a participants service with us or a successor entity is terminated
without cause or for good reason within two years following a change in
control, then all awards held by such participant will vest, any
restrictions will lapse and uncompleted performance measures will be
deemed satisfied at the target level of performance.
If, following a change in
control, the existing awards do not remain outstanding or are not assumed
or replaced with substantially equivalent awards, then all awards will
vest, any restrictions will lapse and uncompleted performance measures
will be deemed satisfied at the target level of performance. The plan
administrator may further cancel (A) any option or stock appreciation
right in exchange for cash equal to the excess of the aggregate fair
market value of the common stock subject to the award over the exercise
price and (B) restricted stock awards, restricted stock units, performance
share awards or other awards denominated in shares of stock, in exchange
for the cash value of the award as determined by the stock price and the
actual or deemed satisfaction of the performance
measures. |
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The acceleration of vesting in
the event of a change in control may be seen as an anti-takeover provision
and may have the effect of discouraging a merger proposal, a takeover
attempt or other efforts to gain control of us. |
|
|
Changes in
Capitalization |
If an equity restructuring causes
the per share value of our common stock to change, such as by reason of a
stock dividend, extraordinary cash dividend, stock split, spinoff, rights
offering, recapitalization or otherwise, equitable adjustments will be
made to the number of shares available for issuance under the plan and to
the terms of outstanding awards in a manner designed to preclude any
dilution or enlargement of the plan and the outstanding
awards. |
|
|
Valuation |
For any award made pursuant to
the 2014 LTIP, the fair market value per share of our common stock as of
any date will be deemed to be equal to the closing price of the Companys
common stock as reported on the New York Stock Exchange on such date, or
determined pursuant to such other method as may be selected by the
Committee. |
|
|
Shareholder Rights and
Transferability |
No participant will have any
shareholder rights with respect to the shares subject to an option or
stock appreciation right until such participant has exercised the option
or stock appreciation right and paid the exercise price for the purchased
shares, and any related withholding taxes. Subject to the terms of the
applicable award agreement, a participant will have full shareholder
rights with respect to any shares of common stock issued under the 2014
LTIP, whether or not his or her interest in those shares is vested. A
participant will not have any shareholder rights with respect to the
shares of common stock subject to a restricted stock unit, performance
share or other share right award until that award vests and the shares of
common stock are actually issued thereunder.
Awards are not assignable or
transferable other than by will or the laws of inheritance or a domestic
relations order. However, the plan administrator may structure one or more
awards to be transferable during a participants lifetime to one or more
members of the participants family or to an estate planning trust or
charity. |
|
|
Withholding |
The plan administrator may
provide holders of awards with the right to have us withhold cash or
portion of the shares otherwise issuable to such individuals in
satisfaction of the withholding taxes to which they become subject in
connection with the exercise, vesting or settlement of the awards.
Alternatively, the plan administrator may allow such individuals to
deliver cash or previously acquired shares of our common stock in payment
of such withholding tax liability. |
|
|
Deferral Programs |
The plan administrator may
structure one or more awards so that the participants may be provided with
an election to defer the compensation associated with those awards for
federal income tax purposes. |
|
|
Restrictive Covenants and Clawback
|
Awards granted under the 2014
LTIP will be subject to forfeiture and in certain cases the participant
must return amounts received if the participant breaches non-solicitation
or confidentiality covenants or engages in any misconduct that results in
Caterpillar having to restate its financial statements. |
|
|
Amendment and
Termination |
The plan administrator will have
the discretionary authority at any time to amend or accelerate the vesting
of any and all stock options, stock appreciation rights, restricted stock
awards, restricted stock units and performance awards, unless it would
cause a performance-based award not to be deductible for income tax
purposes under Section 162(m) of the Code.
The Committee may terminate,
amend or modify the 2014 LTIP at any time, subject to any shareholder
approval requirements under applicable law or regulation or pursuant to
the listing standards of the stock exchange on which our shares of common
stock are at the time primarily traded. No awards may be granted under the
2014 LTIP after June 11, 2024. |
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The following table sets forth the
equity awards granted over the lifetime of the 2014 LTIP to the individuals and
groups indicated, as of March 31, 2017.
NAME POSITION |
NUMBER OF STOCK OPTIONS |
|
NUMBER OF RSUs |
Douglas R.
Oberhelman |
763,525 |
|
94,421 |
Former Chairman and Chief Executive
Officer |
|
|
|
Jim Umpleby |
501,040 |
|
72,249 |
Chief Executive Officer |
|
|
|
Bradley M.
Halverson |
348,261 |
|
46,935 |
Group President and Chief Financial
Officer |
|
|
|
Robert B.
Charter |
348,458 |
|
48,061 |
Group President |
|
|
|
David P. Bozeman |
163,755 |
|
19,706 |
Former Senior Vice President |
|
|
|
All executive officers (8 persons) |
2,833,483 |
|
374,214 |
All non-executive directors (11 persons) |
|
|
51,267 |
All employees (other than current executive officers)
(approximately 5,553 persons) |
14,884,613 |
|
5,354,002 |
The closing price of our common stock on March 31, 2017
was $92.76
SUMMARY OF FEDERAL INCOME TAX
CONSEQUENCES OF AWARDS GRANTED UNDER THE 2014 LTIP
The following is a summary of the
United States Federal income taxation treatment applicable to us and the
participants who receive awards under the 2014 LTIP based on United States
Federal income tax laws in effect as of the date of the filing of this proxy
statement. This discussion does not address all aspects of the United States
Federal income tax consequences of participating in the 2014 LTIP that may be
relevant to participants in light of their personal investment or tax
circumstances and does not discuss any state, local or non-United States tax
consequences of participating in the 2014 LTIP. Each participant is advised to
consult his or her particular tax advisor concerning the application of the
United States Federal income tax laws to such participants particular
situation, as well as the applicability and effect of any state, local or
non-United States tax laws before taking any actions with respect to any
awards.
Option Grants |
Options granted under the 2014
LTIP may be either incentive stock options which satisfy the requirements
of Section 422 of the Code or nonqualified options which are not intended
to meet such requirements. The Federal income tax treatment for the two
types of options differs as follows:
Incentive Stock Options.No
taxable income is recognized by the participant at the time of the grant,
and no taxable income is recognized for regular tax purposes at the time
the option is exercised, although taxable income may arise upon exercise
for alternative minimum tax purposes. The participant will recognize
taxable income in the year in which the purchased shares are sold or
otherwise made the subject of certain other dispositions. For Federal tax
purposes, dispositions are divided into two categories: (i) qualifying,
and (ii) disqualifying. A qualifying disposition occurs if the sale or
other disposition is made more than two years after the date the related
option was granted and more than one year after the date such option was
exercised for those shares. If the sale or disposition occurs before both
of these two periods are satisfied, then a disqualifying disposition will
result.
Upon a qualifying disposition,
the participant will recognize long-term capital gain in an amount equal
to the excess of (i) the amount realized upon the sale or other
disposition of the purchased shares over (ii) the exercise price paid for
the shares. If there is a disqualifying disposition of the shares, then
the excess of (i) the fair market value of those shares on the exercise
date or (if less) the amount realized upon such sale or disposition over
(ii) the exercise price paid for the shares will be taxable as ordinary
income to the participant. Any additional gain recognized upon the
disposition will be a capital gain. We will not be entitled to any income
tax deduction if the participant makes a qualifying disposition of the
shares.
If the participant makes a disqualifying disposition of the
purchased shares, then we will be entitled to an income tax deduction, for
the taxable year in which such disposition occurs, equal to the amount of
ordinary income recognized by the participant as a result of the
disposition. We will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the holder in connection with the
disqualifying disposition. |
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Nonqualified Options.
No taxable income is recognized by a
participant upon the grant of a nonqualified option. The participant will
recognize ordinary income in the year in which the option is exercised,
equal to the excess of the fair market value of the purchased shares on
the exercise date over the exercise price paid for the shares (and subject
to income tax withholding in respect of an employee). We will be entitled
to an income tax deduction equal to the amount of ordinary income
recognized by the participant with respect to the exercised nonqualified
option. |
|
|
Stock Appreciation
Rights |
No taxable income is recognized
upon receipt of a stock appreciation right. The holder will recognize
ordinary income in the year in which the stock appreciation right is
exercised, in an amount equal to the fair market value of the shares
issued to the holder or the amount of the cash payment made to the holder
(and subject to income tax withholding in respect of an employee). We will
be entitled to an income tax deduction equal to the amount of ordinary
income recognized by the holder in connection with the exercise of the
stock appreciation right. |
|
|
Restricted Stock
Awards |
No taxable income is recognized
upon receipt of restricted stock, unless the participant makes an election
to be taxed at the time of grant. If such election is made, the
participant will recognize compensation taxable as ordinary income (and
subject to income tax withholding in respect of an employee) at the time
of the grant in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid for those shares. If
such election is not made, the holder will recognize ordinary income when
those shares subsequently vest in an amount equal to the excess of the
fair market value of the shares on the vesting date over the amount, if
any, paid for the shares (and subject to income tax withholding in respect
of an employee). Subject to the deductibility limitations of Code Section
162(m), we will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the recipient with respect to the
restricted stock award. The deduction will be allowed for the taxable year
in which such ordinary income is recognized by the recipient. In addition,
a participant receiving dividends with respect to restricted stock for
which the above-described election has not been made and prior to the time
the restrictions lapse will recognize compensation taxable as ordinary
income (and subject to income tax withholding in respect of an employee),
rather than dividend income, in an amount equal to the dividends paid and
we will be entitled to a corresponding deduction, except to the extent the
deduction limits of Code Section 162(m) apply. |
|
|
Restricted Stock Units or
Performance Shares |
No taxable income is recognized
upon receipt of restricted stock units or performance shares. The holder
will recognize ordinary income in the year in which the shares subject to
the awards are actually issued to the holder or a dividend equivalent is
paid to the holder, in an amount equal to the fair market value of the
shares on the issuance date and the amount of any cash on the payment date
(and subject to income tax withholding in respect of an employee). Subject
to the deductibility limitations of Code Section 162(m), we will be
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the holder at the time the shares are
issued. |
|
|
Cash Awards |
The payment of a cash award will
result in the recipients recognition of ordinary income equal to the
dollar amount received (and subject to income tax withholding in respect
of an employee). Subject to the deductibility limitations of Code Section
162(m), we will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the recipient.
Future awards under the 2014 Plan
are in the discretion of the Committee and are therefore not determinable
at this time. |
EQUITY COMPENSATION PLAN
INFORMATION
(AS OF MARCH 31, 2017)
PLAN
CATEGORY |
(A) NUMBER OF SECURITIES TO BE ISSUED UPON
EXERCISE OF OUTSTANDING
OPTIONS, WARRANTS AND RIGHTS
(1) |
|
(B) WEIGHTED- AVERAGE EXERCISE PRICE
OF OUTSTANDING OPTIONS,
WARRANTS AND
RIGHTS |
|
(C) NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE
ISSUANCE UNDER EQUITY
COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A)) |
|
Equity compensation plans approved by security
holders |
|
36,362,948 |
|
|
|
$84.73 |
|
|
|
11,434,997 |
|
|
Equity compensation plans not approved by security
holders |
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
Total |
|
36,362,948 |
|
|
|
$84.73 |
|
|
|
11,434,997 |
|
|
1 Excludes any cash payments in-lieu-of stock.
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SHAREHOLDER PROPOSALS
Some of the following shareholder
proposals contain assertions that we believe are incorrect or do not reflect all
of the facts related to these issues. We have not attempted to refute all
inaccuracies.
PROPOSAL 6 SHAREHOLDER PROPOSAL
PROVIDE A REPORT OF LOBBYING ACTIVITIES
|
|
What am I voting
on? Shareholders are being asked to
vote on a shareholder proposal calling for additional disclosure of
Caterpillars lobbying activity.
Who submitted the
proposal? The proposal was submitted
by Fonds de solidarite des travailleurs du Quebec (FTQ), 545, boulevard
Cremazie Est, Bureau 200, Montreal (Quebec) H2M 2W4, who has represented
that it is the owner of 33,000 shares of Caterpillar Inc. common
stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 6 LOBBYING
REPORT
Whereas, we believe in full disclosure of Caterpillars direct and indirect
lobbying activities and expenditures to assess whether Caterpillars lobbying is
consistent with its expressed goals and in the best interests of
stockholders.
Resolved, the stockholders of Caterpillar request the preparation of a report,
updated annually, disclosing:
1. |
Company policy and procedures
governing lobbying, both direct and indirect, and grassroots lobbying
communications. |
|
|
2. |
Payments by Caterpillar used for
(a) direct or indirect lobbying or (b) grassroots lobbying communications,
in each case including the amount of the payment and the
recipient. |
|
3. |
Caterpillars membership in and
payments to any tax-exempt organization that writes and endorses model
legislation. |
|
4. |
Description of managements and
the Boards decision making process and oversight for making payments
described in sections 2 and 3 above. |
For purposes of this proposal, a
grassroots lobbying communication is a communication directed to the general
public that (a) refers to specific legislation or regulation, (b) reflects a
view on the legislation or regulation and (c) encourages the recipient of the
communication to take action with respect to the legislation or regulation.
Indirect lobbying is lobbying engaged in by a trade association or other
organization of which Caterpillar is a member.
Both direct and indirect lobbying and
grassroots lobbying communications include efforts at the local, state and
federal levels.
The report shall be presented to the
Audit Committee or other relevant oversight committees and posted on
Caterpillars website.
SUPPORTING STATEMENT
As stockholders, we encourage
transparency and accountability in Caterpillars use of corporate funds to
influence legislation and regulation. Caterpillar spent $11.83 million in 2014
and 2015 on federal lobbying (opensecrets.org). These figures do not include
state lobbying expenditures, where Caterpillar also lobbies. Caterpillars
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lobbying on Cuba trade has attracted
media attention (Illinois Business: Lets Make a Cuba Deal, Chicago Tribune,
October 16, 2016), as has its lobbying on the Export-Import Bank (Caterpillar
Cranks up Lobbying to Save Ex-Im Bank, Wall Street Journal, June 26,
2014).
Caterpillar serves on the board of the
Chamber of Commerce, which has spent over $1.2 billion on lobbying since 1998.
Caterpillar is also a member of the National Association of Manufacturers and
Business Roundtable, which together spent $63.45 million on lobbying for 2014
and 2015. Caterpillar does not disclose its payments to trade associations or
the amounts used for lobbying. Nor does Caterpillar disclose its contributions
to tax-exempt organizations that write and
endorse model legislation, such as its support for the American Legislative
Exchange Council (ALEC). Over 100 companies have publicly left ALEC, including
3M, Deere, Intel and Walgreens.
Transparent reporting would reveal
whether company assets are being used for objectives contrary to Caterpillars
long-term interests. For example, Caterpillar supports greenhouse gas policy
change through memberships in trade and lobbying associations (Committed to
Coal, World Coal, September 16, 2016), yet the Chamber has sued to block the
EPA Clean Power Plan to address climate change. We are concerned that
Caterpillars current lack of disclosure presents reputational risk.
The Board recommends a vote AGAINST
this proposal for the reasons provided below.
Caterpillars political and advocacy
activities, at both the state and federal levels, are managed by the Vice
President, Global Government & Corporate Affairs who coordinates and reviews
with senior management the legislative and regulatory priorities that are
significant to the Companys business and shareholders, as well as related
advocacy activities. To ensure appropriate Board oversight of political
activities, the Boards Public Policy and Governance Committee receives regular
briefings on the Companys legislative and regulatory priorities, the Companys
political spending and trade association expenditures as well as the activities
of Caterpillars Political Action Committee.
