UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material under Rule 14a-12
BUCYRUS INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
[LOGO] BUCYRUS(R)
Bucyrus International, Inc.
P.O. Box 500
1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Bucyrus International, Inc:
On behalf of the Board of Directors, you are cordially invited to attend
our annual meeting of shareholders on Wednesday, May 3, 2006 at 10 am Central
Standard Time at the Wisconsin Club, 900 West Wisconsin Avenue, Milwaukee,
Wisconsin for the following purposes:
1. To elect two persons to the Company's Board of Directors;
2. To approve an amendment to the Restated Certificate of Incorporation
of Bucyrus International, Inc. to increase the number of authorized
shares of common stock;
3. To approve an amendment to the Bucyrus International, Inc. 2004
Equity Incentive Plan;
4. To ratify the appointment of Deloitte & Touche LLP to serve as the
independent registered public accounting firm of the Company; and
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 14, 2006
as the record date for the determination of the shareholders entitled to notice
of and to vote at the annual meeting.
We hope that you will be able to attend the meeting in person, but if you
are unable to do so, please complete, sign and promptly mail back the enclosed
proxy form using the return envelope provided. If, for any reason, you should
change your plans, you can revoke the proxy at any time before it is actually
voted.
Sincerely,
/s/Craig R. Mackus
Craig R. Mackus
Chief Financial Officer, Controller and Secretary
South Milwaukee, Wisconsin
March 31, 2006
TABLE OF CONTENTS
Notice of Annual Meeting Cover
Proxy Statement
Attendance and Voting Matters 1
Election of Directors (Proposal 1) 2
Board of Directors 4
Security Ownership of Certain Beneficial Owners and Management 6
Executive Compensation 8
Compensation Committee Report on Executive Compensation 13
Amendment of Restated Certificate of Incorporation (Proposal 2) 14
Amendment of 2004 Equity Incentive Plan (Proposal 3) 15
Performance Information 21
Certain Relationships 21
Audit Committee Report 22
Independent Registered Public Accounting Firm (Proposal 4) 24
Section 16(a) Beneficial Ownership Reporting Compliance 25
Shareholder Proposals 25
Cost of Proxy Solicitation 25
Other Matters 26
Annual Report 26
PROXY STATEMENT
ATTENDANCE AND VOTING MATTERS
This proxy statement is being furnished to shareholders by the Board of
Directors (the "Board") of Bucyrus International, Inc. (the "Company"), a
Delaware corporation, in connection with a solicitation of proxies by the Board
for use at the annual meeting of shareholders to be held on May 3, 2006 at 10 am
Central Standard Time at the Wisconsin Club, 900 West Wisconsin Avenue,
Milwaukee, Wisconsin and all adjournments or postponements thereof (the "Annual
Meeting"), for the purposes set forth in the attached Notice of Annual Meeting
of Shareholders.
Execution of a proxy given in response to this solicitation will not
affect a shareholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a shareholder who has signed a proxy does not
in itself revoke a proxy. Any shareholder giving a proxy may revoke it at any
time before it is voted by giving notice thereof to the Company in writing or in
open meeting, by attending the Annual Meeting and voting in person, or by
delivering a proxy bearing a later date.
A proxy, in the enclosed form, which is properly executed, duly returned
to the Company and not revoked will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies will
be voted FOR the election to the Board of the two nominees named below, FOR the
amendment to the Company's Restated Certificate of Incorporation, FOR the
amendment to the Company's 2004 Equity Incentive Plan, FOR ratification of the
appointment of Deloitte & Touche LLP as the Company's independent registered
public accounting firm for fiscal 2006, and on such other business or matters
which may properly come before the Annual Meeting in accordance with the best
judgment of the persons named as proxies in the enclosed form of proxy. Other
than the election of directors and the proposals identified in the enclosed
Notice of Annual Meeting, the Board has no knowledge of any matters to be
presented for action by the shareholders at the Annual Meeting.
Only holders of record of the Company's Class A common stock (the "Common
Stock") at the close of business on March 14, 2006 are entitled to notice of and
to vote at the Annual Meeting. On that date, 21,034,239 shares of Common Stock
were outstanding and entitled to vote. Each such share is entitled to one vote.
Proxy statements and proxies will be mailed to shareholders on or about March
31, 2006. All expenses of solicitation of proxies will be borne by the Company.
In addition to soliciting proxies by mail, proxies may be solicited personally
and by telephone by certain officers and regular employees of the Company. The
Company has retained LaSalle Bank N.A. to assist in the solicitation of proxies,
and expects to pay such firm a fee of approximately $1,000 plus out-of-pocket
expenses. Brokers, nominees and custodians who hold Common Stock in their names
and who solicit proxies from the beneficial owners will be reimbursed by the
Company for out-of-pocket and reasonable clerical expenses.
A quorum of shareholders is necessary to take action at the Annual
Meeting. A majority of the outstanding shares of Common Stock entitled to vote,
represented in person or by proxy, will constitute a quorum of shareholders at
the Annual Meeting. Votes cast by proxy or in person at the Annual Meeting will
be tabulated by the inspectors of election appointed for the Annual Meeting. The
inspectors of election will determine whether or not a quorum is present at the
Annual Meeting. The inspectors of election will treat abstentions as shares of
Common Stock that are represented and entitled to vote for purposes of
determining the presence of a quorum. If a broker indicates on the proxy that it
does not have discretionary authority to vote certain shares of Common Stock on
a particular matter (a "broker non-vote"), those shares will not be considered
as shares represented and entitled to vote with respect to that matter, but will
count toward the quorum requirement. For purposes of determining the approval of
any matter submitted to the shareholders for a vote, abstentions will have the
same effect as shares of Common Stock that have been withheld for the purpose of
electing directors and as voted "against" the other proposals, and broker
non-votes will have no effect on the voting; provided, however, that with
respect to the proposal for the amendment to the Company's Restated Certificate
of Incorporation, broker non-votes will have the effect of votes cast "against"
such proposal.
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Directors are elected by a plurality of the votes cast by the shares
present in person or represented by proxy at the Annual Meeting, at which a
quorum is present. "Plurality" means that the individuals who receive the
largest number of votes are elected as directors up to the maximum number of
directors to be chosen in the election. Therefore, any shares not voted, whether
by withheld authority, broker non-vote or otherwise, have no effect in the
election of directors except to the extent that the failure to vote for an
individual results in another individual receiving a larger number of votes.
The affirmative vote of a majority of the votes entitled to be cast
thereon by all shares present in person or represented by proxy at the Annual
Meeting, at which a quorum is present, will be required for ratification of the
appointment of Deloitte & Touche LLP to serve as the independent registered
public accounting firm of the Company and the proposal relating to the amendment
of the Company's 2004 Equity Incentive Plan. Under the Delaware General
Corporation Law, the affirmative vote of a majority of the outstanding shares of
the Company will be required for approval of the proposal relating to the
amendment of the Company's Restated Certificate of Incorporation.
ELECTION OF DIRECTORS
(Proposal 1)
The Board currently consists of eight persons and is divided into three
classes for purposes of election. One class is elected at each annual meeting of
shareholders to serve for a three-year term and until their successors are duly
elected and qualified. Directors elected at the 2006 annual meeting of
shareholders will hold office for a three-year term expiring at the 2009 annual
meeting of shareholders and until their successors are duly elected and
qualified. Other directors are not up for election this year and will continue
in office for the remainder of their terms.
If a nominee is unavailable for election, proxy holders will vote for
another nominee proposed by the Board. The nominees have indicated that they are
able and willing to serve as directors. However, if some unexpected occurrence
should require the Board to substitute some other person or persons for any of
the nominees, it is intended that the proxies will vote FOR the substitute
nominees.
Nominees for Election at the Annual Meeting
The following sets forth certain information, as of March 14, 2006, about
each of the nominees for election at the Annual Meeting. Both of the nominees
are presently directors of the Company.
ROBERT L. PURDUM, 70, is a director and a Managing Director of American
Industrial Partners. Mr. Purdum was the Non-Executive Chairman of the Company's
Board from 1997 to March 19, 2004. Mr. Purdum retired as Chairman of Armco, Inc.
in 1996. From November 1990 to 1996, Mr. Purdum was Chairman and Chief Executive
Officer of Armco, Inc. Mr. Purdum is also a director of Sheffield Steel
Corporation and Freedom Bank-Bradenton, FL. Mr. Purdum has been a director of
the Company since 1997. Mr. Purdum is a member of the Compensation Committee.
TIMOTHY W. SULLIVAN, 52, became the Company's President and Chief
Executive Officer on March 19, 2004 and was previously President and Chief
Operating Officer from August 14, 2000 to March 19, 2004. Mr. Sullivan rejoined
the Company on January 17, 2000 as Executive Vice President. From January 1999
through December 1999, Mr. Sullivan served as President and Chief Executive
Officer of United Container Machinery, Inc. From June 1998 through December
1998, Mr. Sullivan was the Company's Executive Vice President - Marketing and
from April 1995 through May 1998 was the Company's Vice President Marketing and
Sales. Mr. Sullivan is also a director of Foundations Bank in Pewaukee, WI. Mr.
Sullivan has been a director of the Company since 2000.
Directors Remaining in Office Until 2007
EDWARD G. NELSON, 74, formed Nelson Capital Corp., a merchant banking
firm, in 1985, and has served as its President and Chairman of the Board since
its organization. Mr. Nelson serves as a director of Ohio Star Forge, Inc., a
subsidiary of Daido Steel, Japan, and Central Parking Corporation, a
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leading provider of parking and related services. Mr. Nelson also serves as a
trustee of Vanderbilt University and is Honorary Consul General of Japan. Mr.
Nelson has been a director of the Company since 2004. Mr. Nelson is the chairman
of the Nominating and Corporate Governance Committee.
THEODORE C. ROGERS, 71, served as Chief Executive Officer of the Company
between December 23, 1999 and March 19, 2004. Mr. Rogers also served as
President of the Company from December 1999 to August 2000. Mr. Rogers
co-founded American Industrial Partners and has been an officer and director of
the firm since 1988. He is also a director of Consoltex Holdings, Inc., a
manufacturer, importer and exporter of textiles, Central Industrial Supply,
Inc., a manufacturer of components for technology equipment makers, Great Lakes
Carbon LLC, the world's largest producer of calcined petroleum coke for use in
aluminum smelting, and JHT Holdings, Inc., which provides vehicles to transport
automobiles from manufacturer to dealer, as well as metal products, construction
materials and machinery. Mr. Rogers was President, Chairman, Chief Executive
Officer and Chief Operating Officer of NL Industries, a diversified industrial
concern, from 1980 to 1987. Mr. Rogers has been a director of the Company since
1997 and Chairman of the Board of Directors since March 19, 2004. Mr. Rogers is
a member of the Nominating and Corporate Governance Committee.
ROBERT C. SCHARP, 59, is Chairman of Shell Canada's Mining Advisory
Council, which reviews all aspects of Shell's oil sands mining operations in
Alberta, Canada. Mr. Scharp serves as a director of Foundation Coal Holdings,
Inc. From early 2002 to March 2003, Mr. Scharp was a director of Horizon Natural
Resources. Mr. Scharp held various positions with Kerr-McGee, an oil and natural
gas exploration and production company, from 1975 to 1997. Mr. Scharp has been a
director of the Company since July 2005.
Directors Remaining in Office Until 2008
RONALD A. CRUTCHER, 58, is President of Wheaton College, a private,
national liberal arts college in Norton, Massachusetts. From 1999 to 2004, Dr.
Crutcher served as Provost and Executive Vice President for Academic Affairs of
Miami University, a public university in Ohio and from 1994 to 1999 he served as
Director of the School of Music and the Florence Thelma Hall Centennial Chair in
Music at the University of Texas at Austin. He also was Vice President of
Academic Affairs and Dean of the Conservatory at the Cleveland Institute of
Music, an international music conservatory, from 1990 to 1994. Dr. Crutcher has
been a director of the Company since 2004. Dr. Crutcher is a member of the Audit
Committee and the Compensation Committee.
ROBERT W. KORTHALS, 72, is non-executive chairman of the Ontario Teachers'
Pension Plan Board and is a director of Cognos Inc., a provider of business
intelligence and corporate performance management software solutions, easyhome
Ltd., Canada's largest rental purchase company, Great Lakes Carbon Income Trust,
a holder of securities of Great Lakes Carbon LLC, which is a producer of
calcined petroleum coke, Suncor Energy, Inc., an energy company that explores
for, acquires, develops, produces, markets and refines petroleum products,
Mulvihull Exchange Traded Closed End Funds and Jannock Properties Ltd., a
company that develops, for commercial and residential uses, properties
previously used in its industrial operations. Mr. Korthals joined the Toronto
Dominion Bank in 1967, was appointed President in 1981 and served in that
capacity until 1995. Mr. Korthals holds a B.Sc. in chemical engineering and an
M.B.A. from Harvard Business School. Mr. Korthals has been a director of the
Company since 2004. Mr. Korthals is the chairman of the Compensation Committee
and a member of the Audit Committee.
