Document:

ex_10-1.htm

    Exhibit
10.1

    

    

     

    Caterpillar
Inc.

    

    1996
Stock Option and Long-Term Incentive Plan

    

    (Amended and
Restated through Third Amendment)

     

    

    Section
1.  Purpose

    

    The Caterpillar
Inc. 1996 Stock Option and Long-Term Incentive Plan (“Plan”) is designed to
attract and retain outstanding individuals as non-employee directors, officers
and key employees of Caterpillar Inc. and its subsidiaries (collectively, the
“Company”), and to furnish incentives to such individuals through awards based
upon the performance of the Company and its stock.  To this end, the
Plan provides for grants of stock options, stock appreciation rights
(“SARs”), restricted
stock, restricted stock units, and performance awards, or combinations thereof,
to non-employee directors, officers and other key employees of the Company, on
the terms and subject to the conditions set forth in the Plan.

    

    Section
2.  Shares Subject to the Plan

    

    2.1  Shares Reserved for
Issuance

    

    Sixty-Four Million
shares of Company common stock (“Shares”) shall be available for issuance under
the Plan either from authorized but unissued Shares or from Shares acquired by
the Company, including Shares purchased in the open market.  An
additional four million Shares authorized but unissued under prior Company stock
option plans shall be available for issuance under this Plan.

    

    2.2  Reacquired
Shares

    

    If Shares subject
to an award under the Plan are not acquired by participants, or Shares issued
under the Plan are reacquired by the Company, because of lapse, expiration, or
termination of an award, such Shares shall again become available for issuance
under the Plan.  Shares tendered upon exercise of an option by a Plan
participant may be added back and made available solely for future awards under
the Plan.

    

    2.3  Adjustments in Authorized
Shares

    

    In the event of any
corporate event or transaction (including, but not limited to, a change in the
shares of the Company or the capitalization of the Company) such as a merger,
consolidation, reorganization, recapitalization, separation, stock dividend,
stock split, reverse stock split, split up, spin-off, or other distribution of
stock or property of the Company, combination of Shares, exchange of Shares,
dividend in kind, or other like change in capital structure or distribution
(other than normal cash dividends) to stockholders of the Company, or any
similar corporate event or transaction, the Committee, in its sole discretion,
in order to prevent dilution or enlargement of Participants’ rights under the
Plan, shall substitute or adjust, as applicable, the number and kind of Shares
that may be issued under the Plan or under particular forms of awards, the
number and kind of Shares subject to outstanding awards, the option exercise
price or base price applicable to outstanding awards, the annual award limits,
the limits on awards set forth in Sections 5.1(a), 6.1(b) and 8.2, and other
value determinations applicable to outstanding awards.

     

    Page 1

    
      
        

      

    The Committee, in
its sole discretion, may also make appropriate adjustments in the terms of any
awards under the Plan related to such changes or distributions and to modify any
other terms of outstanding awards, including modifications of performance goals
and changes in the length of Performance Periods.  The determination
of the Committee as to the foregoing adjustments, if any, shall be conclusive
and binding on Participants under the Plan.

    

    Section
3.  Administration

    

    Unless otherwise
provided in the Plan, the Committee shall have the authority to grant awards
under the Plan to non-employee directors, officers, and other key employees of
the Company. Except as limited by the express provisions of the Plan or by
resolutions adopted by the Board, the Committee also shall have the authority
and discretion to interpret the Plan, to establish and revise rules and
regulations relating to the Plan, and to make any other determinations that it
believes necessary or advisable for administration of the Plan, except to the
extent that such authority or discretion would cause an award to fail to qualify
as performance based compensation for purposes of Section 162(m) of the
Code.

    

    The Committee shall
be composed solely of members of the Board that satisfy applicable tax,
securities and stock exchange rules, and other requirements determined to be
necessary or advisable by the Board.  The Committee may delegate to
one or more of its members or to one or more officers of the Company, and/or its
Subsidiaries and Affiliates or to one or more agents or advisors such
administrative duties or powers as it may deem advisable, and the Committee or
any person to whom it has delegated duties or powers 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.

    

    Section
4.  Eligibility and Participation

    

    4.1  Eligibility

    

    Individuals
eligible to participate in this Plan include non-employee directors, officers,
and other key employees.

    

    4.2  Actual
Participation

    

    Subject to the
provisions of the Plan, the Committee may, from time to time, select from all
eligible officers and key Employees those to whom awards shall be
granted.  The Committee shall determine, in its sole discretion, the
nature of any and all terms (as permissible by law) and the amount of each
award. Directors who are not employees shall only receive awards in accordance
with the terms set forth in this Plan.