Caterpillar belongs to a number of
trade associations representing the interests of the manufacturing industry.
These organizations work to represent the industry and advocate on major policy
issues of importance to Caterpillar and its customers. Caterpillars
participation as a member of any trade association comes with the understanding
that we may not always agree with all of the positions of the organization or
other members. Each quarter Caterpillar discloses in a publicly available report the Companys total federal lobbying
expenditures for the quarter which includes the portion of all trade association
payments that are used for lobbying. To provide greater transparency regarding
Caterpillars trade association memberships, Caterpillar voluntarily reports on
its website each trade association that engages in lobbying and other political
activity that has received more than $50,000 from Caterpillar in the most
recently completed year. In addition, Caterpillar makes additional voluntary
website disclosures regarding its engagement in public policy issues, political
contributions and global issues of importance to the Company, including detailed
information on the Companys position with respect to such
issues.
With a view toward providing greater
transparency, the Company in 2016 updated its website disclosures relating to
political activity. The Company believes its disclosures related to political
activity are aligned with, and in other instances exceed, its peers.
The Board does not believe that
additional detailed disclosure of these amounts as contemplated by this proposal
would be beneficial to shareholders.
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PROPOSAL 7 SHAREHOLDER PROPOSAL
DECREASE PERCENT OF OWNERSHIP REQUIRED TO CALL SPECIAL SHAREHOLDER
MEETING
|
|
What am I voting
on? Shareholders are being asked to
vote on a proposal that would give holders in the aggregate of 15 percent
of our outstanding common stock the power to call a special shareholder
meeting.
Who submitted the
proposal? The proposal was submitted
by Myra K. Young, 9295 Yorkship Court, Elk Grove, CA 95758, who has
represented that she is the owner of 50 shares of Caterpillar Inc. common
stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 7 SPECIAL SHAREOWNER
MEETINGS
Resolved, Shareowners ask our board to
take the steps necessary (unilaterally if possible) to amend our bylaws and each
appropriate governing document to give holders in the aggregate of 15% of our
outstanding common stock the power to call a special shareowner meeting. This
proposal does not impact our boards current power to call a special
meeting.
Dozens of Fortune 500 companies allow
10% of shares to call a special meeting and this proposal is only asking that
15% of our shares be enabled to call a special meeting. Special meetings allow
shareowners to vote on important matters, such as electing new directors that
can arise between annual meetings. Shareowner
input on the timing of shareowner meetings is especially important when events
unfold quickly and issues may become moot by the next annual meeting. This is
important because there could be 15-months or more between annual
meetings.
This proposal is particularly important
because we do not have the opportunity to act by written consent. More than 100
Fortune 500 companies provide for shareholders to call special meetings and to
act by written consent. If our management adopts this proposal it will be one
sign that management values our shareholder input.
Please vote to enhance shareholder
value:
Special Shareowner Meetings Proposal
7
The Board recommends a vote AGAINST
this proposal for the reasons provided below.
Caterpillars bylaws currently provide
that persons collectively holding at least 25 percent of the Companys common
stock may call a special meeting upon written request to the Companys Corporate
Secretary. The current threshold is designed to strike a balance between
assuring that shareholders have the ability to call a special meeting and
protecting against the risk that a small minority of shareholders, including
those with special interests, could trigger the expense and distraction of a
special meeting to pursue matters that are not widely viewed as requiring
immediate attention or for reasons that may not be in the best interests of the
Company or all of our shareholders. The Companys current threshold is well
within the mainstream.
Caterpillar continues to view direct
shareholder engagement as key to the Companys success. To that end, Caterpillar
leaders meet regularly with shareholders to discuss our strategy, operational
performance, and business practices. We also meet with shareholders throughout
the year to share perspectives on corporate governance and executive
compensation matters. This commitment to ongoing dialogue with our shareholders,
together with practices such as annual director elections, majority voting for
directors, a proxy access right for nominating directors, no supermajority
voting provisions and shareholders existing right to call special meetings,
protects shareholder rights without the expense and risk associated with a lower
special meeting threshold.
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PROPOSAL 8 SHAREHOLDER PROPOSAL
PROVIDE A REPORT OF LOBBYING PRIORITIES
|
|
What am I voting
on? Shareholders are being asked to
vote on a proposal that requests the Company to report to shareholders on
the Companys process for identifying and prioritizing legislative and
regulatory public policy advocacy activities.
Who submitted the
proposal? The proposal was submitted
by the National Center for Public Policy Research, 20 F Street, NW Suite
700, Washington, DC 20001 who has represented that it is the owner of 71
shares of Caterpillar Inc. common stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 8 LOBBYING
PRIORITIES
Whereas:
Caterpillar Inc.s primary duty is to
create shareholder value. The Company should pursue legal and ethical means to
achieve that goal, including identifying and advocating legislative and
regulatory public policies that would advance Company interests and shareholder
value.
Resolved: The proponent requests that the Board of Directors, at reasonable cost
and omitting proprietary information, report to shareholders on the Companys
process for identifying and prioritizing legislative and regulatory public
policy advocacy activities. The report should:
1. |
Describe the process by which the
Company identifies, evaluates and prioritizes public policy issues of
interest to the Company; |
|
|
2. |
Identify and describe public
policy issues of interest to the Company; |
|
3. |
Prioritize the issues by
importance to creating shareholder value; and |
|
4. |
Explain the business rationale
for prioritization. |
SUPPORTING STATEMENT:
If the Company chooses, the Board might
consider disclosing in its report what actions federal, state and local
governments might take to assist the Companys ability to thrive and create
value for the Company, its investors and its workforce.
Corporate America has in recently faced
unprecedented challenges in the form of increased regulation and taxation
combined with demands from special interest groups with little, if any, interest
in creating either shareholder value or opportunities for the Company to grow,
create jobs and add wealth to the communities in which the Company
operates.
Todays changing political climate
offers a unique opportunity for corporations to once again thrive in America.
Analysts have concluded that very many newly-elected officeholders intend to
make improving conditions for business growth to be a high priority of their
terms of office.
The pursuit of shareholder value in a
lawful manner is a social good.
Shareholders hope the Company will not
be passive in the face of this opportunity. If the Company chooses, without
exposing proprietary or otherwise confidential information that could make it
less competitive or otherwise harm the Company, it may consider communicating to
elective officials, regulators, the news media, and or the public at-large what
policies would best help the Company, and through it, the communities it serves,
thrive.
If it chooses, the Company might also
consider developing plans to defend assaults on the Company and to defend the
Companys decisions, when the Company chooses to make them, to not to be
involved in political or social change campaigns that are outside the Companys
interests.
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The Board recommends a vote AGAINST
this proposal for the reasons provided below.
The Board believes that it is in the
Companys best interests to be involved in and contribute to the legislative and
regulatory process. To that end, the Company engages in lobbying and other
political activities, as permitted by applicable law, to further priorities that
are significant to the Companys business and shareholders. Caterpillars
political and advocacy activities, at both the state and federal levels, are
managed by the Vice President, Global Government & Corporate Affairs who
coordinates and reviews with senior management the legislative and regulatory
priorities that are significant to the Companys business and shareholders, as
well as related advocacy activities. To ensure appropriate Board oversight of
political activities, the Boards Public Policy and Governance Committee
receives regular briefings on the Companys legislative and regulatory
priorities.
Each quarter Caterpillar discloses in a
publicly available report the Companys total federal lobbying expenditures for
the quarter which includes a description of the issues addressed by these
lobbying activities. Caterpillar also identifies on its website global issues of
importance to the Company and has provided detailed information on the Companys
position with respect to some of these issues. Accordingly, much of the
information requested by the proponent is already publicly available.
The proponent requests that the
proposed report not only disclose the public policies of interest to the
Company, but also the priority of such policies and the business rationale for
such priority. Because parties with interests adverse to us also lobby for
legislative and regulatory changes, the unilateral disclosure of this
information could benefit these parties and our competitors and cause strategic
harm to us.
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PROPOSAL 9 SHAREHOLDER PROPOSAL
INCLUDE SUSTAINABILITY AS A PERFORMANCE METRIC UNDER EXECUTIVE INCENTIVE
PLANS
|
|
What am I voting
on? Shareholders are being asked to
vote on a proposal that requests the Compensation Committee of the Board
of Directors to include sustainability as one of the performance measures
for senior executives under the Companys incentive
plans.
Who submitted the
proposal? The proposal was submitted
by Heartland Initiative, Inc., 174 Carroll Street SE, Atlanta, GA 30312
who has represented that it is the owner of 62 shares of Caterpillar Inc.
common stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 9 SUSTAINABILITY
PERFORMANCE METRIC
RESOLVED: That the shareholders of
Caterpillar request the Boards Compensation Committee, when setting senior
executive compensation, include sustainability as one of the performance
measures for senior executives under the Companys incentive plans.
Sustainability is defined as how environmental and social considerations, and
related financial impacts, are integrated into corporate strategy over the long
term.
SUPPORTING STATEMENT: We believe that
the long-term interests of shareholders, as well as other important
constituents, are best served by companies that operate their businesses in a
sustainable manner focused on long-term value creation. As the recent financial
crisis demonstrates, those boards of directors and management that operate their
companies with integrity and a focus on the long term are much more likely to
prosper than ones that are dominated by a short-term focus.
The best means of demonstrating a
companys commitment to the concept of sustainability is through incorporating
it as a performance measure in the Companys annual and/or long-term incentive
plans. We believe that the current failure to do so represents a serious
shortcoming.
While the compensation committee has
the discretion to choose the specific metrics, sustainability metrics may
include evaluation of how company activities and products are affecting
environmental pollution, natural resource exploitation, indigenous rights of
access and control of land, other human rights considerations, and other
appropriate issues of corporate social responsibility and
sustainability.
In support of the principle that the
integration of sustainability standards into corporate strategies serves the
long-term interests of shareholders, we note the following findings:
● |
A 2012 Harvard Business School
study concluded that firms that adopted social and environmental policies
significantly outperformed counterparts over the long-term, in terms of
stock market and accounting performance. |
● |
The Glass Lewis report In Depth:
Linking Executive Pay to Sustainability (2016), finds a mounting body of
research showing that firms that operate in a more responsible manner may
perform better financially.... Moreover, these companies were also more
likely to tie top executive incentives to sustainability
metrics. |
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The Board recommends a vote AGAINST
this proposal for the reasons provided below.
The Board agrees that the interests of
shareholders are best served by companies that operate their business in a
sustainable manner. Indeed, sustainability is one of Caterpillars five core
values. Caterpillar was named to the Dow Jones Sustainability Indices in 2016,
recognizing Caterpillars sustainability performance to be in the top ten
percent of our industry.
The Compensation Committee of our Board
has crafted an incentive compensation program structured around financial and
operational performance measures that the
committee believes are most important in driving the responsible, long-term
growth of our business. Achievement of these performance measures is enhanced by
reducing environmental impacts of operations, providing customers with products
with best-in-class fuel efficiency and productivity and further strengthening
our positive corporate image. Requiring the Compensation Committee to include a
specific sustainability performance measure is unnecessary and interferes with
the Compensation Committees discretion to design and monitor an effective
executive compensation program that is responsive to business goals and market
conditions.
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PROPOSAL 10
SHAREHOLDER PROPOSAL AMEND THE COMPANYS COMPENSATION CLAWBACK
POLICY
|
|
What am I voting
on? Shareholders are being asked to
vote on a proposal that requests the Board of Directors to amend the
Companys compensation clawback policy to include any misconduct or
oversight failure that causes significant financial or reputational
harm.
Who submitted the
proposal? The proposal was submitted
by CtW Investment Group, 1900 L St. NW, Suite 900, Washington, DC 20036
who has represented that it is the owner of 32 shares of Caterpillar Inc.
common stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 10 AMEND CLAWBACK
POLICY
RESOLVED, that shareholders of
Caterpillar Inc. (the Company) urge the Compensation and Human Resource
Committee of the Board of Directors (the Committee) to amend the Companys
clawback policy to provide that the Committee
will (a) review, and determine whether to seek recoupment of, incentive
compensation paid, granted or awarded to a senior executive if, in the
Committees judgment, (i) there has been conduct resulting in a material
violation of law or Company policy that causes significant financial or
reputational harm to Company, and (ii) the senior executive engaged in such
conduct or failed in his or her responsibility to manage or monitor conduct or
risks; and (b) disclose the circumstances of any recoupment if (i) required by
law or regulation or (ii) the Committee determines that disclosure is in the
best interests of Company and its shareholders.
Recoupment is (a) recovery of
compensation already paid and (b) forfeiture, recapture, reduction or
cancellation of amounts awarded or granted over which Valeant retains control.
These amendments should operate prospectively and be implemented so as not to
violate any contract, compensation plan, law or regulation.
SUPPORTING STATEMENT
As long-term shareholders, we believe
that compensation policies should promote sustainable value creation. We agree
with former GE general counsel Ben Heineman Jr. that recoupment policies are a
powerful mechanism for holding senior leadership
accountable to the fundamental mission of the corporation: proper risk taking
balanced with proper risk management and the
robust fusion of high performance with high integrity. (http//:blogs.law.
harvard.edu/corpgov/20 10/08/1 3/making-sense-out-of-clawbacks/)
Caterpillar has adopted a policy
allowing recoupment of certain incentive pay from a corporate officer as a
result of a restatement of financial results, taking into account, among other
things, whether the incentive award would have been lower based on the restated
results. In our view, providing for recoupment only for accounting and financial
reporting noncompliance is too narrow. We believe that recoupment is an
important remedy for other kinds of conduct that may not cause a restatement,
but may harm Caterpillars reputation and prospects. As well, it may be
appropriate to hold accountable a senior executive who did not commit misconduct
but who failed in his or her management or monitoring responsibility.
Recent legal settlements underscore the
need for a stronger policy in this area, notably Caterpillars agreement to pay
over $2.5 million in 2011 to settle alleged Clean Air Act violations for
shipping more than 590,000 highway and non-road diesel engines without the
correct emissions controls and alleged failure to comply with emission control
reporting and engine-labeling requirements (http://latimesblogs.latimes.com/greenspace/2011/08/caterpillar-inc-us-environmental-protection-agency-pentality-fine-clean-air-act.html).
The Company also recently finalized a $60 million class action settlement
related to possible defects in the Companys emission control system for certain
heavy duty diesel
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engines.
(http://www.pjstar.com/news/20161202/caterpillar-settles-truck-engine-suit-for-60-million).
Such lawsuits have the potential to harm the Companys reputation and goodwill,
however, there is no indication that the Company
scrutinized these issues and whether a recoupment of incentive compensation by
the senior officers involved is warranted.
The Board recommends a vote AGAINST
this proposal for the reasons provided below.
This proposal is unnecessary because
the Company has already adopted a customary and robust executive compensation
clawback policy. Our current clawback policy allows the Compensation Committee
to recoup cash and equity incentive compensation from officers if their conduct
contributed to an accounting restatement. The policy provides the Compensation
Committee with discretion to ensure that recoupment would be in the best
interests of the Company, but avoids the vague and subjective standards
advocated by this proposal. The Companys current compensation structure and
recoupment tools strike the right balance to motivate executives to deliver
long-term results, while at the same time discouraging inappropriate
behavior.