GENE E. LITTLE, 62, is a director and audit committee member of Great
Lakes Carbon LLC, the world's largest producer of calcined petroleum coke for
use in aluminum smelting, and a director and member of the audit, governance,
and capital market committees of Unizan Financial Corp., a financial services
holding company that conducts a full-service commercial and retail banking
business through a subsidiary. Mr. Little held various positions with The Timken
Company, a global manufacturer of highly engineered bearings, alloy and
specialty steel and related components, from 1967 to 2002 and most recently
served as its Senior Vice President Finance (the chief financial officer) from
1992 to 2002. In 2003, Mr. Little became a director and finance committee member
of Walsh University, a private
3
university in Ohio. Mr. Little has been a director of the Company since 2004.
Mr. Little is the chairman of the Audit Committee and a member of the Nominating
and Corporate Governance Committee.
BOARD OF DIRECTORS
General
The Board held seven meetings in 2005. Each current director attended at
least 86% of the aggregate of the total number of meetings of the Board and 100%
of the total number of meetings held by all committees of the Board on which the
director served during 2005. All directors are expected to attend the 2006
Annual Meeting. All directors attended the 2005 annual meeting of shareholders.
The Board has determined that all directors other than Messrs. Purdum,
Rogers and Sullivan are independent under NASDAQ listing standards.
Communications
Shareholder communications intended for the Board or for particular
directors may be sent to the attention of the Company's Secretary at Bucyrus
International, Inc., 1100 Milwaukee Ave., South Milwaukee, Wisconsin 53172. The
Secretary will forward all such communications to the Board or to particular
directors as directed. Shareholders may also communicate solely with the
non-management directors of the Board by directing communications to Bucyrus
International, Inc., 1100 Milwaukee Ave., South Milwaukee, Wisconsin 53172,
Attn.: Lead Independent Director.
Director Compensation
Directors of the Company, other than full-time employees of the Company,
receive an annual retainer fee of $25,000 as well as $1,500 per meeting. The
chairman of a committee of the Board receives an additional fee of $1,000 per
committee meeting. The independent directors are able to elect to receive fees
in the form of shares of the Company's Common Stock, or to defer payment of fees
pursuant to the Company's Non-Employee Directors Deferred Compensation Plan,
described immediately below. The Company reimburses all directors for
out-of-pocket expenses incurred in connection with attendance at the meetings.
Mr. Rogers, the Chairman of the Board, has elected to forego the receipt of any
director compensation.
Non-Employee Directors Deferred Compensation Plan
The Company's independent directors may elect to defer payment of their
fees (including annual fees and meeting fees, but excluding reimbursement of
expenses) pursuant to the Bucyrus International, Inc. Non-Employee Directors
Deferred Compensation Plan. Under this plan, the Company has an account for each
plan participant to record cumulative deferred fees. The accounts are
denominated in the form of restricted Common Stock units issued pursuant to the
2004 Equity Incentive Plan (see "EXECUTIVE COMPENSATION - 2004 Equity Incentive
Plan" below) in a number of shares equal to the amount of deferred fees divided
by the market price of the Company's Common Stock and payable in cash and/or
shares of Common Stock, at the discretion of the director, when the director's
service on the Board terminates. In the event of a change in control of the
Company, all restricted stock units credited under this plan will become
immediately payable to the plan participants in the form of cash.
Committees
The Board has three standing committees: an audit committee, a
compensation committee and a nominating and corporate governance committee.
Audit Committee
The Audit Committee is a separately designated committee of the Board, is
comprised of
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Mr. Little, Mr. Korthals and Dr. Crutcher, each of whom has been determined by
the Board to be an independent director under NASDAQ rules, and is chaired by
Mr. Little. The Board has adopted a charter for the Audit Committee, a copy of
which was attached as Exhibit A to the Company's 2005 proxy statement. This
committee is generally responsible for the oversight and surveillance of the
Company's accounting, reporting and financial control practices. Among other
functions, the committee is responsible for the appointment, compensation,
retention and oversight of the work of the Company's independent registered
public accounting firm. The Board has determined that Mr. Little is a "financial
expert" within the definition of that term under the regulations promulgated
under the Securities Act of 1933. The Board believes that the composition of the
Audit Committee meets the requirements for independence under the current
requirements of the Sarbanes-Oxley Act of 2002 and Securities and Exchange
Commission ("SEC") rules and regulations. The Audit Committee met five times
during fiscal 2005.
Compensation Committee
The Compensation Committee met four times during fiscal 2005. The
Compensation Committee was reconstituted in February 2005 as a separately
designated committee of the Board and is comprised of Dr. Crutcher, Mr. Korthals
and Mr. Purdum, and is chaired by Mr. Korthals. The Board has determined that
all members of the current committee except Mr. Purdum are independent under
NASDAQ rules. As permitted by NASDAQ rules, the Board has determined that Mr.
Purdum's membership on the committee, because of his substantial experience on
the Board and his affiliation with the Company's former sole shareholder, would
facilitate the Company in its transition from private ownership to public
ownership and therefore would be in the best interests of the Company and its
shareholders.
This committee approves, administers and interprets the Company's
compensation and benefit policies, including incentive programs. It reviews and
makes recommendations to the Board to ensure that compensation and benefit
policies are consistent with the Company's compensation philosophy and corporate
governance guidelines. This committee is responsible for establishing all
executive officers' compensation.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee met three times during
fiscal 2005. The Nominating and Corporate Governance Committee was reconstituted
in February 2005 as a separately designated committee of the Board and is
comprised of Mr. Little, Mr. Nelson and Mr. Rogers, and is chaired by Mr.
Nelson. The Board has determined that all members of the current committee
except Mr. Rogers are independent under NASDAQ rules. As permitted by NASDAQ
rules, the Board has determined that Mr. Rogers' membership on the committee,
because of his substantial experience on the Board and his affiliation with the
Company's former sole shareholder, would facilitate the Company in its
transition from private ownership to public ownership and therefore would be in
the best interests of the Company and its shareholders.
The charter for this committee was attached to the Company's 2005 proxy
statement as Exhibit B. This committee oversees the evaluation of the Board and
management, nominates directors for election by shareholders, nominates
committee chairpersons and, in consultation with the committee chairpersons,
nominates directors for membership on the committees of the Board.
The Nominating and Corporate Governance Committee identifies nominees for
director positions based upon suggestions by outside directors, management
members and/or shareholders. The selection criteria for membership on the
Company's board of directors include, at a minimum, whether the nominee has
demonstrated, by significant accomplishment in the nominee's field, an ability
to make a meaningful contribution to the Board's oversight of the business and
affairs of the Company and the nominee's reputation for honesty and ethical
conduct in the nominee's personal and professional activities. Additional
factors that the committee may consider include a candidate's specific
experiences and skills, relevant industry background and knowledge, time
availability in light of other commitments, age, potential conflicts of
interest, material relationships with the Company, and independence from
5
management and the Company. In considering these criteria, the committee will
also seek to have the Board represent a diversity of backgrounds, experience,
gender and race.
The Nominating and Corporate Governance Committee will consider director
candidates recommended by the Company's shareholders based upon the same
criteria as applied to candidates identified by the Board or management.
Recommendations should be directed to the committee in care of the Company's
Secretary. Under the Company's Bylaws, shareholder nominations of directors must
be received by the Company at its principal executive offices, 1100 Milwaukee
Avenue, South Milwaukee, Wisconsin 53172, directed to the attention of the
Secretary, not less than 90 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders and any such
nominations must contain the information specified in the Company's Bylaws. The
deadline for submission of nominations for the 2006 Annual Meeting has passed.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 14, 2006 by each person who is known to the Company to
be the beneficial owner of more than five percent of the outstanding Common
Stock. Beneficial ownership of these shares consists of sole voting power and
sole investment power except as noted below. The beneficial ownership does not
reflect the three-for-two stock split of the Company's Common Stock paid on
March 29, 2006.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership (# of shares) Class
- ------------------- ---------------------------------- ---------
FMR Corp. (1) 3,074,460 14.6%
EARNEST Partners, LLC (2) 2,824,012 13.4%
Neuberger Berman Inc. (3) 2,288,768 10.9%
Wellington Management Company, LLP (4) 1,073,341 5.1%
- -----------------------
(1) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2006. The Schedule 13G states that
the address of FMR Corp., the parent holding company of Fidelity
Management & Research Company, is 82 Devonshire Street, Boston,
Massachusetts 02109. The Schedule 13G states that FMR Corp. has the sole
power to vote or direct the vote of 693,078 of these shares and sole power
to dispose or to direct the disposition of 3,074,460 of these shares.
(2) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 6, 2006. The Schedule 13G states that
the address of EARNEST Partners, LLC is 75 Fourteenth Street, Suite 2300,
Atlanta, Georgia 30309. The Schedule 13G states that EARNEST Partners, LLC
has the sole power to vote or direct the vote of 837,799 of these shares,
the shared power to vote or direct the vote of 1,117,913 of these shares
and the sole power to dispose or to direct the disposition of 2,824,012 of
these shares.
(3) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 21, 2006. The Schedule 13G states that
the address of Neuberger Berman Inc. is 605 Third Ave., New York, New
York, 10158. The Schedule 13G states that Neuberger Berman Inc. has the
sole power to vote or direct the vote of 118,368 of these shares, the
shared power to vote or direct the vote of 1,700,500 of these shares and
the shared power to dispose or to direct the disposition of 2,288,768 of
these shares.
(4) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2006. The Schedule 13G states that
the address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts, 02109. The Schedule 13G states that Wellington
Management Company, LLP has the shared power to vote or direct the vote of
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738,790 of these shares and the shared power to dispose or to direct the
disposition of 1,073,341 of these shares.
Executive Officers and Directors
The following table sets forth the beneficial ownership as of March 14,
2006, of the Common Stock by each director and nominee for director, each of the
executive officers named in the Summary Compensation Table below, and by all
directors and executive officers of the Company as a group. Beneficial ownership
of these shares consists of sole voting power and sole investment power except
as noted below. The beneficial ownership does not reflect the three-for-two
stock split of the Company's Common Stock paid on March 29, 2006.
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (# of shares) (1) Class (2)
- ---------------- -------------------------------------- ---------
J.F. Bosbous (3) 13,400 *
F.B. Bruno (4) 12,900 *
R.A. Crutcher 106 *
R.W. Korthals 3,056 *
G.E. Little 1,200 *
C.R. Mackus (5) 13,400 *
E.G. Nelson 1,000 *
T.B. Phillips 0 *
R.L. Purdum 2,500 *
T.C. Rogers 5,000 *
R. C. Scharp 0 *
T.W. Sullivan (6) 33,500 *
All directors and executive officers
as a group (13 persons) (7) 112,862 *
- ---------------------
(1) The beneficial ownership information presented in this proxy statement is
based on information furnished by the specified persons and is determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as required for purposes of this proxy statement. Accordingly, it includes
shares of Common Stock that are issuable upon the exercise of stock
options exercisable at or within 60 days after March 14, 2006. Such
information is not necessarily to be construed as an admission of
beneficial ownership for other purposes.
(2) Asterisk denotes less than 1%.
(3) Includes 6,400 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 14, 2006 and 7,000 shares of
restricted stock which cliff vest on the fourth anniversary of the date of
issuance (February 16, 2006). The vesting period may be accelerated based
on the attainment of certain defined financial goals of the Company.
7
(4) Includes 12,900 shares of restricted stock which cliff vest on the fourth
anniversary of the date of issuance (February 16, 2006). The vesting
period may be accelerated based on the attainment of certain defined
financial goals of the Company.
(5) Includes 13,400 shares of restricted stock which cliff vest on the fourth
anniversary of the date of issuance (February 16, 2006). The vesting
period may be accelerated based on the attainment of certain defined
financial goals of the Company.
(6) Includes 33,500 shares of restricted stock which cliff vest on the fourth
anniversary of the date of issuance (February 16, 2006). The vesting
period may be accelerated based on the attainment of certain defined
financial goals of the Company.
(7) Includes 6,400 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 14, 2006 and 93,600 shares of
restricted stock which cliff vest on the fourth anniversary of the date of
issuance (February 16, 2006). The vesting period may be accelerated based
on the attainment of certain defined financial goals of the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid or awarded to
the Company's Chief Executive Officer and the four other most highly compensated
executive officers other than the Chief Executive Officer who were in office on
December 31, 2005 for services rendered in all capacities during 2005, 2004 and
2003. The persons named in the table are sometimes referred to herein as the
"named executive officers."
