UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
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1934
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Soliciting Material under §
240.14a-12
TEREX
CORPORATION
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement if other than the Registrant)
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TEREX
CORPORATION
200
Nyala Farm Road, Westport, Connecticut 06880
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 15, 2008
The
Annual Meeting of Stockholders of Terex Corporation (“Terex” or the “Company”)
will be held at the corporate offices of Terex Corporation, 200 Nyala Farm
Road,
Westport, Connecticut, on Thursday, May 15, 2008, at 10:00 a.m., local time,
for
the following purposes:
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1.
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To
elect eleven (11) directors to hold office for one year or until
their
successors are duly elected and
qualified.
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2.
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To
ratify the selection of PricewaterhouseCoopers LLP as the independent
registered public accounting firm for the Company for
2008.
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3.
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To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
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The
foregoing items of business are described more fully in the Proxy Statement
accompanying this Notice.
The
Board
of Directors of the Company has fixed the close of business on March 18,
2008 as
the record date for determining the stockholders entitled to notice of, and
to
vote at, the Annual Meeting.
This
year, new Securities and Exchange Commission rules allow us to furnish proxy
materials to our stockholders on the Internet. We are pleased to take advantage
of these new rules and believe that they enable us to provide our stockholders
with the information that they need, while lowering the cost of delivery
and
reducing the environmental impact of our Annual Meeting.
On
or
about April 3, 2008, we will be mailing our Notice of Internet Availability
of
Proxy Materials to most of our stockholders, which contains instructions
for our
stockholders’ use of this new process, including how to access our 2008 Proxy
Statement and 2007 Annual Report and how to vote online. In addition, the Notice
of Internet Availability of Proxy Materials contains instructions on how
you may
receive a paper copy of the Proxy Statement and Annual Report, if you received
only a Notice of Internet Availability of Proxy Materials this year.
Participants in the Company’s 401(k) plan will each receive a printed copy of
the proxy materials.
EVERY
STOCKHOLDER’S VOTE IS IMPORTANT. While all stockholders are invited to attend
the Annual Meeting, we urge you to vote whether or not you will be present
at
the Annual Meeting. You may vote by telephone or via the Internet. If you
received a paper copy of the proxy card by mail, you may complete, date and
sign
the accompanying proxy card and return it in the envelope provided. No postage
is required if the proxy card is mailed in the United States. You may withdraw
your proxy or change your vote at any time before your proxy is voted, either
by
voting in person at the Annual Meeting, by proxy, by telephone or via the
Internet. Please vote promptly in order to avoid the additional expense of
further solicitation.
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By
order of the Board of Directors,
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Eric
I Cohen
Secretary
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March
31,
2008
Westport,
Connecticut
TEREX
CORPORATION
200
Nyala Farm Road
Westport,
Connecticut 06880
Proxy
Statement for the
Annual
Meeting of Stockholders
to
be
held on May 15, 2008
This
Proxy Statement is furnished to stockholders of Terex Corporation (“Terex” or
the “Company”) in connection with the solicitation of proxies by and on behalf
of the Company’s Board of Directors (the “Board”) for use at the Annual Meeting
of Stockholders of the Company to be held at 10:00 a.m. on May 15, 2008,
at the
corporate offices of Terex Corporation, 200 Nyala Farm Road, Westport,
Connecticut, and at any adjournments or postponements thereof (collectively,
the
“Meeting”), for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders (the “Notice”).
As
of
March 18, 2008, the record date for determining the stockholders entitled
to
notice of, and to vote at, the Meeting, the Company had outstanding 101,530,558
shares of common stock, $.01 par value per share (“Common Stock”).
Under
rules and regulations that the Securities and Exchange Commission (“SEC”)
recently adopted, instead of mailing a printed copy of our proxy materials
to
each stockholder of record or beneficial owner of our Common Stock, we are
now
furnishing proxy materials, which include our Proxy Statement and Annual
Report,
to our stockholders over the Internet and providing a Notice of Internet
Availability of Proxy Materials by mail other than stockholders who participate
in the Company’s 401(k) plan. Participants in the Company’s 401(k) plan will
each receive a printed copy of the proxy materials. If you received a Notice
of
Internet Availability of Proxy Materials by mail, you will not receive a
printed
copy of the proxy materials unless you request to receive these materials
in
hard copy by following the instructions provided in the Notice of Internet
Availability of Proxy Materials. Instead, the Notice of Internet Availability
of
Proxy Materials will instruct you how you may access and review all of the
important information contained in the proxy materials. The Notice
of
Internet Availability of Proxy Materials also
instructs you how you may submit your proxy via telephone or the Internet.
If
you received a Notice of Internet Availability of Proxy Materials by mail
and
would like to receive a printed copy of our proxy materials, you should follow
the instructions for requesting such materials included in the Notice of
Internet Availability of Proxy Materials.
We
are
mailing the Notice of Internet Availability of Proxy Materials to stockholders
on or about April 3, 2008.
Each
share of Common Stock is entitled to one vote per share for each matter to
be
voted on at the Meeting. Except for the election of directors, the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote is required for the approval of
any
matters voted upon at the Meeting. In an uncontested election of directors,
as
the election at the Meeting will be, each director shall be elected by a
majority of the votes cast with respect to such director.
A
quorum
of stockholders is constituted by the presence, in person or by proxy, of
holders of record of Common Stock representing a majority of the aggregate
number of votes entitled to be cast. Abstentions and broker non-votes will
be
considered present for purposes of determining the presence of a quorum.
With
respect to all matters to be voted upon at the Meeting, abstentions will
have
the effect of a negative vote and broker non-votes will not be considered
as
votes cast and thus will have no effect on the outcome of the vote.
Proxy
solicitations by the Board will be made by mail, by phone, via the Internet
or
by personal interviews conducted by officers or employees of the Company.
All
costs of solicitations, including (a) printing and mailing of the Notice
of
Internet Availability of Proxy Materials, (b) the printing and mailing of
this
Proxy Statement and accompanying material, (c) the reimbursement of brokerage
firms and others for their expenses in forwarding solicitation material to
the
beneficial owners of the Company’s stock, and (d) supplementary solicitations to
submit proxies, if any, will be borne by the Company.
How
To Vote
In
order
that your shares of Common Stock may be represented at the Meeting, you are
requested to select one of the following methods:
Via
the Internet –
You can
vote your shares via the Internet as instructed in the Notice of Internet
Availability of Proxy Materials. The Internet procedures are designed to
authenticate your identity to allow you to vote your shares and confirm that
your instructions have been properly recorded. Internet voting facilities
for
stockholders of record are available 24 hours a day and will close at
11:59 p.m. (EST) on May 14, 2008.
By
Telephone –
The
Notice of Internet Availability of Proxy Materials includes a toll-free number
you can call to request printed copies of proxy materials. The printed proxy
materials include a different toll-free number that you can call for voting.
By
Mail –
Stockholders who receive a paper proxy card may elect to vote by mail and
should
complete, sign and date their proxy card and mail it in the pre-addressed
envelope that accompanies the delivery of paper proxy cards. Proxy cards
submitted by mail must be received by the time of the Annual Meeting in order
for your shares to be voted. Stockholders who hold shares beneficially in
street
name may vote by mail by requesting a paper proxy card according to the
instructions contained in the Notice of Internet Availability of Proxy Materials
received from your broker or other agent, and then completing, signing and
dating the voting instruction card provided by the brokers or other agents
and
mailing it in the pre-addressed envelope provided.
If
you
vote via the Internet, by telephone or by mailing a proxy card, we will vote
your shares as you direct. For the election of directors, you can specify
whether your shares should be voted for all, some or none of the nominees
for
director listed. With respect to the other items being submitted for stockholder
vote, you may vote “for” or “against” any proposal or you may abstain from
voting on any proposal.
If
you
submit a proxy via the Internet, by telephone or by mailing a proxy card
without
indicating your instructions, we will vote your shares consistent with the
recommendations of our Board as stated in this Proxy Statement and in the
Notice
of Internet Availability of Proxy Materials, specifically in favor of our
nominees for directors and in favor of the ratification of the appointment
of
PricewaterhouseCoopers
LLP as
our
independent registered public accounting firm. If any other matters are properly
presented at the Meeting for consideration, then our officers named on your
proxy will have discretion to vote for you on those matters. As of the date
of
the Notice of Internet Availability of Proxy Materials, we knew of no other
matters to be presented at the Annual Meeting.
Revocation
of Proxies – Any
stockholder giving a proxy has the right to attend the Meeting to vote his
or
her shares of Common Stock in person (thereby revoking any prior proxy).
Any
stockholder also has the right to revoke the proxy at any time by executing
a
later-dated proxy, by telephone, via the Internet or by written revocation
received by the Secretary of the Company prior to the time the proxy is voted.
All properly executed and unrevoked proxies delivered pursuant to this
solicitation, if received at or prior to the Meeting, will be voted at the
Meeting.
2
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROXY STATEMENT.
PROPOSAL
1: ELECTION OF DIRECTORS
At
the
Meeting, eleven directors of the Company are to be elected to hold office
until
the Company’s next Annual Meeting of Stockholders or until their respective
successors are duly elected and qualified. Each director shall be elected
by a
majority of the votes of shares of Common Stock represented at the Meeting
in
person or by proxy cast with respect to such director. Unless marked to the
contrary, the proxies received by the Company will be voted FOR the election
of
the eleven nominees listed below, nine of whom are presently members of the
Board.
Each
nominee has consented to being named in this Proxy Statement and to serve
as a
director if elected. However, should any of the nominees for director decline
or
become unable to accept nomination if elected, it is intended that the Board
will vote for the election of such other person as director as it shall
designate. The Company has no reason to believe that any nominee will decline
or
be unable to serve if elected.
In
the
event of an uncontested election, as is the case this year, any nominee for
director who is a current director and receives less than a majority of the
votes cast in person or by proxy at the Meeting shall offer to resign from
the
Board. While the Board does not believe that in each such case a director
should
necessarily leave the Board, this presents an opportunity for the Board,
through
its Governance and Nominating Committee, to consider the resignation offer.
In
the event of an uncontested election, as is the case this year, any nominee
for
director who is not a current director and receives less than a majority
of the
votes cast in person or by proxy at the meeting shall not be elected to the
Board.
The
information set forth below has been furnished to the Company by the nominees
and sets forth for each nominee, as of March 25, 2008, such nominee’s name,
business experience for at least the past five years, other directorships
held
and age. There is no family relationship between any nominee and any other
nominee or executive officer of the Company. For information regarding the
beneficial ownership of the Common Stock by the current directors of the
Company, see “Security Ownership of Management and Certain Beneficial
Owners.”
The
Governance and Nominating Committee of the Board has nominated each of the
following individuals based on various criteria, including, among others,
a
desire to maintain a balanced experience and knowledge base within the Board,
the nominees’ personal integrity and willingness to devote necessary time and
attention to properly discharge the duties of director, and the ability of
the
nominees to make positive contributions to the leadership and governance
of the
Company.
3
The
Board recommends that the stockholders vote FOR the following nominees for
director.
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Name
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Age
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Positions and
Offices with Company
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First Year
As
Company
Director
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|||
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Ronald
M. DeFeo
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56
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Chairman
of the Board, Chief Executive
Officer
and Director
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1993
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G.
Chris Andersen
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69
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Lead
Director
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1992
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|||
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Paula
H. J. Cholmondeley
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60
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Director
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2004
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|||
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Don
DeFosset
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59
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Director
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1999
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|||
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William
H. Fike
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71
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Director
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1995
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|||
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Thomas
J. Hansen
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59
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Director
Nominee
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N/A
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|||
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Dr.
Donald P. Jacobs
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80
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Director
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1998
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|||
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David
A. Sachs
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48
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Director
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1992
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|||
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Oren
G. Shaffer
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65
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Director
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2007
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|||
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David
C. Wang
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63
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Director
Nominee
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N/A
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Helge
H. Wehmeier
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65
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Director
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2002
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Ronald
M.
DeFeo was appointed President and Chief Operating Officer of the Company
on
October 4, 1993, Chief Executive Officer (“CEO”) of the Company on March 24,
1995 and Chairman of the Board on March 4, 1998. Mr. DeFeo relinquished the
titles of President and Chief Operating Officer of the Company on January
3,
2007. Pursuant to an Employment and Compensation Agreement between Mr. DeFeo
and
the Company, dated as of July 1, 2005 (the “DeFeo Agreement”), Mr. DeFeo is to
remain Chief Executive Officer of the Company through December 31, 2012 and
the
Company will use its best efforts, consistent with generally accepted best
corporate governance standards, to have Mr. DeFeo elected Chairman of the
Board
during this time. Mr. DeFeo joined the Company in May 1992 as President of
the
Company’s then Heavy Equipment Group. A year later, he also assumed the
responsibility of serving as the President of the Company’s former Clark
Material Handling Company subsidiary. Prior to joining the Company on May
1,
1992, Mr. DeFeo was a Senior Vice President of J.I. Case Company, the former
Tenneco farm and construction equipment division, and also served as a Managing
Director of Case Construction Equipment throughout Europe. While at J.I.
Case,
Mr. DeFeo was also a Vice President of North American Construction Equipment
Sales and General Manager of Retail Operations. Mr. DeFeo serves as a director
of Kennametal Inc. (a supplier of the Company).
G.
Chris
Andersen has been a merchant banker since 1996 and is currently a partner
of
G.C. Andersen Partners, LLC, a private merchant banking and advisory firm,
and
also serves as the non-executive Chairman of the Board of Directors of
Millennium Cell Inc.
4
Paula
H.
J. Cholmondeley is currently a private consultant on strategic planning.
Ms.
Cholmondeley served as Vice President and General Manager of Sappi Fine Paper,
North America from 2000 through 2004, where she was responsible for their
Specialty Products division. Ms. Cholmondeley held senior positions with
various
other companies from 1980 through 1998, including Owens Corning, The Faxon
Company, Blue Cross of Greater Philadelphia, and Westinghouse Elevator Company,
and also served as a White House Fellow assisting the U.S. Trade Representative
during the Reagan administration. Ms. Cholmondeley, a former certified public
accountant, is an alumnus of Howard University and received a Masters Degree
in
Accounting from the University of Pennsylvania, Wharton School of Finance.
Ms.
Cholmondeley is also a director of Dentsply International Inc., Ultralife
Batteries, Inc., Albany International Corp. and Minerals Technologies Inc.,
and
is an independent trustee of Nationwide Mutual Funds.
Don
DeFosset retired in November 2005 as Chairman, President and Chief Executive
Officer of Walter Industries, Inc., a diversified company with principal
operating businesses in homebuilding and home financing, water transmission
products and energy services. Mr. DeFosset had served since November 2000
as
President and CEO, and since March 2002 as Chairman, of Walter Industries.
Previously, he was Executive Vice President and Chief Operating Officer of
Dura
Automotive Systems, Inc., a global supplier of engineered systems, from October
1999 through June 2000. Before joining Dura, Mr. DeFosset served as a Corporate
Executive Vice President, President of the Truck Group and a member of the
Office of Chief Executive Officer of Navistar International Corporation from
October 1996 to August 1999. Mr. DeFosset also serves as a director of Regions
Financial Corporation and James Hardie Industries NV.
William
H. Fike has been President of Fike & Associates, a consulting firm, since
January 2000. Mr. Fike retired as the Vice Chairman and Executive Vice President
of Magna International Inc., an automotive parts manufacturer based in Ontario,
Canada, in February 1999. Prior to joining Magna International in August
1994,
Mr. Fike was employed by Ford Motor Company from 1965 to 1994, where he served
most recently as a Corporate Vice President and as President of Ford Europe.
Thomas
J.
Hansen is Vice Chairman of Illinois Tool Works Inc. (“ITW”), a manufacturer of
fasteners and components, consumable systems and a variety of specialty products
and equipment, and is responsible for ITW’s worldwide Automotive Components and
Fastener, Fluids and Polymers, Industrial Metal and Plastic and Construction
businesses. From 1998 until May 2006 Mr. Hansen served as Executive Vice
President of ITW. Mr. Hansen joined ITW in 1980 as sales and marketing manager
of the Shakeproof Industrial Products businesses and held several other
positions with the company. Mr. Hansen is a member of the Northern Illinois
University’s Executive Club, a member of the Economics Club of Chicago, is
Chairman of the ITW Better Government Council, and is a former member of
the
Board of Trustees of MAPI (Manufacturers Alliance).
Dr.
Donald P. Jacobs is Dean Emeritus and the Gaylord Freeman Distinguished
Professor of Banking of the J.L. Kellogg School of Management at Northwestern
University, positions he has held since 2001. Prior to that, Dr. Jacobs was
Dean
of the Kellogg School from 1975 through 2001. He presently teaches government,
strategy and international business. Dr. Jacobs also serves as a director
of
ProLogis Trust.
David
A.
Sachs is the Co-Chairman of the Capital Markets Group Investment Committee
of
Ares Management LLC, an investment management firm of which he was a founder
in
1997. Mr. Sachs has been an investment banker and investment manager since
1981.
Oren
G.
Shaffer was the Vice Chairman and Chief Financial Officer of Qwest
Communications International Inc. from 2002 to 2007. Prior to joining Qwest,
Mr. Shaffer was President and Chief Operating Officer of Sorrento Networks,
a maker of optical products, beginning in 2000. From 1994 to 1999, he was
Chief
Financial Officer of Ameritech Corporation, a telecommunications provider
that
was acquired by SBC Communications Inc. in 1999. Mr. Shaffer also serves as
a director of Belgacom SA and Intermec, Inc.
5
David
C.
Wang is President of Boeing China Inc. and Vice President of International
Relations of The Boeing Company, a large aerospace company and a manufacturer
of
commercial jetliners and military aircraft, and has held these positions
since
November 2002. Prior to joining Boeing, Mr. Wang served as Chairman and CEO
of
General Electric China from 1997 to 2001. Prior to that, Mr. Wang served
in
various positions of increasing responsibility with General Electric since
1980.
Mr. Wang is also a director of KLA-Tencor Corporation.
Helge
H.
Wehmeier retired in December 2004 as Vice-Chairman of Bayer Corporation,
a post
he held since July 1, 2002. Prior to that, Mr. Wehmeier served as President
and
Chief Executive Officer of Bayer Corporation from 1991 through June 2002.
Mr.
Wehmeier spent more than 35 years with Bayer AG, a diversified, international
chemicals and health care group, in various positions of increasing
responsibility, including senior management positions in both Europe and
the
United States. Mr. Wehmeier is an alumnus of the International Management
Development Institute, Lausanne, Switzerland and Institut European
d’Administration des Affaires, Fontainebleau, France. Mr. Wehmeier also serves
as a director of PNC Financial Services Group, Inc., a diversified banking
and
financial services company, and Owens Illinois, Inc., a manufacturer of glass
containers.