The proponents amendment would
introduce vague and imprecise standards into the recoupment process by requiring
recoupment if there has been conduct resulting in a violation of law or Company policy that causes significant financial or
reputational harm to the Company or if he or she failed in his or her
responsibility to manage or monitor conduct or risks. There is no definition or
measurable standard for what conduct qualifies or for calculating the recoupment
amount resulting from such harm. The proposed amendment would undermine the
effectiveness of our performance-based compensation by introducing the type of
discretionary, subjective evaluations that we have sought to avoid under our
performance-based programs.
Requiring public disclosure of all
recoupment action could be harmful. SEC rules already require disclosure of
recoupment action taken against our CEO, CFO and other named executive officers.
Disclosure of recoupment action impacting other officers should be at the
Boards discretion in order to balance investors interest in receiving the
information with applicable legal, commercial and privacy concerns.
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PROPOSAL 11 SHAREHOLDER PROPOSAL
ADOPT A PERMANENT POLICY THAT THE CHAIRMAN BE INDEPENDENT
|
|
What am I voting
on? Shareholders are being asked to
vote on a proposal that requests the Board of Directors to adopt a
permanent policy that would require, whenever possible, the Chairman of
the Board to be an independent director.
Who submitted the
proposal? The proposal was submitted
by John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278
who has represented that he is the owner of 200 shares of Caterpillar Inc.
common stock. |
|
|
|
Voting
Recommendation: AGAINST
proposal |
PROPOSAL 11 INDEPENDENT BOARD
CHAIRMAN
Shareholders request our Board of
Directors to adopt as permanent policy, and amend our governing documents as
necessary, to require the Chair of the Board of Directors, whenever possible, to
be an independent member of the Board. The Board would have the discretion to
phase in this policy for the next CEO transition, implemented so it does not
violate any existing agreement. If the Board determines that a Chair who was
independent when selected is no longer independent, the Board shall select a new
Chair who satisfies the requirements of the policy within a reasonable amount of
time. Compliance with this policy is waived if no independent director is
available and willing to serve as Chair. This proposal requests that all the
necessary steps be taken to accomplish the above.
Caterpillar reversed itself by
temporarily naming an independent board chairman in October 2016. Caterpillar
had opposed a shareholder proposal for an independent board chairman as recently
as its June 2016 annual meeting. Wells Fargo also reversed itself and named an
independent board chairman in October 2016.
According to Institutional Shareholder
Services 53% of the Standard & Poors 1,500 firms separate these 2 positions
2015 Board Practices, April 12, 2015. This proposal topic won 50%-plus
support at 5 major U.S. companies in 2013 including 73%-support at
Netflix.
It is the responsibility of the Board
of Directors to protect shareholders long-term interests by providing
independent oversight of management. By setting agendas, priorities and
procedures, the Chairman is critical in shaping the work of the
Board.
Having a board chairman who is
independent of management is a practice that will promote greater management
accountability to shareholders and lead to a more objective evaluation of
management.
A number of institutional investors
said that a strong, objective board leader can best provide the necessary
oversight of management. Thus, the California Public Employees Retirement
Systems Global Principles of Accountable Corporate Governance recommends that a
companys board should be chaired by an independent director, as does the
Council of Institutional Investors. An independent director serving as chairman
can help ensure the functioning of an effective board.
Please vote to enhance shareholder
value:
Independent Board Chairman Proposal
11
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The Board recommends a vote AGAINST
this proposal for the reasons provided below.
In recent times, the role of
Caterpillars Chairman has been filled by an independent director, the current
CEO and a former CEO. In each case, the decision was made by the independent
directors based on all relevant factors. The Boards Guidelines on Corporate
Governance Issues provide that the Board will regularly evaluate the Board
leadership structure. Currently the Chairman is an independent director. The
Board believes that it should choose a Board leadership structure based on the
facts and circumstances at any particular time.
The Boards guidelines provide that if the Chairman is not an independent
director, then an independent director will serve as the Presiding Director with
the following duties and responsibilities: (i) presiding at all meetings of the
Board at which the Chairman is not present; (ii) serving as a liaison between
the CEO and the independent directors; (iii) approving information sent to the
Board; (iv) approving meeting agendas for the Board; (v) approving meeting
schedules to assure that there is sufficient time for discussion; (vi) authority
to call meetings of the independent directors; and (vii) being available for
consultation and direct communication with major shareholders.
70 | |
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OTHER IMPORTANT
INFORMATION
PERSONS OWNING MORE
THAN FIVE PERCENT OF CATERPILLAR COMMON STOCK
The following table lists those persons
or groups (based on a review of Schedule 13Gs filed with the SEC) who
beneficially own more than five percent of Caterpillar common stock as of
December 31, 2016.
|
|
VOTING
AUTHORITY |
|
DISPOSITIVE
AUTHORITY |
|
TOTAL AMOUNT OF
BENEFICIAL OWNERSHIP |
|
PERCENT OF
CLASS |
NAME AND ADDRESS |
|
SOLE |
|
SHARED |
|
SOLE |
|
SHARED |
|
|
State Street Corporation and various direct and
indirect subsidiaries1 State Street Financial Center One
Lincoln Street Boston, MA 02111 |
|
0 |
|
32,314,408 |
|
0 |
|
53,605,278 |
|
53,605,278 |
|
9.16 |
The Vanguard Group2 100 Vanguard
Blvd. Malvern, PA 19355 |
|
916,786 |
|
111,306 |
|
36,483,391 |
|
1,021,177 |
|
37,504,568 |
|
6.41 |
BlackRock, Inc. 55 East
52nd Street New York, NY 10055 |
|
30,324,917 |
|
26,872 |
|
35,155,354 |
|
26,872 |
|
35,182,226 |
|
6.00 |
1 State Street Bank and Trust Company serves as investment
manager for certain Caterpillar defined contribution plans (21,290,870 shares).
2 Beneficial ownership includes 751,995 shares for which
Vanguard Fiduciary Trust Company (VFTC), a wholly-owned subsidiary of The
Vanguard Group, Inc., is the beneficial owner, as a result of serving as
investment manager of collective trust accounts. VFTC directs the voting of
these shares. Beneficial ownership also includes 433,973 shares for which
Vanguard Investments Australia, Ltd. (VIA), a wholly-owned subsidiary of The
Vanguard Group, Inc., is the beneficial owner as a result of its serving as
investment manager of Australian investment offerings.
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SECURITY OWNERSHIP
OF EXECUTIVE OFFICERS AND DIRECTORS
Security ownership of Caterpillars
Executive Officers, Board of Directors and Nominees to the Board of Directors
(as of December 31, 2016) is included in the following table.
|
|
COMMON STOCK1 |
|
SHARES
UNDERLYING STOCK OPTIONS/SARs EXERCISABLE WITHIN 60
DAYS |
|
ADDITIONAL
STOCK OPTIONS/SARs EXERCISABLE
UPON RETIREMENT2 |
|
PERCENT OF CLASS |
David P. Bozeman |
|
23,790 |
|
|
166,910 |
|
|
|
0 |
|
|
* |
David L. Calhoun |
|
31,320 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Robert B. Charter |
|
25,966 |
|
|
116,882 |
|
|
|
0 |
|
|
* |
Daniel M. Dickinson |
|
11,272 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Juan Gallardo |
|
268,583 |
|
|
5,833 |
|
|
|
1,672 |
|
|
* |
Jesse J. Greene, Jr. |
|
11,960 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Bradley M. Halverson |
|
20,068 |
|
|
175,406 |
|
|
|
290,131 |
|
|
* |
Jon M. Huntsman, Jr. |
|
3,919 |
|
|
0 |
|
|
|
0 |
|
|
* |
Dennis A. Muilenburg |
|
7,886 |
|
|
0 |
|
|
|
0 |
|
|
* |
Douglas R.
Oberhelman |
|
232,820 |
|
|
1,418,774 |
|
|
|
909,389 |
|
|
* |
William A. Osborn |
|
55,272 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Debra L. Reed |
|
2,075 |
|
|
0 |
|
|
|
0 |
|
|
* |
Edward B. Rust, Jr. |
|
28,052 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Susan C. Schwab |
|
13,121 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Jim Umpleby |
|
36,792 |
|
|
188,410 |
|
|
|
315,567 |
|
|
* |
Miles D. White |
|
4,334 |
|
|
0 |
|
|
|
1,672 |
|
|
* |
Rayford Wilkins,
Jr.3 |
|
0 |
|
|
0 |
|
|
|
0 |
|
|
* |
All directors and
executive officers as a group4 (20 persons) |
|
841,852 |
|
|
2,437,846 |
|
|
|
1,742,526 |
|
|
* |
1 Common stock that is directly or indirectly beneficially
owned, including stock that is individually or jointly owned and shares over
which the individual has either sole or shared investment or voting
authority.
2 SARs or RSUs that are
not presently exercisable within 60 days but that would become immediately
exercisable if such individual was eligible to retire and elected to retire
pursuant to long-service separation.
3 Mr. Wilkins joined the
Board in April 2017.
4 None of the shares
held by the group has been pledged.
* Less than 1 percent.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires our executive officers, directors and persons who
own more than ten percent of a registered class of our equity securities, to
file reports of ownership and changes in ownership with the SEC and the NYSE,
and to furnish Caterpillar with copies of such forms. Based on our review of the
forms we have received, or written representations from reporting persons, we
believe that, during 2016, each of our executive officers and directors complied
with all such filing requirements, with the exception of one late Form 4 filing
by David P. Bozeman disclosing one transaction, which was filed late due to an
administrative error.
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MATTERS RAISED AT
THE ANNUAL MEETING NOT INCLUDED IN THIS STATEMENT
We do not know of any matters to be
acted upon at the Annual Meeting other than those discussed in this statement.
If any other matter is properly presented, proxy holders will vote on the matter
in their discretion.
SHAREHOLDER
PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2018 ANNUAL MEETING
A proposal for action or the nomination
of a director to be presented by any shareholder at the 2018 annual meeting of
shareholders will be acted on only:
● |
If the proposal is to be included
in our proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, the proposal is received at the office of the
Corporate Secretary on or before January 2, 2018; |
● |
If the proposal or the nomination
of a director is not to be included in the proxy statement, the proposal
is received at the office of the Corporate Secretary no earlier than
February 14, 2018, and no later than April 15, 2018. |
● |
If the proposal is for the
nomination of directors to be included in our proxy statement pursuant to
proxy access under Article II, Section 4 of Caterpillars bylaws, the
proposal is received at the office of the Corporate Secretary no earlier
than December 3, 2017, and no later than January 2,
2018. |
In each case, your proposal or
nomination must be delivered in the manner and accompanied by the information
required in our bylaws. You may request a copy of the bylaws by writing to
Caterpillar Inc. c/o Corporate Secretary at our principal executive offices. Our
bylaws are also available on our website at www.caterpillar.com/governance. As
of the date of this proxy statement, our principal executive offices are located
at 100 NE Adams Street, Peoria, Illinois 61629, but we have announced plans to
establish our principal executive offices in the Chicago, Illinois area by the
end of 2017. The location of our new principal executive offices will be
reflected in our future filings with the SEC and, upon the change in the
location of our principal executive offices, shareholder proposals, director
nominations and requests for copies of our bylaws should be delivered to that
address. Additionally, we request that you send a copy to the following
facsimile number: 309-675-6620.
ACCESS TO FORM
10-K
On written request, we will provide,
without charge to each record or beneficial holder of Caterpillar common stock
as of April 17, 2017, a copy of our Annual Report on Form 10-K for the year
ended December 31, 2016, as filed with the SEC, including the financial statements and schedules. Written requests should
be directed to Caterpillar Inc. c/o Corporate Secretary at 100 NE Adams Street,
Peoria, Illinois 61629.
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FREQUENTLY ASKED QUESTIONS REGARDING
MEETING ATTENDANCE AND VOTING
Q: |
Why am I receiving these proxy
materials? |
|
|
A: |
You have received these proxy
materials because you are a Caterpillar shareholder and Caterpillars
Board of Directors is soliciting your authority (or proxy) to vote your
shares at the Annual Meeting. This proxy statement includes information
that we are required to provide to you under SEC rules and is designed to
assist you in voting your shares. |
|
|
Q: |
How do I obtain an admission ticket to attend the Annual
Meeting? |
|
|
A: |
Anyone wishing to attend the
Annual Meeting must have an admission ticket. Admission is limited
to: |
|
|
● |
Shareholders on April 17, 2017, together with
one immediate family member; |
● |
Authorized proxy holders of Shareholders on
April 17, 2017; or |
● |
An authorized representative of a registered
shareholder who has been designated to present a shareholder
proposal. |
|
|
|
You must provide evidence of your
ownership of shares with your ticket request and follow the requirements
for obtaining an admission ticket specified in the Admission and Ticket
Request Procedure on page 77. Accredited
members of the media and analysts are also permitted to attend the Annual
Meeting by following the directions provided in the Admission and Ticket
Request Procedure on page 77. |
|
|
Q: |
What is the difference between a registered shareholder
and a street name holder? |
|
|
A: |
A registered shareholder is a
shareholder whose ownership of Caterpillar common stock is reflected
directly on the books and records of our transfer agent, Computershare
Shareowner Services LLC. If you hold stock through a bank, broker or other
intermediary, you hold your shares in street name and are not a
registered shareholder. For shares held in street name, the registered
shareholder is a bank, broker or other intermediary. Caterpillar only has
access to ownership records for registered shareholders. |
|
|
Q: |
When was the record date and who is entitled to
vote? |
|
|
A: |
The Board set April 17, 2017 as
the record date for the Annual Meeting. Holders of Caterpillar common
stock as of the record date are entitled to one vote per share. As of
April 17, 2017, there were 589,157,050 shares of Caterpillar common stock
outstanding.
A list of all registered
shareholders as of the record date will be available for examination by
shareholders during normal business hours at 100 NE Adams Street, Peoria,
Illinois 61629 at least ten days prior to the Annual Meeting and will also
be available for examination at the Annual
Meeting. |
|
|
A: |
You may vote by any of the
following methods: |
|
|
|
|
|
|
|
|
|
|
In Person Shareholders that obtain an admission ticket and
attend the Annual Meeting will receive a ballot for voting. If you hold
shares in street name, you must also obtain a legal proxy from your broker
to vote in person and submit the proxy along with your ballot at the
meeting. |
|
|
|
|
|
|
|
|
|
By Mail Complete, sign and return the proxy and/or voting
instruction card provided. |
|
|
|
|
|
|
|
|
|
By Mobile
Device Scan this QR code and follow
the voting links. |
|
|
|
|
|
|
|
|
|
By Phone Follow the instructions on your Internet Notice,
proxy and/or voting instruction card or email notice. |
|
|
|
|
|
|
|
|
|
By Internet Follow the instructions on your Internet Notice, proxy
and/or voting instruction card or email notice. |
|
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If you vote by phone, mobile
device or the Internet, please have your Internet Notice, proxy and/or
voting instruction card or email notice available. The control number
appearing on your Internet Notice, proxy and/or voting instruction card or
email notice is necessary to process your vote. A mobile device, phone or
Internet vote authorizes the named proxies in the same manner as if you
marked, signed and returned the card by mail. |
|
|
Q: |
How do I vote my 401(k) or savings plan
shares? |
|
|
A: |
If you participate in a 401(k) or savings plan
sponsored by Caterpillar or one of its subsidiaries that includes a
Caterpillar stock investment fund, you may give voting instructions to the
plan trustee with respect to the shares of Caterpillar common stock in
that fund that are associated with your plan account. The plan trustee
will follow your voting instructions unless it determines that to do so
would be contrary to law. If you do not provide voting instructions, the
plan trustee will act in accordance with the employee benefit plan
documents. In general, the plan documents specify that the trustee will
vote the shares for which it does not receive instructions in the same
proportion that it votes shares for which it received timely instructions,
unless it determines that to do so would be contrary to law.