Long-Term
Compensation
Annual Compensation (1) Awards
----------------------- ------
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($)(2)
- ----------------------------- ---- ---------- --------- ----------- --------
Timothy W. Sullivan (3) 2005 $522,504 $981,885 -- $ 8,232
President and Chief 2004 486,954 775,706 -- 8,082
Executive Officer 2003 423,339 652,000 -- 7,932
Thomas B. Phillips (4) (6) 2005 325,629 304,912 -- 9,676
Executive Vice President 2004 305,865 244,346 -- 8,021
and Chief Operating Officer 2003 258,010 252,525 -- 7,522
Craig R. Mackus (5) 2005 235,125 220,923 -- 7,404
Chief Financial Officer, 2004 209,375 122,173 -- 7,047
Controller and Secretary 2003 179,155 121,406 -- 6,786
Frank P. Bruno 2005 165,177 108,762 -- 7,285
Vice President - 2004 154,375 85,521 -- 7,055
Human Resources 2003 148,635 97,125 -- 6,870
John F. Bosbous 2005 152,529 100,094 -- 6,978
Treasurer 2004 144,092 79,826 -- 6,789
2003 135,124 90,653 -- 6,180
- ---------------------
(1) Certain personal benefits provided by the Company to the named executive
officers are not included in the above table as permitted by SEC
regulations because the aggregate amount of such personal benefits for
each named executive officer in each year reflected in the table did not
exceed the lesser of $50,000 or 10% of the sum of such officer's salary
and bonus in each respective year.
(2) "All Other Compensation" includes the following (i) the employer match
under the Company's 401(k) savings plan for 2005, 2004 and 2003,
respectively: Mr. Bosbous ($6,300, $6,150 and $5,598),
8
Mr. Bruno ($6,300, $6,150 and $6,000), Mr. Mackus ($6,300, $6,150 and
$6,000), Mr. Phillips ($6,300, $6,150 and $6,000), and Mr. Sullivan
($6,300, $6,150 and $6,000); (ii) imputed income from life insurance for
2005, 2004 and 2003, respectively: Mr. Bosbous ($678, $639 and $582), Mr.
Bruno ($985, $905 and $870), Mr. Mackus ($1,104, $897 and $786), Mr.
Phillips ($3,376, $1,871 and $1,522) and Mr. Sullivan ($1,932, $1,932 and
$1,932).
(3) Mr. Sullivan became the Chief Executive Officer on March 19, 2004.
(4) Mr. Phillips became the Chief Operating Officer on March 19, 2004.
(5) Mr. Mackus became the Chief Financial Officer on June 9, 2004.
(6) Mr. Phillips retired effective December 31, 2005.
Option Grants
There were no options granted to the named executive officers in 2005.
Aggregated Option Exercises in 2005 and Year-End Option Values
The following table sets forth information regarding the exercise of stock
options by each of the named executive officers during 2005 and the fiscal
year-end value of the unexercised stock options held by such officers. The share
numbers contained in the table do not reflect the three-for-two stock split of
the Company's Common Stock paid on March 29, 2006.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Options at End of End of Fiscal
Fiscal Year 2005 (#) Year 2005 (1) ($)
Shares Acquired Value --------------------------- ---------------------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
J.F. Bosbous 41,872 1,607,583 6,400 -- 257,280 --
F.P. Bruno 86,696 2,674,725 10,000 -- 525,750 --
C.R. Mackus 49,408 2,224,424 64,224 -- 2,716,791 --
T.B. Phillips 143,400 5,395,022 -- -- -- --
T.W. Sullivan 71,700 3,540,188 215,100 -- 11,308,883 --
- ---------------------
(1) The value of unexercised in-the-money options is determined by multiplying
the number of unexercised options for each in-the-money grant by the
difference between the option exercise price for that grant and the
December 31, 2005 stock price of $52.70 per share and then aggregating
these amounts for all in-the-money grants for each executive officer.
1998 Management Stock Option Plan
The Company adopted the Bucyrus International, Inc. 1998 Management Stock
Option Plan (the "1998 Option Plan"), and obtained shareholder approval of the
plan, in March 1998, as part of the compensation and incentive arrangements for
certain of the Company's management employees and those of the Company's
subsidiaries. The 1998 Option Plan provides for the grant of stock options to
purchase up to an aggregate of 1,600,000 shares of the Company's Common Stock at
exercise prices to be determined in accordance with the provisions of the 1998
Option Plan. As of March 14, 2006, 1,429,600 options granted under the 1998
Option Plan have vested and were exercised and 6,400 options were granted, fully
vested and unexercised. As of March 14, 2006, 164,000 shares of the Company's
Common Stock were available for issuance under the 1998 Option Plan.
Upon the termination for cause of a participant in the 1998 Option Plan,
any unexercised options held by the participant will immediately expire and be
forfeited. In the event of a termination without cause, unless provided
otherwise in the participant's employment agreement, the unvested portion of
options granted will immediately expire and the unexercised portion of the
options granted will remain exercisable for 90 days and will then terminate in
full. In the event of a plan participant's voluntary termination of
9
employment, or upon termination of employment due to death or disability
unvested options will immediately expire and the unexercised vested portion of
options granted will remain exercisable for 90 days and then will terminate in
full. The Board will have the discretion to permit options granted to retirees
to remain outstanding after the date of retirement.
2004 Equity Incentive Plan
See below under "AMENDMENT OF 2004 EQUITY INCENTIVE PLAN (Proposal 3)" for
a description of the 2004 Equity Incentive Plan.
Executive Officer Incentive Plan
The Company adopted the Bucyrus International, Inc. Executive Officer
Incentive Plan, and obtained shareholder approval of the plan, in July 2004. The
plan provides for the award of cash bonuses to the Company's executive officers,
including each of the named executive officers. Plan participants generally will
be selected by the Compensation Committee of the Board. The plan is designed to
comply with Section 162(m) of the Internal Revenue Code and is administered
accordingly.
The Board's Compensation Committee administers this plan. The Compensation
Committee has the authority, among other things, to select plan participants, to
determine all of the terms and conditions relating to any award, including the
performance goals applicable to the award, and to make all other determinations
under the plan deemed necessary or advisable for the administration of the plan.
The performance goals that may be applied to awards under this plan are the same
as those discussed above under "2004 Equity Incentive Plan." Prior to fiscal
2005, the plan was administered by the Company's President and Chief Executive
Officer and Vice President - Human Resources.
Payment of bonuses under the plan is contingent upon the achievement of
performance goals during a performance period. Both the performance goals and
the performance period will be specified by the Compensation Committee.
Performance periods under the plan may not exceed one year in length. The
performance goals applicable to awards for any performance period will be
determined by the Compensation Committee prior to the expiration of one-quarter
of the performance period. The Compensation Committee may also determine
minimum, target and maximum levels applicable to each performance goal. Awards
for any performance period may be expressed as a dollar amount or as a
percentage of the participant's annual base salary. Unless otherwise determined
by the Compensation Committee, payment of awards will be made only if and to the
extent the performance goals with respect to a performance period are attained.
In no event may payment in respect of an award under the plan be in excess of $5
million, if the payment were to be made to an executive officer who is a
"covered employee" within the meaning of Section 162(m) of the Internal Revenue
Code.
The Board or the Compensation Committee may at any time amend, suspend or
terminate the plan in whole or in part. No amendment that requires shareholder
approval in order for the plan to continue to comply with Section 162(m) of the
Internal Revenue Code or any other applicable law will be effective unless the
approval is obtained. In addition, no amendment or termination of the plan will
affect adversely the rights of any participant who has an outstanding award
under the plan without the participant's consent.
10
Securities Authorized For Issuance Under Equity Compensation Plans
The following table sets forth information regarding securities authorized
for issuance under the Company's equity compensation plans as of March 14, 2006.
The securities numbers contained in the table do not reflect the three-for-two
stock split of the Company's Common Stock paid on March 29, 2006.
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (Excluding
of Outstanding Options, Outstanding Options, Securities Reflected in
Warrants and Rights Warrants and Rights Column (a))
Plan Category (a) (b) (c)
- ------------- -------------------- -------------------- -------------------------
Equity
compensation
plans approved
by security holders 6,400 (1) $12.50 677,938 (2)
Equity
compensation
plans not
approved by
security holders n/a n/a n/a
----- ------ -------
Total 6,400 $12.50 677,938
===== ====== =======
- --------------------
(1) Represents options granted under the Bucyrus International, Inc. 1998
Management Stock Option Plan (the "1998 Option Plan"), which was approved
by shareholders in March 1998.
(2) Represents 164,000 shares available for issuance under the 1998 Option
Plan and 513,938 shares available for issuance under the Bucyrus
International, Inc. 2004 Equity Incentive Plan.
11
Defined Benefit Pension Plan
The Company maintains a defined benefit pension plan (the "Pension Plan")
for salaried employees including certain of the named executive officers.
Defined Benefit Formula
Historically, the Pension Plan used a Defined Benefit Formula to determine
the annual benefits payable to employees upon normal retirement age. The
following table sets forth the estimated annual benefits payable on a straight
life annuity basis (prior to offset of one-half of estimated Social Security
benefits) to participating employees upon retirement at normal retirement age
for the years of service and the average annual earnings indicated under the
defined benefit formula.
Years of Service
----------------------------------------------------------
Remuneration 30 25 20 15 10
-------- -------- ------- -------- --------
$125,000 $ 65,625 $ 54,688 $43,750 $ 32,813 $ 21,875
150,000 78,750 65,625 52,500 39,375 26,250
175,000 91,875 76,563 61,250 45,938 30,625
200,000 105,000 87,500 70,700 52,500 35,000
225,000 118,125 98,438 78,750 59,063 39,375
250,000 131,250 109,375 87,500 65,625 43,750
300,000 157,500 131,250 105,000 78,750 52,500
350,000 183,750 153,125 122,500 97,875 61,250
400,000 210,000 175,000 140,000 105,000 70,000
450,000 236,250 196,875 157,500 118,125 78,750
500,000 262,500 218,750 175,000 131,250 87,500
Cash Balance Formula
Effective January 1, 2000, the Pension Plan was converted to a cash
balance formula for all employees except for those who, on December 31, 1999,
were either age 60 and above or age 55 with 10 years or more years of credited
service. The actuarial equivalent of benefits earned as of December 31, 1999 was
used to establish an opening account balance. Each month a percentage of the
employee's earnings is credited to the account in accordance with the following
table:
Service at the Beginning of Year Pay Credits
-------------------------------- -----------
Less than 5 ............................................... 4.0%
5 but less than 10 ........................................ 4.5%
10 but less than 15 ....................................... 5.0%
15 but less than 20 ....................................... 5.5%
20 but less than 25 ....................................... 6.0%
25 but less than 30 ....................................... 6.5%
30 or more ................................................ 7.0%
In addition, employees hired prior to January 1, 1999 received transition
pay-based credits of 1.5% to 2.5% for the next five years. In February 2005, the
Board approved extending the transition pay-based credits for an additional five
years. Each account is also credited with interest using the average annual rate
of U.S. 30-year Treasury Securities for the November preceding the plan year.
Upon termination of employment, the employee may receive benefits in the
form of a lump sum equal to the value of the cash balance account or a monthly
annuity equal to the actuarial equivalent of the cash account balance.
12
General
Covered compensation for purposes of the Pension Plan consists of the
average of a participant's highest total salary and bonus (excluding
compensation deferred pursuant to any non-qualified plan) for a consecutive
five-year period during the last ten calendar years of service prior to
retirement. Compensation covered by the plan includes the salary and bonus
amounts reported in the Summary Compensation Table. Bonuses earned in 2005 but
paid in 2006 are considered to be compensation for 2006 for purposes of the
Pension Plan.
Mr. Bruno's benefits under the Pension Plan will be determined under the
Defined Benefit Formula described above. The years of credited service under the
Pension Plan for Mr. Bruno are 8.
The Pension Plan benefits payable to Messrs. Bosbous, Mackus, Phillips and
Sullivan will be determined under the cash balance formula described above. The
years of credited service under the Pension Plan for Messrs. Bosbous, Mackus,
Phillips and Sullivan are 21, 26, 29, and 26, respectively. As of December 31,
2005, the estimated annual benefits payable under the Pension Plan at normal
retirement age (as determined under the Pension Plan) to Messrs. Bosbous,
Mackus, Phillips and Sullivan were $58,777, $83,761, $60,243 and $72,990,
respectively. In making these estimates, the assumptions were (i) that 2005 pay
remains level to normal retirement age; (ii) that the 2006 compensation limit of
$220,000 remains level to normal retirement age; (iii) that the interest
crediting rate for all years is 4.73%, the November 2005 30-year Treasury rate,
which is the rate to be used for the 2006 plan year; and (iv) the projected cash
balance at normal retirement age was converted to an annuity using an interest
rate of 4.73% and the 1994 Group Annuity Reserve Table, 50% of the unloaded male
mortality rates and 50% of the female mortality rates.
Supplemental Plan
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, the Company has a supplemental plan which authorizes the payment out of
general funds of any benefits calculated under provisions of the applicable
retirement plan which may be above the limits under these sections.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board, subject to the approval of the
Board, is responsible for the compensation packages offered to the Company's
executive officers, including the Chief Executive Officer (the "CEO") and the
named executive officers. The goal is to establish a compensation program that
serves the long-term interests of the Company and its shareholders. The
Compensation Committee is appointed by the Board, and will at all times consist
of directors who are "outside directors" for purposes of Section 162(m) of the
Internal Revenue Code and "non-employee directors" for purposes of Rule 16b-3
under the Exchange Act.