Board
Meetings and Corporate Governance
The
Board
met seven times in 2007 at regularly scheduled and special meetings, including
telephonic meetings. All of the directors in office during 2007 attended
at
least
75% of the meetings of the Board and all committees of the Board on which
they
served during 2007. It is the Company’s policy, as stated in the Company’s
Governance Guidelines (the “Guidelines”), that each director is expected to
attend the annual meeting of stockholders. All of the directors then in office
attended the Company’s previous annual stockholder meeting held on May 17,
2007.
It
is the
Company’s policy that the Board consists of a majority of directors who qualify
as independent directors under the listing standards of the New York Stock
Exchange (“NYSE”), the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the requirements of any other applicable regulatory
authority, including the SEC. The Board annually reviews the relationship
of
each director with the Company, and only those directors who the Board
affirmatively determines have no material relationship with the Company are
deemed to be independent directors. The Guidelines specifically define what
is
deemed to be a material relationship between the Company and an independent
director. The following are the relationships that the Board considers in
making
its independence determination:
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(i)
|
whether
the director or any of his or her immediate family members is or
was
within the past five years an officer of the
Company;
|
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(ii)
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whether
the director is or was within the past five years an employee of
the
Company;
|
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(iii)
|
whether
the director or any of his or her immediate family members is or
was
during the past five years affiliated with, or employed by, any
past or
present auditor of the Company (or an
affiliate);
|
|
(iv)
|
whether
the director or any of his or her immediate family members is or
was
within the past five years part of an interlocking directorate
in which an
executive officer of the Company serves or served on the compensation
committee of a company that concurrently employs or employed the
director
or any of his or her immediate family
members;
|
|
(v)
|
whether
the director is an executive officer, a partner, member, of counsel
or
beneficial owner of more than ten percent (10%) of the equity interest
of
a customer of, or a supplier of goods or services (including without
limitation any investment banking firm or law firm) to, the Company
where
the amount involved in any of the last three fiscal years exceeds
certain
thresholds;
|
6
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(vi)
|
whether
the director is an executive officer, a partner or beneficial owner
of
more than ten percent (10%) of the equity interest of a company
to which
the Company was indebted at the end of any fiscal quarter during
the
Company’s most recently completed fiscal year or current fiscal year in
an
amount in excess of five percent (5%) of the Company’s total consolidated
assets at the end of such fiscal
year;
|
|
(vii)
|
whether
the director is an executive officer, a partner or beneficial owner
of
more than ten percent (10%) of the equity interest of a company
which was
indebted to the Company;
|
|
(viii)
|
whether
the director or any of his or her immediate family members was
indebted to
the Company, other than in the ordinary course of business of the
Company
and the business of the director or the member of his or her immediate
family, as applicable, at the end of any fiscal quarter during
the
Company’s most recently completed fiscal year or current fiscal year in
an
amount in excess of $100,000 at the end of such fiscal
year;
|
|
(ix)
|
whether
the director is affiliated with a tax exempt entity that within
the
preceding three years received the greater of (x) $1 million or
(y) two
percent (2%) of its consolidated gross revenues from the Company
(based on
the tax exempt entity’s most recently completed fiscal year);
|
|
(x)
|
whether
the director or any of his or her immediate family members is during
the
current fiscal year or was during the most recently completed fiscal
year
a party to a transaction or series of similar transactions with
the
Company or its subsidiaries (excluding director fees, stock options
and
other director compensation) other than on arms-length terms where
the
amount involved is not material to either
party;
|
|
(xi)
|
whether
the director or any of his or her immediate family members received
more
than $100,000 per year in direct compensation from the Company,
other than
director and committee fees and pension or other forms of deferred
compensation for prior service within the past three years;
and
|
|
(xii)
|
whether
the director has any other relationships with the Company or the
members
of management of the Company that the Board has determined to be
material
and which are not described in (i) through (xi)
above.
|
After
consideration of all applicable matters, the Board determined, based on the
above criteria, that none of the directors has a material relationship with
the
Company other than as a director or as a stockholder except for Mr. DeFeo,
who
is not an independent director. Accordingly, the Board has determined that
all
of the nominees for director are independent directors except for Mr. DeFeo,
who
has been nominated to serve on the Board as a result of his position as Chief
Executive Officer of the Company.
Directors
who are employees of the Company receive no additional compensation by virtue
of
being directors of the Company. Outside directors receive compensation for
their
service as directors and reimbursement of their expenses incurred as a result
of
their service as directors. See “Director Compensation” for a detailed
description of director compensation, including the Company’s Common Stock
ownership objective for outside directors.
Directors
have complete access to management and the Company’s outside advisors, and
senior officers and other members of management frequently attend Board meetings
at the discretion of the Board. It is the policy of the Board that
non-management directors also meet privately in executive sessions without
the
presence of any members of management at each regularly scheduled meeting
of the
Board and at such other times as the Board shall determine. In addition,
the
Board may retain and have access to independent advisors of its choice with
respect to any issue relating to its activities, and the Company pays the
expenses of such advisors.
7
Since
2003, the Board has determined that, because the offices of Chairman and
Chief
Executive Officer have been combined in Mr. DeFeo, it has been desirable
for the
Company to have an independent director serve as Lead Director of the Board.
The
Lead Director, in conjunction with the Chairman and the Chief Executive Officer,
provides leadership and guidance to the Board. In addition, the Lead Director
presides at all executive sessions of the non-management directors. Mr. Andersen
was appointed Lead Director in 2006. The directors intend to nominate Mr.
Andersen as the Lead Director for an additional one-year term beginning in
May
2008. Thereafter, the directors will review annually the desirability of
having
a Lead Director and, if the directors determine it best to continue to have
a
Lead Director, shall elect a Lead Director for the succeeding one-year period.
No director may serve as Lead Director for more than three consecutive years.
The
Board
and the Governance and Nominating Committee annually review the Company’s
corporate governance policies and practices and the Guidelines. The Board
believes that the Guidelines effectively assist the Board in the exercise
of its
duties and responsibilities and serve the best interests of the Company.
These
Guidelines reflect the Board’s commitment to monitor the effectiveness of policy
and decision making both at the Board and management levels, with a view
to
achieving strategic objectives of the Company while enhancing stockholder
value
over the long term. The Board and
the
Governance and Nominating Committee
will
continue to review the Guidelines annually and may make changes as they
determine are necessary and appropriate, including changes that may be necessary
to comply with new or proposed laws, rules or regulations issued by the SEC
and
the NYSE. A copy of the Guidelines is available at the Company’s
website,
www.terex.com,
under “About Terex” – “Investor Relations” – “Corporate
Governance.” In
addition, a copy of the Guidelines is available in print, without charge,
to any
stockholder who requests these materials from the Company.
If
you
wish to communicate with the Board, you may correspond by filing a report
through Ethicspoint, 24 hours a day, 7 days a week, via the Internet at
www.ethicspoint.com or by calling toll free, (877) 584-8488 or 1-800-ETHICSP.
Reports should be submitted under the category “Director Communications.”
Ethicspoint is an independent third-party provider retained by the Company
to
offer a comprehensive, confidential and, upon request, anonymous reporting
system for receiving complaints, grievances and communications. All
communications received by Ethicspoint will be relayed to the
Board.
The
Board
has an Audit Committee, Compensation Committee and Governance and Nominating
Committee.
Audit
Committee Meetings and Responsibilities
The
Audit
Committee of the Board consists of Messrs. DeFosset (chairperson), Jacobs,
Sachs, Shaffer and Wehmeier
and Ms.
Cholmondeley, each of whom is independent as defined in the listing standards
of
the NYSE and under the Exchange Act.
The
Audit Committee met 13 times during 2007.
8
Each
member of the Audit Committee is required to be financially literate or must
become financially literate within a reasonable time after appointment to
the
Audit Committee, and at least one member of the Audit Committee must have
accounting or related financial management expertise. The Board, in its business
judgment, believes that each of the current members of the Audit Committee
is
financially literate and that each of its members has accounting or financial
management expertise: Mr. DeFosset through his business experience as a
corporate executive, his involvement in preparing financial statements at
various public companies and particularly his experience as a Chief Executive
Officer of a public company; Dr. Jacobs through his years of experience teaching
business, finance, management and accounting at the graduate level, as well
as
serving as a chairman of the public review board of a national accounting
firm
and as Chairman of the Board of Amtrak; Mr. Sachs through his extensive
experience as an investment banker and investment manager; Mr. Shaffer through
his extensive experience and involvement in preparing financial statements
as
the Chief Financial Officer of a large public company; Mr. Wehmeier through
his
business experience as a corporate executive and his involvement in preparing
financial statements as a senior executive, including as a Chief Executive
Officer, of a large multinational company; and Ms. Cholmondeley through her
education, training and experience as a former certified public accountant
and
her involvement in preparing financial statements as the Chief Financial
Officer
of a large insurance company. The Board has determined that each of Ms.
Cholmondeley, Mr. DeFosset, Dr. Jacobs, Mr. Sachs and Mr. Shaffer is an “audit
committee financial expert,” as such term is defined under the regulations of
the SEC.
Ms.
Cholmondeley also serves on the audit committees of Dentsply International
Inc.,
Albany International Corp., Minerals
Technologies Inc.
and
Ultralife Batteries, Inc., each of which is a public company. The rules of
the
NYSE and the charter of the Audit Committee do not permit any member of the
Audit Committee to serve on the audit committee of more than two other public
companies in addition to the Company’s Audit Committee without a determination
by the Board that such simultaneous service would not impair the ability
of such
member to effectively serve on the Audit Committee. In the case of Ms.
Cholmondeley, the Board has made the determination that her service to the
Company will not be impaired by her service on the audit committees of such
other public companies. In making this determination, the Board noted that
Ms.
Cholmondeley served on the audit committees of such other companies in the
prior
year and this did not affect her ability to devote the necessary time to
the
Company’s Audit Committee. The Board also took into account the fact that Ms.
Cholmondeley is retired from full time employment and can be expected to
have
sufficient time to devote to her Audit Committee responsibilities.
The
Audit
Committee assists the Board in fulfilling its oversight responsibilities
by
meeting regularly with the Company’s independent registered public accounting
firm and operating and financial management personnel. The Audit Committee
reviews the audit performed by the Company's independent registered public
accounting firm and reports the results of such audit to the Board. The Audit
Committee reviews the Company’s annual financial statements and all material
financial reports provided to the stockholders and reviews the Company’s
internal auditing, accounting and financial controls.
As
stated
in the Audit Committee Charter, the Audit Committee also reviews related
party
transactions and any other matters pertaining to potential conflicts of interest
or adherence to the Company’s standards of business conduct. Related
party transactions must be approved by the Audit Committee, who will approve
the
transaction only if they determine that it is in the best interests of the
Company. In considering the transaction, the Audit Committee will consider
all
relevant factors, including as applicable (i) the Company’s business
rationale for entering into the transaction; (ii) the alternatives to
entering into a related party transaction; (iii) whether the transaction is
on terms comparable to those available to third parties, or in the case of
employment relationships, to employees generally; (iv) the potential for
the transaction to lead to an actual or apparent conflict of interest and
any
safeguards imposed to prevent such actual or apparent conflicts; and
(v) the overall fairness of the transaction to the Company.
The
Audit
Committee is responsible for appointing, setting compensation for, and
overseeing the work of, the independent registered
public accounting firm.
The
Audit Committee has established a policy requiring its pre-approval of all
audit
and permissible non-audit services provided by the independent registered
public accounting firm.
On an
annual basis, or more frequently as needed, the Chief Financial Officer of
the
Company provides the Audit Committee an estimate for the services needed
and
seeks pre-approval of such services from the Audit Committee. The Audit
Committee considers whether such services are consistent with the rules of
the
SEC on auditor independence. The policy prohibits the Audit Committee from
delegating to management the Audit Committee’s responsibility to pre-approve
permitted services of the independent registered
public accounting firm.
9
Requests
for pre-approval for services must be detailed as to the services to be provided
and the estimated total cost and must be submitted to the Company’s Chief
Financial Officer. The Chief Financial Officer then determines whether the
services requested fall within the guidance of the Audit Committee as to
the
services eligible for pre-approval. If the service was not of a type that
was
already pre-approved or the estimated cost would exceed the amount already
pre-approved, then the Chief Financial Officer seeks pre-approval of the
Audit
Committee on a timely basis.
The
Audit
Committee operates under a written charter adopted by the Board that complies
with all applicable requirements of the SEC and the NYSE. A copy of the Audit
Committee Charter is available at the Company’s website, www.terex.com, under
“About Terex” – “Investor Relations” – “Corporate
Governance.” In
addition, a copy of the charter is available in print, without charge, to
any
stockholder who requests these materials from the Company. This charter sets
out
the responsibilities, authority and duties of the Audit Committee.
See
“Audit Committee Report” for
a
discussion of the Audit Committee’s review of the audited financial statements
of the Company for the Company’s fiscal year ended December 31,
2007.
Compensation
Committee Meetings and Responsibilities
The
Compensation Committee of the Board consists of Messrs. Sachs (chairperson),
Andersen, DeFosset,
Fike and
Shaffer,
each of
whom is independent as defined in the listing standards of the NYSE.
The
Compensation Committee met nine times during 2007.
Each
member of the Compensation Committee must have a basic understanding of the
components of executive compensation and of the role of each component as
part
of a comprehensive program linking compensation to corporate and individual
performance in support of the Company’s objectives.
The
Compensation Committee assists the Board in its responsibilities regarding
compensation of the Company’s senior executives and outside directors, including
overall responsibility for approving, evaluating and modifying the Company’s
plans, policies and programs for compensation of key management personnel.
The
Compensation Committee establishes compensation arrangements for executive
officers and for certain other key management personnel.
The
Compensation Committee operates under a written charter adopted by the Board
that complies with all applicable requirements of the NYSE. A copy of the
Compensation Committee Charter is available at the Company’s website,
www.terex.com, under “About Terex” – “Investor Relations” – “Corporate
Governance.” In
addition, a copy of the charter is available in print, without charge, to
any
stockholder who requests these materials from the Company. This charter sets
out
the responsibilities, authority and duties of the Compensation Committee.
The
charter does not provide for any delegation of the Compensation Committee’s
duties.
See
“Compensation Discussion and Analysis” for
a
description of the Company’s executive compensation philosophy and executive
compensation program, including a discussion of how the compensation of the
Company’s executive officers was determined.
10
Compensation
Committee Interlocks and Insider Participation
No
member
of the Compensation Committee served as one of the Company’s officers or
employees during 2007 or was formerly an officer of the Company. None of
the
Company’s executive officers served as a member of the compensation committee of
any other company that has an executive officer serving as a member of the
Board
or Compensation Committee during 2007. None of the Company’s executive officers
served as a member of the board of directors of any other company that has
an
executive officer serving as a member of the Compensation Committee during
2007.
Governance
and Nominating Committee Meetings and Responsibilities
The
Governance and Nominating Committee of the Board consists of Messrs. Andersen
(chairperson), Fike, Jacobs and Wehmeier
and Ms. Cholmondeley, each of whom is independent as defined in the listing
standards of the NYSE.
The
Governance and Nominating Committee met five times during 2007.
The
Governance and Nominating Committee plays a central role in planning the
size
and composition of the Board, developing criteria and implementing the process
of identifying, screening and nominating candidates for election to the Board,
recommending corporate governance guidelines and actions to improve corporate
governance and evaluating individual director and full Board performance.
The
Governance and Nominating Committee is responsible for overseeing a review
and
assessment of the performance of the Board and its committees at least annually,
including establishing the evaluation criteria and implementing the process
for
evaluation.
The
Governance and Nominating Committee will consider as candidates for nomination
as directors individuals who have been recommended by the Company’s
stockholders, directors, officers, third party search firms and other sources.
For details on how stockholders may submit nominations for directors, see
“Stockholder Proposals.”
The
Company paid fees to an unaffiliated third party search firm in 2007 to assist
the Governance and Nominating Committee in identifying and screening possible
candidates for nomination, including Oren G. Shaffer, Thomas J. Hansen and
David
Wang, and also conducted appropriate background and reference checks on such
candidates.
In
evaluating a candidate, the Governance and Nominating Committee considers
the
attributes of the candidate, including his or her independence, integrity,
diversity, experience, sound judgment in areas relevant to the Company’s
businesses, and willingness to commit sufficient time to the Board, all in
the
context of an assessment of the perceived needs of the Board at that point
in
time. Maintaining a balanced experience and knowledge base within the total
Board shall include considering whether the candidate: (i) is a CEO, or has
similar work experience, in companies engaged in capital and industrial goods
industries; (ii) has significant direct management experience of multinational
business operations; (iii) has extensive knowledge and experience in financial
services and capital markets; and (iv) has unique knowledge and experience
and
can provide significant contributions to the Board’s effectiveness. Each
director is expected to ensure that other existing and planned future
commitments do not materially interfere with his or her service as a director.
There are no specific, minimum qualifications that the Governance and Nominating
Committee believes must be met by a candidate. All candidates are reviewed
in
the same manner, regardless of the source of the recommendation.
The
Governance and Nominating Committee operates under a written charter adopted
by
the Board that complies with all applicable requirements of the NYSE. A copy
of
the Governance and Nominating Committee Charter is available at the Company’s
website, www.terex.com, under “About Terex” – “Investor Relations” –
“Corporate Governance.” In
addition, a copy of the charter is available in print, without charge, to
any
stockholder who requests these materials from the Company. This charter sets
out
the responsibilities, authority and duties of the Governance and Nominating
Committee.
11
SECURITY
OWNERSHIP OF MANAGEMENT
AND
CERTAIN BENEFICIAL OWNERS
The
following table sets forth certain information regarding the beneficial
ownership of the Common Stock by each person known by the Company to own
beneficially more than 5% of the Company’s Common Stock, by each director, by
each director nominee, by each executive officer of the Company named in
the
summary compensation table below, and by all directors and executive officers
as
a group, as of March 1, 2008 (unless otherwise indicated below). Each person
named in the following table has sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by such person,
except
as otherwise set forth in the notes to the table. Shares of Common Stock
that
any person has a right to acquire within 60 days after March 1, 2008, pursuant
to an exercise of options or otherwise, are deemed to be outstanding for
the
purpose of computing the percentage ownership of such person, but are not
deemed
to be outstanding for computing the percentage ownership of any other person
shown in the table.
|
NAME AND ADDRESS OF
BENEFICIAL OWNER (1)
|
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (2)
|
PERCENT
OF CLASS
|
|||||
|
Neuberger
Berman, Inc.
|
7,795,071
|
(3)
|
7.7
|
%
|
|||
|
605
Third Avenue
|
|||||||
|
New
York, NY 10158
|
|||||||
|
AXA
Financial, Inc.
|
6,218,669
|
(4)
|
6.1
|
%
|
|||
|
1290
Avenue of the Americas
|
|||||||
|
New
York, New York 10104
|
|||||||
|
G.