You may revoke previously given voting
instructions by following the instructions provided by the
trustee. |
|
|
Q: |
What are broker non-votes and why is it important that
I submit my voting instructions for shares I hold in street
name? |
|
|
A: |
Under the rules of the New York Stock Exchange
(NYSE), if a broker or other financial institution holds your shares in
its name and you do not provide your voting instructions to them, that
firms discretion to vote your shares for you is very limited. For this
Annual Meeting, in the absence of your voting instructions, your broker
only has discretion to vote on Proposal 2, the ratification of the
appointment of our independent registered public accounting firm. It does
not have discretion to vote your shares for any of the other proposals
expected to be presented at the Annual Meeting. If you do not provide
voting instructions and your broker elects to vote your shares on Proposal
2, the missing votes for each of the other proposals are considered
broker non-votes.
Whether or not you plan to attend the Annual
Meeting, we encourage you to vote your shares promptly. |
|
|
Q: |
How can I authorize someone else to attend the Annual
Meeting or vote for me? |
|
|
A: |
Registered shareholders can authorize someone
other than the individual(s) named on the proxy and/or voting instruction
card to attend the meeting or vote on their behalf by crossing out the
individual(s) named on the card and inserting the name of the individual
being authorized or by providing a written authorization to the individual
being authorized.
Street name holders can authorize someone other
than the individual(s) named on the legal proxy obtained from their broker
to attend the meeting or vote on their behalf by providing a written
authorization to the individual being authorized along with the legal
proxy.
To obtain an admission ticket for an authorized
proxy representative, see the requirements specified in the Admission and
Ticket Request Procedure on page 77. |
|
|
Q: |
How can I change or revoke my proxy? |
|
|
A: |
Registered shareholders: You may change or revoke your proxy by submitting a written notice
of revocation to Caterpillar Inc. c/o Corporate Secretary at 100 NE Adams
Street, Peoria, Illinois 61629 before the Annual Meeting or by attending
the Annual Meeting and voting in person. For all methods of voting, the
last vote cast will supersede all previous votes. |
|
|
|
Holders in street
name: You may change or revoke your
voting instructions by following the specific directions provided to you
by your bank or broker. |
|
|
Q: |
What is the quorum requirement for the Annual
Meeting? |
|
|
A: |
A quorum of shareholders is necessary to hold a valid meeting. Holders
of at least one-third of all Caterpillar common stock must be present in
person or by proxy at the Annual Meeting to constitute a quorum.
Abstentions and broker non-votes are counted as present for establishing a
quorum. |
|
|
Q: |
What vote is necessary for action to be taken on
proposals? |
|
|
A: |
In uncontested elections, director nominees are elected by a majority
vote of the shares cast, meaning that each director nominee must receive a
greater number of shares voted for such director than shares voted
against such director. If an incumbent director does not receive a
greater number of shares voted for such director than shares voted
against such director, then such director must tender his or her
resignation to the Board of Directors. |
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In a contested election, director nominees are
elected by a plurality of the votes cast, meaning that the nominees with
the most affirmative votes are elected to fill the available
seats.
All other actions presented for a vote of the
shareholders at the Annual Meeting require an affirmative vote of the
majority of shares present in person or by proxy and entitled to vote on
the subject matter, except for the advisory vote on the frequency of
executive compensation (Proposal 4), where the alternative receiving the
most votes will be considered to be the expressed preference of the
shareholders, even if those votes do not constitute a majority of the
shares present in person or by proxy and entitled to vote at the Annual
Meeting.
Abstentions will have no effect on director
elections. Abstentions will have the effect of a vote against all other
proposals. Broker non-votes will not have an effect on any of the
proposals presented for your vote.
Votes submitted by mail, telephone, mobile
device or Internet will be voted by the individuals named on the card (or
the individual properly authorized) in the manner indicated. If you do not
specify how you want your shares voted, they will be voted in accordance
with the Boards recommendations. If you hold shares in more than one
account, you must vote each proxy and/or voting instruction card you
receive to ensure that all shares you own are voted. |
|
|
Q: |
What does it mean if I receive more than one proxy
card? |
|
|
A: |
Whenever possible, registered shares and plan
shares for multiple accounts with the same registration will be combined
into the same proxy card. Shares with different registrations cannot be
combined and as a result, you may receive more than one proxy card. For
example, shares held in your individual account will not be combined on
the same proxy card as shares held in a joint account with your
spouse.
Street shares are not combined with registered
or plan shares and may result in your receipt of more than one proxy card.
For example, shares held by a broker for your account will not be combined
with shares registered directly in your name.
If you hold shares in more than one form, you
must vote separately for each notice, proxy and/or voting instruction card
or email notification you receive that has a unique control number to
ensure that all shares you own are voted.
If you receive more than one proxy card for
accounts that you believe could be combined because the registration is
the same, contact our transfer agent (for registered shares) or your
broker (for street shares) to request that the accounts be combined for
future mailings. |
|
|
Q: |
Who pays for the solicitation of
proxies? |
|
|
A: |
Caterpillar pays the cost of
soliciting proxies on behalf of the Board. This solicitation is being made
by mail and through the Internet, but also may be made by telephone or in
person. We have hired Innisfree to assist in the solicitation. We will pay
Innisfree a fee of $15,000 for these services and will reimburse their
out-of-pocket expenses. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
for sending proxy materials to shareholders and obtaining their votes.
Proxies also may be solicited on behalf of the Board by directors,
officers or employees of Caterpillar by telephone or in person, or by mail
or through the Internet. No additional compensation will be paid to such
directors, officers, or employees for soliciting proxies. |
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Q: |
Where can I find voting results of the Annual
Meeting? |
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A: |
We will announce preliminary
voting results at the Annual Meeting and publish the results in a Form 8-K
filed with the SEC within four business days after the Annual
Meeting. |
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ADMISSION AND
TICKET REQUEST PROCEDURE
ADMISSION
Admission is limited to shareholders on
April 17, 2017 and one immediate family member, or one individual designated as
a shareholders authorized proxy holder or one representative designated in
writing to present a shareholder proposal. In each case, the individual must
have an admission ticket and valid government issued photo identification to be
admitted to the Annual Meeting. In addition, share ownership will be verified by
one of the following methods:
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REGISTERED SHAREHOLDERS |
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STREET NAME HOLDERS |
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Option A
●A copy of your proxy
card or notice showing shareholder name and address
Option B
●Name(s) of
shareholder,
●Address,
●Phone number,
and
●Social security
number or shareholder account ID; or
Also include:
●Name of immediate
family member guest, if not a shareholder
●Name of authorized
proxy representative, if applicable
●Address where
tickets should be mailed and phone number |
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One of the
following:
●A copy of your April
brokerage account statement showing Caterpillar stock ownership as of
April 17, 2017; or
●A letter from your
broker, bank or other nominee verifying your ownership as of April 17,
2017; or
●A copy of your
brokerage account voting instruction card showing shareholder name and
address
Also include:
●Name of immediate
family member guest, if not a shareholder
●Name of authorized
proxy representative, if applicable
●Address where
tickets should be mailed and phone number |
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TICKET REQUEST
DEADLINE
Ticket requests must include all
information specified in the applicable table above and be submitted in writing
and received by Caterpillar on or before May 31, 2017. No requests will be
processed after that date.
TO SUBMIT A REQUEST
Submit ticket requests by email to
catshareservices@cat.com or by mail to Caterpillar Inc. c/o Corporate Secretary,
100 NE Adams Street, Peoria, Illinois 61629-7310. Ticket requests by telephone
will not be accepted.
AUTHORIZED PROXY
REPRESENTATIVE
A shareholder may appoint a
representative to attend the Annual Meeting and/or vote on his/her behalf. The
admission ticket must be requested by the shareholder but will be issued in the
name of the authorized representative. Individuals holding admission tickets
that are not issued in their name will not be admitted to the Annual Meeting.
The shareholder information specified above and a written proxy authorization
must accompany the ticket request.
PROPONENT OF A SHAREHOLDER
PROPOSAL
For each shareholder proposal included
in this proxy statement, the shareholder sponsor should notify the Company in
writing of the individual authorized to present the proposal on behalf of the
shareholder at the Annual Meeting. One admission ticket will be issued for the
designated representative.
MEDIA
Accredited members of the media must
register with the Company prior to the Annual Meeting. To register, please
contact Rachel Potts by phone 309-675-6892 or email (Potts_Rachel_A@cat.com).
ANALYSTS
Analysts must register with the Company
prior to the Annual Meeting. To register, please contact Amy Campbell, Director
of Investor Relations, by phone 309-675-4549 or email
(CATir@cat.com).
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EXHIBIT A - AMENDED
AND RESTATED CATERPILLAR INC. 2014 LONG-TERM INCENTIVE PLAN
CATERPILLAR
INC.
2014 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED, EFFECTIVE AS
OF JUNE 14, 2017)
1.1 Purposes. The purposes of the Caterpillar Inc. 2014 Long-Term
Incentive Plan (this Plan) are (i) to align the interests of the Companys
stockholders and the recipients of awards under this Plan by increasing the
proprietary interest of such recipients in the Companys growth and success, (ii)
to advance the interests of the Company by attracting and retaining officers,
other employees, Non-Employee Directors, consultants and independent contractors
and (iii) to motivate such persons to act in the long-term best interests of the
Company and its stockholders. The Plan has been amended and restated, as set
forth herein, effective June 14, 2017.
1.2 Certain
Definitions.
(a) |
Award Gain shall mean
(a) with respect to a given Option exercise, the product of (X) the excess
of the Fair Market Value of a share of Common Stock on the date of
exercise over the grant price per share of Common Stock of such Option
times (Y) the number of shares purchased pursuant to the exercise of such
Option, and (b) with respect to any other settlement of an award granted
to the participant, the Fair Market Value of the cash or shares of Common
Stock paid or payable to the participant (regardless of any elective
deferral pursuant to Section 5.10) less any cash or the Fair Market Value
of any shares of Common Stock 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 with such settlement. |
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(b) |
Award Notice
shall mean the written or electronic
notice evidencing an award hereunder. |
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(c) |
Blackout Period shall
have the meaning set forth in Section 2.1(b). |
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(d) |
Board shall mean the
Board of Directors of the Company. |
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(e) |
Business Combination
shall have the meaning set forth in Section 5.9(b). |
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(f) |
Cause shall have the
meaning set forth in Section 5.9(c). |
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(g) |
Change in Control shall
have the meaning set forth in Section 5.9(b). |
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(h) |
Code shall mean the
Internal Revenue Code of 1986, as amended. |
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(i) |
Committee shall mean the
Compensation and Human Resources Committee of the Board, or any successor
or subcommittee thereof, consisting of two or more members of the Board,
each of whom is intended to be (i) a Non-Employee Director within the
meaning of Rule 16b-3 under the Exchange Act, (ii) an outside director
within the meaning of Section 162(m) of the Code and (iii) independent
within the meaning of the rules of the New York Stock Exchange or, if the
Common Stock is not listed on the New York Stock Exchange, within the
meaning of the rules of the principal stock exchange on which the Common
Stock is then traded. |
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(j) |
Common Stock shall mean
the common stock of the Company, and all rights appurtenant
thereto. |
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(k) |
Company shall mean
Caterpillar Inc., a Delaware corporation, or any successor
thereto. |
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(l) |
Company Voting Securities shall have the meaning set forth in Section
5.9(b)(ii). |
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(m) |
Exchange Act shall mean
the Securities Exchange Act of 1934, as amended. |
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(n) |
Fair Market Value shall
mean, as of any given date, the fair market value of a share of Common
Stock on a particular date determined by such methods or procedures as may
be established from time to time |
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by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of a share of Common Stock as of any date
shall be the closing transaction price of a share of Common Stock as
reported on the New York Stock Exchange for that date or, if no closing
price is reported for that date, the closing price on the next preceding
date for which transactions were reported. Notwithstanding the foregoing,
unless otherwise determined by the Committee, for purposes of clause (D)
of Section 2.1(c) of the Plan, Fair Market Value means the actual price at
which the shares of Common Stock used to acquire the shares of Common
Stock are sold. |
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(o) |
Forfeiture
Event shall have the meaning set forth
in Section 5.16(a). |
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(p) |
Free-Standing
SAR shall mean an SAR which is not
granted in tandem with, or by reference to, an Option, which entitles the
holder thereof to receive, upon exercise, shares of Common Stock (which
may be Restricted Stock) or, to the extent provided in the applicable
Award Notice, cash or a combination thereof, with an aggregate value equal
to the excess of the Fair Market Value of one share of Common Stock on the
date of exercise over the base price of such SAR, multiplied by the number
of such SARs which are exercised. |
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(q) |
Good
Reason shall have the meaning set
forth in Section 5.9(d). |
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(r) |
Incentive Stock
Option shall mean an option to
purchase shares of Common Stock that meets the requirements of Section 422
of the Code, or any successor provision, which is intended by the
Committee to constitute an Incentive Stock Option. |
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(s) |
Incumbent
Directors shall have the meaning set
forth in Section 5.9(b)(i). |
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(t) |
Non-Employee
Director shall mean any director of
the Company who is not an officer or employee of the Company or any
Subsidiary. |
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(u) |
Nonqualified Stock
Option shall mean an option to
purchase shares of Common Stock which is not an Incentive Stock
Option. |
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(v) |
Option shall mean an Incentive
Stock Option or a Nonqualified Stock Option granted under this
Plan. |
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(w) |
Performance Award
shall mean a right to receive an amount of cash, Common Stock, or a
combination of both, contingent upon the attainment of specified
Performance Measures within a specified Performance Period. |
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(x) |
Performance Measures
shall mean the criteria and objectives, established by the Committee,
which shall be satisfied or met (i) as a condition to the grant or
exercisability of all or a portion of an Option or SAR or (ii) during the
applicable Restriction Period or Performance Period as a condition to the
vesting of the holders interest, in the case of a Restricted Stock Award,
of the shares of Common Stock subject to such award, or, in the case of a
Restricted Stock Unit Award or Performance Award, to the holders receipt
of the shares of Common Stock subject to such award or of payment with
respect to such award. To the extent necessary for an award to be
qualified performance- based compensation under Section 162(m) of the Code
and the regulations thereunder, such criteria and objectives shall be one
or more of the following corporate-wide or subsidiary, division, operating
unit or individual measures: (i) attainment by a share of Common Stock of
a specified Fair Market Value for a specified period of time, (ii) cash
flow from operations, (iii) cash flow margin or free cash flow, (iv) cash
flow per share, (v) earnings of the Company before or after taxes and/or
interest, (vi) earnings before interest, taxes, depreciation, and/or
amortization (EBITDA), (vii) EBITDA margin, (viii) economic value added,
(ix) expense levels or cost reduction goals, (x) gross profit or margin,
(xi) increase in stockholder value, (xii) interest expense, (xiii)
inventory, (xiv) market share, (xv) net assets, (xvi) net cash provided by
operations, (xvii) net operating profits after taxes, (xviii) operating
expenses, (xix) operating income, (xx) operating margin, (xxi) operating
profit after capital charge (OPACC), (xxii) percent of dealer deliveries
(PODD), (xxiii) percent of industry sales (PINS), (xxiv) percent of
parts sales (POPS), (xxv) percent of parts sales Caterpillar branded
(POPS-C), (xxvi) pretax income, (xxvii) price-to-earnings growth,
(xxviii) price realization, (xxix) primary or fully-diluted earnings per