Executive Compensation
Cash Compensation
The Compensation Committee, in consultation with the CEO, establishes base
salaries for the executive officers of the Company, which the Company believes
are commensurate with their respective responsibilities, position, and
experience. Consideration is also given to the compensation levels of similarly
situated personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Compensation Committee
generally considers the foregoing factors as well as corporate financial
performance and return to shareholders. In individual cases where appropriate,
the Compensation Committee also considers non-financial performance measures,
such as increases in market share, manufacturing efficiency gains, improvements
in product quality, and improvements in relations with customers, suppliers, and
employees. Executive officer base
13
salaries are reviewed annually.
Executive Officers of the Company participated in the Bucyrus
International, Inc. Executive Officer Incentive Plan (the "Executive Plan") in
2005 (see "EXECUTIVE COMPENSATION - Executive Officer Incentive Plan" above).
For 2005, all performance goals were achieved or exceeded and bonuses were
earned.
Long-Term Incentive Compensation
The Bucyrus International, Inc. 2004 Equity Incentive Plan, which is
described above under the caption "EXECUTIVE COMPENSATION - 2004 Equity
Incentive Plan", serves as the vehicle to provide long-term incentive
compensation to the Company's directors, officers (including each of the named
executive officers), and other employees, advisors and consultants who are
selected by the Compensation Committee for participation in the plan.
Chief Executive Officer Compensation
Mr. Sullivan's compensation for 2005 included base salary of $522,504 and
bonus of $981,885. In determining Mr. Sullivan's compensation for 2005, the
Board considered his individual performance, compensation data for similarly
sized manufacturing companies, and the Company's EBITDA performance. In February
2006, the Compensation Committee formally reviewed Mr. Sullivan's individual
goals established at the beginning of 2005 and his subsequent performance
against those goals. The Compensation Committee also established performance
goals for Mr. Sullivan for 2006.
Internal Revenue Code Section 162(m)
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. The compensation package of Mr.
Sullivan, the Company's CEO, does meet the regulatory criteria for exclusion
from the limitation. Where practical, the Compensation Committee intends to
qualify compensation paid to the Company's executive officers in order to
preserve the full deductibility thereof under Section 162(m), although the
Compensation Committee reserves the right in individual cases to cause the
Company to enter into compensation agreements which may result in some
compensation being nondeductible under Code Section 162(m).
COMPENSATION COMMITTEE
Robert W. Korthals (Chairman)
Ronald A. Crutcher
Robert L. Purdum
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
(Proposal 2)
The Board believes it is advisable to amend the Company's Restated
Certificate of Incorporation to increase the authorized shares of Class A Common
Stock from 41,000,000 to 75,000,000 shares. Accordingly, at its meeting held
March 7, 2006, the Board adopted a resolution proposing that an amendment to the
first paragraph of Article Fourth of the Restated Certificate of Incorporation
be presented to the shareholders at the Annual Meeting for approval. The
amendment would not change the number of authorized shares of Class B Common
Stock or Preferred Stock.
If approved by the shareholders, the first paragraph of Article Fourth
would read in its entirety as follows:
14
"FOURTH: Authorized Capital Stock. The total number of shares of
stock which the Corporation shall have authority to issue is 110,000,000
shares of capital stock, consisting of (i) 75,000,000 shares of class A
common stock, par value $0.01 per share (the "Class A Common Stock"), (ii)
25,000,000 shares of class B common stock, par value $0.01 per share (the
"Class B Common Stock" and, together with the Class A Common Stock, the
"Common Stock"), and (iii) 10,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock")."
On March 8, 2006, the Company announced a three-for-two stock split in the
form of a stock dividend on its Class A Common Stock, payable on March 29, 2006
to shareholders of record on March 20, 2006, which will result in the issuance
of approximately 10,517,120 additional shares Class A Common Stock; the number
of additional shares may be less depending on the number of fractional shares
that are paid in cash. The proposed increase in the number of authorized shares
of Class A Common Stock in part would replace, as shares available for future
issuance, the shares of Class A Common Stock issued in connection with the stock
split, and also would provide the Board the necessary flexibility to issue Class
A Common Stock in the future in connection with the raising of capital, the
acquisition of new businesses, employee stock benefit plans, future stock splits
or dividends, and other corporate purposes as deemed necessary or appropriate by
the Board of Directors.
Of the 41,000,000 shares of Class A Common Stock presently authorized, as
of March 14, 2006, 21,034,239 shares were outstanding, 72,400 shares were held
by the Company as treasury shares and 677,938 shares were reserved for issuance
under equity compensation plans. The additional shares proposed to be authorized
would be part of the existing class of Class A Common Stock and, if and when
issued, would have the same rights and privileges as the shares of Class A
Common Stock presently outstanding.
Adoption of the amendment will eliminate the delay and expense involved in
calling a special meeting of shareholders to authorize the additional shares at
the time such issuance may become necessary. If the amendment is approved, no
further action or authorization by the Company's shareholders would be necessary
prior to issuance of the additional shares, except as may be required for a
particular transaction by the Company's Restated Certificate of Incorporation,
by applicable law or by the rules of any stock exchange on which the Company's
common stock is then listed. For example, under the current rules of the Nasdaq
stock market, shareholder approval would still be required prior to the adoption
of a new equity compensation plan or a material revision to an existing plan.
Shareholder approval is also a prerequisite to listing additional shares to be
issued in an acquisition and certain other types of transactions where the
shares issuable exceed 20% of the number of shares outstanding.
Except for the issuance of shares of Class A Common Stock pursuant to
equity compensation plans and other stock related benefit plans, the Company
currently has no plans or arrangements for the issuance of shares of Class A
Common Stock for any purpose, including but not limited to rendering more
difficult or discouraging a change in control of the Company. Shareholders do
not have any preemptive rights with respect to issuance of any additional shares
of the Company's Class A Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
AMENDMENT OF 2004 EQUITY INCENTIVE PLAN
(Proposal 3)
The Company's shareholders are being asked to approve an amendment of the
Bucyrus International, Inc. 2004 Equity Incentive Plan (the "2004 Equity
Incentive Plan"), to increase the number of shares of the Company's common stock
reserved for issuance under the 2004 Equity Incentive Plan from 1,000,000 to
2,000,000 shares of Class A Common Stock. The Compensation Committee of the
Board and the full Board approved this amendment, subject to shareholder
approval at the Annual Meeting.
15
The proposed amendment will assure that a sufficient reserve of common
stock remains available for issuance under the 2004 Equity Incentive Plan in
order to allow the Company to continue to utilize equity incentives to attract
and retain the services of key individuals and other personnel essential to the
Company's long-term growth and financial success. The Company relies on
equity-based incentive awards, as described below, in order to attract and
retain key employees and other personnel and believes such equity-based
incentive awards are necessary for the Company to remain competitive in the
marketplace for executive talent and other key employees. Option grants made to
newly hired or continuing employees will be based on both competitive market
conditions and individual performance.
The following is a summary of the principal features of the 2004 Equity
Incentive Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 2004 Equity Incentive Plan and is
qualified in its entirety by reference to the copy of the 2004 Equity Incentive
Plan as filed with the Securities and Exchange Commission, which interested
parties are encouraged to review.
As described more fully below, the 2004 Equity Incentive Plan allows the
Company's Compensation Committee to adjust the number of shares available under
the plan in the event of certain corporate events, including stock splits.
Following the effective date of the Company's previously announced three-for-two
stock split, the Compensation Committee intends to take action to adjust the
available shares and outstanding grants under the plan. As such, the shares
available for awards under the plan, assuming shareholder approval of this
proposal, would be adjusted from 2,000,000 shares to 3,000,000 shares. Unless
noted otherwise, all references to share amounts contained in this summary are
prior to any adjustment by the Compensation Committee.
Summary of Material Terms
The Company adopted the 2004 Equity Incentive Plan, and obtained
shareholder approval of the plan, in July 2004. The plan will expire in June
2014, unless terminated earlier by the Board. The plan provides for the grant of
equity based awards, including restricted stock, restricted stock units, stock
options, stock appreciation rights (SARs), and other equity based awards to the
Company's directors, officers, including each of the named executive officers,
and other employees, advisors and consultants and those of the Company's
subsidiaries who are selected by the Compensation Committee for participation in
the plan. As of March 14, 2006, in addition to the Company's seven non-employee
directors and six executive officers, there were approximately 550 employees,
advisors and consultants eligible to participate in the plan.
The Board's Compensation Committee administers the plan. The Compensation
Committee has the authority, among other things, to determine who will be
granted awards and all of the terms and conditions of the awards, including but
not limited to the effect of a change in control of the Company on those awards.
The Compensation Committee is also authorized to determine to what extent an
award may be settled, cancelled, forfeited or surrendered, to interpret the plan
and any awards granted under the plan and to make all other determinations
necessary or advisable for the administration of the plan. Where the vesting or
payment of an award under the plan is subject to the attainment of performance
goals, the Compensation Committee will be responsible for certifying that the
performance goals have been attained. Neither the Compensation Committee nor the
Board has the authority under the plan to reprice, or to cancel and re-grant,
any stock option granted under the plan, or to take any action that would lower
the exercise, base or purchase price of any award granted under the plan without
first obtaining the approval of the Company's shareholders.
Under the existing terms of the plan, a maximum of one million shares of
the Company's Class A Common Stock are available for awards under the plan. If
adopted, this proposal would increase the maximum to two million shares of the
Company's Class A Common Stock.
Shares issued under the plan may be authorized but unissued shares or
treasury shares. If any shares subject to an award granted under the plan are
forfeited, cancelled, exchanged or surrendered or if an award terminates or
expires without a distribution of shares, or if shares of stock are surrendered
or withheld as payment of either the exercise price of an award and/or
withholding taxes in respect of an
16
award, those shares will again be available for awards under the plan. Under the
plan, no more than 160,000 shares of the Company's Class A Common Stock may be
made subject to stock options or stock appreciation rights to a single
individual in a single plan year, and no more than 160,000 shares of the
Company's Class A Common Stock may be made subject to awards other than stock
options or SARs to a single individual in a single plan year. In the event that
the Compensation Committee determines that any corporate event, such as a stock
split, reorganization, merger, consolidation, repurchase or share exchange,
affects the Company's Class A Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of plan
participants, then the Compensation Committee will make those adjustments as it
deems necessary or appropriate to any or all of (i) the number and kind of
shares or other property that may thereafter be issued in connection with future
awards, (ii) the number and kind of shares or other property that may be issued
under outstanding awards, (iii) the exercise price or purchase price of any
outstanding award and (iv) the performance goals applicable to outstanding
awards.
The Compensation Committee will determine all of the terms and conditions
of awards under the plan, including whether the vesting or payment of an award
will be subject to the attainment of performance goals. The Compensation
Committee may base performance goals on one or more of the following criteria,
determined in accordance with generally accepted accounting principles, where
applicable:
o earnings before or after interest, taxes, depreciation,
amortization, or extraordinary or special items;
o net income, before or after extraordinary or special items;
o return on equity (gross or net), before or after extraordinary or
special items;
o return on assets, before or after extraordinary or special items;
o earnings per share, before or after extraordinary or special items;
or
o stock price.
The performance goals may be expressed in terms of attaining a specified
level of the particular criterion, an increase or decrease in the particular
criterion or a comparison of achievement against a peer group of companies, and
may be applied to the Company or a subsidiary or division or strategic business
unit of the Company. The Compensation Committee has the authority to make
equitable adjustments to the performance goals in recognition of unusual or
non-recurring events, in response to changes in laws or regulations or to
account for extraordinary or unusual events. Where an award under the plan is
made subject to a performance goal, no compensation may be paid under such award
unless and until the compensation committee certifies that the goal has been
attained.
The terms and conditions of stock options and SARs granted under the plan
will be determined by the Compensation Committee and set forth in an agreement.
Stock options granted under the plan may be "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, or non-qualified stock
options. SARs confer on the participant the right to receive an amount, in cash
or shares of the Company's Class A Common Stock, equal to the excess of the fair
market value of a share of Class A Common Stock on the date of exercise over the
grant price of the SAR, and may be granted alone or in tandem with another
award. The exercise price of an option or SAR granted under the plan will not be
less than the fair market value of the Company's Class A Common Stock on the
date of grant. The grant price of an SAR granted in tandem with a stock option
will be the same as the stock option to which the SAR relates. The vesting of a
stock option or SAR will be subject to such conditions as the Compensation
Committee may determine, which may include the attainment of performance goals
as well as continued employment with the Company. As of March 14, 2006, the fair
market value of the Company's Class A Common Stock, established for purposes of
the plan as the average of the closing bid and asked prices, was $66.34 per
share.
17
The terms and conditions of awards of restricted stock and restricted
stock units granted under the plan will be determined by the Compensation
Committee and set forth in an award agreement. A restricted stock unit confers
on the participant the right to receive a share of the Company's Class A Common
Stock or its equivalent value in cash, in the discretion of the Compensation
Committee. These awards will be subject to restrictions on transferability which
may lapse under those circumstances that the Compensation Committee determines,
which may include the attainment of performance goals as well as continued
employment with the Company. The Compensation Committee may determine that the
holder of restricted stock or restricted stock units may receive dividends (or
dividend equivalents, in the case of restricted stock units) that may be
deferred during the restricted period applicable to these awards.