Chris Andersen
|
207,783
|
(5)
|
*
|
||||
|
Paula
H. J. Cholmondeley
|
11,294
|
*
|
|||||
|
Ronald
M. DeFeo
|
1,182,338
|
(6)
|
1.1
|
%
|
|||
|
Don
DeFosset
|
64,073
|
(7)
|
*
|
||||
|
William
H. Fike
|
92,465
|
(8)
|
*
|
||||
|
Thomas
J. Hansen
|
0
|
||||||
|
Dr.
Donald P. Jacobs
|
60,585
|
(9)
|
*
|
||||
|
David
A. Sachs
|
292,194
|
(10)
|
*
|
||||
|
Oren
G. Shaffer
|
4,510
|
*
|
|||||
|
David
C. Wang
|
0
|
*
|
|||||
|
Helge
H. Wehmeier
|
35,875
|
*
|
|||||
12
|
NAME AND ADDRESS OF
BENEFICIAL OWNER (1)
|
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (2)
|
PERCENT
OF CLASS
|
|||||
|
Phillip
C. Widman
|
176,682
|
(11)
|
*
|
||||
|
Thomas
J. Riordan
|
133,598
|
*
|
|||||
|
Steve
Filipov
|
78,496
|
(12)
|
*
|
||||
|
Richard
Nichols
|
122,071
|
(13)
|
*
|
||||
|
All
directors and executive officers as
a group (20 persons)
|
2,886,776
|
(14)
|
2.8
|
%
|
|||
|
*
|
Amount
owned does not exceed one percent (1%) of the class so
owned.
|
|
(1)
|
Unless
indicated otherwise, each person’s principal address is c/o Terex
Corporation, 200 Nyala Farm Road, Westport, CT
06880.
|
|
(2)
|
Certain
executive officers and directors maintain margin securities accounts,
and
the positions held in such margin accounts, which may from time
to time
include shares of Common Stock, are pledged as collateral security
for the
repayment of debit balances, if any, in the accounts. At March
1, 2008, no
executive officer or director had debit balances in such
accounts.
|
|
(3)
|
Neuberger
Berman, Inc. (“Neuberger”) filed a Schedule 13G, dated February 12, 2008,
disclosing the beneficial ownership of 7,795,071 shares of Common
Stock.
This includes Neuberger having sole voting power over 4,454,934
shares of
Common Stock, shared voting power over 3,017,961 shares of Common
Stock
and shared dispositive power over 7,795,071 shares of Common
Stock.
|
|
(4)
|
AXA
Financial, Inc. and its affiliates (“AXA”) filed a Schedule 13G, dated
February 14, 2008, disclosing the beneficial ownership of 6,218,669
shares
of Common Stock. This includes AXA having sole voting power over
4,083,327
shares of Common Stock, shared voting power over 921,688 shares
of Common
Stock, sole dispositive power over 6,218,648 shares of Common Stock
and
shared dispositive power over 21 shares of Common Stock.
|
|
(5)
|
Includes
5,174 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days. Also includes 15,000 shares that are
pledged.
|
|
(6)
|
Includes
147,152 shares that are owned indirectly by Mr. DeFeo through a
grantor
retained annuity trust. Also includes 313,230 shares of Common
Stock
issuable upon the exercise of options exercisable within 60 days.
|
|
(7)
|
Includes
2,587 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
|
(8)
|
Includes
2,587 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
|
(9)
|
Includes
13,826 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
13
|
(10)
|
Includes
7,600 shares of Common Stock owned by Mr. Sachs’ wife. Mr. Sachs disclaims
the beneficial ownership of such shares. Also includes 27,524 shares
of
Common Stock issuable upon the exercise of options exercisable
within 60
days.
|
|
(11)
|
Includes
44,500 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
|
(12)
|
Includes
10,000 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
|
(13)
|
Includes
49,500 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
|
(14)
|
Includes
540,893 shares of Common Stock issuable upon the exercise of options
exercisable within 60 days.
|
14
EXECUTIVE
OFFICERS
The
following table sets forth, as of March 25, 2008, the respective names
and ages
of the Company’s executive officers, indicating all positions and offices held
by each such person. Each officer is elected by the Board to hold office
for one
year or until his or her successor is duly elected and qualified.
|
NAME
|
AGE
|
POSITIONS
AND OFFICES WITH COMPANY
|
||
|
Ronald
M. DeFeo
|
56
|
Chairman
of the Board, Chief Executive Officer
and
Director
|
||
|
Thomas
J. Riordan
|
51
|
President
and Chief Operating Officer
|
||
|
Phillip
C. Widman
|
53
|
Senior
Vice President and Chief Financial Officer
|
||
|
Eric
I Cohen
|
49
|
Senior
Vice President, Secretary and General Counsel
|
||
|
Brian
J. Henry
|
49
|
Senior
Vice President, Finance and Business Development
|
||
|
Kevin
A. Barr
|
48
|
Senior
Vice President, Human Resources
|
||
|
Richard
Nichols
|
46
|
President,
Terex Cranes
|
||
|
Stoyan
(Steve) Filipov
|
39
|
President,
Developing Markets and Strategic Accounts
|
||
|
Timothy
A. Ford
|
46
|
President,
Terex Aerial Work Platforms
|
||
|
Robert
G. Isaman
|
46
|
President,
Terex Construction
|
For
information regarding Mr. DeFeo, refer to the section above titled “Election of
Directors.”
Thomas
J.
Riordan became President and Chief Operating Officer (“COO”) of the Company on
January 3, 2007. Prior to joining the Company, Mr. Riordan was Executive
Vice
President and Chief Operating Officer of SPX Corporation, a diversified
global
industrial manufacturer. From 1996 to 2006, he held a number of positions
of
increasing responsibility at SPX, resulting in his appointment as Executive
Vice
President and Chief Operating Officer of SPX. Prior to joining SPX, he
was
President of Portland, Oregon based Consolidated Sawmill Machinery
International. Prior to that, Mr. Riordan held a series of manufacturing
and
management positions of increasing responsibility with J.I. Case and Borg-Warner
Automotive.
Phillip
C. Widman was appointed Senior Vice President and Chief Financial Officer
of the
Company on September 16, 2002. Prior to joining the Company, Mr. Widman
served
as Executive Vice President, Chief Financial Officer of Philip Services
Corporation, an industrial outsourcing and metal services company, from
1998 to
2001, and as an independent consultant from 2001 to 2002. Prior to joining
Philip Services, Mr. Widman worked at Asea Brown Boveri Ltd. (“ABB”) for eleven
years in various financial and operational capacities in the transportation,
power generation and power distribution businesses. During his last two
years at
ABB, he served as Vice President, Chief Financial Officer and Supply Management
of its diverse businesses in the United States. Additionally, Mr. Widman’s
experience includes twelve years with Unisys Corporation in a variety of
financial roles.
Eric
I
Cohen became Senior Vice President, Secretary and General Counsel of the
Company
on January 1, 1998. Prior to joining the Company, Mr. Cohen was a partner
with
the New York City law firm of Robinson Silverman Pearce Aronsohn & Berman
LLP (which firm has since merged with Bryan Cave LLP) since January 1992
and was
an associate attorney with that firm from 1983 to 1992.
15
Brian
J.
Henry was appointed Senior Vice President, Finance and Business Development
on
October 18, 2002. Mr. Henry previously held the positions of Vice President,
Finance and Business Development, Vice President-Finance and Treasurer,
and Vice
President-Corporate Development and Acquisitions. Mr. Henry also served
as the
Company’s Director of Investor Relations. Mr. Henry has been employed by the
Company since 1993. From 1990 to 1993, Mr. Henry was employed by KCS Industries,
L.P. and its predecessor, KCS Industries, Inc., an entity that until December
31, 1993, provided administrative, financial, marketing, technical, real
estate
and legal services to the Company and its subsidiaries.
Kevin
A.
Barr was named Senior Vice President, Human Resources of the Company on
January
3, 2006. Prior to that, Mr. Barr had been serving as Vice President, Human
Resources of the Company since September 25, 2000. Prior to joining the
Company,
Mr. Barr served as Vice President-Human Resources at DBT Online since 1998.
From
1995 to 1998, Mr. Barr was at Nabisco, Inc. as Vice President-Human Resources,
Asia/Pacific. Prior to that, Mr. Barr served as Vice President-Human Resources,
Asia/Pacific and Latin America with Dun and Bradstreet Corporation from
1990 to
1995, and in various human resources executive positions at Chase Manhattan
Bank, N.A. from 1981 to 1990.
Richard
Nichols was named President, Terex Cranes on January 16, 2008. At that
time, Mr.
Nichols had been serving as President, Terex Materials Processing & Mining
since January 23, 2004. Prior to that, Mr. Nichols served as the Company’s Vice
President and General Manager, Infrastructure since April 2003. Mr. Nichols
previously held the position of Vice President and General Manager of Terex
Mining Trucks since joining the Company in October 2000. Prior to joining
the
Company, Mr. Nichols spent 15 years in the aerospace industry at Honeywell
International Inc. in various senior management positions.
Stoyan
(Steve) Filipov was named President, Developing Markets and Strategic Accounts
on January 16, 2008. Prior to that, Mr. Filipov had been serving as President,
Terex Cranes since January 1, 2004. At that time, Mr. Filipov had been
serving
as President of the international operations for Terex Cranes since July
1,
2002. Prior to that Mr. Filipov held various other positions with a number
of
the Company’s international cranes businesses. Mr. Filipov started with the
Company on September 1, 1995 as Export Manager for one of the Company’s crane
operations in France.
Timothy
A. Ford became President, Terex Aerial Work Platforms on October 2, 2006.
Prior to joining the Company, since 2005, Mr. Ford was Executive Vice President
of The Toro Company, a lawn care and turf maintenance product and service
provider. Previous to that, Mr. Ford held various senior executive
positions with The Toro Company since 2001. Prior to that, he held various
senior management positions with Honeywell International from 1998 through
2001. Mr. Ford began his career at General Electric in 1985, progressing
through a series of positions in a variety of disciplines culminating in
General
Manager, GE Lighting from 1994 through 1997.
Robert
G.
Isaman became President, Terex Construction on January 2, 2007. Prior to
joining
the Company, Mr. Isaman spent 21 years at United Technologies Corporation,
a
diversified industrial manufacturer, in a number of positions of increasing
responsibility, most recently as President of Fire Safety Americas, UTC
Fire
& Security.
Code
of Ethics and Conduct
The
Company has adopted a code of ethics and conduct that applies to all of
its
directors and employees, including the Company’s principal executive officer,
principal financial officer and principal accounting officer, among others.
This
code of ethics and conduct is a set of written standards reasonably designed
to
deter wrongdoing and to promote: honest and ethical conduct; full, fair,
accurate, timely and understandable disclosure; compliance with applicable
governmental laws, rules and regulations; prompt internal reporting of
code
violations; and accountability for adherence to the code. The Company
periodically reviews, updates and revises its code of ethics and conduct
when it
considers appropriate. A copy of the current code of ethics and conduct
is
available at the Company’s website, www.terex.com, under “About Terex” –
“Investor Relations” – “Corporate Governance.” In
addition, a copy of the code of ethics and conduct is available in print,
without charge, to any stockholder who requests these materials from the
Company.
16
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Compensation Philosophy
The
objectives of the Company’s executive compensation program are to: (i) attract
and retain executives with the skills critical to the long-term success
of the
Company; (ii) motivate and reward individual and team performance in attaining
business objectives and maximizing stockholder value; and (iii) link a
significant portion of compensation to achieving performance goals and
appreciation in the price of the Company’s stock, so as to align the interests
of the executives with those of the stockholders. In keeping with its vision
of
being the best place to work in its industry, the Company seeks to attract
executive officers with superb skills and leadership abilities.
To
meet
these objectives, the Company designs its total compensation program to
be
motivational and competitive with the programs of other corporations of
comparable revenue size, corporations in the same industry, corporations
with
which the Company competes for executives, and other manufacturing corporations
that may not be in the same industry as the Company but that provide similarly
strong returns to their shareholders, as well as to be fair and equitable
to
both the executives and the Company.
The
Company’s compensation program is built around a philosophy of targeting
market-median base salary compensation with incentive components of compensation
that can reflect positive, as well as negative, Company and individual
performance. The Company’s objective with respect to base salary is to provide
its executive officers with competitive salaries that are, on average,
at or
slightly below the 50th
percentile of the Benchmark Companies (as defined below).
The
Compensation Committee (the “Committee”) believes that the Company’s
compensation program should deliver top-tier compensation given top-tier
individual and Company performance. Likewise, where individual performance
falls
short of expectations and/or Company performance lags the industry, the
programs
should deliver lower-tier compensation. Consequently, the Company’s objective
with respect to incentive compensation is to provide its executive officers
with
bonuses and long-term incentive awards that are generally within the third
quartile of the Benchmark Companies.
The
Committee believes that its objectives of pay-for-performance and retention
should be appropriately balanced even in periods of temporary downturns,
so that
programs should continue to ensure that successful, high-achieving executives
will remain motivated and committed to the Company during all phases of
the
business cycle.
When
determining an executive officer’s compensation package, there are a number of
factors that the Committee takes into account. Consideration is given to
the
executive’s overall responsibilities, professional qualifications, business
experience, job performance, technical expertise and career potential,
as well
as the combined value of these factors to the Company’s immediate and long-term
performance and growth. The Committee believes that generally more than
half of
an executive’s total compensation should be aligned with the performance of the
Company. Therefore, an executive officer will receive a significant portion
of
his or her compensation in an annual bonus and long-term incentive awards,
a
majority of which is linked to the performance of the Company.
The
allocation in compensation between current and long-term compensation is
based
on global employment market conditions with an emphasis on attraction and
retention, as well as attempting to motivate executive officers to achieve
excellent results. Typically, an executive will receive less than half
of
his/her total compensation in salary. Generally, as an executive has greater
responsibility within the Company, salary will be a less significant portion
of
the executive’s total compensation. Accordingly, as an executive officer’s level
of responsibility increases, it is the intent of the Committee to have
the
largest portion of that executive’s compensation be dependent on the Company’s
performance.
17
While
the
Committee believes that there is merit in taking into account the amount
of
equity that an executive owns in the Company, an overriding factor in
determining the size and amount of future equity grants is ensuring that
grants
are motivational and measurable, while providing competitive equity grants
that
are determined based on grant date economic value.
The
Committee retained Hewitt Associates (“Hewitt”) to support it in determining the
compensation of the Company’s executive officers, including its CEO. Hewitt was
not given a narrow list of instructions but rather was engaged to provide
the
Committee with any and all information and advice that might assist the
Committee in performing its duties.
One
of
the principal methods that the Committee uses to determine compensation
is to
benchmark the executive officer’s compensation against the compensation of
executive officers at comparable companies (the “Benchmark Companies”). The
Benchmark Companies include global corporations of similar size and similar
industries to the Company, and also companies that the Company competes
with for
talent. In addition, the Benchmark Companies include manufacturing companies
that are not in the same industry as the Company, but that have historically
provided similarly strong returns for their shareholders. The companies
currently comprising the Benchmark Companies are:
|
Astec
Industries, Inc.
|
The
Black & Decker Corporation
|
Illinois
Tool Works Inc.
|
||
|
Sauer-Danfoss
Inc.
|
ITT
Industries, Inc.
|
PACCAR
Inc.
|
||
|
Joy
Global Inc.
|
Danaher
Corp.
|
3M
|
||
|
Manitowoc,
Inc.
|
Parker
Hannifin Corporation
|
Deere
& Company
|
||
|
Cooper
Cameron Corporation
|
Cummins,
Inc.
|
Johnson
Controls, Inc.*
|
||
|
FMC
Technologies
|
Textron
Inc.
|
Honeywell
International Inc.*
|
||
|
Rockwell
Automation
|
American
Standard Companies Inc.
|
Caterpillar
Inc.
|
||
|
AGCO
Corporation
|
Ingersoll-Rand
Company
|
United
Technologies Corporation*
|
||
|
Dover
Corporation
|
Eaton
Corporation
|
General
Electric Company*
|
||
|
Oshkosh
Corporation
|
Masco
Corporation
|
*
The
Benchmark Companies that are denoted with an asterisk are companies that
are
used to benchmark the compensation of the heads of certain of the Company’s
business units, but are not used to benchmark the compensation of the Company’s
corporate functional executives or its CEO.
The
Benchmark Companies have a median annual revenue that is close to that
of the
Company, although there is a significant variance in size among the Benchmark
Companies. The Committee and its compensation consultants believe that
some
variability in annual revenue size is desirable to be able to predict pay
levels
on a size adjusted basis (using a solid regression line of external pay
information).
In
general, the Company’s executive officers receive their salary and bonus in
cash, while their long-term compensation components are received in equity.
Historically, equity awards had been given in both restricted stock and
options.
Over the past several years, the Company has moved towards granting equity
awards, including performance based shares, with more of an emphasis on
restricted stock and less of an emphasis on options. For the last two annual
grant cycles, there were no options awarded to executive officers.
Executive
Compensation Program
Compensation
is based on the level of job responsibility, individual performance, and
Company
performance. As executives progress to higher levels in the Company, an
increasing proportion of their pay is linked to Company performance and
shareholder returns, because in these roles the executives have a greater
ability to affect the Company’s results.
18
The
Committee’s aim is to achieve the proper balance between individual goals, the
corporate strategic plan and enhancing stockholder value and stockholder
interests. Each year the Committee, which is comprised entirely of independent
directors, determines the compensation arrangements, with informational
guidance
from Hewitt, for the Company’s executive officers, including the Named Executive
Officers (as defined below). The Committee relies on both Hewitt and the
Company’s human resources department for support in its work. The CEO plays an
integral role, in conjunction with the Committee, in determining the
compensation of the other executive officers of the Company.
Typically,
the CEO makes recommendations to the Committee regarding salary increases,
bonus
targets and amounts, and equity grants for each of the other executive
officers
of the Company. Under the Company’s performance management system, the CEO and
the COO annually evaluate each of the Company’s senior executives that report to
them. This assessment includes setting goals for the coming year for each
senior
executive and periodically evaluating the senior executive’s performance against
the goals for the prior year. Consistent with the Committee’s charter, the CEO
then makes recommendations to the Committee regarding the performance goals
and
the compensation of the Company’s senior executives.