share or profit per share, (xxx) profit after tax, (xxxi) return on
assets, (xxxii) return on equity, (xxxiii) return on invested capital,
(xxxiv) return on investments, (xxxv) return on sales, (xxxvi) revenues,
(xxxvii) sales, (xxxviii) total cash flow, (xxxix) total stockholder
(shareholder) return and (xl) strategic business criteria consisting of
one or more objectives based on meeting specified goals relating to (A)
acquisitions or divestitures, (B) business expansion, (C) realized
production system benefits, (D) cost
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(E) customer acquisition, (F)
customer satisfaction, (G) diversity and inclusion, (H) efficiency, (I)
inventory turns, (J) realized lean benefits, (K) management of employment
practices and employee benefits, (L) market penetration, (M) purchasing
material costs, (N) quality and quality audit scores, (O) reductions in
errors and omissions, (P) reductions in lost business, (Q) supervision of
litigation and information technology, (R) sustainability or (S) realized
6 Sigma benefits. Each such goal may be expressed on an absolute or
relative basis and may include comparisons based on current internal
targets, the past performance of the Company (including the performance of
one or more subsidiaries, divisions, or operating units) or the past or
current performance of other companies (or a combination of such past and
current performance). In addition to the ratios specifically enumerated
above, performance goals may include comparisons relating to capital
(including, but not limited to, the cost of capital), shareholders
equity, shares outstanding, assets or net assets, sales, or any
combination thereof. The applicable performance measures may be applied on
a pre- or post-tax basis and may be established or adjusted in accordance
with Section 162(m) of the Code to include or exclude objectively
determinable components of any performance measure, including, without
limitation, special charges such as restructuring or impairment charges,
debt refinancing costs, extraordinary or noncash items, unusual,
nonrecurring, infrequently occurring or one-time events affecting the
Company or its financial statements or changes in law or accounting
principles (Adjustment Events). In the sole discretion of the Committee,
unless such action would cause a grant to a covered employee to fail to
qualify as qualified performance-based compensation under Section 162(m)
of the Code, the Committee may amend or adjust the Performance Measures or
other terms and conditions of an outstanding award in recognition of any
Adjustment Events. If the Committee determines that it is advisable to
grant awards that are not intended to qualify as performance-based
compensation under Section 162(m) of the Code, the Committee may grant
such award without satisfying the requirements of Section 162(m) of the
Code and that use Performance Measures other than those specified
herein. |
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(y) |
Performance Period shall mean
any period designated by the Committee during which (i) the Performance
Measures applicable to an award shall be measured and (ii) the conditions
to vesting applicable to an award shall remain in effect. |
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(z) |
Permitted Transferee shall have
the meaning set forth in Section 5.4(a). |
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(aa) |
Plan shall have the meaning set
forth in Section 1.1. |
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(bb) |
Prior Plan shall mean the
Caterpillar Inc. 2006 Long-Term Incentive Plan and each other plan
previously maintained by the Company under which equity awards remain
outstanding as of the effective date of this Plan. |
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(cc) |
Restricted Stock shall mean
shares of Common Stock which are subject to a Restriction Period and which
may, in addition thereto, be subject to the attainment of specified
Performance Measures within a specified Performance Period. |
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(dd) |
Restricted Stock Award shall
mean an award of Restricted Stock under this Plan. |
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(ee) |
Restricted Stock Unit shall
mean a right to receive one share of Common Stock or, in lieu thereof and
to the extent provided in the applicable Award Notice, the Fair Market
Value of such share of Common Stock in cash, which shall be contingent
upon the expiration of a specified Restriction Period and which may, in
addition thereto, be contingent upon the attainment of specified
Performance Measures within a specified Performance Period. |
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(ff) |
Restricted Stock Unit Award
shall mean an award of Restricted Stock Units under this
Plan. |
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(gg) |
Restriction Period shall mean
any period designated by the Committee during which (i) the Common Stock
subject to a Restricted Stock Award may not be sold, transferred,
assigned, pledged, hypothecated or otherwise encumbered or disposed of,
except as provided in this Plan or the Award Notice relating to such
award, or (ii) the conditions to vesting applicable to a Restricted Stock
Unit Award shall remain in effect. |
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(hh) |
SAR shall mean a stock
appreciation right which may be a Free-Standing SAR or a Tandem
SAR. |
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(ii) |
Stock Award shall mean a
Restricted Stock Award, Restricted Stock Unit Award or Unrestricted Stock
Award. |
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(jj) |
Subsidiary shall mean any
corporation, limited liability company, partnership, joint venture or
similar entity in which the Company owns, directly or indirectly, an
equity interest possessing more than 50% of the combined voting power of
the total outstanding equity interests of such entity or, in the case of a
partnership, |
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joint venture or similar entity,
the possession, directly or indirectly, of the power to direct or cause
the direction of management or policies of the controlled
entity. |
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(kk) |
Substitute Award shall
mean an award granted under this Plan upon the assumption of, or in
substitution for, outstanding equity awards previously granted by a
company or other entity in connection with a corporate transaction,
including a merger, combination, consolidation or acquisition of property
or stock; provided, however, that in no event shall the term
Substitute Award be construed to refer to an award made in connection
with the cancellation and repricing of an Option or SAR. |
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(ll) |
Tandem SAR shall mean an
SAR which is granted in tandem with, or by reference to, an Option
(including a Nonqualified Stock Option granted prior to the date of grant
of the SAR), which entitles the holder thereof to receive, upon exercise
of such SAR and surrender for cancellation of all or a portion of such
Option, shares of Common Stock (which may be Restricted Stock) or, to the
extent provided in the applicable Award Notice, cash or a combination
thereof, with an aggregate value equal to the excess of the Fair Market
Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock
subject to such Option, or portion thereof, which is
surrendered. |
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(mm) |
Tax Date shall have the
meaning set forth in Section 5.5. |
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(nn) |
Ten Percent Holder shall
have the meaning set forth in Section 2.1(a). |
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(oo) |
Unrestricted Stock shall
mean shares of Common Stock which are not subject to a Restriction Period
or Performance Measures. |
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(pp) |
Unrestricted Stock Award
shall mean an award of Unrestricted Stock under this
Plan. |
1.3
Administration. This Plan shall be
administered by the Committee. Any one or a combination of the following awards
may be made under this Plan to eligible persons: (i) Options to purchase shares
of Common Stock in the form of Incentive Stock Options or Nonqualified Stock
Options; (ii) SARs in the form of Tandem SARs or Free-Standing SARs; (iii) Stock
Awards in the form of Restricted Stock, Restricted Stock Units or Unrestricted
Stock; and (iv) Performance Awards. The Committee shall, subject to the terms of
this Plan, select eligible persons for participation in this Plan and determine
the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock subject to
an award, the number of SARs, the number of Restricted Stock Units, the dollar
value subject to a Performance Award, the grant price or base price associated
with the award, the time and conditions of exercise or settlement of the award
and all other terms and conditions of the award, including, without limitation,
the form of the Award Notice evidencing the award. The Committee may, in its
sole discretion and for any reason at any time, unless such action would cause a
grant to a covered employee to fail to qualify under Section 162(m) of the Code
and regulations thereunder as qualified performance-based compensation, take
action such that (i) any or all outstanding Options and SARs shall become
exercisable in part or in full, (ii) all or a portion of the Restriction Period
applicable to any outstanding Restricted Stock or Restricted Stock Units shall
lapse, (iii) all or a portion of the Performance Period applicable to any
outstanding Restricted Stock, Restricted Stock Units or Performance Awards shall
lapse and (iv) the Performance Measures (if any) applicable to any outstanding
award shall be deemed to be satisfied at the target or any other level. The
Committee shall, subject to the terms of this Plan, interpret this Plan and the
application thereof, establish rules and regulations it deems necessary or
desirable for the administration of this Plan and may impose, incidental to the
grant of an award, conditions with respect to the award, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all
of its power and authority hereunder to the Board or, subject to applicable law,
to the Chief Executive Officer or such other executive officer of the Company as
the Committee deems appropriate; provided, however, that (i) the
Committee may not delegate its power and authority to the Board or the Chief
Executive Officer or other executive officer of the Company with regard to the
grant of an award to any person who is a covered employee within the meaning
of Section 162(m) of the Code or who, in the Committees judgment, is likely to
be a covered employee at any time during the period an award hereunder to such
employee would be outstanding and (ii) the Committee may not delegate its power
and authority to the Chief Executive Officer or other executive officer of the
Company with regard to the selection for participation in this Plan of an
officer, director or other person subject to Section 16 of the Exchange Act or
decisions concerning the timing, pricing or amount of an award to such an
officer, director or other person.
No member of the Board or Committee,
and neither the Chief Executive Officer nor any other executive officer to whom
the Committee delegates any of its power and authority hereunder, shall be
liable for any act, omission, interpretation,
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construction or determination made in
connection with this Plan in good faith, and the members of the Board and the
Committee and the Chief Executive Officer or other executive officer shall be
entitled to indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including attorneys fees) arising therefrom to
the full extent permitted by law (except as otherwise may be provided in the
Companys Certificate of Incorporation and/or By-laws) and under any directors
and officers liability insurance that may be in effect from time to time.
1.4
Eligibility. Participants in this Plan
shall consist of such officers, other employees, Non-Employee Directors,
consultants, independent contractors, and persons expected to become officers,
other employees, Non-Employee Directors, consultants, and independent
contractors of the Company and its Subsidiaries as the Committee in its sole
discretion may select from time to time; provided, that Incentive Stock
Options may be granted only to employees of the Company or a Subsidiary
Corporation, within the meaning of Section 424(f) of the Code. The Committees
selection of a person to participate in this Plan at any time shall not require
the Committee to select such person to participate in this Plan at any other
time. Except as provided otherwise in an Award Notice, for purposes of this
Plan, references to employment by the Company shall also mean employment by a
Subsidiary, and references to employment shall include service as a Non-Employee
Director, consultant or independent contractor. The extent to which a
participant shall be considered employed during any periods during which such
participant is on a leave of absence shall be determined in accordance with
Company policy.
1.5 Shares
Available. Subject to adjustment as
provided in Section 5.8 and to all other limits set forth in this
Section 1.5, 38.8 million shares of Common Stock were initially available
for all awards under this Plan and no more than 38.8 million shares of Common
Stock in the aggregate could be issued under the Plan in connection with
Incentive Stock Options. Upon and subject to stockholder approval of the
amendment and restatement of the Plan pursuant to Section 5.1, an
additional 36 million shares of Common Stock shall become available for all
awards under this Plan and an additional 36 million shares of Common Stock may
be issued under the Plan in connection with Incentive Stock Options. To the
extent the Company grants an Option or a Free-Standing SAR under the Plan, the
number of shares of Common Stock that remain available for future grants under
the Plan shall be reduced by an amount equal to the number of shares subject to
such Option or Free-Standing SAR. To the extent the Company grants a Stock Award
or settles a Performance Award in shares of Common Stock, the number of shares
of Common Stock that remain available for future grants under the Plan shall be reduced by an amount equal to 2.75 times the
number of shares subject to such Stock Award or Performance Award.
To the extent that shares of Common
Stock subject to an outstanding Option, SAR, Stock Award or Performance Award
granted under the Plan, other than Substitute Awards, are not issued or
delivered by reason of (i) the expiration, termination, cancellation or
forfeiture of such award (excluding shares subject to an Option cancelled upon
settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR
cancelled upon exercise of a related Option) or (ii) the settlement of such
award in cash, then such shares of Common Stock shall again be available under
this Plan; provided, however, that shares of Common Stock subject
to an award under this Plan shall not again be available for issuance under this
Plan if such shares are (x) shares that were subject to an Option or an SAR and
were not issued or delivered upon the net settlement or net exercise of such
Option or SAR, (y) shares delivered to or withheld by the Company to pay the
grant price or the withholding taxes related to an outstanding Option or SAR or
(z) shares repurchased by the Company on the open market with the proceeds of an
Option exercise. Shares delivered to or withheld by the Company to pay the
withholding taxes for Stock Awards or Performance Awards granted under this
Plan, but not Options or SARs, shall again be available for issuance under this
Plan. The number of shares that again become available pursuant to this
paragraph shall be equal to (i) one share for each share subject to an Option or
Free-Standing SAR described herein and (ii) 2.75 shares for each share subject
to a Stock Award or a Performance Award described herein. At the time this Plan
becomes effective, none of the shares of Common Stock available for future grant
under the Prior Plan shall be available for grant under this Plan and none of
the shares of Common Stock subject to outstanding awards granted under the Prior
Plan shall again become available for issuance under this Plan, whether upon the
expiration, termination, cancellation or forfeiture of such awards or
otherwise.
The number of shares of Common Stock
available for awards under this Plan shall not be reduced by (i) the number of
shares of Common Stock subject to Substitute Awards or (ii) available shares
under a stockholder approved plan of a company or other entity which was a party
to a corporate transaction with the Company (as appropriately adjusted to
reflect such corporate transaction) which become subject to awards granted under
this Plan (subject to applicable stock exchange requirements).
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Shares of Common Stock to be delivered
under this Plan shall be made available from authorized and unissued shares of
Common Stock, or authorized and issued shares of Common Stock reacquired and
held as treasury shares or otherwise or a combination thereof.
1.6 Per Person
Limits. To the extent necessary for an
award to be qualified performance-based compensation under Section 162(m) of the
Code and the regulations thereunder (i) the maximum number of shares of Common
Stock with respect to which Options or SARs, or a combination thereof, may be
granted during any fiscal year of the Company to any person shall be 800,000
shares, subject to adjustment as provided in Section 5.8, (ii) with
respect to Stock Awards subject to Performance Measures or Performance Awards
denominated in Common Stock, which in either case are intended to qualify as performance-based awards under Section 162(m) of
the Code, the maximum number of shares of Common Stock subject to such awards
that may be earned by any person for each 12-month period during a Performance
Period shall be the number of shares having a Fair Market Value of $20 million,
determined as of the date of grant, subject to adjustment as provided in
Section 5.8, and (iii) with respect to Performance Awards denominated in
cash that are intended to qualify as performance-based awards under Section
162(m) of the Code, the maximum amount that may be earned by any person for each
12-month period during a Performance Period shall be $20 million. The aggregate
grant date fair value of shares of Common Stock that may be granted during any
fiscal year of the Company to any Non-Employee Director shall not exceed
$750,000.
II.
STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS |
2.1 Stock
Options. The Committee may, in its
discretion, grant Options to purchase shares of Common Stock to such eligible
persons as may be selected by the Committee. Each Option, or portion thereof,
that is not an Incentive Stock Option shall be a Nonqualified Stock Option. To
the extent that the aggregate Fair Market Value (determined as of the date of
grant) of shares of Common Stock with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year (under this Plan or any other plan of the Company, or
any parent or Subsidiary) exceeds the amount (currently $100,000) established by
the Code, such Options shall constitute Nonqualified Stock Options.