The plan also provides for other equity based awards, the form and terms
of which will be as determined by the Compensation Committee, consistent with
the purposes of the plan. The vesting or payment of one of these awards may be
made subject to the attainment of performance goals as well as to continued
employment with the Company.
The plan also provides for the issuance of shares of the Company's Class A
Common Stock to the Company's non-employee directors if such a director elects
to receive, in the form of stock, payment of the fees (including annual fees and
meeting fees, but not including reimbursement for expenses) to which the
non-employee director would otherwise be entitled in consideration of the
director's services to the Company. In addition, the plan provides for the
issuance of restricted stock units for the purpose of fulfilling the Company's
obligations under the Non-Employee Directors Deferred Compensation Plan, (see
"BOARD OF DIRECTORS - Non-Employee Directors Deferred Compensation Plan"
described above).
The Board may amend the plan at any time, provided that any amendment that
would require shareholder approval in order for the plan to continue to qualify
under Section 162(m) of the Internal Revenue Code or to comply with securities
laws or other applicable laws or regulations will not be effective prior to
obtaining shareholder approval.
As of March 14, 2006, 513,938 shares of the Company's Class A Common Stock
remained available for issuance under the 2004 Equity Incentive Plan.
Stock Awards
The following table sets forth the equity-based awards granted under the
2004 Equity Incentive Plan.
Number of Shares
of Common Stock
Name Principal Position Underlying Awards
- ---- ------------------ -----------------
T.W. Sullivan President and C.E.O. 100,500
T.B. Phillips Executive Vice President and C.O.O. --
C.R. Mackus Chief Financial Officer, Controller and Secretary 40,200
F.B. Bruno Vice President - Human Resources 38,700
J.F. Bosbous Treasurer 21,000
All Executive Officers as a group 280,800
All non-employee Directors as a group 2,162
All other employees 203,100
Total awards through March 14, 2006 486,062
18
Grants and Issuances of Shares Under the Amendment
As of March 14, 2006, no stock options had been granted and no shares had
been issued under the 2004 Equity Incentive Plan on the basis of the share
increase that will result from the amendment to the 2004 Equity Incentive Plan
for which shareholder approval is sought at the Annual Meeting.
Federal Income Tax Consequences
Option Grants
Options granted under the 2004 Equity Incentive Plan may be either
incentive stock options which satisfy the requirements of Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet
such requirements. The Federal income tax treatment for the two types of options
differs as follows:
Incentive Options. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally
recognized at the time the option is exercised. The optionee will,
however, recognize taxable income in the year in which the purchased
shares are sold or otherwise disposed of. For Federal tax purposes,
dispositions are divided into two categories: (i) qualifying and (ii)
disqualifying. A qualifying disposition occurs if the sale or other
disposition is made after the optionee has held the shares for more than
two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied,
then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized
upon the sale or other disposition of the purchased shares over (ii) the
exercise price paid for the shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the exercise date over (ii) the exercise price paid for
the shares will be taxable as ordinary income to the optionee. Any
additional gain or loss recognized upon the disposition will be recognized
as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for
the taxable year in which such disposition occurs, equal to the excess of
(i) the fair market value of such shares on the option exercise date over
(ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition
of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in
general recognize ordinary income, in the year in which the option is
exercised, equal to the excess of the fair market value of the purchased
shares on the exercise date over the exercise price paid for the shares,
and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then
the optionee will not recognize any taxable income at the time of exercise
but will have to report as ordinary income, as and when the Company's
repurchase right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right lapses over
(ii) the exercise price paid for the shares. The optionee may, however,
elect under Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise of the option an amount equal to
the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any
additional income as and when the repurchase right lapses.
19
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is
recognized by the optionee.
Stock Appreciation Rights
No taxable income is recognized upon receipt of an SAR. The holder will
recognize ordinary income, in the year in which the SAR is exercised, in an
amount equal to the excess of the fair market value of the underlying shares of
common stock on the exercise date over the base price in effect for the
exercised right, and the holder will be required to satisfy the tax withholding
requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the holder in connection with the
exercise of an SAR. The deduction will be allowed for the taxable year in which
such ordinary income is recognized.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to their chief executive officer
or any of their four other most highly compensated executive officers, to the
extent that compensation exceeds $1 million per covered officer in any fiscal
year. The limitation applies only to compensation that is not considered to be
"performance-based." Compensation deemed paid by the Company in connection with
disqualifying dispositions of incentive stock option shares or exercises of
non-statutory stock options granted under the 2004 Equity Incentive Plan
qualifies as performance-based compensation for purposes of Section 162(m) if
such plan is administered by a committee of "outside directors" as defined under
Section 162(m). The Company anticipates that any compensation deemed paid by it
in connection with disqualifying dispositions of incentive stock option shares
or exercises of non-statutory options will qualify as performance-based
compensation for purposes of Code Section 162(m) and will not have to be taken
into account for purposes of the $1 million limitation per covered individual on
the deductibility of the compensation paid to certain executive officers of the
Company. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by the Company without limitation under Code Section
162(m).
Accounting Treatment
Option grants made to employees under the 2004 Equity Incentive Plan prior
to fiscal 2006 did not result in any charge to the Company's earnings. However,
the Company has disclosed in footnotes and pro-forma statements to the Company's
financial statements the impact those options would have upon the Company's
reported earnings were the value of those options at the time of grant treated
as a compensation expense. Effective in the first quarter of fiscal 2006, the
Company is required under Statement of Financial Accounting Standards No.
123(R), "Share-Based Payment", to record as a charge to earnings the fair value
of options granted.
Should one or more optionees be granted stock appreciation rights under
the 2004 Equity Incentive Plan that have no conditions upon exercisability other
than a service or employment requirement, then such rights would result in a
compensation expense to be charged against the Company's reported earnings.
Accordingly, at the end of each fiscal quarter, the amount (if any) by which the
fair market value of the shares of common stock subject to such outstanding
stock appreciation rights has increased from the prior quarter-end would be
accrued as compensation expense, to the extent such fair market value is in
excess of the aggregate exercise price in effect for those rights.
20
Proposal
At the Annual Meeting, shareholders will be asked to approve the amendment
of the 2004 Equity Incentive Plan to increase the number of shares of Class A
Common Stock reserved for issuance under the 2004 Equity Incentive Plan from
1,000,000 to 2,000,000 shares. Such approval will require the affirmative vote
of a majority of the voting power of the shares of the Company's common stock
present or represented by proxy at the Annual Meeting (at which a quorum is
present) and entitled to be voted on the Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 2004 EQUITY INCENTIVE PLAN.
PERFORMANCE INFORMATION
The following graph compares the Company's cumulative total shareholder
return with the cumulative total return of the Standard & Poor's 500 Stock Index
and the Dow Jones U.S. Commercial Vehicles and Truck Index ("DJUSHR"), which was
formerly known as the Dow Jones Heavy Machinery Index. The graph assumes $100
was invested on July 23, 2004, the first trading day following the completion of
the Company's initial public offering, and assumes the reinvestment of
dividends.
[GRAPHIC OMITTED]
2004 2005
---------------------------------- -----------------------------------------------
July 23 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
-------- -------- -------- -------- -------- -------- --------
S&P 500 Stock Index $100 $103 $111 $109 $110 $113 $115
DJUSHR $100 $109 $129 $120 $119 $133 $138
Bucyrus International, Inc. $100 $187 $226 $218 $212 $275 $296
CERTAIN RELATIONSHIPS
Transactions With Management
Employment Agreements; Change of Control
21
The Company has employment agreements with certain of the named executive
officers. These agreements govern the executive's compensation, benefits and
treatment upon termination under various circumstances, including voluntary
termination by either party, or termination by reason of retirement, death or
disability, or in the event of a change of control, as those terms are defined
in the agreements. Each employment agreement automatically renews for a one-year
term upon the expiration of its initial term and any subsequent terms, unless
two months' written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either the
Company or the executive at any time by giving notice as required under the
agreement, provided, however, that if the executive is terminated by the Company
without cause at any time, or if the executive terminates his employment with
good reason in connection with a change in control, as those terms are defined
in the agreement, then the executive will be entitled to certain severance
benefits as described in the executive's individual agreement. Finally, each
agreement imposes confidentiality restrictions on the executive and places
restrictions on the executive's involvement in activities that may compete with
the Company both during employment and following termination. Violation of such
confidentiality and non-competition provisions, or other termination for cause,
as defined in the agreements, may result in forfeiture of severance and other
benefits that may otherwise accrue. Individual compensation, benefits and other
salient features of each agreement are described below.
On March 19, 2004, Mr. Sullivan was elected Chief Executive Officer. In
July 2004, Mr. Sullivan's employment agreement was restated and now provides for
a base salary of not less than $500,000, subject to increase at the discretion
of the Board and for additional incentive based compensation. In the event that
Mr. Sullivan's employment is terminated for any reason other than for cause, he
will be entitled to receive severance pay in the amount of one year's base
salary. In addition, Mr. Sullivan is entitled to participate in employee and
benefit plans that the Company provides to similarly situated management
employees.
Messrs. Bruno and Mackus each serve under one-year employment agreements
dated December 1, 1997 and May 21, 1997, respectively. The agreements
automatically renew for successive one-year terms unless terminated by either
party at least 60 days prior to the end of a one-year term. Upon termination
without cause or through non-renewal of the contract, the Company will continue
to pay salary and benefits for one year. In the event of a "qualifying
termination" (as defined in the agreements) of employment within one year of a
change of control with respect to the Company, the Company will make a severance
payment equal to one-half of the executive's then current annual base salary,
and all unvested stock options will immediately vest and become exercisable as
of the date of the change of control.
On March 5, 2002, the Company entered into a Termination Benefits
Agreement with Messrs. Bosbous and Phillips, which was intended to provide
benefits to Messrs. Bosbous and Phillips only in the event of a change of
control or ownership of the Company or any of its subsidiaries prior to December
31, 2005. In the event of the occurrence of certain terminations or deemed
terminations of employment following a change of control, Messrs. Bosbous and
Phillips would have been entitled to payments in an amount equal to annual base
salary plus annual incentives, and certain benefits maintained. By its terms,
the Termination Benefits Agreement lapsed on December 31, 2005.
AUDIT COMMITTEE REPORT
The Audit Committee is comprised entirely of independent directors (as
defined for members of an audit committee under Rule 4200(a)(15) of NASDAQ's
listing standards). Management of the Company is responsible for the Company's
internal controls and financial reporting process. The independent registered
public accounting firm is responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with standards of The
Public Company Accounting Oversight Board (United States) and issuing a report
thereon. The Audit Committee is responsible for monitoring these processes and
is responsible for appointing the Company's independent registered public
accounting firm and approving the terms of the independent registered public
accounting firm's services. The Audit Committee has established a policy for the
pre-approval of all audit and
22
permissible non-audit services to be provided by the independent registered
public accounting firm, as described below.
The services performed by the independent registered public accounting
firm in 2005 were pre-approved in accordance with the pre-approval policy and
procedures adopted by the Board at its December 8, 2003 meeting. This policy
describes the permitted audit, audit-related, tax and other services
(collectively, the "Disclosure Categories") that the independent registered
public accounting firm may perform. The policy requires that prior to the
beginning of each fiscal year, a description of the services (the "Service
List") anticipated to be performed by the independent registered public
accounting firm in each of the Disclosure Categories in the ensuing fiscal year
be presented to the Board for approval. Services provided by the independent
registered public accounting firm during the ensuing fiscal year were
pre-approved in accordance with the policies and procedures of the Board.
Any request for audit, audit-related, tax and other services not
contemplated by the Service List must be submitted to the Audit Committee for
specific pre-approval, irrespective of the amount, and cannot commence until
such approval has been granted. Normally, pre-approval is provided at regularly
scheduled meetings of the Audit Committee. However, the authority to grant
specific pre-approval between meetings, as necessary, has been delegated to the
Chairman of the Audit Committee. The Chairman will update the full Audit
Committee at the next regularly scheduled meeting for any interim approvals
granted. On an annual basis, the Audit Committee reviews the status of services
and fees incurred year-to-date as compared to the original Service List.
The Audit Committee met with the Company's management and its independent
registered public accounting firm five times during 2005.
The Audit Committee has discussed with the Company's independent
registered public accounting firm the overall scope and plans for the
independent audits. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America.
Discussions regarding the Company's audited financial statements included the
independent registered public accounting firm's judgments about the quality, not
just the acceptability of the accounting principles, the reasonableness of
significant judgements, and the clarity of the disclosures in the financial
statements. The Audit Committee also discussed with the independent registered
public accounting firm other matters required by Statement on Auditing Standards
No. 61, "Communication with Audit Committees", as amended by SAS No. 90, "Audit
Committee Communications".