The
executive compensation program has three principal components: short-term
compensation (salary and annual bonus), long-term incentive compensation
and
post-employment compensation, each of which is described below. While the
components of compensation are considered separately, the Committee takes
into
account the full compensation package afforded by the Company to the individual
executive.
Internal
Pay Equity
As
is the
case with many companies, the Company relies more heavily on the management
and
leadership skills of its Chairman and CEO than that of its other named
executive
officers. Mr. DeFeo has been with the Company since 1992, has been CEO
since
1995 and Chairman since 1998, and has overseen the transformation of Terex
during that time. In addition, under Mr. DeFeo’s leadership during the most
recent three year period from 2005 - 2007, the Company’s market capitalization
grew from approximately $2.4 billion to approximately $6.9 billion, which
represents an approximate 190% increase. Further, the Company’s Stockholders’
equity grew during this period from $1,135.2 million to $2,343.2 million,
an
increase of over 100%. Moreover, the Company’s total shareholder return over
this period outperformed approximately 79% of the Benchmark Companies.
As a
result, Mr. DeFeo received a significantly greater amount of compensation
than
the other named executive officers.
Deductibility
of Executive Compensation
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limits to
$1 million a year the deduction that a publicly held corporation may take
for
compensation paid to each of its chief executive officer and four other
most
highly compensated employees unless the compensation is “performance-based.”
Performance-based compensation must be based on the achievement of
pre-established, objective performance goals under a plan approved by
stockholders.
In
order
to reduce or eliminate the amount of compensation that would not qualify
for a
tax deduction should the compensation of the CEO or any other executive
officer
exceed $1 million in any year, the Company’s 1999 Long Term Incentive Plan, 2004
Annual Incentive Compensation Plan (the “Annual Incentive Plan”), 2000 Incentive
Plan (the “2000 Plan”) and 1996 Long Term Incentive Plan (the “1996 Plan”) were
submitted to and previously approved by the Company’s stockholders, so that
amounts earned thereunder by certain employees will qualify as
performance-based.
19
Short-Term
Compensation
Salary
Salary
is
determined by evaluating the responsibilities of the position held, the
individual’s past experience in his/her current position, current performance,
future potential and the competitive marketplace for executive talent.
The
Company’s objective is to provide its executive officers with competitive
salaries that are, on average, at or slightly below the median of the Benchmark
Companies. Salaries are reviewed annually to ensure that strong performance
is
reflected in any increase in an executive’s base salary level. The Committee
believes that salary ranges for the Company’s executive officers in 2007 were,
in aggregate, approximately at the 50th
percentile of the Benchmark Companies.
In
May
2007, the Committee approved an increase in the CEO’s base salary from $900,000
to $1,150,000 effective July 1, 2007. The key factors that the Committee
considered in reaching this decision were the increase in the size and
complexity of the Company and the Company’s strong performance over the last
several years.
Annual
Cash Bonus
In
addition to salary, each executive officer is eligible for an annual cash
bonus
under the Annual Incentive Plan, which was adopted by the Board and the
stockholders of Terex in 2004. Bonuses are given based upon the Company’s
performance and the executive’s individual performance, both measured against
previously determined targets. The individual targets are financial and
non-financial, and contain individual and Company performance measures.
The
CEO’s bonus target is approximately two times his base salary. The bonus targets
of the other executive officers generally range from 50% - 100% of their
base
salary.
The
Company’s objective is to provide its executive officers with competitive
bonuses that are generally within the third quartile of bonus target percentage
ranges for the Benchmark Companies. The objective of the management annual
incentive bonus program is to provide bonus opportunity and reward executives
when their actions drive the overall performance of the Company. For performance
that meets the pre-determined objectives, the executive is scheduled to
receive
100% of the bonus target. For performance that fails to meet the pre-determined
objectives, but which is within a satisfactory range of achievement, the
executive would receive less than 100% of the bonus target, with the actual
payment amount corresponding directly with the level of achievement under
the
predetermined target. Alternatively, for performance that exceeds the
pre-determined objectives, the executive would receive greater than 100%
of the
bonus target, with the actual payment amount corresponding directly with
the
level of achievement in excess of the predetermined target. For each 1%
increase
or decrease in attainment above or below the bonus target, the payment
will
increase or decrease by 2.5%. For attainment at or above 120% of the bonus
target, the payment will be capped at 150%. If attainment is at 80% of
the bonus
target, the payment will be 50%. For attainment below 80% of the bonus
target,
no payment would be made.
The
amount of an executive’s annual bonus is greatly dependent on how the Company
performs and on how the individual performs in helping the Company reach
its
objectives. While there is downside risk to the executive in having a
performance component that can result in no bonus for less than 80% achievement,
there is also an advantage and opportunity (bonus payments of up to 150%
of
target levels) if the Company and the individual both perform well. This
meets
the Committee’s objective that superior performance that adds value to the
Company should be rewarded and performance that does not meet expectations
should have significant consequences. The Committee, in its sole discretion,
may
increase, decrease or eliminate the payment of a bonus to any executive
officer
who is not a Covered Employee (as defined in Section 162(m) of the Code)
under
certain extraordinary events in accordance with the bonus plan.
20
In
2007,
for executive officers with corporate functional responsibilities who reported
directly to the Company’s CEO or COO, 60% of the bonus target was based upon a
return on invested capital (“ROIC”) measurement determined at the overall Terex
level and the other 40% was based on individual performance areas under
the
individual’s control and influence. For 2007, the targeted ROIC value was 41.9%,
which was based upon the 2007 budgeted numbers of the Company, approved
by the
Board in December 2006.
In
2007,
for executive officers who reported directly to the COO who have direct
operating responsibility, 40% of the bonus target was based on ROIC (with
the
same target ROIC as described above), 20% based on Business Segment Performance,
and 40% based on individual performance. Business Segment Performance was
based
upon an equal rating of cash flow and operating earnings at the operating
segment level, with performance measured against approved management-operating
plans. For 2007, the operating earnings targets for each of the Company’s four
segment presidents were as follows: Terex Aerial Work Platforms ($389.8
million); Terex Construction ($58.3 million); Terex Cranes ($210.1 million);
and
Terex Materials Processing & Mining ($236.0 million). For 2007, the cash
flow targets for each of the Company’s four segment presidents were as follows:
Terex Aerial Work Platforms ($357.5 million); Terex Construction ($99.9
million); Terex Cranes ($156.5 million); and Terex Materials Processing
&
Mining ($167.8 million).
The
Committee uses ROIC as one of the primary measures to assess operational
performance as it measures how effectively the Company uses money invested
in
its operations. For example, ROIC highlights the level of value creation
when
compared to the Company’s cost of capital. ROIC is defined as the Company’s
Consolidated Income from operations divided by the average of its (i) Debt
less
Cash and cash equivalents plus (ii) Total stockholders’ equity. For this
purpose, Debt is calculated using the Company’s balance sheet amounts for Notes
payable and current portion of long-term debt plus Long-term debt, less
current
portion.
For
2008
Annual Incentive Plan bonus payouts, ROIC will be calculated differently
than in
2007 and will be based upon an after tax return on invested capital measurement
determined at the overall Terex level. The Committee has moved to an after
tax
ROIC measurement because it believes tax performance is an important component
of the Company’s overall performance and this is a metric that is better aligned
to stockholder interests. After tax ROIC will be determined by dividing
the sum
of 2008 four quarters’ Net Operating Profit After Tax (as defined below) by the
average of the sum of Total stockholders’ equity plus Debt (as defined below)
less Cash and cash equivalents for the last quarter of 2007 and the four
quarters of 2008. Net Operating Profit After Tax for each quarter is calculated
by multiplying Income from operations by a figure equal to one minus the
effective tax rate of the Company. The
effective tax rate is equal to the (Provision for) benefit from Income
taxes
divided by Income before income taxes for the respective quarter.
Debt is
calculated using the amounts for Notes payable and current portion of long-term
debt plus Long-term debt, less current portion. For 2008, the after tax
ROIC
target is 25.6%, which may be adjusted down a maximum of 2.6 percentage
points
to reflect an acquisition made by the Company in 2008.
Individual
performance for each of the executive officers could include all or any
combination of personal goals, Terex Business Systems and human resources
planning initiatives, as well as other financial and non-financial measurements.
The CEO and COO are responsible for determining individual performance
measurements for each of their direct reports. The individual performance
calculation for the executive officers, other than the CEO, is done on
a
holistic basis in evaluating the achievement of such goals rather than
based
upon a rigid formula. The difficulty in achieving the targeted goals depends
on
a variety of factors, some of which are in the executive’s control and some of
which are not. These targets are established annually in conjunction with
setting the business plan of the Company for the coming year. If the Company
achieves its business plan objectives for the year, the Committee believes
the
goals are attainable.
21
The
following table shows the total 2007 Annual Incentive Plan bonus payout
and
details the bonus amount that was earned for the quantitative and qualitative
portions of the 2007 Annual Incentive Plan bonus for each of the named
executive
officers other than the CEO.
|
Name
|
Quantitative Bonus
|
Qualitative Bonus
|
Total Bonus
|
|||||||
|
Phillip
C. Widman
|
$
|
243,788
|
$
|
187,500
|
$
|
431,288
|
||||
|
Thomas
J. Riordan
|
$
|
484,904
|
$
|
372,945
|
$
|
857,849
|
||||
|
Steve
Filipov
|
$
|
207,045
|
$
|
149,076
|
$
|
356,121
|
||||
|
Richard
Nichols
|
$
|
171,229
|
$
|
168,750
|
$
|
339,979
|
||||
For
2007,
the Committee approved a bonus plan for Mr. DeFeo with an overall total
bonus
target of $2,025,000. This was contingent on Mr. DeFeo satisfying both
quantitative financial performance measures (with a bonus target equal
to 100%
of Mr. DeFeo’s base salary, which for 2007 was $1,025,000) and qualitative
performance measures (with a bonus target equal to $1,000,000).
The
2007
quantitative financial performance measures for Mr. DeFeo focused on three
specific areas of financial performance:
|
Performance
Measure
|
Weighting
(%)
|
Target
|
Achievement
|
|||||||
|
ROIC
|
60%
|
|
41.9%
|
|
43.3%
|
|
||||
|
Earnings
Per Share, on a fully diluted basis (“EPS”)
|
20%
|
|
$
|
5.00
|
$
|
5.85
|
||||
|
Management
of Working Capital
|
20%
|
|
79
net cash days
|
73.7
net cash days
|
||||||
For
2007
for Mr. DeFeo, the targeted EPS number was $5.00, which was based on the
Company’s budget for 2007 approved by the Board in December 2006. Management of
working capital was measured based on a target of net cash days. Net cash
days
are determined by using the following mathematical formula: (i) the number
of
days sales are outstanding, plus the inventory turn rate (measured in days),
minus (ii) the number of days payables are outstanding. The result of this
calculation will determine the net number of cash days. Mr. DeFeo’s target is
based on the Company’s budget for 2007 approved by the Board in December 2006.
Days sales are outstanding is calculated by dividing Trade receivables
by the
trailing three months Net sales multiplied by 365 days. Inventory turn
rate is calculated by dividing Inventories by the trailing three months
Cost of
goods sold multiplied by 365 days. Days payable outstanding is calculated
by dividing Trade accounts payable by the trailing three months Cost of
goods
sold multiplied by 365 days.
Mr.
DeFeo
had a number of qualitative performance measures that were considered in
determining his award under the Plan. The following table provides a detailed
listing of the qualitative performance measures that were considered by
the
Committee and their percent weighting:
22
|
Performance
Measure
|
Weighting
(%)
|
Excerpt
of Goals
|
||
|
Talent
Development,
Diversity and Succession Planning |
15%
|
Develop
and diversify talent base. Implement new programs to recruit
and retain
talent.
|
||
|
Financial
Controls, Ethics
and Information Technology |
15%
|
Strengthen
financial controls and continue to enhance finance and tax
staff. Develop
future tax strategy plans.
|
||
|
Corporate
Operational
Initiatives |
20%
|
Enhance
supply chain purchasing savings initiatives. Continue to train/develop
people to enhance the Company’s operating capabilities.
|
||
|
Corporate
Marketing
Initiatives |
20%
|
Continue
to build marketing capabilities, including analyzing and acting
upon
market share and research data.
|
||
|
Making
Terex a Better
Place to Work |
10%
|
Continue
to improve team member communication and satisfaction. Increase
focus on
team member health and safety.
|
||
|
Business
Development
|
10%
|
Continue
to pursue mergers and acquisitions that are attractive to the
Company,
including Asian businesses as well as bolt-on
transactions.
|
||
|
Financial
Structure
|
10%
|
Support
business development goals and continue to use the Company’s balance
sheet, including implementing the Company’s stock repurchase program.
|
The
following tables detail the quantitative and qualitative portions of Mr.
DeFeo’s
2007 Annual Incentive Plan bonus amount.
|
Quantitative Bonus Goal
|
Quantitative Bonus
Target Amount |
Quantitative Bonus
Amount |
|||||
|
ROIC
|
$
|
615,000
|
$
|
666,353
|
|||
|
EPS
|
$
|
205,000
|
$
|
292,125
|
|||
|
Management
of Working Capital
|
$
|
205,000
|
$
|
239,235
|
|||
|
Total
|
$
|
1,025,000
|
$
|
1,197,713
|
|||
|
Qualitative Bonus Goal
|
Qualitative Bonus
Target Amount |
Qualitative Bonus
Amount |
|||||
|
Talent
Development, Diversity and Succession Planning
|
$
|
150,000
|
$
|
225,000
|
|||
|
Financial
Controls, Ethics and Information Technology
|
$
|
150,000
|
$
|
150,000
|
|||
|
Corporate
Operational Initiatives
|
$
|
200,000
|
$
|
200,000
|
|||
|
Corporate
Marketing Initiatives
|
$
|
200,000
|
$
|
200,000
|
|||
|
Making
Terex a Better Place to Work
|
$
|
100,000
|
$
|
150,000
|
|||
|
Business
Development
|
$
|
100,000
|
$
|
125,000
|
|||
|
Financial
Structure
|
$
|
100,000
|
$
|
150,000
|
|||
|
Total
|
$
|
1,000,000
|
$
|
1,200,000
|
|||
23
The
qualitative measures accounted for $1,200,000 of the $2,397,713 total 2007
Annual Incentive Plan bonus amount that the CEO earned.
In
addition, Mr. Widman received a discretionary bonus in the amount of $100,000
in
recognition of his efforts in remediating the Company’s material weakness
relating to accounting for income taxes and Mr. DeFeo received a discretionary
bonus in the amount of $110,000 in recognition of his efforts in the area
of
Talent Development, Diversity and Succession Planning.
The
Committee believes that bonus target percentage ranges for the Company’s
executive officers are generally within the third quartile of bonus target
percentage ranges for the Benchmark Companies. The actual 2007 bonus payouts
for
Messrs. Riordan, Nichols and Filipov were within the third quartile of
bonus
target percentage ranges for the Benchmark Companies. The actual 2007 bonus
payout for Mr. Widman was in the middle of the fourth quartile of bonus
target
percentage ranges for the Benchmark Companies and for Mr. DeFeo was in
the top
of the fourth quartile of bonus target percentage ranges for the Benchmark
Companies. Mr. Widman’s 2007 bonus payout was in the fourth quartile primarily
due to his receiving a discretionary bonus in the amount of $100,000 in
recognition of his efforts in remediating the Company’s material weakness
relating to accounting for income taxes. Mr. DeFeo’s 2007 bonus payout was in
the fourth quartile due to his bonus target percentage being set in the
fourth
quartile.
Perquisites
The
Company provides certain perquisites and benefits to its executive officers
as a
method of attracting and retaining its executive officers. There is not
a
pre-determined set of perquisites that the Company gives to its executive
officers. Instead, an executive officer’s perquisites are determined on an
individual basis and are often influenced by benefits and perquisites that
former employers or predecessor organizations may have offered to these
executives.
Perquisites
that were given to executive officers in 2007 included company cars, club
memberships, private airplane travel on a limited basis (which requires
approval
by the CEO and in the case of travel by the CEO, approval by the Chief
Financial
Officer), financial planning services, payment of supplemental long-term
disability premiums, housing allowances and relocation costs. Generally,
perquisites granted to executive officers are allocated to their income
and they
are required to pay income taxes on such perquisites. Executive officers,
as
well as certain other key employees of the Company, may upon their election,
also receive matching contributions in the Company’s Deferred Compensation Plan.
In addition to the perquisites described above, the Company generally provides
its executive officers such other benefits as Company-paid life insurance
and
matching contributions in the Company’s 401(k) Plan and Employee Stock Purchase
Plan, medical insurance, dental insurance and short-term disability coverage,
which are also provided generally to all other U.S. based salaried employees.
Long-Term
Incentive Compensation
The
purpose of long-term incentive compensation is both to align the interests
of
the executive officers with the interests of the stockholders and to provide
a
level of reward and recognition for superior performance. The Company’s
objective is to provide its executive officers with long term incentive
awards
that are generally within the third quartile of the award level at the
Benchmark
Companies. Long-term incentive awards may include cash and non-cash components.
In 2007, all long-term incentive awards granted consisted solely of an
equity
component. It is the Company’s intention in the future to primarily grant
long-term incentive awards in shares of restricted stock with time and/or
performance based criteria, although other forms of awards may be
considered.
The
long
term incentive awards are designed to provide wealth creation for the executives
if shareholder value is created. The Committee believes that long-term
incentive
compensation ensures that the Company’s executive officers have a continuing
stake in the long-term success of the Company and fosters the retention
of key
management personnel.
24
In
2007,
the Company issued long-term incentive awards designed to provide an economic
value that was significantly below the 75th
percentile. This was done to keep expenses down, as well as due to the
fact that
two equity grants were issued to executive officers in 2006, due to the
Company’s delay in the timely filing of its periodic reports with the SEC in
2005.
Stock
Awards
One
of
the primary components of the Company’s long-term incentive compensation is the
granting of restricted stock awards to executive officers, including awards
which have a performance measurable component. In this way, the stock awards
have the dual objective of helping to build shareholder value while also
serving
to retain and motivate the Company’s senior leadership.
The
Company expects to make grants of stock awards in the first quarter of
each
calendar year at its March Board meeting, which is soon after the Company’s
prior year’s results are finalized and released publicly, as well as after the
Company’s budget has been finalized for the coming year. This is consistent with
the Company’s move towards restricted stock awards that have a performance
component, as it is intended that the performance component would be based
upon
a specific measure or measures from the Company’s budget for the coming
year.
In
March
2007, the executive officers received a grant of restricted stock. This
grant
contained both time based and performance based restricted stock awards.
The
time-based award vests 25% per year on each of the first four anniversaries
of
the date of grant.