Options shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) |
Number of Shares and Grant Price. The number of
shares of Common Stock subject to an Option and the grant price per share
of Common Stock purchasable upon exercise of the Option shall be
determined by the Committee; provided, however, that the
grant price per share of Common Stock purchasable upon exercise of an
Option shall not be less than 100% of the Fair Market Value of a share of
Common Stock on the date of grant of such Option; provided
further, that if an Incentive Stock Option shall be granted to any
person who, at the time such Option is granted, owns capital stock
possessing more than 10 percent of the total combined voting power of all
classes of capital stock of the Company (or of any parent or Subsidiary)
(a Ten Percent Holder), the grant price per share of Common Stock
shall not be less than the price (currently 110% of Fair Market Value)
required by the Code in order to constitute an Incentive Stock Option.
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Notwithstanding the foregoing, in the case of an Option
that is a Substitute Award, the grant price per share of the shares
subject to such Option may be less than 100% of the Fair Market Value per
share on the date of grant, provided, that the excess of: (a) the
aggregate Fair Market Value (as of the date such Substitute Award is
granted) of the shares subject to the Substitute Award, over (b) the
aggregate purchase price thereof does not exceed the excess of: (x) the
aggregate fair market value (as of the time immediately preceding the
transaction giving rise to the Substitute Award, such fair market value to
be determined by the Committee) of the shares of the predecessor company
or other entity that were subject to the grant assumed or substituted for
by the Company, over (y) the aggregate purchase price of such
shares. |
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Option Period and Exercisability. The period
during which an Option may be exercised shall be determined by the
Committee; provided, however, that no Option shall be
exercised later than ten (10) years after its date of grant;
provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such Option shall not be exercised later
than five years after its date of grant; provided, further,
that with respect to a Nonqualified Stock Option, if the expiration date
of such Option occurs during any period when the participant is prohibited
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pursuant to the Companys insider trading policy or
other policy of the Company or during a period when the exercise of such
Option would violate applicable securities laws (each, a Blackout
Period), then the period during which such Option shall be
exercisable shall continue until the date that is 30 days after the
expiration of such Blackout Period. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a
condition to the grant of an Option or to the exercisability of all or a
portion of an Option. The Committee shall determine whether an Option
shall become exercisable in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable Option, or portion thereof,
may be exercised only with respect to whole shares of Common Stock. Prior
to the exercise of an Option, the holder of such Option shall have no
rights as a stockholder of the Company with respect to the shares of
Common Stock subject to such Option, including the right to receive
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(c) |
Method of Exercise. An Option may be exercised
(i) by giving written or electronic notice to the Company or its
designated agent, in accordance with procedures prescribed by the Company,
specifying the number of whole shares of Common Stock to be purchased and
paying the aggregate purchase price in full (or arrangement made for such
payment to the Companys satisfaction) either (A) in cash, (B) by delivery
(either actual delivery or by attestation procedures established by the
Company) of shares of Common Stock having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
by reason of such exercise, (C) authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered having an
aggregate Fair Market Value, determined as of the date of exercise, equal
to the amount necessary to satisfy such obligation, (D) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted
an irrevocable notice of exercise or (E) a combination of (A), (B) and
(C), in each case to the extent set forth in the Award Notice relating to
the Option, (ii) if applicable, by surrendering to the Company any Tandem
SARs which are cancelled by reason of the exercise of the Option and (iii)
by executing such documents as the Company may reasonably request. No
shares of Common Stock shall be issued and no certificate representing
shares of Common Stock shall be delivered until the full purchase price
therefor and any withholding taxes thereon, as described in Section 5.5,
have been paid (or arrangement made for such payment to the Companys
satisfaction). |
2.2 Stock Appreciation
Rights. The Committee may, in its
discretion, grant SARs to such eligible persons as may be selected by the
Committee. The Award Notice relating to an SAR shall specify whether the SAR is
a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) |
Number of SARs and Base Price. The number of SARs
subject to an award shall be determined by the Committee. Any Tandem SAR
related to an Incentive Stock Option shall be granted at the same time
that such Incentive Stock Option is granted. The base price of a Tandem
SAR shall be the grant price per share of Common Stock of the related
Option. The base price of a Free-Standing SAR shall be determined by the
Committee; provided, however, that such base price shall not
be less than 100% of the Fair Market Value of a share of Common Stock on
the date of grant of such SAR (or, if earlier, the date of grant of the
Option for which the SAR is exchanged or substituted). |
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Notwithstanding the foregoing, in the case of an SAR
that is a Substitute Award, the base price per share of the shares subject
to such SAR may be less than 100% of the Fair Market Value per share on
the date of grant, provided, that the excess of: (a) the aggregate
Fair Market Value (as of the date such Substitute Award is granted) of the
shares subject to the Substitute Award, over (b) the aggregate base price
thereof does not exceed the excess of: (x) the aggregate fair market value
(as of the time immediately preceding the transaction giving rise to the
Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor company or other entity that
were subject to the grant assumed or substituted for by the Company, over
(y) the aggregate base price of such shares. |
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Exercise Period and Exercisability. The period
for the exercise of an SAR shall be determined by the Committee;
provided, however, that no SAR shall be exercised later than
ten (10) years after its date of grant; provided further,
that no Tandem SAR shall be exercised later than the expiration,
cancellation, forfeiture or other termination of the related Option;
provided, further, if the expiration date of an SAR occurs
during any Blackout |
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Period, then the period during which such SAR shall be
exercisable shall continue until the date that is 30 days after the
expiration of such Blackout Period. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a
condition to the grant of an SAR or to the exercisability of all or a
portion of an SAR. The Committee shall determine whether an SAR may be
exercised in cumulative or non-cumulative installments and in part or in
full at any time. An exercisable SAR, or portion thereof, may be exercised
only with respect to whole shares of Common Stock. If an SAR is exercised
for shares of Restricted Stock, a certificate or certificates representing
such Restricted Stock shall be issued in accordance with Section
3.3(c), or such shares shall be transferred to the holder in book
entry form with restrictions on the shares duly noted, and the holder of
such Restricted Stock shall have such rights of a stockholder of the
Company as determined pursuant to Section 3.3(d). Prior to the
exercise of a stock-settled SAR, the holder of such SAR shall have no
rights as a stockholder of the Company with respect to the shares of
Common Stock subject to such SAR, including the right to receive dividends
or dividend equivalents. |
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(c) |
Method of Exercise. A Tandem SAR may be exercised
(i) by giving written or electronic notice to the Company or its
designated agent, in accordance with procedures prescribed by the Company,
specifying the number of whole SARs which are being exercised, (ii) by
surrendering to the Company any Options which are cancelled by reason of
the exercise of the Tandem SAR and (iii) by executing such documents as
the Company may reasonably request. A Free-Standing SAR may be exercised
(A) by giving written or electronic notice to the Company, in accordance
with procedures prescribed by the Company, specifying the whole number of
SARs which are being exercised and (B) by executing such documents as the
Company may reasonably request. No shares of Common Stock shall be issued
and no certificate representing shares of Common Stock shall be delivered
until any withholding taxes thereon, as described in Section 5.5,
have been paid (or arrangement made for such payment to the Companys
satisfaction). |
2.3 Termination of Employment or
Service. All of the terms relating to the
exercise, cancellation or other disposition of an Option or SAR (i) upon a
termination of employment with or service to the Company of the holder of such
Option or SAR, as the case may be, whether by reason of disability, retirement,
death or any other reason, or (ii) during a paid or unpaid leave of absence,
shall be determined by the Committee and set forth in the applicable Award
Notice.
2.4 No
Repricing. The Committee shall not,
without the approval of the stockholders of the Company, (i) reduce the grant
price or base price of any previously granted Option or SAR, (ii) cancel any
previously granted Option or SAR in exchange for another Option or SAR with a
lower grant price or base price or (iii) cancel any previously granted Option or
SAR in exchange for cash or another award if the grant price of such Option or
the base price of such SAR exceeds the Fair Market Value of a share of Common
Stock on the date of such cancellation, in each case, other than in connection
with a Change in Control or the adjustment provisions set forth in Section
5.8.
3.1 Stock
Awards. The Committee may, in its
discretion, grant Stock Awards to such eligible persons as may be selected by
the Committee. The Award Notice relating to a Stock Award shall specify whether
the Stock Award is a Restricted Stock Award, Restricted Stock Unit Award or
Unrestricted Stock Award.
3.2 Terms of Unrestricted Stock
Awards.
The number of shares of Common Stock subject
to an Unrestricted Stock Award shall be determined by the Committee.
Unrestricted Stock Awards shall not be subject to any Restriction Periods or
Performance Measures; provided, however, Unrestricted Stock Awards
shall be limited to (i) awards to Non-Employee Directors, (ii) awards to newly
hired employees, (iii) awards made in lieu of a cash bonus or (iv) awards
granted under this Plan with respect to the
number of shares Common Stock which, in the aggregate, does not exceed five
percent (5%) of the total number of shares available for awards under this Plan.
Upon the grant of an Unrestricted Stock Award, subject to the Companys right to
require payment of any taxes in accordance with Section 5.5, a
certificate or certificates evidencing ownership of the requisite number of
shares of Common Stock shall be delivered to the holder of such award or such
shares shall be transferred to the holder in book entry form.
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3.3 Terms of Restricted Stock
Awards. Restricted Stock Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) |
Number of Shares and Other Terms. The number of
shares of Common Stock subject to a Restricted Stock Award and the
Restriction Period, Performance Period (if any) and Performance Measures
(if any) applicable to a Restricted Stock Award shall be determined by the
Committee. |
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(b) |
Vesting and Forfeiture. The Award Notice relating
to a Restricted Stock Award shall provide, in the manner determined by the
Committee, in its discretion, and subject to the provisions of this Plan,
for the vesting of the shares of Common Stock subject to such award (i) if
the holder of such award remains continuously in the employment of the
Company during the specified Restriction Period and (ii) if specified
Performance Measures (if any) are satisfied or met during a specified
Performance Period, and for the forfeiture of the shares of Common Stock
subject to such award (x) if the holder of such award does not remain
continuously in the employment of the Company during the specified
Restriction Period or (y) if specified Performance Measures (if any) are
not satisfied or met during a specified Performance Period. |
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(c) |
Stock Issuance. During the Restriction Period,
the shares of Restricted Stock shall be held by a custodian in book entry
form with restrictions on such shares duly noted or, alternatively, a
certificate or certificates representing a Restricted Stock Award shall be
registered in the holders name and may bear a legend, in addition to any
legend which may be required pursuant to Section 5.7, indicating
that the ownership of the shares of Common Stock represented by such
certificate is subject to the restrictions, terms and conditions of this
Plan and the Award Notice relating to the Restricted Stock Award. All such
certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of attorney),
each endorsed in blank with a guarantee of signature if deemed necessary
or appropriate, which would permit transfer to the Company of all or a
portion of the shares of Common Stock subject to the Restricted Stock
Award in the event such award is forfeited in whole or in part. Upon
termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), subject to the Companys
right to require payment of any taxes in accordance with Section
5.5, the restrictions shall be removed from the requisite number of
any shares of Common Stock that are held in book entry form, and all
certificates evidencing ownership of the requisite number of shares of
Common Stock shall be delivered to the holder of such
award. |
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(d) |
Rights with Respect to Restricted Stock Awards.
Unless otherwise set forth in the Award Notice relating to a Restricted
Stock Award, and subject to the terms and conditions of a Restricted Stock
Award, the holder of such award shall have all rights as a stockholder of
the Company, including, but not limited to, voting rights, the right to
receive dividends and the right to participate in any capital adjustment
applicable to all holders of Common Stock; provided,
however, that (i) a distribution with respect to shares of Common
Stock, other than a regular cash dividend, and (ii) a regular cash
dividend with respect to shares of Common Stock that are subject to
performance-based vesting conditions, in each case, shall be deposited
with the Company and shall be subject to the same restrictions as the
shares of Common Stock with respect to which such distribution was
made. |
3.4 Terms of Restricted Stock
Unit Awards. Restricted Stock Unit Awards
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable.
(a) |
Number of Shares and Other
Terms. The number of shares of Common Stock subject to a Restricted
Stock Unit Award and the Restriction Period, Performance Period (if any)
and Performance Measures (if any) applicable to a Restricted Stock Unit
Award shall be determined by the Committee. |
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(b) |
Vesting and Forfeiture.
The Award Notice relating to a Restricted Stock Unit Award shall provide,
in the manner determined by the Committee, in its discretion, and subject
to the provisions of this Plan, for the vesting of such Restricted Stock
Unit Award (i) if the holder of such award remains continuously in the
employment of the Company during the specified Restriction Period and (ii)
if specified Performance Measures (if any) are satisfied or met during a
specified Performance Period, and for the forfeiture of the shares of
Common Stock subject to such award (x) if the holder of such award does
not remain continuously in the employment of the Company during the
specified Restriction Period or (y) if specified Performance Measures (if
any) are not satisfied or met during a specified Performance
Period. |
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(c) |
Settlement of Vested
Restricted Stock Unit Awards. The Award Notice relating to a
Restricted Stock Unit Award shall specify (i) whether such award may be
settled in shares of Common Stock or cash or a combination thereof and
(ii) whether the holder thereof shall be entitled to receive, on a current
or deferred basis, dividend equivalents, and, if determined by the
Committee, interest on, or the deemed reinvestment of, any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. Any dividend equivalents with respect to Restricted
Stock Units that are subject to performance-based vesting conditions
shall be subject to the same restrictions as such Restricted Stock Units.
Prior to the settlement of a Restricted Stock Unit Award, the holder of
such award shall have no rights as a stockholder of the Company with
respect to the shares of Common Stock subject to such award. |
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3.5 Termination of Employment
or Service. All of the terms relating to
the satisfaction of Performance Measures and the termination of the Restriction
Period or Performance Period relating to a Stock Award, or any forfeiture and
cancellation of such award (i) upon a termination of employment with or service
to the Company of the holder of such award, whether by reason of disability,
retirement, death or any other reason, or (ii) during a paid or unpaid leave of
absence, shall be determined by the Committee and set forth in the applicable
Award Notice.
4.1 Performance
Awards. The Committee may, in its
discretion, grant Performance Awards to such eligible persons as may be selected
by the Committee.
4.2 Terms of Performance
Awards. Performance Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) |
Value of Performance Awards and Performance
Measures. The method of determining the value of the Performance Award
and the Performance Measures and Performance Period applicable to a
Performance Award shall be determined by the Committee. |
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(b) |
Vesting and Forfeiture. The Award Notice relating
to a Performance Award shall provide, in the manner determined by the
Committee, in its discretion, and subject to the provisions of this Plan,
for the vesting of such Performance Award if the specified Performance
Measures are satisfied or met during the specified Performance Period and
for the forfeiture of such award if the specified Performance Measures are
not satisfied or met during the specified Performance Period. |
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(c) |
Settlement of Vested Performance Awards. The
Award Notice relating to a Performance Award shall specify whether such
award may be settled in shares of Common Stock (including shares of
Restricted Stock) or cash or a combination
thereof. If a Performance Award is settled in shares of Restricted Stock,
such shares of Restricted Stock shall be issued to the holder in book
entry form or a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.3(c) and the
holder of such Restricted Stock shall have such rights as a stockholder of
the Company as determined pursuant to Section 3.3(d). Any dividends
or dividend equivalents with respect to a Performance Award shall be
subject to the same restrictions as such Performance Award. Prior to the
settlement of a Performance Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a
stockholder of the Company. |
4.3 Termination of Employment or
Service. All of the terms relating to the
satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Award, or any forfeiture and cancellation of
such award (i) upon a termination of employment with or service to the Company
of the holder of such award, whether by reason of disability, retirement, death
or any other reason, or (ii) during a paid or unpaid leave of absence, shall be
determined by the Committee and set forth in the applicable Award
Notice.