    

    Section
5.  Stock Options

    

    5.1  Company
Employees

    

    (a)
Eligibility

     

    The Committee shall
determine Company officers and key employees to whom options shall be granted,
the timing of such grants, and the number of shares subject to the option;
provided that the maximum number of Shares upon which options may be granted to
any employee in any calendar year shall be 400,000.  All Options
granted under the Plan will be evidenced by an Award Agreement.

     

    
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    (b) Option Exercise
Price

    

    The exercise price
of each option shall not be less than 100% of the fair market value of Shares
underlying the option at the time the option is granted.  The fair
market value for purposes of determining the exercise price shall be the mean
between the high and the low prices at which Shares are traded on the New York
Stock Exchange on the day the option is granted.  In the event this
method for determining fair market value is not practicable, fair market value
shall be determined by such other reasonable method as the Committee shall
select.

     

    (c) Option
Exercise

    

    Options shall be
exercisable in such installments and during such periods as may be fixed by the
Committee at the time of grant.  Each Option granted to a Participant
shall expire at such time as the Committee shall determine at the time of grant;
provided, however, no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.

    

    Payment of the
exercise price shall be made upon exercise of all or a portion of any
option.  Such payment shall be in cash or by tendering Shares that
have been owned by the participant for at least six months having a fair market
value equal to 100% of the exercise price.  The fair market value of
Shares for this purpose shall be the mean between the high and low prices at
which Shares are traded on the New York Stock Exchange on the date of
exercise.  Upon exercise of an option, any applicable taxes the
Company is required to withhold shall be paid to the Company.  Shares
to be received upon exercise may be surrendered to satisfy withholding
obligations.

     

    (d) 
Termination of Employment

    

    The Committee may
require a period of continued employment before an option can be
exercised.  That period shall not be less than one year, except that
the Committee may permit a shorter period in the event of termination of
employment by retirement or death.

    

    Termination of
employment with the Company shall terminate remaining rights under options then
held; provided, however, that an option grant may provide that if employment
terminates after completion of a specific period, the option may be exercised
during a period of time after termination.  That period may not exceed
sixty months where termination of employment is caused by retirement or death or
sixty days where termination results from any other cause provided that such
period shall not extend beyond the original maximum term of the
option.  If death occurs after termination of employment but during
the period of time specified, such period may be extended to not more than
sixty-six months after retirement, or thirty-eight months after termination of
employment for any other cause provided that such period shall not extend beyond
the original maximum term of the option.  In the event of termination
within two years after a Change of Control as defined in Section 10.2 of the
Plan, options shall be exercisable for a period of sixty months following the
date of termination or for the maximum term of the option, whichever is
shorter.  Notwithstanding the foregoing, the Committee may change the
post-termination period of exercisability of an option provided that change does
not extend the original maximum term of the option.

     

    
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      (e) 
Transferability of Options

     

    (i)  Except as
otherwise permitted in Section 4.1(e)(ii), options shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or the Employee
Retirement Income Security Act.  Options are exercisable during the
holder’s lifetime only by the holder, unless the holder becomes incapacitated or
disabled, in which case the option may be exercised by the holder’s authorized
representative.  A holder may file with the Company a written
designation of beneficiaries with the authority to exercise options in the event
of the holder’s death.

     

    (ii) 
Notwithstanding the provisions of Section 4.1(e)(i), and in addition to the
permissible transfers under that provision, options granted to persons at the
level of Vice President and above, as well as directors of the Company and
persons retired from those positions, may be transferred to any one or more
“Permitted Transferees,” as long as those options are not incentive stock
options as defined below and are fully vested.  Options granted to
employees below the level of Vice President may be transferred upon prior
approval of the Company’s Director of Compensation and Benefits pursuant to the
terms of this section.

     

    (iii)  For
purposes of Section 4.1(e)(ii), the term "Permitted Transferees" shall mean the
members of the group that consists exclusively of the individual to whom the
option is granted, the spouse of the individual to whom the option is granted,
the lineal descendants of the individual to whom the option is granted, the
spouses of the lineal descendents to whom the option is granted, the lineal
descendants of any spouse or former spouse of the individual to whom the option
is granted, the spouses of the lineal descendants of any spouse or former spouse
of the individual to whom the option is granted, the estate (and any trust that
serves a distributive function of an estate) of the Permitted Transferee, all
trusts that an individual who is a Permitted Transferee can revoke and all
trusts, corporations, partnerships, limited liability companies and other
entities in which, directly or indirectly, but for the exercise of a power of
appointment or the death of the survivor of the individual who are Permitted
Transferees.  Each owner of an equitable interest is an individual who
is a Permitted Transferee.