Each
executive will receive the performance-based portion of the March 2007
award, in
accordance with the formula described below, only if Terex achieves a targeted
percentage ROIC over four (4) consecutive calendar quarters ending December
31,
2007 (the “Target ROIC”). The Target ROIC was set at 41.9%, based upon Terex’s
2007 budgeted numbers.
For
each
1% increase or decrease in attainment above or below the Target ROIC, the
number
of shares to be received by each Executive for the performance-based award
would
increase or decrease by 2.5%. For attainment at or above 120% of the Target
ROIC, the number of shares distributed would be capped at 150% of the
performance-based share award. If attainment is at 80% of the Target ROIC,
the
number of shares distributed would be 50% of the performance-based share
award.
For performance below 80% of the Target ROIC, the entire performance-based
share
award would be forfeited. As Terex achieved an ROIC of 43.3% in 2007, each
executive received 108.5% of the performance-based award, which will be
paid as
follows: 25% in the first quarter of 2008, 25% on December 31, 2008, 25%
on
December 31, 2009 and 25% on December 31, 2010.
For
each
of the executive officers, other than Messrs. DeFeo, Widman and Riordan,
the
economic value of the time and performance based components were intended
to
each be approximately 50% of the total restricted stock award value. For
Messrs.
DeFeo, Widman and Riordan, the economic value of the time and performance
based
components were intended to be approximately 25% and 75% of the restricted
stock
award value, respectively. The restricted stock awards for Messrs. DeFeo,
Widman
and Riordan were more heavily performance-based than that of the other
executives because the Committee believes they are the three executives
with the
greatest potential impact on the Company’s performance and therefore their
compensation should be more attuned to the Company’s performance than that of
the other executive officers.
Although
many of the Benchmark Companies continue to grant predominantly time based
awards, the Company believes that restricted stock grants that contain
both time
based and performance measures provide the right mix of motivating performance
and providing for retention, which are the primary objectives of the restricted
stock awards. Accordingly, the Company intends to continue granting restricted
stock awards that contain both time and performance based components.
25
In
2008,
the performance-based components of the Company’s long-term incentive
compensation to executive officers will be based upon an EPS measure and
a Total
Shareholder Return (“TSR”) measure by comparing the Company’s TSR against the
TSR of the Benchmark Companies. TSR combines share price appreciation and
dividends paid to show the total return to the shareholder. In addition,
these
performance-based components will be measured over a three year period.
The
Committee believes that the longer measurement period for these awards
and these
performance metrics will help motivate long-term decision making and better
align the interests of the executives and the Company’s
stockholders.
Option
Awards
Historically,
one of the components of the Company’s long-term incentive compensation had been
the granting of option awards to executive officers. However, over the
past few
years, the Company has been decreasing the number of options awarded to
its
executive officers. This decrease culminated in no option awards being
made in
2007.
The
decrease in the number of options granted is not a Terex-specific development.
The implementation of Statement of Financial Accounting Standard No. 123R
“Share-Based Payment” (“FAS 123R”), which requires that costs resulting from
stock options be recognized in a company’s financial statements, as well as the
dilutive effect of option exercises, has caused many companies, including
Terex,
to move away from the granting of options. It is generally more cost effective
for the Company to grant restricted stock than options, as more options
would
need to be given for an executive to receive the same economic value as
he or
she would receive from a grant of fewer shares of restricted stock. The
Company
may grant options to executive officers in the future as the Company deems
appropriate. However, the Company does not expect that the granting of
options
will be a key component of an executive officers’ long-term compensation in the
near future.
Post-Employment
Compensation
Retirement
Plans and Life Insurance
The
Company offers a variety of mechanisms for its executive officers to plan
for
their retirement. These plans are offered to attract and retain executive
officers by offering them benefits that are similar to what is offered
by the
Benchmark Companies. The retirement plans offered by the Company to its
executive officers generally include a 401(k) plan, which is also offered
to
most of the Company’s U.S. based employees, a deferred compensation plan, a
supplemental executive retirement plan (“SERP”) and, in certain situations,
other defined benefit pension plans. See “Pension Benefits” and “Nonqualified
Deferred Compensation” for a description of the Company’s SERP and deferred
compensation plan, respectively. In addition, each executive officer receives
a
life insurance policy that provides his or her family with a core level
of
security in case of the premature death of the executive officer. The Company
provides each executive officer with a universal life insurance policy
that is
two times his or her base salary. In addition, the Company owns a universal
life
insurance policy on the life of Mr. DeFeo in the amount of $10,000,000.
Pursuant
to the terms of this arrangement, the Trustee of the Ronald M. DeFeo 1996
Life
Insurance Trust has the right to designate a beneficiary or beneficiaries
to
receive the insurance proceeds from this policy on Mr. DeFeo’s death, subject to
the Company’s right to first receive a certain portion of the insurance
proceeds.
26
Termination
of Employment and Change in Control Arrangements
Each
of
the Named Executive Officers, other than Mr. DeFeo, is a party to a Change
in
Control and Severance Agreement with the Company that was entered into
in March
2006 (the “Executive Agreements”). The Company and Mr. DeFeo entered into an
Employment and Compensation Agreement in July 2005 (the “DeFeo Agreement”) that
contains provisions regarding termination of employment and change in control
circumstances. These agreements provide the executive officers with a core
level
of assurance that their actions on behalf of the Company and its shareholders
can proceed without the potential distraction of short-term issues that
may
affect the Company (e.g. merger, buyout, etc.) and helps ensure that they
continue to act in the best interests of the Company. In addition, these
agreements contain measures that protect the Company as well by including
confidentiality, non-compete and non-solicitation provisions. The key terms
of
these agreements are generally standard provisions for agreements of this
type
and are described below in “Potential Payments Upon Termination or Change in
Control.”
27
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
Summary Compensation Table below shows the compensation for the previous
fiscal
year of the Company’s CEO, Chief Financial Officer and its three other highest
paid executive officers who had 2007 total qualifying compensation in excess
of
$100,000 (the “Named Executive Officers”).
|
Name
and Principal
Position |
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(1) (2)
|
Option
Awards
($)
(1)
(2) |
Non-
Equity Incentive Plan Compensa -tion ($) |
Change
in
Pension Value and Nonquali- fied Deferred Compen- sation Earnings ($)
|
All
Other
Compens- ation ($) (3) |
Total
($)
|
|||||||||||||||||||
|
Ronald
M. DeFeo
Chairman
and Chief
Executive
Officer
|
2007
2006
|
$
$
|
1,025,000
875,000
|
$
|
110,000
-0-
|
$
$
|
10,596,912
4,942,447
|
$
$
|
166,200
261,200
|
$
$
|
2,397,713
8,602,600
|
$
$
|
1,585,928
584,844
|
$
$
|
313,733
214,293
|
$
$
|
16,195,486
15,480,384
|
|||||||||||
|
Phillip
C. Widman
Senior
Vice President and Chief Financial Officer
|
2007
2006
|
$
$
|
500,000
416,000
|
$
|
100,000
-0-
|
$
$
|
1,960,078
542,569
|
$
$
|
80,807
147,327
|
$
$
|
431,288
1,911,840
|
$
$
|
154,329
75,916
|
$
$
|
76,928
110,611
|
$
$
|
3,303,430
3,204,263
|
|||||||||||
|
Thomas
J. Riordan
President
and
Chief
Operating Officer
|
2007
|
$
|
744,231
|
-0-
|
$
|
1,754,686
|
-0-
|
$
|
857,849
|
$
|
93,595
|
$
|
269,177
|
$
|
3,719,538
|
|||||||||||||
|
Steve
Filipov (4)
President,
Developing
Markets
and Strategic
Accounts
|
2007
|
$
|
397,535
|
-0-
|
$
|
1,222,571
|
$
|
76,397
|
$
|
356,121
|
$
|
355,430
|
(5)
|
$
|
42,182
|
$
|
2,450,236
|
|||||||||||
|
Richard
Nichols
President,
Terex Cranes
|
2007
|
$
|
375,000
|
-0-
|
$
|
1,248,241
|
$
|
128,055
|
$
|
339,979
|
$
|
204,446
|
$
|
85,008
|
$
|
2,380,729
|
||||||||||||
______________________
(1)
See
Note Q – “Stockholders’ Equity” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2007 for a detailed description of the
assumptions that the Company used in determining the dollar amounts recognized
for financial statement reporting purposes of its stock and option
awards.
(2)
The
amounts listed in the Stock Awards and Option Awards columns are the dollar
amounts recognized for financial statement reporting purposes for the fiscal
year ended December 31, 2007 and December 31, 2006 in accordance with FAS
123R
and comprise grants made by the Company in 2003, 2004, 2006 and 2007 and
2002,
2003, 2004 and 2006, respectively. There were no forfeitures that occurred
during the fiscal year ended December 31, 2007.
28
(3)
As
part of its competitive compensation program, the Company provides its
Named
Executive Officers with certain perquisites and other personal benefits.
The
amounts listed are the aggregate incremental cost of the perquisites paid
by the
Company. The aggregate incremental cost to the Company is computed as the
actual
out-of-pocket cost to the Company of supplying such perquisite. For example,
the
amount listed under the Company Car column is the amount that the Company
paid
to a third party as a result of providing a company car to the named executive
officer. As part of their compensation, each of the Named Executive Officers
in
2007 received the perquisites listed in the table below:
|
Name
|
Company
Car
|
Club
Memberships
|
Use
of Private Aircraft
|
Long Term
Disability Premiums
|
Financial
Planning Services
|
401(k)
Matching Contributions
|
Employee Stock
Purchase Plan Company Contributions
|
Company
Paid Life Insurance
|
Other*
|
Total
|
|||||||||||||||||||||
|
Ronald
M. DeFeo
|
$
|
2,510
|
$
|
17,161
|
$
|
49,963
|
$
|
6,672
|
$
|
14,995
|
$
|
9,000
|
$
|
2,125
|
$
|
210,474
|
$
|
833
|
$
|
313,733
|
|||||||||||
|
Phillip
C. Widman
|
$
|
25,676
|
$
|
7,130
|
$
|
14,329
|
$
|
6,967
|
$
|
2,500
|
$
|
9,000
|
$
|
2,125
|
$
|
9,151
|
$
|
50
|
$
|
76,928
|
|||||||||||
|
Thomas
J. Riordan
|
$
|
19,741
|
-0-
|
-0-
|
$
|
696
|
-0-
|
$
|
9,000
|
$
|
3,625
|
$
|
7,114
|
$
|
229,001
|
$
|
269,177
|
||||||||||||||
|
Steve
Filipov
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,199
|
$
|
40,983
|
$
|
42,182
|
||||||||||||||||||
|
Richard
Nichols
|
$
|
28,291
|
-0-
|
-0-
|
$
|
5,284
|
-0-
|
$
|
9,000
|
-0-
|
$
|
2,933
|
$
|
39,500
|
$
|
85,008
|
|||||||||||||||
______________________
*
The
amount shown for Mr. DeFeo was $599 for personal use of a Company driver
and
$234 for travel by Mr. DeFeo’s spouse; Mr. Widman was for payment of a Wellness
Award; the amount shown for Mr. Riordan was $220,748 for payment of relocation
costs, $8,203 for a matching contribution to the Company’s Deferred Compensation
Plan, which matching contribution is invested in Common Stock and $50 for
payment of a Wellness Award; the amount shown for Mr. Filipov was for payment
of
a housing allowance; and the amount shown for Mr. Nichols was for payment
of a
housing allowance.
(4)
Mr.
Filipov received his 2007 compensation in Euros. Amounts shown are converted
into U.S. Dollars at an average rate of one Euro = $1.3661.
(5)
The
amounts shown include $146 for Mr. Filipov, which amount was earnings that
were
above-market or preferential.
29
Grants
of Plan-Based Award
The
following table sets forth information on grants of awards under the Company’s
equity and non-equity incentive plans during 2007 to the Named Executive
Officers. The amount of stock awards, option awards and non-equity incentive
plan compensation recognized for financial reporting purposes by the Company
for
the Named Executive Officers during 2007 is also listed in the Summary
Compensation Table.
|
Name
|
Grant
Date
|
Grant
Date
(123R)
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
Grant Date
Fair Value
of Stock
and Option
Awards
|
||||||||||||||||||||||||||||
|
Thresh-
old
($)
|
Target
($)
|
Maxi-
mum
($)
|
Thresh-
old
(#)
|
Target
(#)
|
Maxi-
mum
(#)
|
||||||||||||||||||||||||||||||||
|
Ronald
M. DeFeo
|
3/6/2007
|
31,506
|
63,012
|
94,518
|
$
|
4,072,466
|
|||||||||||||||||||||||||||||||
|
|
3/6/2007
|
17,114
|
$
|
1,106,078
|
|||||||||||||||||||||||||||||||||
|
|
N/A
|
$
|
512,500
|
$
|
2,025,000
|
$
|
3,037,500
|
||||||||||||||||||||||||||||||
|
Phillip
C. Widman
|
3/6/2007
|
10,240
|
20,479
|
30,719
|
$
|
1,323,558
|
|||||||||||||||||||||||||||||||
|
|
3/6/2007
|
5,562
|
$
|
359,472
|
|||||||||||||||||||||||||||||||||
|
|
N/A
|
$
|
112,500
|
$
|
375,000
|
$
|
562,500
|
||||||||||||||||||||||||||||||
|
Thomas
J. Riordan
|
1/31/2007
|
3,750
|
7,500
|
15,000
|
$
|
426,675
|
|||||||||||||||||||||||||||||||
|
|
1/31/2007
|
12/13/2007
|
3,750
|
7,500
|
15,000
|
$
|
426,675
|
||||||||||||||||||||||||||||||
|
|
1/31/2007
|
|
(1)
|
3,750
|
7,500
|
15,000
|
$
|
426,675
|
|||||||||||||||||||||||||||||
|
|
1/31/2007
|
|
(1)
|
3,750
|
7,500
|
15,000
|
$
|
426,675
|
|||||||||||||||||||||||||||||
|
|
1/31/2007
|
30,000
|
$
|
853,350
|
|||||||||||||||||||||||||||||||||
|
|
3/6/2007
|
11,815
|
23,629
|
35,444
|
$
|
1,527,142
|
|||||||||||||||||||||||||||||||
|
|
3/6/2007
|
6,418
|
$
|
414,795
|
|||||||||||||||||||||||||||||||||
|
|
N/A
|
$
|
223,269
|
$
|
744,231
|
$
|
1,116,347
|
||||||||||||||||||||||||||||||
|
Steve
Filipov
|
3/6/2007
|
4,201
|
8,402
|
12,603
|
$
|
543,021
|
|||||||||||||||||||||||||||||||
|
|
3/6/2007
|
6,846
|
$
|
442,457
|
|||||||||||||||||||||||||||||||||
|
|
N/A
|
$
|
29,815
|
$
|
298,151
|
$
|
447,227
|
||||||||||||||||||||||||||||||
|
Richard
Nichols
|
3/6/2007
|
4,201
|
8,402
|
12,603
|
$
|
543,021
|
|||||||||||||||||||||||||||||||
|
|
3/6/2007
|
6,846
|
$
|
442,457
|
|||||||||||||||||||||||||||||||||
|
|
N/A
|
$
|
28,125
|
$
|
281,250
|
$
|
421,875
|
||||||||||||||||||||||||||||||
(1)
The
target for this award has not yet been set and therefore the grant date
criteria
under FAS 123R has not yet been satisfied. No expense has been recognized
for
financial statement reporting purposes for this award.
30
On
January 31, 2007, a grant of Common Stock subject to restrictions on transfer,
conditions of forfeitability and other limitations and restrictions (“Restricted
Stock”) with performance-based criteria (“Performance Shares”) was made under
the 2000 Plan to Mr. Riordan (30,000 shares, which is made up of four 7,500
share grants). The value of the Performance Shares granted to Mr. Riordan
set
forth in the table above is based on the closing stock price on the NYSE
of the
Common Stock of $56.89 per share on January 31, 2007. The Performance Shares
awarded vest at a rate of 7,500 per year if the Company achieves a targeted
percentage ROIC for each such year.
For
each
1% increase or decrease in attainment above or below the Target ROIC, the
number
of shares to be received by Mr. Riordan for the performance-based award
for each
such year would increase or decrease by 2.5%. For attainment at or above
120% of
the Target ROIC, the number of shares distributed would be capped at 150%
of the
performance-based share award for each such year. For performance below
80% of
the Target ROIC, the entire performance-based share award for each such
year
would be forfeited. As Terex achieved an ROIC of 43.3% in 2007, Mr. Riordan
received 108.5% of the 2007 portion of the performance-based award. Upon
the
earliest to occur of a change in control of the Company or the death or
disability of Mr. Riordan, any unvested portion of such Performance Shares
grant
shall vest immediately. Dividends, if any, are paid on Performance Shares
at the
same rate as paid to all stockholders.
In
addition, on January 31, 2007, a grant of Restricted Stock was made under
the
2000 Plan to Mr. Riordan (30,000 shares). The value of the Restricted Stock
granted to Mr. Riordan set forth in the table above is based on the closing
stock price on the NYSE of the Common Stock of $56.89 per share on January
31,
2007. The shares of Restricted Stock awarded vest as follows: 25% on January
31,
2008; 25% on January 31, 2009; 25% on January 31, 2010; and 25% on January
31,
2011. Upon the earliest to occur of a change in control of the Company
or the
death or disability of Mr. Riordan, any unvested portion of such Restricted
Stock grant shall vest immediately. Dividends, if any, are paid on Restricted
Stock awards at the same rate as paid to all stockholders.
On
March
6, 2007, grants of Performance Shares were made under the 2000 Plan to
Mr. DeFeo
(63,012 shares), Mr. Widman (20,479 shares), Mr. Riordan (23,629 shares),
Mr.
Filipov (8,402 shares) and Mr. Nichols (8,402 shares). The value of the
Performance Shares granted to such Named Executive Officers set forth in
the
table above is based on the closing stock price on the NYSE of the Common
Stock
of $64.63 per share on March 6, 2007. With respect to each grant of Performance
Shares made to a Named Executive Officer on March 6, 2007, the Performance
Shares awarded vest as follows because the Company achieved a targeted
percentage ROIC for the four consecutive calendar quarter period ending
December
31, 2007: 25% of this grant will vest as soon as practicable after the
Terex
financial statements for 2007 are completed and filed, and 25% will vest
on each
of December 31, 2008, December 31, 2009, and December 31, 2010. The number
of
shares in this grant are subject to adjustment, up or down, based upon
attainment above or below the targeted percentage ROIC measurement. See
the
“Compensation Discussion & Analysis” section above for a detailed
description of the performance measures used in this grant of Restricted
Stock.