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5.1 Effective Date and Term of
Plan. This Plan was approved by the Board
on April 9, 2014, and became effective as of June 11, 2014, the date on which
the Companys stockholders approved the Plan. This Plan superseded and replaced
the Prior Plan; provided that the Prior Plan shall remain in effect with
respect to all outstanding awards granted under the Prior Plan until such awards
have been exercised, forfeited, canceled, expired or otherwise terminated in
accordance with the terms of such grants. The amendment and restatement of the
Plan, as set forth herein, was approved by the Board on April 12, 2017, and
shall become effective as of the date the Companys stockholders approve the
amendment and restatement of the Plan. The amended and restated 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 in
person or by proxy 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. In the event this amendment and restatement of the Plan is not
approved by Companys stockholders, this amendment and restatement shall not
take effect and the Plan as in effect on April 11, 2017 will continue. The Plan
shall terminate on the tenth anniversary of the Plans effective date, June 11,
2024, unless terminated earlier by the Committee; provided that no
Incentive Stock Options shall be granted later than ten (10) years after the
date the Plan is adopted by the Board or the date the Plan is approved by the
stockholders of the Company, whichever is earlier. Termination of this Plan
shall not affect the terms or conditions of any award granted prior to
termination. Awards hereunder may be made at any time prior to the termination
of this Plan.
5.2
Amendments. The Committee may amend
this Plan as it shall deem advisable; provided, however, that no
amendment to the Plan shall be effective without the approval of the Companys
stockholders if (i) stockholder approval is required by applicable law, rule or
regulation, including Section 162(m) of the Code and any rule of the New York
Stock Exchange, or any other stock exchange on which the Common Stock is then
traded, or (ii) such amendment seeks to modify Section 2.4 hereof;
provided further, that no amendment may materially impair the
rights of a holder of an outstanding award without the consent of such holder.
5.3 Award
Notice. Each award under this Plan shall
be evidenced by an Award Notice setting forth the terms and conditions
applicable to such award. No award shall be valid until an Award Notice is
provided by the Company and, to the extent the Committee may, in its sole
discretion, require, either executed by the recipient or accepted by the
recipient by electronic means approved by the
Committee within the time period specified by the Committee. Upon execution by
the Company, or if required, upon such execution and delivery of the Award
Notice to the Company or electronic acceptance of the Award Notice, such award
shall be effective as of the effective date set forth in the Award Notice.
5.4
Non-Transferability.
(a) |
Except as provided in Section
5.4(b), no award shall be transferable other
than by will, the laws of descent and distribution, pursuant to
beneficiary designation procedures approved by the Company, pursuant to a
domestic relations order or, to the extent expressly permitted in the
Award Notice relating to such award, to the holders family members, a
trust or entity established by the holder for estate planning purposes or
a charitable organization designated by the holder (a Permitted Transferee), in each case, without
consideration. Except to the extent permitted by the foregoing sentence or
the Award Notice relating to an award, each award may be exercised or
settled during the holders lifetime only by the holder or the holders
legal representative, agent or similar person. Except as permitted by the
second preceding sentence, no award may be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or
similar process. Upon any attempt to so sell, transfer, assign, pledge,
hypothecate, encumber or otherwise dispose of any award, such award and
all rights thereunder shall immediately become null and
void. |
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Nonqualified Stock Options and
SARs (except for any Tandem SAR granted in tandem with an Incentive Stock
Option), whether vested or unvested, held by (A) participants who are
considered officers of the Company for purposes of Section 16 of the
Exchange Act; (B) participants who are Directors; or (C) any participants
who previously held the positions in clauses (A) and (B) may be
transferred by gift or by domestic relations order to one or more
Permitted Transferees. Nonqualified Stock Options and SARs (except for any
Tandem SAR granted in tandem with an Incentive Stock Option), whether
vested or unvested, held by all other participants and by Permitted
Transferees may be transferred by gift or by domestic relations order only
to Permitted Transferees and, in the case of transfers other than in
connection with a domestic relations order, upon the prior written
approval of the Companys Director of Compensation &
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5.5 Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Award Notice may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the Tax Date), or withhold an amount of cash which would
otherwise be payable to a holder, in the amount necessary to satisfy any such
obligation or (ii) the holder may satisfy any such obligation by any of the
following means: (A) a cash payment to the Company; (B) delivery (either actual
delivery or by attestation procedures established by the Company) to the Company
of previously owned whole shares of Common Stock having an aggregate Fair Market
Value, determined as of the Tax Date, equal to the amount necessary to satisfy
any such obligation; (C) authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered having an aggregate Fair Market
Value, determined as of the Tax Date, or withhold an amount of cash which would
otherwise be payable to a holder, equal to the amount necessary to satisfy any
such obligation; (D) in the case of the exercise of an Option, a cash payment by
a broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in
each case to the extent set forth in the Award Notice relating to the award.
Shares of Common Stock to be delivered or withheld may not have an aggregate
Fair Market Value in excess of the amount determined by applying the minimum
statutory withholding rate; provided, however, that if a fraction
of a share of Common Stock would be required to satisfy the minimum statutory
withholding taxes, then the number of shares of Common Stock to be delivered or
withheld may be rounded up to the next nearest whole share of Common
Stock.
5.6 Section 83(b)
Election. No election under Section
83(b) of the Code (to
include in gross income in the year of transfer the amounts specified in Code
Section 83(b)) or under a similar provision of the laws of a jurisdiction
outside the United States may be made, unless expressly permitted by the terms
of the Award Notice. In any case in which a participant is permitted to make
such an election in connection with an award, the participant shall notify the
Company of such election within ten days of filing notice of the election with
the Internal Revenue Service or other governmental authority, in addition to any
filing and notification required pursuant to regulations issued under Code
Section 83(b) or other applicable provision.
5.7 Restrictions on
Shares. Each award made hereunder shall
be subject to the requirement that if at any time the Company determines that
the listing, registration or qualification of the shares of Common Stock subject
to such award upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery of
shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5.8
Adjustment. In the event of any equity
restructuring (within the meaning of Financial Accounting Standards Board
Accounting Standards Codification Topic 718, CompensationStock Compensation)
that causes the per share value of shares of Common Stock to change, such as a
stock dividend, stock split, spinoff, rights offering or recapitalization
through an extraordinary cash dividend, the number and class of securities
available under this Plan, the terms of each outstanding Option and SAR
(including the number and class of securities subject to each outstanding Option
or SAR and the grant price or base price per share), the terms of each
outstanding Restricted Stock Award and Restricted Stock Unit Award (including
the number and class of securities subject thereto), the terms of each
outstanding Performance Award (including the number and class of securities
subject thereto), the maximum number of securities with respect to which Options
or SARs may be granted during any fiscal year of the Company to any one grantee,
the maximum number of shares of Common Stock that may be awarded during any
fiscal year of the Company to any one grantee pursuant to a Stock Award that is
subject to Performance Measures or a Performance Award, as set forth in
Section 1.6, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding Options and SARs in accordance
with Section 409A of the Code. In the event of any other change in corporate
capitalization, including a merger, consolidation, reorganization, or partial or
complete liquidation of the Company, such equitable adjustments described in the
foregoing sentence may be made as determined to be appropriate and equitable by
the Committee to prevent dilution or enlargement of rights of participants. In
either case, the decision of the Committee regarding any such adjustment shall
be final, binding and conclusive.
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(a) |
Impact of a Change in
Control. Notwithstanding any other provision of the Plan to the
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(i) |
If and to the extent that
outstanding awards under the Plan are (A) continued by the Company, (B)
assumed by the successor corporation (or affiliate thereto) or (C)
replaced with awards that preserve the existing value of the awards at the
time of the Change in Control and provide for subsequent payout in
accordance with a vesting schedule and Performance Measures, as
applicable, that are the same or more favorable to the participants than
the vesting schedule and Performance Measures applicable to the awards,
then all such awards or such substitutes therefor shall remain outstanding
and be governed by their respective terms and the provisions of the Plan
subject to Section 5.9(a)(iv) below. |
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(ii) |
If and to the extent that
outstanding awards under the Plan are not continued, assumed or replaced
in accordance with Section 5.9(a)(i) above, then upon the Change in
Control: (A) outstanding Options and SARs shall immediately vest and
become exercisable, (B) the Restriction Period applicable to outstanding
Restricted Stock Awards and Restricted Stock Unit Awards shall immediately
lapse; and, with respect to Restricted Stock Unit Awards, shall be payable
immediately in accordance with their terms or, if later, as of the
earliest permissible date under Code Section 409A, and (C) outstanding
Performance Awards granted under the Plan shall immediately vest and shall
become immediately payable in accordance with their terms as if the target
level of the Performance Measures had been achieved or, with respect to
completed performance periods, based on the actual level of
achievement. |
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(iii) |
If and to the extent that
outstanding awards under the Plan are not continued, assumed or replaced
in accordance with Section 5.9(a)(i) above, then the Board may, in
its sole discretion, require outstanding awards to be surrendered to the
Company by the holder, and to be immediately cancelled by the Company, and
to provide for the holder to receive a cash payment in an amount equal to
(1) in the case of an Option or an SAR, the aggregate number of shares of
Common Stock then subject to the portion of such Option or SAR surrendered
multiplied by the excess, if any, of the Fair
Market Value of a share of Common Stock as of the date of the Change in
Control, over the grant price or base price per share of Common Stock
subject to such Option or SAR, (2) in the case of a Stock Award or a
Performance Award denominated in shares of Common Stock, the aggregate
number of shares of Common Stock then subject to the portion of such award
surrendered to the extent the Performance Measures applicable to such
award have been satisfied or are deemed satisfied pursuant to Section
5.9(a)(ii), multiplied by the Fair Market Value of a share of Common
Stock as of the date of the Change in Control, and (3) in the case of a
Performance Award denominated in cash, the value of the Performance Award
then subject to the portion of such award surrendered to the extent the
Performance Measures applicable to such award have been satisfied or are
deemed satisfied pursuant to Section
5.9(a)(ii). |
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(iv) |
If and to the extent that (A)
outstanding awards are continued, assumed or replaced in accordance with
Section 5.9(a)(i) above and (B) a participants employment with, or
performance of services for, the Company (or the company resulting from or
succeeding to the business of the Company pursuant to such Change in
Control) is terminated by the Company for any reason other than Cause or
by such participant for Good Reason, in each case, within the 24-month
period commencing on the date of the Change in Control, then, as of the
date of such participants termination: (A) outstanding Options and SARs
shall immediately vest and become exercisable, (B) the Restriction Period
applicable to outstanding Restricted Stock Awards and Restricted Stock
Unit Awards shall immediately lapse; and, with respect to Restricted Stock
Unit Awards, shall be payable immediately in accordance with their terms
or, if later, as of the earliest permissible date under Code Section 409A,
and (C) outstanding Performance Awards granted under the Plan shall
immediately vest and shall become immediately payable in accordance with
their terms as if the target level of the Performance Measures had been
achieved or, with respect to completed performance periods, based on the
actual level of achievement. |
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(v) |
Outstanding Options or SARs that
are assumed or replaced in accordance with Section 5.9(a)(i) may be
exercised by the participant in accordance with the applicable terms and
conditions of such award as set forth in the applicable Award Notice or
elsewhere; provided, however, that Options or SARs that become exercisable
in accordance with Section 5.9(a)(iv) may be exercised until the
expiration of the original full term of such Option or SAR notwithstanding
the other original terms and conditions of such award.
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(b) |
For purposes of this Plan, unless
otherwise provided in an Award Notice, Change in Control means
the occurrence of any one of the following events: |
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(i) |
During any twenty-four (24) month
period, individuals who, as of the beginning of such period, constitute
the Board (the Incumbent Directors) cease for any reason to
constitute at least a majority of the Board; provided that any
person becoming a director subsequent to the beginning of such period
whose election or nomination for election was approved by a vote of at
least a majority of the Incumbent Directors then on the Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director;
provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of
any other actual or threatened solicitation of proxies by or on behalf of
any person other than the Board shall be deemed to be an Incumbent
Director; |
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(ii) |
Any person (as such term is
defined in the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act) is or becomes a beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of
the Companys then outstanding securities eligible to vote for the
election of the Board (the Company Voting Securities), unless the
Board, as constituted immediately prior to the date on which such person
acquires such beneficial interest, by resolution negates the effect of
this provision in a particular circumstance, deeming that resolution to be in the best interests of Company stockholders;
provided, however, that the event described in this
paragraph (ii) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or any Subsidiary;
(B) by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary; (C) by any underwriter
temporarily holding securities pursuant to an offering of such securities;
or (D) by any person of Company Voting Securities from the Company, if a
majority of the Incumbent Board approves in advance the acquisition of
beneficial ownership of 20% or more of Company Voting Securities by such
person; |
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(iii) |
The consummation of a merger,
consolidation, statutory share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries that requires
the approval of the Companys stockholders, whether for such transaction
or the issuance of securities in the transaction (a Business
Combination), that results 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 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such Business Combination; or |
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(iv) |
The stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or
the consummation of a sale of all or substantially all of the Companys
assets. |
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Notwithstanding the foregoing, to
the extent a payment to be made pursuant to an award upon a Change in
Control constitutes deferred compensation that is subject to Section 409A
of the Code, and such Change in Control does not constitute a change in
control event, within the meaning of Treasury regulations promulgated
under Section 409A of the Code, such payment shall be paid at the time it
is otherwise scheduled to be paid, without regard to the occurrence of the
Change in Control. |
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(c) |
For purposes of this Section 5.9, Cause means, unless otherwise provided in an Award Notice, a willful engaging in gross misconduct materially and demonstrably injurious to the Company. For this purpose, willful means an act or omission in bad
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faith and without a reasonable
belief that such act or omission was in or not opposed to the best
interests of the Company. |
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(d) |
For purposes of this Section
5.9, Good Reason means, unless otherwise provided in an Award
Notice, the occurrence of any of the following circumstances (unless such
circumstances are fully corrected by the Company before a participants
termination of employment or the participant fails to provide written
notice of such circumstances within 30 days after the participant becomes,
or reasonably should have become, aware of such circumstances): (A) the
Companys assignment of any duties materially inconsistent with the
participants position with the Company, or which result in a material
adverse alteration in the nature or status of the responsibilities of the
participants employment; or (B) a material reduction by the Company in
the participants annual base salary, unless such reduction is part of a
compensation reduction program affecting all similarly situated management
employees. |
5.10
Deferrals. The Committee may determine
that the delivery of shares of Common Stock or the payment of cash, or a
combination thereof, upon the settlement of all or a portion of any award (other
than awards of Incentive Stock Options, Nonqualified Stock Options and SARs)
made hereunder shall be deferred, or the Committee may, in its sole discretion,
approve deferral elections made by holders of awards. Deferrals shall be for
such periods and upon such terms as the Committee may determine in its sole
discretion, subject to the requirements of Section 409A of the Code.
5.11 No Right of Participation,
Employment or Service. Unless otherwise
set forth in an employment agreement, no person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by or service with the
Company, any Subsidiary or any affiliate of the Company or affect in any manner
the right of the Company, any Subsidiary or any affiliate of the Company to
terminate the employment or service of any person at any time without liability
hereunder.