The Company's independent registered public accounting firm provided to
the Audit Committee the written disclosures required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees", and the
Audit Committee discussed the independent registered public accounting firm's
independence with management and auditors.
Based on the Audit Committee's discussion with management and the
independent registered public accounting firm, the Audit Committee's review of
the representation of management and the report of the independent registered
public accounting firm to the Audit Committee, the Audit Committee recommended
to the Board that the audited consolidated financial statements be included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2005
filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Gene E. Little (Chairman)
Ronald A. Crutcher
Robert W. Korthals
23
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal 4)
Deloitte & Touche LLP served as the Company's independent registered
public accounting firm for 2005. A representative of Deloitte & Touche LLP is
expected to be present at the 2006 annual meeting and will be given the
opportunity to make a statement and answer questions that may be asked by
shareholders.
The Audit Committee of the Board has selected Deloitte & Touche LLP as the
Company's independent registered public accounting firm for the Company's fiscal
year ending December 31, 2006. The Company is submitting the selection of the
independent registered public accounting firm for shareholder ratification at
the Annual Meeting.
The Company's organizational documents do not require that the Company's
shareholders ratify the selection of Deloitte & Touche LLP as the Company's
independent registered public accounting firm. The Company is doing so because
it believes it is a matter of good corporate practice. If the Company's
shareholders do not ratify the selection, the Audit Committee will reconsider
whether to retain Deloitte & Touche LLP, but still may retain them. Even if the
selection is ratified, the Audit Committee, in its discretion, may change the
appointment at any time during the year if it determines that such a change
would be in the best interests of the Company and its shareholders.
Fees billed to the Company by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu and their respective affiliates (collectively, the
"Deloitte Entities") for the years ended December 31, 2005,and 2004 were as
follows:
Audit Fees
The aggregate fees billed for the audit of the Company's annual financial
statements for the fiscal years ended December 31, 2005 and 2004, for work in
2005 in connection with the attestations required by Section 404 of the
Sarbanes-Oxley Act of 2002 related to the Company's internal control over
financial reporting, for services performed in 2004 in connection with the
Company's initial public offering and secondary stock offering, and for the
reviews of the financial statements included in the Company's quarterly reports
on Form 10-Q including services related thereto such as statutory audits,
regulatory filings and for other attest services were $818,000 and $1,141,000,
respectively.
Audit-Related Fees
The aggregate fees billed for audit-related services for the fiscal years
ended December 31, 2005 and 2004 were $5,000 and $25,000, respectively. These
fees relate primarily to audits of employee benefit plans.
Tax Fees
The aggregate fees billed for tax services for the fiscal years ended
December 31, 2005 and 2004 were $414,000 and $312,000, respectively. These fees
are for tax consultation and planning provided by Deloitte & Touche LLP that are
related to various federal, state and international issues.
All Other Fees
There were no fees billed for services not included above for the fiscal
years ended December 31, 2005 and 2004.
The Board considered the non-audit services provided by the Deloitte
Entities and determined that the provision of such services was compatible with
maintaining the Deloitte Entities' independence. The Board also adopted a policy
prohibiting the Company from hiring the Deloitte Entities personnel at the
manager or partner level who have been directly involved in performing auditing
procedures or
24
providing accounting advice to the Company. None of the fees reported under the
headings Audit- Related Fees, Tax Fees, and All Other Fees were approved by the
Audit Committee pursuant to Rule 2- 01(c)(7)(i)(C) of Regulation S-X, which
permits the Audit Committee to waive its pre-approval requirement under certain
circumstances.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity security, to file with the SEC and
with the NASDAQ Stock Market reports of ownership and changes in ownership of
common stock and other equity securities of the Company. Directors, executive
officers and greater than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of such reports furnished to the Company or written
representations that no other reports were required, the Company believes that,
during the 2005 fiscal year, all filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners were
complied with other than with respect to the Form 3 of Mr. Robert C. Scharp,
which was due on or before July 24, 2004 but, through omission, was
inadvertently not filed until February 16, 2006. The Form 3 disclosed that Mr.
Scharp held no Company stock on the date of his appointment as director. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
SHAREHOLDER PROPOSALS
A shareholder who intends to present a proposal for action at any annual
meeting and who desires that such proposal be included in the Company's proxy
materials must submit the proposal to the Company in advance of the meeting.
Proposals for the annual meeting to be held in 2007 must be received by the
Company at its principal office, directed to the attention of the Secretary, no
later than December 1, 2006. Under SEC rules relating to the discretionary
voting of proxies at shareholder meetings, if a proponent of a matter for
shareholder consideration (other than a shareholder proposal) fails to notify
the Company at least 45 days prior to the month and day of mailing the prior
year's proxy statement, then management proxies are allowed to use their
discretionary voting authority if a proposal is raised at the annual meeting,
without any discussion of the matter in the proxy statement. Therefore, any such
matters must be received by the Company by February 14, 2007 in the case of the
2007 annual meeting of shareholders. The Company is not aware of any such
proposals for the 2006 annual meeting. The Company's Bylaws also establish
advance notice procedures as to (1) business to be brought before an annual
meeting of shareholders other than by or at the direction of the Board; (2) the
nomination, other than by or at the direction of the Board, of candidates for
election as directors; and (3) the request to call a special meeting of
shareholders. Under the Company's Bylaws, written notice of shareholder
proposals for the 2007 annual meeting which are not intended to be considered
for inclusion in next year's annual meeting proxy materials (shareholder
proposals submitted outside the processes of Rule 14a-8 under the Securities
Exchange Act of 1934) must be received by the Company at its principal office,
directed to the attention of the Secretary, not less than 90 nor more than 120
days before the first anniversary of this year's meeting, and must contain the
information specified in the Company's Bylaws. Any shareholder who wishes to
take such action should obtain a copy of the Bylaws and may do so by written
request addressed to the Secretary of the Company at the principal executive
offices of the Company.
COST OF PROXY SOLICITATION
The Company will pay the cost of preparing, printing and mailing proxy
materials as well as the cost of soliciting proxies on behalf of the Board. In
addition to using the mail services, officers and other employees of the
Company, without additional remuneration, may solicit proxies in person and by
telephone, e-mail or facsimile transmission. The Company has retained LaSalle
Bank N.A. and expects to pay such firm a fee of approximately $1,000 to solicit
proxies from direct holders and from banks, brokers and other nominees having
shares registered in their names, which are beneficially owned by others.
25
OTHER MATTERS
The Board is not aware of any other matters that may come before the
Annual Meeting. If any other matters are properly presented to the Annual
Meeting for action, it is the intention of the persons named as proxies in the
enclosed form of proxy to vote such proxies in accordance with the best judgment
of a majority of the proxies on such matters.
ANNUAL REPORT
The Company's Annual Report to Shareholders, including audited financial
statements for the year ended December 31, 2005, although not a part of this
Proxy Statement, is delivered herewith.
The Company will furnish to any shareholder, without charge, a copy of its
Annual Report on Form 10-K for the fiscal year 2005. Requests for Form 10-K must
be in writing and addressed to Investor Relations, Bucyrus International, Inc.,
Post Office Box 500, 1100 Milwaukee Avenue, South Milwaukee, Wisconsin 53172.
By Order of the Board of Directors,
Bucyrus International, Inc.
/s/Craig R. Mackus
Craig R. Mackus
Chief Financial Officer, Controller and Secretary
South Milwaukee, Wisconsin
March 31, 2006
26
BUCYRUS INTERNATIONAL, INC.
PLEASE MARK VOTES AS IN THIS EXAMPLE USING DARK INK ONLY.
1. Election of Directors: For Withhold For All 3. AMENDMENT OF 2004 EQUITY INCENTIVE
Nominees: R.L. Purdum All All Except PLAN. To approve an amendment to the For Against Abstain
T.W. Sullivan |_| |_| |_| Bucyrus International, Inc. 2004 |_| |_| |_|
Equity Incentive Plan.
(INSTRUCTION: To withhold authority
to vote for any individual nominee, 4. RATIFICATION OF APPOINTMENT OF
mark "For All Except" and write the INDEPENDENT REGISTERED PUBLIC
nominee's name for which you wish to ACCOUNTANTS. To ratify the For Against Abstain
withhold authority In the space appointment of Deloitte & Touche LLP |_| |_| |_|
below.) as independent registered public
accountants of the Company for the
- ----------------------------------------- fiscal year ending December 31, 2006.
2. AMENDMENT OF RESTATED CERTIFICATE OF For Against Abstain
INCORPORATION. To approve an |_| |_| |_| 5. In their discretion, the Proxies are
amendment to the Restated Certificate authorized to vote upon such other
of Incorporation of Bucyrus business as may properly come before
International, Inc. to increase the the meeting.
number of authorized shares of common
stock.
Dated:___________________________, 2006
--------------------------------------------------------------
Signature
--------------------------------------------------------------
Signature if held jointly
Please sign exactly as name appears above. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation. please sign
in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
7144-Bucyrus International, Inc.
PROXY PROXY
BUCYRUS INTERNATIONAL, INC.
1100 Milwaukee Avenue
South Milwaukee, WI 53172
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John F. Bosbous and Frank P. Bruno and
each of them, as Proxies, each with full power of substitution, and hereby
authorizes them to vote, as designated below, all Class A Common Shares of
Bucyrus International, Inc. held of record by the undersigned on March 14, 2006,
that the undersigned is entitled to vote and would possess if personally
present, at the Annual Meeting of Shareholders to be held at 10:00 a.m. on
Wednesday, May 3, 2006 at the Wisconsin Club, 900 West Wisconsin Avenue,
Milwaukee, Wisconsin 53233 and any adjournment or postponement thereof. All
Proxies present at the meeting, and if only one is present, then that one, may
exercise the power granted hereunder.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL LISTED DIRECTORS AND FOR PROPOSALS.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
7144-Bucyrus International, Inc.
BUCYRUS INTERNATIONAL, INC.
2004 EQUITY INCENTIVE PLAN
(2006 AMENDMENT AND RESTATEMENT)
TABLE OF CONTENTS
Page
BUCYRUS INTERNATIONAL, INC.
2004 EQUITY INCENTIVE PLAN
(2006 AMENDMENT AND RESTATEMENT)
1. Purpose; Types of Awards; Effective Date...............................1
2. Definitions............................................................1
3. Administration.........................................................6
4. Eligibility............................................................7
5. Stock Subject to the Plan..............................................7
6. Specific Terms of Awards...............................................8
7. General Provisions....................................................13
-i-
BUCYRUS INTERNATIONAL, INC.
2004 EQUITY INCENTIVE PLAN
(2006 AMENDMENT AND RESTATEMENT)
1. Purpose; Types of Awards; Effective Date.
The purposes of the Bucyrus International, Inc. 2004 Equity Incentive Plan
(2006 Amendment and Restatement) (the "Plan") are to provide an incentive to
non-employee directors, selected officers and other employees, advisors and
consultants of Bucyrus International, Inc. (the "Company"), or any Parent or
Subsidiary of the Company that now exists or hereafter is organized or acquired,
to continue as non-employee directors, officers or employees, advisors or
consultants, as the case may be, to increase their efforts on behalf of the
Company and its Subsidiaries and to promote the success of the Company's
business. The Plan provides for the grant of Options (including "incentive stock
options" and "nonqualified stock options"), stock appreciation rights,
restricted stock, restricted stock units and other stock-based awards. The Plan
is designed so that Awards granted hereunder intended to comply with the
requirements for "performance-based compensation" under Section 162(m) of the
Code may comply with such requirements, and the Plan and Awards shall be
interpreted in a manner consistent with such requirements. The Plan was
initially adopted effective June 30, 2004. The Plan, as amended and restated
herein, is effective on March 6, 2006, subject to the approval of the Company's
stockholders at the 2006 Annual Meeting.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Award" means any Option, SAR, Restricted Stock, Restricted
Stock Unit or Other Stock-Based Award granted under the Plan.
(b) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" with respect to any Participant, shall have the
definition set forth in an individual employment, severance or
other similar agreement between such Participant and the
Company or one of its affiliates or, if there is no such
definition in any such agreement, Cause shall mean (i) the
continued failure by the Participant substantially to perform
his or her duties and obligations to the Company or any of its
affiliates, including without limitation repeated refusal to
follow the reasonable directions of the Participant's
employer, knowing violation of law in the course of
1
performance of the duties of Participant's employment with the
Company or any of its affiliates, repeated absences from work
without a reasonable excuse, and intoxication with alcohol or
illegal drugs while on the Company's premises or that of any
of the Company's affiliates during regular business hours
(other than any such failure resulting from his or her
incapacity due to physical or mental illness); (ii) fraud or
material dishonesty against the Company or any of its
subsidiaries; or (iii) a conviction or plea of guilty or nolo
contendre for the commission of a felony or a crime involving
material dishonesty. Determination of Cause shall be made by
the Committee in its sole discretion.