Upon the earliest to occur of a change in control of the Company or the
death or
disability of the recipient of the grant, any unvested portion of such
Performance Shares grant shall vest immediately. Dividends, if any, are
paid on
Performance Shares at the same rate as paid to all stockholders.
In
addition, on March 6, 2007, grants of Restricted Stock were made under
the 2000
Plan to Mr. DeFeo (17,114 shares), Mr. Widman (5,562 shares), Mr. Riordan
(6,418
shares), Mr. Filipov (6,846 shares) and Mr. Nichols (6,846 shares). The
value of
the Restricted Stock granted to such Named Executive Officers set forth
in the
table above is based on the closing stock price on the NYSE of the Common
Stock
of $64.63 per share on March 6, 2007. With respect to each grant of Restricted
Stock made to a Named Executive Officer on March 6, 2007, the shares of
Restricted Stock awarded vest as follows: 25% on March 6, 2008; 25% on
March 6,
2009; 25% on March 6, 2010; and 25% on March 6, 2011. Upon the earliest
to occur
of a change in control of the Company or the death or disability of the
recipient of the grant, any unvested portion of such Restricted Stock grant
shall vest immediately. Dividends, if any, are paid on Restricted Stock
awards
at the same rate as paid to all stockholders.
31
It
is
generally the Company’s policy not to enter into employment contracts unless it
is legally required or customary to do so in a particular country. However,
the
Board has determined that maintaining Mr. DeFeo’s services is important to the
long-term strategy of the Company and that the loss of Mr. DeFeo’s services
could have a significant, negative impact on the Company’s business. Therefore,
the Company feels it is prudent to have an employment agreement with Mr.
DeFeo,
which expires on December 31, 2012. The Company relies on the management
and
leadership skills of its other named executive officers, but not to the
same
extent that it relies on Mr. DeFeo, and accordingly these executives are
not
bound by employment agreements. The Company’s other executive officers are
strictly at-will employees. Each of the Company’s executive officers, including
Mr. DeFeo, have their compensation reviewed on an annual basis.
Under
the
DeFeo Agreement, Mr. DeFeo received an initial annual base salary of $850,000,
subject to increase by the Board, as well as annual bonuses and long-term
incentive compensation during his term of employment in accordance with
any plan
or plans established by the Company. The Company also agrees to use its
best
efforts to have Mr. DeFeo elected as a member of the Board and, consistent
with
generally accepted best corporate governance standards, Chairman of the
Board
during the term of the DeFeo Agreement.
For
additional information regarding Mr. DeFeo’s employment agreement, see
“Potential Payments Upon Termination or Change in Control.”
32
Outstanding
Equity Awards at Fiscal Year-End
The
table
below summarizes the amount of unexercised stock options, Restricted Stock
that
has not vested and equity incentive plan awards that have not yet vested
for
each of the Named Executive Officers as of the end of 2007.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (1)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($) (1)
|
|||||||||||||||||||
|
Ronald
M. DeFeo
|
3,230
|
|
|
$
|
8.40
|
4/5/2011
|
||||||||||||||||||||||
|
|
150,000
|
|
|
$
|
11.18
|
3/19/2012
|
||||||||||||||||||||||
|
|
100,000
|
|
|
$
|
5.59
|
3/13/2013
|
||||||||||||||||||||||
|
|
60,000
|
20,000
|
(2)
|
|
$
|
16.35
|
5/7/2014
|
|||||||||||||||||||||
|
|
|
|
|
|
|
10,000
|
(3)
|
$
|
655,700
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
160,000
|
(4)
|
$
|
10,491,200
|
|||||||||||||||||
|
|
|
|
|
|
|
21,975
|
(5)
|
$
|
1,440,901
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
107,871
|
(6)
|
$
|
7,073,101
|
|||||||||||||||||
|
|
|
|
|
|
|
17,114
|
(7)
|
$
|
1,122,165
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
63,012
|
(8)
|
$
|
4,131,697
|
|||||||||||||||||
|
Phillip
C. Widman
|
25,000
|
|
|
$
|
10.05
|
9/17/2012
|
||||||||||||||||||||||
|
|
9,000
|
3,000
|
(9)
|
|
$
|
17.35
|
3/11/2014
|
|||||||||||||||||||||
|
|
5,000
|
5,000
|
(10)
|
|
$
|
45.75
|
6/1/2016
|
|||||||||||||||||||||
|
|
|
|
|
|
|
5,000
|
(11)
|
$
|
327,850
|
|||||||||||||||||||
|
|
|
|
|
|
|
5,000
|
(12)
|
$
|
327,850
|
|||||||||||||||||||
|
|
|
|
|
|
|
10,000
|
(13)
|
$
|
655,700
|
|||||||||||||||||||
|
|
|
|
|
|
|
11,986
|
(5)
|
$
|
785,922
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
19,613
|
(6)
|
$
|
1,286,024
|
|||||||||||||||||
33
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (1)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($) (1)
|
|||||||||||||||||||
|
|
|
|
|
|
|
5,562
|
(7)
|
$
|
364,700
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
20,479
|
(8)
|
$
|
1,342,808
|
|||||||||||||||||
|
Thomas
J. Riordan
|
|
|
|
|
|
30,000
|
(14)
|
$
|
1,967,100
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
30,000
|
(15)
|
$
|
1,967,100
|
|||||||||||||||||
|
|
|
|
|
|
|
6,418
|
(7)
|
$
|
420,828
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
23,629
|
(8)
|
$
|
1,549,354
|
|||||||||||||||||
|
Steve
Filipov
|
|
2,500
|
(9)
|
|
$
|
17.35
|
3/11/2014
|
|||||||||||||||||||||
|
5,000
|
5,000
|
(10)
|
|
$
|
45.75
|
6/1/2016
|
||||||||||||||||||||||
|
|
|
|
|
|
|
5,000
|
(16)
|
$
|
327,850
|
|||||||||||||||||||
|
|
|
|
|
|
|
4,500
|
(11)
|
$
|
295,065
|
|||||||||||||||||||
|
|
|
|
|
|
|
10,000
|
(13)
|
$
|
655,700
|
|||||||||||||||||||
|
|
|
|
|
|
|
7,991
|
(5)
|
$
|
523,970
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
13,075
|
(6)
|
$
|
857,328
|
|||||||||||||||||
|
|
|
|
|
|
|
6,846
|
(7)
|
$
|
448,892
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
8,402
|
(8)
|
$
|
550,919
|
|||||||||||||||||
|
Richard
Nichols
|
7,500
|
$
|
6.53
|
10/1/2010
|
||||||||||||||||||||||||
|
|
10,000
|
|
|
$
|
5.66
|
2/7/2013
|
||||||||||||||||||||||
|
|
7,500
|
2,500
|
(17)
|
|
$
|
14.99
|
2/1/2014
|
|||||||||||||||||||||
|
|
7,500
|
2,500
|
(9)
|
|
$
|
17.35
|
3/11/2014
|
|||||||||||||||||||||
|
|
8,000
|
8,000
|
(10)
|
|
$
|
45.75
|
6/1/2016
|
|||||||||||||||||||||
34
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (1)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($) (1)
|
|||||||||||||||||||
|
|
|
|
|
|
|
3,750
|
(18)
|
$
|
245,888
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
3,750
|
(11)
|
$
|
245,888
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
16,000
|
(13)
|
$
|
1,049,120
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
7,991
|
(5)
|
$
|
523,970
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
13,075
|
(6)
|
$
|
857,328
|
|||||||||||||||||
|
|
|
|
|
|
|
6,846
|
(7)
|
$
|
448,892
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
8,402
|
(8)
|
$
|
550,919
|
|||||||||||||||||
(1)
Values based on the closing price of the Company’s Common Stock on the NYSE on
December 31, 2007 of $65.57.
(2)
The
options vest on May 7, 2008.
(3)
The
shares of Restricted Stock vest on May 7, 2008.
(4)
The
shares of Restricted Stock vest as follows: (i) 20,000 shares vest on March
31,
2008, because the Company exceeded certain pre-determined financial targets
for
2007; (ii) 70,000 shares will vest on March 31, 2009, if the Company equals
or
exceeds certain pre-determined financial targets for 2005 through 2008;
and (iv)
70,000 shares will vest on March 31, 2009, if the Company equals or exceeds
certain other pre-determined financial targets for 2006 through 2008.
(5)
The
shares of Restricted Stock vest in equal increments on September 1, 2008,
September 1, 2009 and September 1, 2010.
(6)
The
shares of Restricted Stock vest as follows because the Company exceeded
the
targeted percentage ROIC for the five consecutive calendar quarter period
ending
December 31, 2007: 25% of this grant vest on March 6, 2008, and 25% vest
on each
of December 31, 2008, December 31, 2009, and December 31, 2010. As Terex
achieved an ROIC of 41.6% in the five consecutive calendar quarter period
ending
December 31, 2007, each executive received 118.0% of the performance-based
award, which will be paid in accordance with the vesting schedule described
above.
(7)
The
shares of Restricted Stock vest in equal increments on March 6, 2008, March
6,
2009, March 6, 2010 and March 6, 2011.
35
(8)
The
shares of Restricted Stock vest as follows because the Company exceeded
the
targeted percentage ROIC for the four consecutive calendar quarter period
ending
December 31, 2007: 25% of this grant vest on March 6, 2008, and 25% vest
on each
of December 31, 2008, December 31, 2009, and December 31, 2010. As Terex
achieved an ROIC of 43.3% in 2007, each executive received 108.5% of the
performance-based award, which will be paid in accordance with the vesting
schedule described above.
(9)
The
options vest on March 11, 2008.
(10)
The
options vest in equal increments on March 31, 2008 and March 31, 2009.
(11)
The
shares of Restricted Stock vest on March 11, 2008.
(12)
The
shares of Restricted Stock vest on September 17, 2008.
(13)
The
shares of Restricted Stock vest on March 31, 2010.
(14)
The
shares of Restricted Stock vest in equal increments on January 31, 2008,
January
31, 2009, January 31, 2010 and January 31, 2011.
(15)
The
shares of Restricted Stock vest at a rate of 7,500 per year if the Company
achieves a targeted percentage ROIC for each such year. See the “Grants of Plan
Based Awards” section above for a detailed description of the performance
measures used in this grant of Restricted Stock. As Terex achieved an ROIC
of
43.3% in 2007, Mr. Riordan received 108.5% of the 2007 portion of the
performance-based award.
(16)
The
shares of Restricted Stock vest on January 1, 2008.
(17)
The
options vest on February 1, 2008.
(18)
The
shares of Restricted Stock vest on February 1, 2008.
36
Option
Exercises and Stock Vested
The
table
below summarizes the stock options exercised and each vesting of Restricted
Stock during 2007 for each of the Named Executive Officers.
|
Option Awards
|
Stock Awards
|
||||||||||||
|
Name
|
Number of
Shares
Acquired
on Exercise
(#)
|
Value Realized
on Exercise
($)
|
Number of
Shares
Acquired
on Vesting
(#)
|
Value Realized
on Vesting
($)
|
|||||||||
|
Ronald M. DeFeo
|
162,990
|
$
|
11,828,184
|
37,324
|
$
|
2,820,341
|
|||||||
|
Phillip
C. Widman
|
12,500
|
$
|
878,850
|
18,995
|
$
|
1,335,671
|
|||||||
|
Thomas
J. Riordan
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||
|
Steve
Filipov
|
6,500
|
$
|
398,713
|
13,163
|
$
|
900,460
|
|||||||
|
Richard
Nichols
|
-0-
|
-0-
|
11,163
|
$
|
739,958
|
||||||||
37
Pension
Benefits
The
table
below provides information with respect to each of the Company’s pension plans
that provide for payments at, following, or in connection with the retirement
of
a Named Executive Officer.
|
Name
|
Plan Name
|
Number of
Years Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
|
Payments
During Last
Fiscal Year
($)
|
|||||||||
|
Ronald
M. DeFeo
|
Supplemental
Executive Retirement Plan |
16
|
$
|
5,086,642
|
-0-
|
||||||||
|
|
Terex
Corporation
Salaried Employees’ Retirement Plan |
1(1)
|
|
$
|
22,647
|
-0-
|
|||||||
|
Phillip
C. Widman
|
Supplemental
Executive Retirement Plan |
5(3)
|
|
$
|
328,360
|
-0-
|
|||||||
|
Thomas
J. Riordan
|
Supplemental
Executive Retirement Plan |
1(2)
|
|
$
|
93,595
|
-0-
|
|||||||
|
Steve
Filipov
|
Supplemental
Executive Retirement Plan |
12
|
$
|
355,284
|
-0-
|
||||||||
|
Richard
Nichols
|
Supplemental
Executive Retirement Plan |
7
|
$
|
204,446
|
-0-
|
||||||||
(1) Participation in the Terex Corporation Salaried Employees’ Retirement Plan was frozen as of May 7, 1993, and no participants, including Mr. DeFeo, are credited with service for benefit purposes following such date.
(2)
Following the completion of five years of service with the Company, Mr. Riordan
will be credited with an additional ten years of service for vesting purposes.
(3)
Upon
completing ten years of service with the Company, Mr. Widman will be credited
with an additional five years of service for benefit and vesting
purposes.
The
Company adopted the SERP effective October 1, 2002. The SERP is intended
to
provide certain senior executives of the Company with retirement benefits
in
recognition of their contributions to the long-term growth of the Company.
Participants in the SERP with fifteen or more years of eligible service are
vested and entitled to annual pension benefits beginning at a normal retirement
age (“NRA”) of 65 or when age plus years of service first equal 90 (the “Normal
Retirement Benefit”). The Board determined that for hiring and retention
purposes, Messrs. Riordan and Widman would be credited with additional years
of
service as described above. Participants in the SERP who are at least 55
years
of age and vested but not yet eligible to receive the Normal Retirement Benefit
may receive an early retirement benefit that is equal to the actuarial
equivalent of the Normal Retirement Benefit.
The
compensation covered by the SERP is based on a participant’s final five-year
average of annual salary and bonus. Benefits are computed assuming an NRA
of 65
or when age plus years of service first equal 90. Benefits accrue at 2% of
average compensation per year of service, payable at the NRA, up to a maximum
of
20 years of service. Benefits are payable monthly as a life annuity with
120
monthly payments guaranteed. Benefits are reduced by 50% for Social Security
payments and 100% for any other Company-paid retirement benefits.
38
Mr.
DeFeo
participates in the Terex Corporation Salaried Employees’ Retirement Plan, which
was merged into the Terex Corporation Retirement Program for Salaried Employees
on June 30, 2000 (the “Retirement Plan”). None of the other Named Executive
Officers participate in the Retirement Plan. Participants in the Retirement
Plan
with five or more years of eligible service are fully vested and entitled
to
annual pension benefits beginning at age 65. Retirement benefits under the
Retirement Plan for Mr. DeFeo are equal to the product of (i) his years of
service (as defined in the Retirement Plan) and (ii) 1.08% of final average
earnings (as defined in the Retirement Plan) plus 0.65% of such compensation
in
excess of amounts shown on the applicable Social Security Integration Table.
There is no offset for primary Social Security. Participation in the Retirement
Plan was frozen as of May 7, 1993, and no participants, including Mr. DeFeo,
are
credited with service for benefit purposes following such date. However,
participants not currently fully vested will be credited with service for
purposes of determining vesting only. The annual retirement benefits payable
at
normal retirement age under the Retirement Plan will be $3,687 for Mr.
DeFeo.
See
Note
P – “Retirement Plans and Other Benefits” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007, for a detailed description
of
the assumptions that the Company uses in determining the present value of
the
accumulated benefit.
39
Nonqualified
Deferred Compensation
The
table
below provides information for the Named Executive Officers with respect
to the
Company’s Deferred Compensation Plan, which was approved by the Board effective
January 1, 1997 and by the stockholders of the Company pursuant to the NYSE
rules on May 25, 2004.
|
Name
|
Executive
Contributions in
Last FY
($)
|
Registrant
Contributions in
Last FY
($) (1)
|
Aggregate
Earnings in Last
FY
($) (1)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at Last
FYE
($)
|
|||||||||||
|
Ronald
M. DeFeo
|
-0-
|
-0-
|
$
|
149,323
|
$
|
4,094,840
|
$
|
9,889,991
|
(2)
|
|||||||
|
Phillip
C. Widman
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||
|
Thomas
J. Riordan
|
$
|
32,813
|
$
|
8,203
|
$
|
(5,269
|
)
|
-0-
|
$
|
35,747
|
||||||
|
Steve
Filipov
|
-0-
|
-0-
|
$
|
18,300
|
-0-
|
$
|
986,909
|
|||||||||
|
Richard
Nichols
|
-0-
|
-0-
|
$
|
11,373
|
-0-
|
$
|
743,649
|
|||||||||
(1) The amounts shown in the Registrant Contributions in Last FY column are included in the “All Other Compensation” column of the Summary Compensation table above. The amounts shown in the “Aggregate Earnings” in Last FY column include $146 for Mr. Filipov, which amounts are included in the Summary Compensation Table above, as these earnings were above-market or preferential.
(2)
Includes $1,723,150 for Mr. DeFeo, which amount was included in Summary
Compensation Tables in previous years.
Under
the
Deferred Compensation Plan, a Named Executive Officer may defer up to (i)
20% of
his/her salary and (ii) 100% of his/her bonus. The deferrals may be invested
in
Common Stock or in a bond index. The Company credits the deferrals in the
bond
index with an interest rate equal to a bond fund that mirrors an investment
strategy in corporate bonds of companies rated Baa or higher. The rate of
interest for 2007 was approximately 6% per annum. The Company makes a
contribution of 25% of the Named Executive Officer’s salary and/or bonus that is
invested in Common Stock. The Company does not make a contribution with respect
to any deferrals into the bond index.
The
Named
Executive Officers may receive payments under the Deferred Compensation Plan
after their employment terminates, upon their death or if they have an
unforeseeable emergency (as defined in the Deferred Compensation Plan). In
addition, they may elect to receive all or a portion of their deferral,
including the Company’s matching contribution, after the deferral has been in
the Deferred Compensation Plan for at least three years. Furthermore, for
deferrals made prior to December 31, 2004, if they elect to receive an
accelerated distribution under the Deferred Compensation Plan, the Named
Executive Officers shall (i) forfeit 10% of the amount of the distribution
to
the Company, (ii) forfeit any Company matching contribution that has not
been in
the plan for at least one year due to the accelerated distribution and (iii)
be
unable to make further deferrals into the plan for at least 12 months. In
accordance with Section 409A of the Code, accelerated distributions are not
allowed under the Deferred Compensation Plan for any deferrals made after
December 31, 2004.
40
Potential
Payments Upon Termination or Change in Control
If
Mr.