5.12 Rights as
Stockholder. No person shall have any
right as a stockholder of the Company with respect to any shares of Common Stock
or other equity security of the Company which is subject to an award hereunder
unless and until such person becomes a stockholder of record with respect to
such shares of Common Stock or equity security.
5.13 Designation of
Beneficiary. To the extent permitted by
the Company, a holder of an award may file with the Company a written
designation of one or more persons as such holders beneficiary or beneficiaries
(both primary and contingent) in the event of the holders death or incapacity.
To the extent an outstanding Option or SAR granted hereunder is exercisable,
such beneficiary or beneficiaries shall be entitled to exercise such Option or
SAR pursuant to procedures prescribed by the Company. Each beneficiary
designation shall become effective only when filed in writing with the Company
during the holders lifetime on a form prescribed by the Company. The spouse of
a married holder domiciled in a community property jurisdiction shall join in
any designation of a beneficiary other than such spouse. The filing with the
Company of a new beneficiary designation shall cancel all previously filed
beneficiary designations. If a holder fails to designate a beneficiary, or if
all designated beneficiaries of a holder predecease the holder, then each
outstanding award held by such holder, to the extent vested or exercisable,
shall be payable to or may be exercised by such holders executor,
administrator, legal representative or similar person.
5.14 Governing
Law. This Plan, each award hereunder and
the related Award Notice, and all determinations made and actions taken pursuant
thereto, 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 in accordance therewith without giving effect to principles of
conflicts of laws.
5.15 Non-U.S.
Employees. Without amending this Plan,
the Committee may grant awards to eligible persons who are foreign nationals
and/or reside outside the U.S. on such terms and conditions different from those
specified in this Plan as may in the judgment of the Committee be necessary or
desirable to foster and promote achievement of the purposes of this Plan and, in
furtherance of such purposes the Committee may make such modifications,
amendments, procedures, subplans and the like as may be necessary or advisable
to comply with provisions of laws in other countries or jurisdictions in which
the Company or its Subsidiaries operates or has employees.
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5.16 Award
Forfeitures.
(a)
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Forfeiture of Options and
Other Awards. Each award granted hereunder shall be subject to the
following additional forfeiture conditions, to which the participant, by
accepting an award hereunder, agrees. If any of the events specified in
Section 5.16(b) occurs (a Forfeiture Event), all of the
following forfeitures will result: |
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(i) |
The unexercised portion of any
Option, whether or not vested, and any other award not then settled
(except for an award that has not been settled solely due to an elective
deferral pursuant to Section 5.10 by the participant and otherwise
is not forfeitable in the event of any termination of service of the
participant) will be immediately forfeited and canceled upon the
occurrence of the Forfeiture Event; and |
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(ii) |
The participant will be obligated
to repay the Company, in cash, within five business days after demand is
made thereof by the Company, the total amount of Award Gain (as defined
herein) realized by the participant upon each exercise of an Option or
settlement of an award (regardless of any elective deferral pursuant to
Section 5.10) that occurred on or after (i) the date that is 12
months before the occurrence of the Forfeiture Event, if the Forfeiture
Event occurred while the participant was employed by the Company or a
Subsidiary, or (ii) the date that is 12 months before the date the
participants employment by, or service as a Director with the Company or
a Subsidiary terminated, if the Forfeiture Event occurred after the
participant ceased to be so employed. |
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(b)
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Events Triggering
Forfeiture. The forfeitures specified in Section 5.16(a) will
be triggered upon the occurrence of any one of the following Forfeiture
Events at any time during the participants employment by or service as a
Director with the Company or a Subsidiary or during the one-year period
following termination of such employment or service: |
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(i) |
Non-Solicitation. The
participant, for his or her own benefit or for the benefit of any other
person, company or entity, directly or indirectly, (i) induces or attempts
to induce or hires or otherwise counsels, induces or attempts to induce or
hire or otherwise counsel, advise, encourage or solicit any person to
leave the employment of or the service for the Company or any Subsidiary,
(ii) hires or in any manner employs or retains the services of any
individual employed by or providing services to
the Company or any Subsidiary as of the date of his or her termination of
employment, or employed by or providing services to the Company or any
Subsidiary subsequent to such termination, (iii) solicits, pursues, calls
upon or takes away, any potential customers of the Company or any
Subsidiary, (iv) solicits, pursues, calls upon or takes away, any
potential customer of the Company or any Subsidiary that has been the
subject of a bid, offer or proposal by the Company or any Subsidiary, or
of substantial preparation with a view to making such a bid, proposal or
offer, within 12 months before such participants termination of
employment with the Company or any Subsidiary, or (v) otherwise interferes
with the business or accounts of the Company or any
Subsidiary. |
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(ii) |
Confidential Information.
The participant discloses to any person or entity or makes use of any
confidential or proprietary information (as defined below in this
Section 5.16(b)(2)) for his or her own purpose or for the benefit
of any person or entity, except as may be necessary in the ordinary course
of employment with or other service to the Company or any Subsidiary. Such
confidential or proprietary information of the Company or any
Subsidiary, includes, but is not limited to, the design, development,
operation, building or manufacturing of products manufactured and supplied
by the Company and its Subsidiaries, the identity of the Companys or any
Subsidiarys customers, the identity of representatives of customers with
whom the Company or any Subsidiary has dealt, the kinds of services
provided by the Company or any Subsidiary to customers and offered to be
performed for potential customers, the manner in which such services are
performed or offered to be performed, the service needs of actual or
prospective customers, pricing information, information concerning the
creation, acquisition or disposition of products and services, customer
maintenance listings, computer software and hardware applications and
other programs, personnel information, information identifying, relating
to or concerning investors in the Company or any Subsidiary, joint venture
partners of the Company or any Subsidiary, business partners of the
Company or any Subsidiary or other entities providing financing to the
Company or any Subsidiary, real estate and leasing opportunities,
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communications and
telecommunications operations and processes, zoning and licensing matters,
relationships with, or matters involving, landlords and/or property
owners, and other trade secrets. |
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(c) |
Plan Does Not Prohibit
Competition or Other Participation Activities. Although the conditions set
forth in this Section 5.16 shall be deemed to be incorporated into an
award, the Plan does not thereby prohibit the participant from engaging in
any activity, including but not limited to competition with the Company
and its Subsidiaries. Rather, the non-occurrence of the Forfeiture Events
set forth in Section 5.16(b) is a condition to the participants right to
realize and retain value from his or her compensatory awards, and the
consequence under the Plan if the participant engages in an activity
giving rise to any such Forfeiture Event are the forfeitures specified
herein. This provision shall not preclude the Company and the participant
from entering into other written agreements concerning the subject matter
of Sections 5.16(a) and 5.16(b) and, to the extent any terms of this
Section 5.16 are inconsistent with any express terms of such agreement,
this Section 5.16 shall not be deemed to modify or amend such
terms. |
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(d) |
Committee Discretion. The
Committee may, in its sole discretion, waive in whole or in part the
Companys right to forfeiture under this Section 5.16, but no such waiver
shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on awards, by inclusion of appropriate provisions in
the Award Notice. Nothing contained herein shall require the Committee to
enforce the forfeiture provisions of this Section 5.16. Failure to enforce
these provisions against any individual shall not be construed as a waiver
of the Companys right to forfeiture under this Section
5.16. |
5.17 Awards Subject to
Clawback. Notwithstanding any other provision
of the Plan to the contrary, any participant who is an officer of the Company
whose negligence, intentional or gross misconduct contributes to the Companys
having to restate all or a portion of its financial statements, will be required
to forfeit awards granted under this Plan and any cash payment or shares of
Common Stock delivered pursuant to an award, as determined by the Board of
Directors, an authorized committee, or its designee, pursuant to the Caterpillar
Inc. Guidelines on Corporate Governance Issues, as adopted on December 7, 2013
and any subsequent amendments, including without limitation any such amendments
which the Company may be required to adopt under the Dodd-Frank Wall Street
Reform and Consumer Protection Act and implementing rules and regulations
thereunder, or as otherwise required by law.
5.18 Right of Setoff. The Company or any Subsidiary may, to the extent permitted
by applicable law, deduct from and set off against any amounts the Company or
Subsidiary may owe to the participant from time to time, including amounts
payable in connection with any award, owed as wages, fringe benefits, or other
compensation owed to the participant, such amounts as may be owed by the
participant to the Company, although the participant shall remain liable for any
part of the participants payment obligation not satisfied through such
deduction and setoff. By accepting any award granted hereunder, the participant
agrees to any deduction or setoff under this Section 5.18.
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Table of Contents
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Please mark
your vote as in this example |
|
The Board of Directors
recommends a vote FOR all of the nominees for Director in Proposal 1,
FOR Proposals 2, 3 and 5, and 1 YEAR on Proposal 4 |
1. |
Election of the following nominees
as directors: |
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Nominees: |
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FOR |
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AGAINST |
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ABSTAIN |
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FOR |
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AGAINST |
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ABSTAIN |
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01. David L. Calhoun |
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☐ |
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☐ |
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☐ |
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08. Debra L. Reed |
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☐ |
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☐ |
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☐ |
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02. Daniel M. Dickinson
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☐ |
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☐ |
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☐ |
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09. Edward B. Rust, Jr.
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☐ |
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☐ |
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☐ |
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03. Juan Gallardo |
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☐ |
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☐ |
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☐ |
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10. Susan C. Schwab |
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☐ |
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☐ |
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☐ |
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04. Jesse J. Greene, Jr.
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☐ |
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☐ |
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☐ |
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11. Jim Umpleby |
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☐ |
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☐ |
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☐ |
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05. Jon M. Huntsman, Jr.
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☐ |
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☐ |
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☐ |
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12. Miles D. White |
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☐ |
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☐ |
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☐ |
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06. Dennis A. Muilenburg
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☐ |
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☐ |
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☐ |
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13. Rayford Wilkins,
Jr. |
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☐ |
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☐ |
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☐ |
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07. William A. Osborn |
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☐ |
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☐ |
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☐ |
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2. |
Ratify the appointment of
independent registered public accounting firm for 2017. |
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FOR ☐ |
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AGAINST ☐ |
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ABSTAIN ☐ |
|
4. |
Advisory vote on
the frequency of executive compensation
votes. |
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1 YEAR ☐ |
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2 YEARS ☐ |
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3 YEARS ☐ |
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ABSTAIN ☐ |
3. |
Advisory vote to approve executive compensation. |
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FOR ☐ |
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AGAINST ☐ |
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ABSTAIN ☐ |
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5. |
Approve the Amended and Restated
Caterpillar Inc. 2014 Long-Term
Incentive Plan. |
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FOR ☐ |
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AGAINST ☐ |
|
ABSTAIN ☐ |
The Board of Directors
recommends a vote AGAINST Proposals 6-11 |
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FOR |
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AGAINST |
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ABSTAIN |
6. |
Shareholder Proposal
Provide a report of lobbying activities. |
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☐ |
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☐ |
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☐ |
7. |
Shareholder Proposal Decrease percent of ownership required to
call special shareholder meeting. |
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☐ |
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☐ |
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☐ |
8. |
Shareholder Proposal Provide a report of lobbying
priorities. |
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☐ |
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☐ |
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☐ |
9. |
Shareholder Proposal Include sustainability as a performance
measure under executive incentive plans. |
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☐ |
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☐ |
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☐ |
10. |
Shareholder Proposal Amend the Companys compensation clawback
policy. |
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☐ |
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☐ |
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☐ |
11. |
Shareholder Proposal Adopt a
permanent policy that the Chairman be independent.
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☐ |
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☐ |
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☐ |
SIGNATURE |
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SIGNATURE |
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NOTE: Please sign exactly as name
appears hereon. If more than one owner, each must sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. |
▲
TO VOTE BY MAIL, PLEASE DETACH HERE ▲ |
YOUR VOTE IS IMPORTANT.
Please take a moment now to vote your
shares of Caterpillar Inc.
common stock for the upcoming Annual Meeting of
Shareholders.
YOU CAN VOTE TODAY USING ONE OF THE
FOLLOWING METHODS:
|
|
Vote by
InternetPlease access https://www.proxyvotenow.com/cat and follow the instructions on the screen. Please note
you must type an s after http. |
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Mobile DeviceScan this QR code to vote with your mobile
device. |
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Vote by
TelephonePlease call toll-free at 1-866-257-2283 on a touch-tone
telephone and follow the recorded
instructions. Your vote will be confirmed and cast as you direct.
(Telephone voting is available for residents of the U.S. and Canada
only.) |
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|
Vote by MailPlease complete, sign, date and return the proxy card in
the envelope provided to: Caterpillar Inc., c/o Innisfree M&A
Incorporated, FDR Station, P.O. Box 5156, New York, NY
10150-5156. |
You may vote by telephone, mobile
device or Internet 24 hours a day, 7 days a week. Your telephone,
mobile device or Internet vote authorizes the named proxies in the same
manner as if you had marked, signed and returned a proxy
card. |
Table of Contents
P R O X Y A N D V O T I N G I N S T R
U C T I O N
ANNUAL MEETING OF SHAREHOLDERSJUNE 14, 2017
This proxy is solicited on behalf of
the Board of Directors
At the Annual Meeting of Shareholders of Caterpillar Inc. (the “Company” or “Caterpillar”) on June 14, 2017, or at any adjournments thereof, the undersigned (i) hereby appoints, Christopher M. REITZ, Chad J. WIENER and Joni J. FUNK, and each of them, proxies with power of substitution to vote the common stock of the undersigned and/or (ii) with respect to Caterpillar or subsidiary employee benefit plans (“Plan(s)”) for which THE NORTHERN TRUST COMPANY or CIBC MELLON TRUST COMPANY, each act as directed Trustee (the “Trustee” or “Trustees”) for the Plans’ Trusts, respectively, hereby directs the Trustee(s) to appoint Christopher M. REITZ, Chad J. WIENER and Joni J. FUNK, and each of them, proxies with power of substitution to vote all shares of the Company’s stock credited to the accounts of the undersigned under any Plan(s) held under the Trusts at the close of business on April 17, 2017, as directed hereon on the following matters, and, in their discretion, on any other matters that may come before the meeting. For Plan participants, if the Trustees have not received directions from the undersigned by 8:00 a.m. Eastern Time, on June 12, 2017, the Trustees will vote the shares for which they do not receive instructions (“Undirected Shares”) in the same proportion that they votes shares for which they received timely instructions, unless the Trustee(s) determines that to do so would be contrary to law. Further, under the Plan(s), participants are “named fiduciaries” as defined under ERISA to the extent of their authority to direct the voting of the shares held in their accounts and the proportionate share of Undirected Shares in the Trust(s).
You are encouraged to specify your
choices by marking the appropriate boxes. However, if you wish to vote in
accordance with the Board of Directors recommendations, simply sign and return
this card.
This Proxy, when properly executed,
will be voted in the manner you have directed. If you return a signed proxy with
no direction given, it will be voted in accordance with the Board of Directors
recommendations.
▲ TO VOTE BY MAIL, PLEASE DETACH HERE
▲ |
PLEASE VOTE TODAY!
SEE REVERSE SIDE FOR FOUR EASY WAYS
TO VOTE.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on June 14, 2017: This Notice of Annual Meeting and Proxy Statement and the 2016 Form 10-K are available at www.eproxyaccess.com/cat2017.
ELECTRONIC DELIVERY OF PROXY
MATERIALS
Sign up to receive next years proxy materials
via the Internet. To sign up for the optional service, visit https://www.proxyvotenow.com/cat.
This regulatory filing also includes additional resources:
cat_courtesy-pdf.pdf
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