(e) "Change in Control" means a change in control of the Company,
which will be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (A) the Company,
(B) any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, (C) any
corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of Stock or (D) American
Industrial Partners or any of its affiliates), is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing one-third (33
1/3%) or more of the combined voting power of the
Company's then outstanding voting securities;
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a
director whose initial assumption of office is in
connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board
or nomination for election by the Company's stockholders
was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office
who either were directors on the Effective Date or whose
appointment, election or nomination for election was
previously so approved or recommended;
(iii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the
Company with any other corporation, other than a merger
or consolidation immediately following which the
individuals who comprise the Board immediately prior
thereto constitute at least a majority of the Board, the
entity surviving such merger or consolidation or, if the
2
Company or the entity surviving such merger is then a
subsidiary, the ultimate parent thereof; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or there is
consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect),
other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an
entity, immediately following which the individuals who
comprise the Board immediately prior thereto constitute
at least a majority of the board of directors of the
entity to which such assets are sold or disposed of or,
if such entity is a subsidiary, the ultimate parent
thereof.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred by virtue of (x) a Public Offering or (y)
the consummation of any transaction or series of integrated
transactions immediately following which the holders of the Stock
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of
transactions.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder.
(g) "Committee" means the committee established by the Board to
administer the Plan, the composition of which shall at all
times satisfy the provisions of Rule 16b-3 and Section 162(m)
of the Code.
(h) "Company" means Bucyrus International, Inc., a corporation
organized under the laws of the State of Delaware, or any
successor corporation.
(i) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
(j) "Director Fees" means any amount paid to a Non-Employee
Director, including annual retainer and committee meeting
fees, but excluding any payment or reimbursement with respect
to a Non-Employee Director's expenses arising from his or her
service as a member of the Board.
(k) "Disability" shall have the meaning set forth in the Company's
long-term disability benefits policy.
(l) "Effective Date" means March 6, 2006, the date that the Plan
was approved by the Compensation Committee of the Board.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations
promulgated thereunder.
3
(n) "Fair Market Value" means, with respect to Stock or other
property, the fair market value of such Stock or other
property determined by such methods or procedures as shall be
established from time to time by the Committee. Unless
otherwise determined by the Committee in good faith, the per
share Fair Market Value of Stock as of a particular date shall
mean (i) the mean between the highest and lowest reported
sales price per share of Stock on the national securities
exchange on which the Stock is principally traded, for the
last preceding date on which there was a sale of such Stock on
such exchange, or (ii) if the shares of Stock are then traded
in an over-the-counter market, the average of the closing bid
and asked prices for the shares of Stock in such
over-the-counter market for the last preceding date on which
there was a sale of such Stock in such market, or (iii) if the
shares of Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value
as the Committee, in its sole discretion, shall determine.
(o) "Grantee" means a person who, as a non-employee director,
officer or other employee of the Company or a Parent or
Subsidiary of the Company, has been granted an Award under the
Plan.
(p) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of
the Code.
(q) "Non-Employee Director" means any director of the Company who
is not also employed by the Company or any of its
Subsidiaries.
(r) "Non-Employee Director Stock Grant" means an Award of
unrestricted shares of Stock to be granted to a Non-Employee
Director under Section 6(f) in lieu of payment of such
individual's Director Fees.
(s) "NQSO" means any Option that is not designated as an ISO.
(t) "Option" means a right, granted to a Grantee under Section
6(b), to purchase shares of Stock. An Option may be either an
ISO or an NQSO, provided that ISOs may be granted only to
employees of the Company or a Parent or Subsidiary of the
Company.
(u) "Other Stock-Based Award" means a right or other interest
granted to a Grantee under Section 6(g) that may be
denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock,
including but not limited to (i) unrestricted Stock awarded as
a bonus or upon the attainment of Performance Goals or
otherwise as permitted under the Plan, and (ii) a right
granted to a Grantee to acquire Stock from the Company
containing terms and conditions prescribed by the Committee.
(v) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
4
(w) "Performance Goals" means performance goals based on one or
more of the following criteria, determined in accordance with
generally accepted accounting principles where applicable: (i)
earnings before or after interest, taxes, depreciation,
amortization, or extraordinary or special items; (ii) net
income, before or after extraordinary or special items; (iii)
return on equity (gross or net), before or after extraordinary
or special items; (iv) earnings per share, before or after
extraordinary or special items; and (v) stock price. Where
applicable, the Performance Goals may be expressed in terms of
attaining a specified level of the particular criterion or the
attainment of an increase or decrease (expressed as absolute
numbers of a percentage) in the particular criterion, and may
be applied to one or more of the Company or a Parent or
Subsidiary of the Company, or a division or strategic business
unit of the Company, all as determined by the Committee. The
Performance Goals may include a threshold level of performance
below which no payment will be made (or no vesting will
occur), levels of performance at which specified payments will
be paid (or specified vesting will occur), and a maximum level
of performance above which no additional payment will be made
(or at which full vesting will occur). Each of the foregoing
Performance Goals shall be evaluated in accordance with
generally accepted accounting principles, where applicable,
and shall be subject to certification by the Committee. The
Committee shall have the authority to make equitable
adjustments to the Performance Goals in recognition of unusual
or non-recurring events affecting the Company or any Parent or
Subsidiary of the Company or the financial statements of the
Company or any Parent or Subsidiary of the Company, in
response to changes in applicable laws or regulations, or to
account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence
or related to the disposal of a segment of a business or
related to a change in accounting principles.
(x) "Plan" means this Bucyrus International, Inc. 2004 Equity
Incentive Plan (2006 Amendment and Restatement), as amended
from time to time.
(y) "Plan Year" means a calendar year.
(z) "Public Offering" means an offering of securities of the
Company that is registered with the Securities and Exchange
Commission.
(aa) "Restricted Stock" means an Award of shares of Stock to a
Grantee under Section 6(d) that may be subject to certain
restrictions and to a risk of forfeiture.
(bb) "Restricted Stock Unit" or "RSU" means a right granted to a
Grantee under Section 6(e) to receive Stock or cash at the end
of a specified deferral period, which right may be conditioned
on the satisfaction of specified performance or other
criteria.
5
(cc) "Retirement" shall be within the meaning of such term under
the Bucyrus International, Inc. Cash Balance Plan.
(dd) "Rule 16b-3" means Rule 16b-3, as from time to time in effect
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to
such Rule.
(ee) "Stock" means shares of the Class A common stock, par value
$0.01 per share, of the Company.
(ff) "Stock Appreciation Right" or "SAR" means the right, granted
to a Grantee under Section 6(c), to be paid an amount measured
by the appreciation in the Fair Market Value of Stock from the
date of grant to the date of exercise of the right.
(gg) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Administration.
The Plan shall be administered by the Board or by such Committee
that the Board may appoint for this purpose. If a Committee is appointed to
administer the Plan, all references herein to the "Committee" shall be
references to such Committee. If no Committee is appointed by the Board to
administer the Plan, all references herein to the "Committee" shall be
references to the Board. The Committee shall have the authority in its
discretion, subject to and not inconsistent with the express provisions of the
Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted, the number of shares of Stock to which an Award may relate and the
terms, conditions, restrictions and performance criteria relating to any Award,
including but not limited to the effect of a Change in Control upon any Award;
to determine, at the time of grant or thereafter, whether and to what extent the
vesting or payment of any Award may be accelerated; to determine Performance
Goals no later than such time as required to ensure that an underlying Award
which is intended to comply with the requirements of Section 162(m) of the Code
so complies; and to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, exchanged, or
surrendered; to make adjustments in the terms and conditions of, and the
Performance Goals (if any) included in, Awards; to construe and interpret the
Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the Award
Agreements (which need not be identical for each Grantee); and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
Notwithstanding the foregoing, neither the Board, the Committee nor their
respective delegates shall have the authority to reprice (or cancel and regrant)
any Option or, if applicable, other Award at a lower exercise, base or purchase
price without first obtaining the approval of the Company's stockholders.
6
The Committee may appoint a chairperson and a secretary and may make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent. The
Committee may delegate to one or more of its members or to one or more agents
such administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including but not limited to the Company, any Parent or Subsidiary of the
Company or any Grantee (or any person claiming any rights under the Plan from or
through any Grantee) and any stockholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
granted hereunder.
4. Eligibility.
Awards may be granted to selected Non-Employee Directors, officers
and other employees, advisors or consultants of the Company or any Parent or
Subsidiary of the Company, in the discretion of the Committee. In determining
the persons to whom Awards shall be granted and the type of any Award (including
the number of shares to be covered by such Award), the Committee shall take into
account such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. Stock Subject to the Plan.
The maximum number of shares of Stock reserved for the grant of
Awards under the Plan shall be 2,000,000, subject to adjustment as provided
herein. All of the shares of Stock reserved for grant hereunder may be awarded
in the form of ISOs. No more than 160,000 shares of Stock may be made subject to
Options or SARs to a single individual in a single Plan Year, subject to
adjustment as provided herein, and no more than 160,000 shares of Stock may be
made subject to stock-based awards other than Options or SARs (including
Restricted Stock and Restricted Stock Units or Other Stock-Based Awards
denominated in shares of Stock) to a single individual in a single Plan Year, in
either case, subject to adjustment as provided herein. Determinations made in
respect of the limitations set forth in the immediately preceding sentence shall
be made in a manner consistent with Section 162(m) of the Code. Such shares may,
in whole or in part, be authorized but unissued shares or shares that shall have
been or may be reacquired by the Company in the open market, in private
transactions or otherwise. If any shares subject to an Award are forfeited,
cancelled, exchanged or surrendered or if an Award terminates or expires without
a distribution of shares to the Grantee, or if shares of Stock are surrendered
or withheld as payment of either the exercise price of an Award and/or
withholding taxes in respect of an Award, the shares of Stock with respect to
such Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, withholding, termination or expiration, again be available for Awards
under the Plan. Upon the exercise of any Award granted in tandem with any Awards
such related Awards shall be cancelled to the extent of the number of
7
shares of Stock as to which the Award is exercised and, notwithstanding the
foregoing, such number of shares shall no longer be available for Awards under
the Plan.
In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Grantees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares of Stock or other property (including cash) that
may thereafter be issued in connection with Awards, (ii) the number and kind of
shares of Stock or other property (including cash) issued or issuable in respect
of outstanding Awards, (iii) the exercise price, grant price, or purchase price
relating to any Award; provided, that, with respect to ISOs, such adjustment
shall be made in accordance with Section 424(h) of the Code; and (iv) the
Performance Goals applicable to outstanding Awards.
6. Specific Terms of Awards.
(a) General. The Committee is authorized to grant the Awards
described in this Section 6, under such terms and conditions
as deemed by the Committee to be consistent with the purposes
of the Plan. Each Award granted under the Plan shall be
evidenced by an Award Agreement containing such terms and
conditions applicable to such Award as the Committee shall
determine at the date of grant or thereafter. Subject to the
terms of the Plan and any applicable Award Agreement, payments
to be made by the Company or a Parent or Subsidiary of the
Company upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at
the date of grant or thereafter, including, without
limitation, cash, Stock, or other property, and may be made in
a single payment or transfer, in installments, or on a
deferred basis. The Committee may make rules relating to
installment or deferred payments with respect to Awards,
including the rate of interest to be credited with respect to
such payments. In addition to the foregoing, the Committee may
impose on any Award or the exercise thereof, at the date of
grant or thereafter, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee
shall determine. The date on which the Committee adopts a
resolution expressly granting an Award shall be considered the
day on which such Award is granted, provided that such Award
is communicated to the Grantee within a relatively short time
period after the date such resolution is adopted.
(b) Options. The Committee is authorized to grant Options to
Grantees on the following terms and conditions:
8
(i) Type of Award. The Award Agreement evidencing the grant
of an Option under the Plan shall designate the Option
as an ISO or an NQSO.
(ii) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the
Committee, but in no event shall the exercise price of
any Option be less than the Fair Market Value of a share
of Stock on the date of grant of such Option. The
exercise price for Stock subject to an Option may be
paid in cash or by an exchange of Stock previously owned
by the Grantee for at least six months (if acquired from
the Company), through a "broker cashless exercise"
procedure approved by the Committee (to the extent
permitted by law), or a combination of the above, in any
case in an amount having a combined value equal to such
exercise price. An Award Agreement may provide that a
Grantee may pay all or a portion of the aggregate
exercise price by having shares of Stock with a Fair
Market Value on the date of exercise equal to the
aggregate exercise price withheld by the Company.
(iii) Exercisability of Options. Options shall be exercisable
over the exercise period (which shall not exceed ten
years from the date of grant), at such times and upon
such conditions as the Committee may determine, as
reflected in the Award Agreement; provided, that the
Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time
and under such circumstances as it, in its sole
discretion, deems appropriate. An Option may be
exercised to the extent of any or all full shares of
Stock as to which the Option has become exercisable, by
giving written notice of such exercise to the Committee
or its designated agent.
(iv) Termination of Employment. An Option may not be
exercised unless the Grantee is then a director of, in
the employ of, or otherwise providing services to the
Company or a Parent or Subsidiary of the Company, and
unless the Grantee has remained continuously so
employed, or continuously maintained such relationship,
since the date of grant of the Option; provided, that
the Award Agreement may contain provisions extending the
exercisability of Options, in the event of specified
terminations, to a date not later than the expiration
date of such Option.