DeFeo's employment with the Company is terminated for any reason, including
for
Cause (as such term is defined in the DeFeo Agreement), due to Mr. DeFeo's
death
or disability, or by Mr. DeFeo voluntarily, or if Mr. DeFeo elects not to
extend
the DeFeo Agreement at the end of its term, Mr. DeFeo or his beneficiary
is to
receive, in addition to his salary, bonus and other compensation earned through
the time of such termination, (i) any deferred compensation then in effect,
(ii)
any other compensation or benefits that have vested through the date of
termination or to which Mr. DeFeo may then be entitled, including long term
incentive compensation awards, stock and stock option awards, and (iii)
reimbursement of expenses incurred by Mr. DeFeo through the date of termination
but not yet reimbursed. If Mr. DeFeo’s employment with the Company is terminated
as the result of Mr. DeFeo’s death or disability, then Mr. DeFeo or his
beneficiary would also be entitled to receive a prorated portion of his bonus
for the fiscal year during which such termination occurs.
If
Mr.
DeFeo's employment with the Company is terminated by the Company without
Cause
or by Mr. DeFeo for Good Reason (as such term is defined in the DeFeo
Agreement), or if the Company elects not to extend the DeFeo Agreement at
the
end of its term, Mr. DeFeo is to receive, in addition to his salary, bonus
and
other compensation earned through the time of such termination, (i) two times
his base salary, (ii) two times the average of his annual bonuses for the
two
calendar years preceding termination, (iii) a prorated portion of his bonus
for
the fiscal year during which such termination occurs, (iv) continuing insurance
coverage for up to two years from termination, (v) immediate vesting of
non-performance based unvested stock options and stock grants with a period
of
one year following termination to exercise his options, and (vi) continuation
of
all other benefits in effect at the time of termination for up to two years
from
termination. The cash portion of this payment is spread over a 13-month period
following the date of termination, except if such termination occurs within
24
months following a Change in Control, in which event the cash portion is
to be
paid in a lump sum. In addition, if Mr. DeFeo’s employment is terminated by the
Company without Cause or by Mr. DeFeo for Good Reason within 24 months following
a Change in Control, Mr. DeFeo is entitled to (A) the greater of (1) the
sum of
(i), (ii) and (iii) above and (2) an amount equal to all compensation required
to be paid to Mr. DeFeo for the balance of the term of the DeFeo Agreement,
(B)
the immediate vesting of any unvested performance stock options, stock grants,
long term incentive compensation awards and other similar awards, with a
period
of one year following termination to exercise any such options and (C) any
amounts payable under the SERP for the number of years of service achieved
by
Mr. DeFeo on the date of termination. The DeFeo Agreement also provides for
additional payments to Mr. DeFeo in the event that any payments under the
DeFeo
Agreement are subject to excise tax under the Code, such that Mr. DeFeo retains
an amount of such additional payments equal to the amount of such excise
tax.
The
DeFeo
Agreement requires Mr. DeFeo to keep certain information of the Company
confidential during his employment and thereafter. The DeFeo Agreement also
contains an agreement by Mr. DeFeo not to compete with the business of the
Company during his term of employment with the Company and for a period of
18
months thereafter (24 months thereafter, if the date of Mr. DeFeo's termination
is within 24 months following a Change in Control).
The
following table describes the potential payments upon termination or a change
in
control of the Company for Mr. DeFeo, the Company’s Chief Executive Officer,
assuming that the triggering event took place on December 31, 2007 using
the
share price of Terex Common Stock as of that day (both as required by the
SEC).
However, a termination or change in control did not occur on December 31,
2007 and Mr. DeFeo was not terminated on that date. There can be no assurance
that a termination or change in control would produce the same or similar
results as those described if it occurs on any other date or at any other
price.
41
|
Executive Benefits
and Payments Upon
Termination
|
Voluntary
Termination
|
Early or
Normal
Retirement
|
Involuntary Not
For Cause or
Good Reason
Termination
|
For Cause
Termination
|
Involuntary Not For
Cause or Good
Reason Termination
(CIC)
|
Death
|
Disability
|
|||||||||||||||
|
Base
Salary
|
-0-
|
-0-
|
$
|
2,300,000
|
-0-
|
$
|
2,300,000
|
-0-
|
-0-
|
|||||||||||||
|
Annual
Incentive
|
$
|
2,507,713
|
$
|
2,507,713
|
$
|
6,510,713
|
$
|
2,507,713
|
$
|
6,510,713
|
$
|
2,507,713
|
$
|
2,507,713
|
||||||||
|
Restricted
Shares (time-based)
|
-0-
|
-0-
|
$
|
3,218,766
|
-0-
|
$
|
3,218,766
|
$
|
3,218,766
|
$
|
3,218,766
|
|||||||||||
|
Restricted
Shares (performance-based)
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
21,695,998
|
$
|
21,695,998
|
$
|
21,695,998
|
||||||||||||
|
Stock
Options
|
-0-
|
-0-
|
$
|
984,400
|
-0-
|
$
|
984,400
|
$
|
984,400
|
$
|
984,400
|
|||||||||||
|
Company
Car
|
-0-
|
-0-
|
$
|
60,000
|
(1)
|
-0-
|
$
|
60,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Club
Memberships
|
-0-
|
-0-
|
$
|
34,000
|
(1)
|
-0-
|
$
|
34,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Long-term
Disability Premiums
|
-0-
|
-0-
|
$
|
18,000
|
(1)
|
-0-
|
$
|
18,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Life
Insurance Premiums
|
-0-
|
-0-
|
$
|
420,000
|
(1)
|
-0-
|
$
|
420,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Financial
Planning Services
|
-0-
|
-0-
|
$
|
30,000
|
(1)
|
-0-
|
$
|
30,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Retirement
Plan Payments
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
$
|
16,000,000
|
(2)
|
|
|
Life
Insurance Proceeds
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
11,800,000
|
-0-
|
||||||||||||||
|
Disability
Benefits
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
2,100,000
|
(3)
|
|||||||||||||
|
Excise
Tax Gross
Up
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
(1)
Reflects the estimated value of a benefit or perquisite that Mr. DeFeo would
be
entitled to receive.
(2)
Reflects the estimated value of Mr. DeFeo’s qualified and non-qualified
retirement plans on December 31, 2007.
(3)
Reflects the estimated value of all future payments that Mr. DeFeo would
be
entitled to receive under the Company’s disability program.
Pursuant
to the Executive Agreements, if an executive’s employment with the Company is
terminated within six months of a Change in Control (as defined in the Executive
Agreements) in anticipation of such Change in Control or within 24 months
following a Change in Control, other than for Cause, by reason of death or
Permanent Disability (as defined therein), or by the executive without Good
Reason (each as defined in the Executive Agreements), the executive is to
receive (i) two times his base salary (Messrs. Nichols and Filipov each would
receive one times his base salary), (ii) two times his annual bonus for the
last
calendar year preceding termination (Messrs. Nichols and Filipov each would
receive one times his annual bonus), and (iii) any accrued vacation pay.
This
payment is to be paid in a lump sum simultaneously with the executive’s
termination or on a monthly basis. The Executive Agreements also provide
for
additional payments to the executive in the event that any payments under
the
Executive Agreements are subject to excise tax under the Code, such that
the
executive retains an amount of such additional payments equal to the amount
of
such excise tax. In addition, the executive also will receive (a) immediate
vesting of unvested stock options and stock grants, with a period of up to
six
months following termination to exercise such options, (b) immediate vesting
of
all unvested units granted under the 1999 LTIP for their maximum cumulative
value (this is applicable only for Messrs. Widman and Riordan), (c) continuing
insurance coverage for 24 months from termination (Messrs. Nichols and Filipov
each would receive coverage for 12 months), (d) continuation of all other
benefits in effect at the time of termination for 24 months from termination
(Messrs. Nichols and Filipov each would receive benefits for 12 months) and
(e)
outplacement services for a period of at least 12 months from termination.
42
In
the
event an executive’s employment with the Company is terminated by the Company
without Cause or by the executive for Good Reason (other than in connection
with
a Change in Control), the Company is to pay the executive (i) two times his
base
salary (Messrs. Nichols and Filipov each would receive one times his base
salary), (ii) two times his annual bonus for the last calendar year preceding
termination (this is applicable only for Messrs. Widman and Riordan) and
(iii)
any accrued vacation pay. This is to be paid in 12 or 24 equal monthly payments,
as applicable. In such event, the executive would also have the right to
exercise any stock options, long term incentive awards or similar awards
for up
to six months following termination, and would immediately vest in options
and
stock awards granted under the Company’s incentive plans that would vest in the
24 months following the date of termination (Messrs. Nichols and Filipov
each
would immediately vest in options and stock awards granted under the Company’s
incentive plans that would vest in the 12 months following the date of
termination). In addition, the Company would also provide continuing insurance
coverage, continuation of all other benefits in effect at the time of
termination for 24 months from termination (Messrs. Nichols and Filipov each
would receive coverage and benefits for 12 months) and outplacement services
for
a period of at least 12 months from termination.
As
part
of the Executive Agreements, the executives agree to keep confidential certain
Company information and not to disparage the Company. In addition, Mr. Riordan
agrees that, for a period of 18 months, and Messrs. Widman, Nichols and Filipov
agree that, for a period of 12 months, following the date of termination
(or 24
months for Mr. Riordan following such termination, if such termination is
within
24 months following a Change in Control), the executive will not, without
the
prior written consent of the Company, directly or indirectly engage in or
render
any services to any Competitive Business (as such term is defined in the
Executive Agreements) nor solicit, induce or entice any employee of the Company
to leave the Company.
Each
Executive Agreement remains in effect until the earliest of: (i) termination
of
the executive’s employment prior to a Change in Control (other than termination
in anticipation of a Change in Control) by the Company for Cause, by the
executive for any reason other than Good Reason or by reason of the executive’s
death or Permanent Disability; (ii) termination of the executive’s employment
with the Company following a Change in Control, by reason of death or Permanent
Disability, by the Company for Cause or by the executive for any reason other
than Good Reason; or (iii) three years after the date of a Change in Control;
however, each Executive Agreement terminates on March 31, 2008, if the executive
is still in the employ of the Company at such time and a Change in Control
has
not yet occurred and is not reasonably expected to occur within six months
thereafter.
As
the
Executive Agreements are set to expire on March 31, 2008, the Board has reviewed
the costs and benefits of these agreements and has determined that it remains
in
the best interests of the Company and its stockholders to foster the continued
employment of key management personnel. Therefore, Terex and its named executive
officers, other than its CEO, and certain of its other executive officers
will
be entering into new Executive Agreements effective April 1, 2008. The new
Executive Agreements are similar in nature to the previous agreements described
above. The primary difference between the new Executive Agreements and the
previous agreements is the replacement of a fixed two year term with a one
year
term with an annual renewal provision. In addition, certain changes were
made
which were intended to comply with Sections 409A and 162(m) of the Code.
Furthermore, the form of Executive Agreement that will be entered into with
Messrs. Nichols and Filipov will be similar to the form of Executive Agreement
entered into with Messrs. Widman and Riordan where the severance payments
and
certain other benefits received by the executive are based upon a two year
time
period instead of a one year time period.
43
The
following table describes the potential payments upon termination or a change
in
control of the Company for Mr. Widman, assuming that the triggering event
took
place on December 31, 2007 using the share price of Terex Common Stock as
of
that day (both as required by the SEC). However, a termination or change
in
control did not occur on December 31, 2007 and Mr. Widman was not
terminated on that date. There can be no assurance that a termination or
change
in control would produce the same or similar results as those described if
it
occurs on any other date or at any other price.
|
Executive Benefits
and Payments Upon
Termination
|
Voluntary
Termination
|
Early or
Normal
Retirement
|
Involuntary Not
For Cause or
Good Reason
Termination
|
For Cause
Termination
|
Involuntary Not For
Cause or Good
Reason Termination
(CIC)
|
Death
|
Disability
|
|||||||||||||||
|
Base
Salary
|
-0-
|
-0-
|
$
|
1,000,000
|
-0-
|
$
|
1,000,000
|
-0-
|
-0-
|
|||||||||||||
|
Annual
Incentive
|
-0-
|
-0-
|
$
|
1,130,168
|
-0-
|
$
|
1,130,168
|
-0-
|
-0-
|
|||||||||||||
|
Restricted
Shares (time-based)
|
-0-
|
-0-
|
$
|
1,362,020
|
-0-
|
$
|
2,462,022
|
$
|
2,462,022
|
$
|
2,462,022
|
|||||||||||
|
Restricted
Shares (performance-based)
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
2,628,832
|
$
|
2,628,832
|
$
|
2,628,832
|
||||||||||||
|
Stock
Options
|
-0-
|
-0-
|
$
|
243,760
|
-0-
|
$
|
243,760
|
$
|
243,760
|
$
|
243,760
|
|||||||||||
|
Company
Car
|
-0-
|
-0-
|
$
|
50,000
|
(1)
|
-0-
|
$
|
50,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Club
Memberships
|
-0-
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Long-term
Disability Premiums
|
-0-
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Life
Insurance Premiums
|
-0-
|
-0-
|
$
|
20,000
|
(1)
|
-0-
|
$
|
20,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Financial
Planning Services
|
-0-
|
-0-
|
$
|
5,000
|
(1)
|
-0-
|
$
|
5,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Retirement
Plan Payments
|
$
|
350,000
|
(2)
|
$
|
350,000
|
(2)
|
$
|
700,000
|
(2)
|
$
|
350,000
|
(2)
|
$
|
700,000
|
(2)
|
$
|
350,000
|
(2)
|
$
|
350,000
|
(2)
|
|
|
Life
Insurance Proceeds
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,000,000
|
-0-
|
||||||||||||||
|
Disability
Benefits
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
2,450,000
|
(3)
|
|||||||||||||
|
Excise
Tax Gross
Up
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
(1)
Reflects the estimated value of a benefit or perquisite that Mr. Widman would
be
entitled to receive.
(2)
Reflects the estimated value of Mr. Widman’s qualified and non-qualified
retirement plans on December 31, 2007.
(3)
Reflects the estimated value of all future payments that Mr. Widman would
be
entitled to receive under the Company’s disability program.
44
The
following table describes the potential payments upon termination or a change
in
control of the Company for Mr. Riordan, assuming that the triggering event
took
place on December 31, 2007 using the share price of Terex Common Stock as
of
that day (both as required by the SEC). However, a termination or change
in
control did not occur on December 31, 2007 and Mr. Riordan was not
terminated on that date. There can be no assurance that a termination or
change
in control would produce the same or similar results as those described if
it
occurs on any other date or at any other price.
|
Executive Benefits
and Payments Upon
Termination
|
Voluntary
Termination
|
Early or
Normal
Retirement
|
Involuntary Not
For Cause or
Good Reason
Termination
|
For Cause
Termination
|
Involuntary Not For
Cause or Good
Reason Termination
(CIC)
|
Death
|
Disability
|
|||||||||||||||
|
Base
Salary
|
-0-
|
-0-
|
$
|
1,500,000
|
-0-
|
$
|
1,500,000
|
-0-
|
-0-
|
|||||||||||||
|
Annual
Incentive
|
-0-
|
-0-
|
$
|
1,607,849
|
-0-
|
$
|
1,607,849
|
-0-
|
-0-
|
|||||||||||||
|
Restricted
Shares (time-based)
|
-0-
|
-0-
|
$
|
1,193,964
|
-0-
|
$
|
2,387,928
|
$
|
2,387,928
|
$
|
2,387,928
|
|||||||||||
|
Restricted
Shares (performance-based)
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
3,516,454
|
$
|
3,516,454
|
$
|
3,516,454
|
||||||||||||
|
Stock
Options
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Company
Car
|
-0-
|
-0-
|
$
|
40,000
|
(1)
|
-0-
|
$
|
40,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Club
Memberships
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Long-term
Disability Premiums
|
-0-
|
-0-
|
$
|
1,500
|
(1)
|
-0-
|
$
|
1,500
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Life
Insurance Premiums
|
-0-
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
$
|
15,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Financial
Planning Services
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Retirement
Plan Payments
|
$
|
60,000
|
(2)
|
$
|
60,000
|
(2)
|
$
|
150,000
|
(2)
|
$
|
60,000
|
(2)
|
$
|
150,000
|
(2)
|
$
|
60,000
|
(2)
|
$
|
60,000
|
(2)
|
|
|
Life
Insurance Proceeds
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,500,000
|
-0-
|
||||||||||||||
|
Disability
Benefits
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,150,000
|
(3)
|
|||||||||||||
|
Excise
Tax Gross
Up
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
2,800,000
|
-0-
|
-0-
|
||||||||||||||
(1)
Reflects the estimated value of a benefit or perquisite that Mr. Riordan
would
be entitled to receive.
(2)
Reflects the estimated value of Mr. Riordan’s qualified and non-qualified
retirement plans on December 31, 2007.
(3)
Reflects the estimated value of all future payments that Mr. Riordan would
be
entitled to receive under the Company’s disability program.
45
The
following table describes the potential payments upon termination or a change
in
control of the Company for Mr. Filipov, assuming that the triggering event
took
place on December 31, 2007 using the share price of Terex Common Stock as
of
that day (both as required by the SEC). However, a termination or change
in
control did not occur on December 31, 2007 and Mr. Filipov was not
terminated on that date. There can be no assurance that a termination or
change
in control would produce the same or similar results as those described if
it
occurs on any other date or at any other price.
|
Executive Benefits
and Payments Upon
Termination
|
Voluntary
Termination
|
Early or
Normal
Retirement
|
Involuntary Not
For Cause or
Good Reason
Termination
|
For Cause
Termination
|
Involuntary Not For
Cause or Good
Reason Termination
(CIC)
|
Death
|
Disability
|
|||||||||||||||
|
Base
Salary
|
-0-
|
-0-
|
$
|
397,535
|
-0-
|
$
|
397,535
|
-0-
|
-0-
|
|||||||||||||
|
Annual
Incentive
|
-0-
|
-0-
|
$
|
356,121
|
-0-
|
$
|
716,136
|
-0-
|
-0-
|
|||||||||||||
|
Restricted
Shares (time-based)
|
-0-
|
-0-
|
$
|
909,652
|
-0-
|
$
|
2,251,477
|
$
|
2,251,477
|
$
|
2,251,477
|
|||||||||||
|
Restricted
Shares (performance-based)
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,408,247
|
$
|
1,408,247
|
$
|
1,408,247
|
||||||||||||
|
Stock
Options
|
-0-
|
-0-
|
$
|
170,100
|
-0-
|
$
|
219,650
|
$
|
219,650
|
$
|
219,650
|
|||||||||||
|
Company
Car
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Club
Memberships
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Long-term
Disability Premiums
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Life
Insurance Premiums
|
-0-
|
-0-
|
$
|
1,000
|
(1)
|
-0-
|
$
|
1,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Financial
Planning Services
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Retirement
Plan Payments
|
$
|
1,400,000
|
(2)
|
$
|
1,400,000
|
(2)
|
$
|
1,750,000
|
(2)
|
$
|
1,400,000
|
(2)
|
$
|
1,750,000
|
(2)
|
$
|
1,400,000
|
(2)
|
$
|
1,400,000
|
(2)
|
|
|
Life
Insurance Proceeds
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
478,000
|
-0-
|
||||||||||||||
|
Disability
Benefits
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,600,000
|
(3) | |||||||||||||
|
Excise
Tax Gross
Up
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
(1)
Reflects the estimated value of a benefit or perquisite that Mr. Filipov
would
be entitled to receive.
(2)
Reflects the estimated value of Mr. Filipov’s qualified and non-qualified
retirement plans on December 31, 2007.
(3)
Reflects the estimated value of all future payments that Mr. Filipov would
be
entitled to receive under the Company’s disability program.
46
The
following table describes the potential payments upon termination or a change
in
control of the Company for Mr. Nichols, assuming that the triggering event
took
place on December 31, 2007 using the share price of Terex Common Stock as
of
that day (both as required by the SEC). However, a termination or change
in
control did not occur on December 31, 2007 and Mr. Nichols was not
terminated on that date. There can be no assurance that a termination or
change
in control would produce the same or similar results as those described if
it
occurs on any other date or at any other price.
|
Executive Benefits
and Payments Upon
Termination
|
Voluntary
Termination
|
Early or
Normal
Retirement
|
Involuntary Not
For Cause or
Good Reason
Termination
|
For Cause
Termination
|
Involuntary Not For
Cause or Good
Reason Termination
(CIC)
|
Death
|
Disability
|
|||||||||||||||
|
Base
Salary
|
-0-
|
-0-
|
$
|
375,000
|
-0-
|
$
|
375,000
|
-0-
|
-0-
|
|||||||||||||
|
Annual
Incentive
|
-0-
|
-0-
|
$
|
339,979
|
-0-
|
$
|
678,167
|
-0-
|
-0-
|
|||||||||||||
|
Restricted
Shares (time-based)
|
-0-
|
-0-
|
$
|
778,512
|
-0-
|
$
|
2,513,757
|
$
|
2,513,757
|
$
|
2,513,757
|
|||||||||||
|
Restricted
Shares (performance-based)
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
1,408,247
|
$
|
1,408,247
|
$
|
1,408,247
|
||||||||||||
|
Stock
Options
|
-0-
|
-0-
|
$
|
326,280
|
-0-
|
$
|
405,560
|
$
|
219,650
|
$
|
219,650
|
|||||||||||
|
Company
Car
|
-0-
|
-0-
|
$
|
28,000
|
(1)
|
-0-
|
$
|
28,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Club
Memberships
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Long-term
Disability Premiums
|
-0-
|
-0-
|
$
|
5,000
|
(1)
|
-0-
|
$
|
5,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Life
Insurance Premiums
|
-0-
|
-0-
|
$
|
3,000
|
(1)
|
-0-
|
$
|
3,000
|
(1)
|
-0-
|
-0-
|
|||||||||||
|
Financial
Planning Services
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
|
Retirement
Plan Payments
|
$
|
825,000
|
(2)
|
$
|
825,000
|
(2)
|
$
|
1,000,000
|
(2)
|
$
|
825,000
|
(2)
|
$
|
1,000,000
|
(2)
|
$
|
825,000
|
(2)
|
$
|
825,000
|
(2)
|
|
|
Life
Insurance Proceeds
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
750,000
|
-0-
|
||||||||||||||
|
Disability
Benefits
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
3,050,000
|
(3)
|
|||||||||||||
|
Excise
Tax Gross
Up
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
|||||||||||||||
(1)
Reflects the estimated value of a benefit or perquisite that Mr. Nichols
would
be entitled to receive.
(2)
Reflects the estimated value of Mr. Nichols’ qualified and non-qualified
retirement plans on December 31, 2007.
(3)
Reflects the estimated value of all future payments that Mr. Nichols would
be
entitled to receive under the Company’s disability program.
47
DIRECTOR
COMPENSATION
The
compensation program for outside directors is designed to encourage outside
directors to receive a significant portion of their annual retainer for Board
service in Common Stock, or in options for Common Stock, or both, to enable
directors to defer receipt of their fees, and to satisfy the Company's Common
Stock ownership objective for outside directors.
The
Company has established a Common Stock ownership objective for outside
directors. Each director is expected to accumulate, over the director’s first
four years of Board service, the number of shares of Common Stock that is
equal
in market value to two times the annual retainer for Board service ($300,000).
Once this ownership objective is achieved, the director is expected to maintain
such minimum ownership level. The intent is to encourage acquisition and
retention of Common Stock by directors, evidencing the alignment of their
interests with the interests of stockholders. To this end, each new director
receives an award of shares of Common Stock having a market value of $25,000
on
the date of the award. Each new director must defer receipt of this award
under
the Company’s Deferred Compensation Plan. If a director has not achieved the
ownership objective, a director is expected to invest $75,000 per year in
shares
of Common Stock until the director has satisfied the ownership objective.
Directors
who are employees of the
Company receive no additional compensation by virtue of their being directors
of
the Company. For their service, outside directors receive an annual retainer,
as
described below. All directors of the Company are reimbursed for travel,
lodging
and related expenses incurred in attending Board and committee
meetings.
Each
outside director receives annually, on the first business day of each year,
the
equivalent of $150,000 for service as a Board member (or a prorated amount
if a
director’s service begins other than on the first day of the year). Each
director elects annually, for the particular year, to receive this fee in
(i)
shares of Common Stock currently, which may be deferred into the stock fund
of
the Company’s Deferred Compensation Plan, (ii) options to purchase shares of
Common Stock currently, (iii) cash currently, (iv) cash deferred into the
bond
fund of the Company’s Deferred Compensation Plan, or (v) any two of the four
preceding alternatives in equal amounts. If a director elects to receive
shares
of Common Stock currently, then 40% of this amount is paid in cash to offset
the
tax liability related to such election.
For
purposes of calculating the number of shares of Common Stock into which any
fixed sum translates, Common Stock is valued at its per share closing price
on
the NYSE on the day immediately preceding the grant date. For purposes of
calculating the number of options into which any fixed sum translates, each
option to purchase a share is valued by dividing the amount of the annual
retainer elected by each director to be received in options by the modified
Black-Scholes value for each option, as calculated on the date of grant.
The
modified Black-Scholes value takes into account the design parameters of
the
options such as the term, termination and vesting provisions of the options.
Options have an exercise price equal to the per share closing price of Common
Stock on the NYSE on the day immediately preceding the grant of such option,
vest immediately upon grant and have a ten-year term.
48
Each
director who serves on a committee of the Board receives an annual committee
retainer as set forth in the table below:
|
Committee
Position
|
Committee Retainer
|
|||
|
Lead
Director, who is also the Governance and Nominating Committee
Chair
|
$
|
40,000
|
||
|
Audit
Committee Chair
|
$
|
35,000
|
||
|
Compensation
Committee Chair
|
$
|
25,000
|
||
|
Audit
Committee Member
|
$
|
5,000
|
||
|
Compensation
Committee Member
|
$
|
3,000
|
||
|
Governance
and Nominating Committee Member
|
$
|
3,000
|
||
The
committee retainers listed above are payable in cash, and may be deferred
into
the bond fund of the Company’s Deferred Compensation Plan. For a director whose
service begins other than on the first day of the year, any retainer is
prorated.
A
director who leaves the Board in mid-year, for any reason, will retain any
retainer payments already received. The Compensation Committee has discretion
to
authorize the payment of additional fees to any director under extraordinary
circumstances.
The
compensation paid to the Company’s outside directors in 2007 is summarized in
the following table:
|
Name
|
Fees
Earned or
Paid in
Cash
($)
|
Stock
Awards
($) (1) (2)
|
Option
Awards
($) (1) (3) (4)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||
|
G. Chris Andersen
|
$
|
43,000
|
$
|
150,000
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
193,000
|
||||||||||||
|
Paula
H. J. Cholmondeley
|
$
|
83,000
|
$
|
75,000
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
158,000
|
||||||||||||
|
Don
DeFosset
|
$
|
38,000
|
$
|
150,000
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
188,000
|
||||||||||||
|
William
H. Fike
|
$
|
6,000
|
$
|
150,000
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
156,000
|
||||||||||||
|
Dr.
Donald P. Jacobs
|
$
|
158,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
158,000
|
|||||||||||||
|
David
A. Sachs
|
$
|
30,000
|
-0-
|
$
|
144,318
|
-0-
|
-0-
|
-0-
|
$
|
174,318
|
||||||||||||
|
Oren
G. Shaffer
|
$
|
6,575
|
$
|
148,288
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
154,863
|
||||||||||||
|
Helge
H. Wehmeier
|
$
|
158,000
|
-0-
|
-0-
|
-0-
|
-0-
|
-0-
|
$
|
158,000
|
|||||||||||||
49
(1)
See
Note Q – “Stockholders’ Equity” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2007 for a detailed description of the
assumptions that the Company used in determining the dollar amounts recognized
for financial statement reporting purposes of its stock and option
awards.
(2)
The
grant date fair value of each stock award computed in accordance with FAS
123R
is the following: Mr. Andersen $150,000 (annual retainer paid on January
3,
2007); Ms. Cholmondeley $75,000 (annual retainer paid on January 3, 2007);
Mr.
DeFosset $150,000 (annual retainer paid on January 3, 2007); Mr. Fike $150,000
(annual retainer paid on January 3, 2007); Mr. Shaffer $25,000 (initial director
sign-on grant paid on March 7, 2007) and Mr. Shaffer $123,288 (pro-rated
portion
of annual retainer paid on March 14, 2007.
(3)
The
grant date fair value of each option award computed in accordance with FAS
123R
is the following: Mr. Sachs $144,318 (annual retainer paid on January 3,
2007).
(4)
As of
December 31, 2007, the following directors had vested outstanding options
in
these amounts: Mr. Andersen 15,000; Mr. DeFosset 15,000; Dr. Jacobs 28,826;
and
Mr. Sachs 27,524.
The
Compensation Committee of the Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
|
COMPENSATION
COMMITTEE
|
|
|
G.
CHRIS ANDERSEN
|
|
|
DON
DEFOSSET
|
|
|
WILLIAM
H. FIKE
|
|
|
DAVID
A. SACHS
|
|
|
OREN
G. SHAFFER
|
50
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
Company intends that all transactions with affiliates are to be on terms
no less
favorable to the Company than could be obtained in comparable transactions
with
an unrelated person. The Board will be advised in advance of any such proposed
transaction or agreement and will utilize such procedures in evaluating their
terms and provisions as are appropriate in light of the Board’s fiduciary duties
under Delaware law. In addition, the Company has an Audit Committee consisting
solely of independent directors. Pursuant to the terms of the written Audit
Committee Charter, one of the responsibilities of the Audit Committee is
to
review related party transactions. See “Audit Committee Meetings and
Responsibilities.”
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Company’s directors and executive
officers, and each person who is the beneficial owner of more than 10% of
the
Company’s outstanding equity securities, to file with the SEC initial reports of
ownership and changes in ownership of equity securities of the Company. Specific
due dates for these reports have been established by the SEC and the Company
is
required to disclose in this Proxy Statement any failure to file such reports
by
the prescribed dates during 2007. Officers, directors and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with
copies of all reports filed with the SEC pursuant to Section 16(a) of the
Exchange Act.
To
the
Company’s knowledge, based solely on review of the copies of reports furnished
to the Company and written representations that no other reports were required,
all filings required pursuant to Section 16(a) of the Exchange Act applicable
to
the Company’s officers, directors and greater than 10% beneficial owners were
complied with during the year ended December 31, 2007.
51
AUDIT
COMMITTEE REPORT
The
Audit
Committee of the Board has reviewed and discussed the Company’s audited
financial statements for the fiscal year ended December 31, 2007, with the
management of the Company and the Company’s independent registered
public accounting firm,
PricewaterhouseCoopers LLP. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement
on
Auditing Standards 61 (Codification of Statements on Auditing Standards,
Communication with Audit Committees). The Audit Committee also has received
the
written disclosures and the letter from the independent registered
public accounting firm required
by Independence Standards Board Standard No. 1 (Independence Discussions
with
Audit Committees) and has discussed with PricewaterhouseCoopers LLP the
independence of such independent registered
public accounting firm.
The
Audit Committee also has considered whether PricewaterhouseCoopers LLP’s
provision of non-audit services to the Company is compatible with the
independent registered
public accounting firm’s
independence.
Based
on
its review and discussions referred to in the preceding paragraph, the Audit
Committee recommended to the Board that the audited financial statements
for the
Company’s fiscal year ended December 31, 2007 be included in the Company’s
Annual Report on Form 10-K for the Company’s fiscal year ended December 31, 2007
for filing with the SEC.
The
Audit
Committee’s responsibility is to monitor and oversee the audit and financial
reporting processes. However, the members of the Audit Committee are not
practicing certified public accountants or professional auditors and rely,
without independent verification, on the information provided to them and
on the
representations made by management and the independent registered
public accounting firm.
|
AUDIT
COMMITTEE
|
|
|
PAULA
H. J. CHOLMONDELEY
|
|
|
DON
DEFOSSET
|
|
|
DR.
DONALD P. JACOBS
|
|
|
DAVID
A. SACHS
|
|
|
OREN
G. SHAFFER
|
|
|
HELGE
WEHMEIER
|
52
PROPOSAL
2: INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The
firm
of PricewaterhouseCoopers LLP has audited the consolidated financial statements
and the internal control over financial reporting of the Company for 2007.
The
Board of Directors, at the recommendation of the Audit Committee, desires
to
continue the service of this firm for 2008. Accordingly, the Board of Directors
recommends to the stockholders ratification of the retention of
PricewaterhouseCoopers LLP as the Company’s independent registered
public accounting firm for
the
fiscal year ending December 31, 2008. If the stockholders do not approve
PricewaterhouseCoopers LLP as the Company’s independent registered
public accounting firm,
the
Board of Directors and the Audit Committee will reconsider this
selection.
Representatives
of PricewaterhouseCoopers LLP are expected to be present at the Meeting with
the
opportunity to make a statement if they desire to do so, and they are expected
to be available to respond to appropriate questions.
Audit
Fees
During
the last two fiscal years ended December 31, 2007 and December 31, 2006,
PricewaterhouseCoopers LLP charged the Company $9,197,000 and $8,829,000,
respectively, for professional services rendered by such firm for the audit
of
the Company’s annual financial statements and internal control over financial
reporting and review of the Company’s financial statements included in the
Company’s quarterly reports on Form 10-Q for that fiscal year. Audit fees for
the fiscal years ended December 31, 2007 and December 31, 2006 include fees
of
$2,833,000 and $2,552,000 for professional services provided in connection
with
the assessment of the Company’s internal controls pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002.
Audit-Related
Fees
Audit-Related
Fees consist of fees for assurance and related services that are reasonably
related to the performance of the audit or review of the Company’s financial
statements. This category includes fees related to various audit and attest
services, due diligence related to mergers, acquisitions and investments,
and
consultations concerning financial accounting and reporting standards. The
aggregate fees billed by PricewaterhouseCoopers LLP for such audit-related
services for the fiscal years ended December 31, 2007 and December 31, 2006,
were $1,053,000 and $882,000, respectively.
Tax
Fees
The
aggregate fees billed for tax services provided by PricewaterhouseCoopers
LLP in
connection with tax compliance, tax consulting and tax planning services
for the
fiscal years ended December 31, 2007 and December 31, 2006, were $856,000
and
$633,000, respectively.
All
Other Fees
The
aggregate fees billed for services not included in the above services for
the
fiscal years ended December 31, 2007 and December 31, 2006, were $23,000
and
$26,000, respectively and were primarily related to miscellaneous items,
including foreign government filings.
All
of
the services related to the Audit-Related Fees, Tax Fees or All Other Fees
described above were approved by the Audit Committee pursuant to the general
pre-approval provisions set forth in the Audit Committee’s pre-approval policies
described in “Audit Committee Meetings and Responsibilities.”
The
Board of Directors recommends that the stockholders vote FOR the ratification
of
PricewaterhouseCoopers LLP as the Company’s independent registered
public accounting firm for
2008.
53
OTHER
MATTERS
The
Board
does not know of any other business to be brought before the Meeting. In
the
event any such matters are brought before the Meeting, the persons named
in the
enclosed Proxy will vote the Proxies received by them as they deem best with
respect to all such matters.
All
proposals of stockholders intended to be included in the proxy statement
to be
presented at the 2009 Annual Meeting of Stockholders must be received at
the
Company’s offices at 200 Nyala Farm Road, Westport, Connecticut 06880, no later
than December 2, 2008. All proposals must meet the requirements set forth
in the
rules and regulations of the SEC in order to be eligible for inclusion in
the
proxy statement for that meeting.
To
nominate a candidate for election as a director at an annual meeting of
stockholders or propose business for consideration at such a meeting, the
Bylaws
of the Company generally provides that notice must be given to the Secretary
of
the Company no more than 90 days nor less than 60 days prior to the date
of the
annual meeting. The Company anticipates that in order for a stockholder to
nominate a candidate for election as a director at the Company's 2008 annual
meeting or to propose business for consideration at such meeting, notice
must be
given between February 14, 2009 and March 16, 2009. The fact that the Company
may not insist upon compliance with these requirements should not be construed
as a waiver by the Company of its right to do so at any time in the
future.
Pursuant
to the rules of the SEC, services that deliver our communications to
stockholders that hold their stock through a bank, broker or other holder
of
record may deliver to multiple stockholders sharing the same address a single
copy of our Notice of Internet Availability of Proxy Materials or Annual
Report
to Stockholders and Proxy Statement. Upon written or oral request, we will
promptly deliver a separate copy of the Notice of Internet Availability of
Proxy
Materials or Annual Report and Proxy Statement to any stockholder at a shared
address to which a single copy of each document was delivered. Stockholders
may
notify us of their requests by calling or writing Terex Corporation, 200
Nyala
Farm Road, Westport, CT 06880, (203) 222-7170.
STOCKHOLDERS
ARE URGED TO VOTE THEIR PROXIES WITHOUT DELAY.
A
PROMPT RESPONSE WILL BE GREATLY APPRECIATED.
|
By
order of the Board of Directors,
|
|
|
Eric
I Cohen
Secretary
|
March
31,
2008
Westport,
Connecticut
54