(v) Other Provisions. Options may be subject to such other
conditions including, but not limited to, restrictions
on transferability of the shares acquired upon exercise
of such Options, as the Committee may prescribe in its
discretion or as may be required by applicable law.
9
(c) SARs. The Committee is authorized to grant SARs to Grantees on
the following terms and conditions:
(i) In General. Unless the Committee determines otherwise,
an SAR (1) granted in tandem with an NQSO may be granted
at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only
be granted at the time of grant of the related ISO. An
SAR granted in tandem with an Option shall be
exercisable only to the extent the underlying Option is
exercisable. Payment of an SAR may made in cash, Stock,
or property as specified in the Award or determined by
the Committee
(ii) SARs. An SAR shall confer on the Grantee a right to
receive an amount with respect to each share subject
thereto, upon exercise thereof, equal to the excess of
(1) the Fair Market Value of one share of Stock on the
date of exercise over (2) the grant price of the SAR
(which in the case of an SAR granted in tandem with an
Option shall be equal to the exercise price of the
underlying Option, and which in the case of any other
SAR shall be such price as the Committee may determine).
(iii) Term and Exercisability of SARs. The date on which the
Committee adopts a resolution expressly granting an
Option shall be considered the day on which such SAR is
granted. Subject to paragraph (i) above, SARs shall be
exercisable over the exercise period (which shall not
exceed ten years from the date of grant), at such times
and upon such conditions as the Committee may determine,
as reflected in the Award Agreement; provided, that the
Committee shall have the authority to accelerate the
exercisability of any outstanding SAR at such time and
under such circumstances as it, in its sole discretion,
deems appropriate. Subject to paragraph (i) above, an
SAR may be exercised to the extent of any or all full
shares of Stock as to which the SAR has become
exercisable, by giving written notice of such exercise
to the Committee or its designated agent.
(iv) Termination of Employment. An SAR may not be exercised
unless the Grantee is then a director of, in the employ
of, or otherwise providing services to the Company or a
Parent or Subsidiary of the Company, and unless the
Grantee has remained continuously so employed, or
continuously maintained such relationship, since the
date of grant of the SAR; provided, that the Award
Agreement may contain provisions extending the
exercisability of the SAR, in the event of specified
terminations, to a date not later than the expiration
date of such SAR.
10
(v) Other Provisions. SARs may be subject to such other
conditions including, but not limited to, restrictions
on transferability of the shares acquired upon exercise
of such SARs, as the Committee may prescribe in its
discretion or as may be required by applicable law.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Grantees on the following terms and
conditions:
(i) Issuance and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability and
other restrictions, if any, as the Committee may impose
at the date of grant or thereafter, which restrictions
may lapse separately or in combination at such times,
under such circumstances, in such installments, or
otherwise, as the Committee may determine. The Committee
may place restrictions on Restricted Stock that shall
lapse, in whole or in part, only upon the attainment of
Performance Goals. Except to the extent restricted under
the Award Agreement relating to the Restricted Stock, a
Grantee granted Restricted Stock shall have all of the
rights of a stockholder including, without limitation,
the right to vote Restricted Stock and the right to
receive dividends thereon.
(ii) Forfeiture. Upon termination of employment with or
service to the Company, or upon termination of the
director or independent contractor relationship, as the
case may be, during the applicable restriction period,
Restricted Stock and any accrued but unpaid dividends
that are then subject to restrictions shall be
forfeited; provided, that the Committee may provide, by
rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock will
be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the
Committee shall determine. If certificates representing
Restricted Stock are registered in the name of the
Grantee, such certificates shall bear an appropriate
legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the
certificate.
(iv) Dividends. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date, or deferred
for payment to such date as determined by the Committee,
in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends.
Stock distributed in connection with a stock
11
split or stock dividend, and other property distributed
as a dividend, shall be subject to restrictions and risk
of forfeiture to the same extent as the Restricted Stock
with respect to which such Stock or other property has
been distributed.
(e) Restricted Stock Units. The Committee is authorized to grant
Restricted Stock Units to Grantees on the following terms and
conditions:
(i) Award and Restrictions. Delivery of Stock or cash, as
determined by the Committee, will occur upon expiration
of the deferral period specified for RSUs by the
Committee. The Committee may place restrictions on RSUs
that shall lapse, in whole or in part, only upon the
attainment of Performance Goals.
(ii) Forfeiture. Upon termination of employment with or
service to the Company, or upon termination of the
director or independent contractor relationship, as the
case may be, during the applicable deferral period or
portion thereof to which forfeiture conditions apply, or
upon failure to satisfy any other conditions precedent
to the delivery of Stock or cash to which such RSUs
relate, all RSUs and any accrued but unpaid dividend
equivalents that are then subject to deferral or
restriction shall be forfeited; provided, that the
Committee may provide, by rule or regulation or in any
Award Agreement, or may determine in any individual
case, that restrictions or forfeiture conditions
relating to RSUs will be waived in whole or in part in
the event of termination resulting from specified
causes, and the Committee may in other cases waive in
whole or in part the forfeiture of RSUs.
(iii) Non-Employee Director Deferred Compensation Awards. The
Committee is authorized to grant RSUs pursuant to this
Section 6(e)(iii) for the purpose of fulfilling the
Company's obligations under its Non-Employee Director
Deferred Compensation Plan (the "Director Deferred
Compensation Plan"); provided, that certain terms and
conditions of the grant and payment of such RSUs set
forth under the Director Deferred Compensation Plan (and
only to the extent set forth in such plan) shall
supercede the terms generally applicable to RSUs granted
under the Plan. RSUs granted under this paragraph need
not be evidenced by an Award Agreement unless the
Committee determines that such an Award Agreement is
desirable for the furtherance of the purposes of the
Plan and the Director Deferred Compensation Plan.
(f) Non-Employee Director Stock Grants. The Committee is
authorized to grant shares of Stock to Non-Employee Directors,
if such a director elects to receive his or her Director Fees
in the form of shares of Stock. Such shares of Stock shall be
awarded at such times as the Company shall
12
otherwise pay to Non-Employee Directors their Director Fees
(the "Fee Payment Date"). The number of shares of Stock to be
issued in lieu of Director Fees pursuant to this Section 6(f)
shall be determined by dividing (i) the amount otherwise to be
paid to such Non-Employee Director on a Fee Payment Date by
(ii) the Fair Market Value of a share of Stock as of such Fee
Payment Date; provided, that fractional shares resulting from
such calculation shall be paid in cash. Such shares of Stock
shall be immediately vested and non-forfeitable and a
certificate in respect of such shares shall be issued promptly
following such Fee Payment Date to such Non-Employee Director.
(g) Other Stock-Based Awards. The Committee is authorized to grant
Other Stock-Based Awards to Grantees in such form as deemed by
the Committee to be consistent with the purposes of the Plan.
Awards granted pursuant to this paragraph may be granted with
value and payment contingent upon Performance Goals. The
Committee shall determine the terms and conditions of such
Awards at the date of grant or thereafter. The maximum value
of the aggregate payment that any Grantee may receive pursuant
to this Section 6(g) in respect of any Plan Year is $1
million. Payments earned hereunder may be decreased or, with
respect to any Grantee who is not a Covered Employee,
increased in the sole discretion of the Committee based on
such factors as it deems appropriate. No payment shall be made
prior to the certification by the Committee that the
Performance Goals have been attained. The Committee may
establish such other rules applicable to the Other Stock-Based
Awards to the extent not inconsistent with Section 162(m) of
the Code.
7. General Provisions.
(a) Nontransferability. Unless otherwise provided in an Award
Agreement, Awards shall not be transferable by a Grantee
except by will or the laws of descent and distribution and
shall be exercisable during the lifetime of a Grantee only by
such Grantee or his guardian or legal representative.
(b) No Right to Continued Employment, etc. Nothing in the Plan or
in any Award, any Award Agreement or other agreement entered
into pursuant hereto shall confer upon any Grantee the right
to continue in the employ of or to continue as a director of
the Company or any Parent or Subsidiary of the Company or to
be entitled to any remuneration or benefits not set forth in
the Plan or such Award Agreement or other agreement or to
interfere with or limit in any way the right of the Company or
any such Parent or Subsidiary to terminate such Grantee's
employment, or director or independent contractor
relationship.
(c) Taxes. The Company or any Parent or Subsidiary of the Company
is authorized to withhold from any Award granted, any payment
relating to an Award under the Plan, including from a
distribution of Stock, or any
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other payment to a Grantee, amounts of withholding and other
taxes due in connection with any transaction involving an
Award, and to take such other action as the Committee may deem
advisable to enable the Company and Grantees to satisfy
obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in
satisfaction of a Grantee's tax obligations. The Committee may
provide in the Award Agreement that in the event that a
Grantee is required to pay any amount to be withheld in
connection with the issuance of shares of Stock in settlement
or exercise of an Award, the Grantee may satisfy such
obligation (in whole or in part) by electing to have a portion
of the shares of Stock to be received upon settlement or
exercise of such Award equal to the minimum amount required to
be withheld.
(d) Stockholder Approval; Amendment and Termination.
(i) The Plan shall take effect upon its adoption by the
Board but the Plan (and any grants of Awards made prior
to the stockholder approval mentioned herein) shall be
subject to the requisite approval of the stockholders of
the Company. In the event that the stockholders of the
Company do not ratify the Plan at a meeting of the
stockholders at which such issue is considered and voted
upon, then upon such event the Plan and all rights
hereunder shall immediately terminate and no Grantee (or
any permitted transferee thereof) shall have any
remaining rights under the Plan or any Award Agreement
entered into in connection herewith.
(ii) The Board may at any time and from time to time alter,
amend, suspend, or terminate the Plan in whole or in
part; provided, however, that unless otherwise
determined by the Board, an amendment that requires
stockholder approval in order for the Plan to continue
to comply with Section 162(m) or any other law,
regulation or stock exchange requirement shall not be
effective unless approved by the requisite vote of
stockholders. Notwithstanding the foregoing, no
amendment to or termination of the Plan shall affect
adversely any of the rights of any Grantee, without such
Grantee's consent, under any Award theretofore granted
under the Plan.
(e) Expiration of Plan. Unless earlier terminated by the Board
pursuant to the provisions of the Plan, the Plan shall expire
on June 30, 2014, the tenth anniversary of the initial
effective date of the Plan. No Awards shall be granted under
the Plan after such expiration date. The expiration of the
Plan shall not affect adversely any of the rights of any
Grantee, without such Grantee's consent, under any Award
theretofore granted.
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(f) Deferrals. The Committee shall have the authority to establish
such procedures and programs that it deems appropriate to
provide Grantees with the ability to defer receipt of cash,
Stock or other property payable with respect to Awards granted
under the Plan, subject to the provisions of Code Section
409A.
(g) No Rights to Awards; No Stockholder Rights. No Grantee shall
have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of
Grantees. Except as provided specifically herein, a Grantee or
a transferee of an Award shall have no rights as a stockholder
with respect to any shares covered by the Award until the date
of the issuance of a stock certificate to him for such shares.
(h) Unfunded Status of Awards. The Plan is intended to constitute
an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Grantee
pursuant to an Award, nothing contained in the Plan or any
Award shall give any such Grantee any rights that are greater
than those of a general creditor of the Company.
(i) No Fractional Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Regulations and Other Approvals.
(i) The obligation of the Company to sell or deliver Stock
with respect to any Award granted under the Plan shall
be subject to all applicable laws, rules and
regulations, including all applicable federal and state
securities laws and the applicable laws, rules and
regulations of non-U.S. jurisdictions, and the obtaining
of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Committee.
(ii) Each Award is subject to the requirement that, if at any
time the Committee determines, in its absolute
discretion, that the listing, registration or
qualification of Stock issuable pursuant to the Plan is
required by any securities exchange or under any state
or federal law or any applicable law, rule or regulation
of a non-U.S. jurisdiction, or the consent or approval
of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the
grant of an Award or the issuance of Stock, no such
Award shall be granted or payment made or Stock issued,
in whole or in part, unless listing, registration,
qualification, consent or approval has been effected or
obtained free of any conditions not acceptable to the
Committee.
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(iii) In the event that the disposition of Stock acquired
pursuant to the Plan is not covered by a then current
registration statement under the Securities Act and is
not otherwise exempt from such registration, such Stock
shall be restricted against transfer to the extent
required by the Securities Act or regulations
thereunder, and the Committee may require a Grantee
receiving Stock pursuant to the Plan, as a condition
precedent to receipt of such Stock, to represent to the
Company in writing that the Stock acquired by such
Grantee is acquired for investment only and not with a
view to distribution.
(iv) The Committee may require a Grantee receiving Stock
pursuant to the Plan, as a condition precedent to
receipt of such Stock, to enter into a stockholder
agreement or "lock-up" agreement in such form as the
Committee shall determine is necessary or desirable to
further the Company's interests.
(k) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of
the State of Delaware without giving effect to the conflict of
laws principles thereof.
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