    

    (f)  Incentive
Stock Options

    

    Incentive stock
options (“ISOs”), as defined in Section 422 of the Code, may be granted to key
employees under the Plan. The decision to grant ISOs to particular persons is
within the Committee’s discretion. An Option Award Agreement shall specify
whether the Option is intended to be an ISO or a Non-Qualified Stock Option
(“NQSO”).  A NQSO is an option that does not meet the definition of an
ISO.  ISOs shall not be exercisable after expiration of ten years from
the date of grant. The amount of ISOs vesting in a particular calendar year for
an option recipient under this Plan and all incentive stock option plans of the
Company or any parent or subsidiary corporation cannot exceed $100,000, based on
the fair market value of the Shares subject to the options on the date of grant;
provided that any portion of an option that cannot be exercised as an ISO
because of this limitation may be converted by the Committee to another form of
option. If any employee or former
employee shall make any disposition of Shares issued pursuant to the exercise of
an ISO under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), such employee or former employee shall
notify the Company of such disposition within ten (10) days
thereof.  The Board may amend the Plan to comply with Section
422 of the Code or other applicable laws and to permit options previously
granted to be converted to ISOs.

     

    
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    5.2  Non-Employee
Directors

    

    (a) 
Terms

    

    Subject to the
share ownership requirements, options with a term of ten years are granted to
each non-employee director for 4,000 Shares, effective as of the close of each
annual meeting of stockholders at which an individual is elected a director or
following which such individual continues as a director.  Options
granted to non-employee directors shall become exercisable by one-third at the
end of each of the three successive one-year periods since the date of
grant.  The exercise price of each option shall be 100% of the fair
market value of Shares underlying the option on the date of grant.

    

    (b) 
Termination of Directorship

    

    An option awarded
to a non-employee director may be exercised any time within sixty months of
the date the director terminates such status.  In the event of a
director’s death, the director’s authorized representative may exercise the
option within sixty months of the date of death, provided that if the director
dies after cessation of director status, the option is exercisable within
sixty-six months of such cessation.  In no event shall an option
awarded to a non-employee director be exercisable beyond the expiration date of
that option.

    

    Section
6.  Stock Appreciation Rights

     

    6.1  Company
Employees

     

    (a)  Types of
SARs

    

    The Committee may
grant “tandem” and “non-tandem” SARs under the Plan.  A tandem SAR
shall be granted at the same time as an option and may be exercised by the
recipient as an alternative to the option.  The term of a tandem SAR,
its exercisability and any conditions or restrictions applicable to it shall be
the same as its related option, and its base price shall be equal to the
exercise price of the related option.  In addition, upon the exercise
of the option, the tandem SAR (or the portion related to the exercise) shall
expire and upon exercise of the tandem SAR, the related option (or such portion)
shall expire.  The terms of a non-tandem SAR shall be established by
the Committee.  A SAR that is not otherwise designated but is granted
at the same time as an option shall be a tandem SAR.

    

    (b) 
Eligibility

    

    The Committee shall
determine Company officers and employees to whom SARs shall be granted, the
timing of such grants, and the number of shares subject to the SAR; provided
that the maximum number of Shares upon which non-tandem SARs may be granted to
any employee in any calendar year shall be 400,000.

     

    
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    (c)  SAR Base
Price

    

    The base price of
each non-tandem SAR shall not be less than one hundred percent of the fair
market value of Shares underlying the SAR at the time the SAR is
granted.  The fair market value for purposes of determining the base
price shall be the mean between the high and the low prices at which Shares are
traded on the New York Stock Exchange on the day the SAR is
granted.  In the event this method for determining fair market value
is not practicable, fair market value shall be determined by such other
reasonable method as the Committee shall select.

     

    (d)  SAR
Exercise

    

    Non-tandem SARs
shall be exercisable in such installments and during such periods as may be
fixed by the Committee at the time of grant.  Non-tandem SARs shall
not be exercisable after the expiration of ten years from the date of
grant.

    

    Upon exercise of an
SAR, the recipient shall be entitled to receive from the Company that number of
Shares having an aggregate fair market value as of the date of exercise equal to
the product of (i) the number of Shares as to which the recipient is exercising
the SAR, and (ii) the excess of the fair market value (at the date of exercise)
of a Share over the base price of the SAR, provided that the Committee may elect
to settle all or a portion of the Company's obligation arising out of the
exercise of an SAR by the payment of cash in an amount equal to the fair market
value as of the date of exercise of the Shares it would otherwise be obligated
to deliver.  The fair market value of Shares for this purpose shall be
the mean between the high and low prices at which Shares are traded on the New
York Stock Exchange on the date of exercise.  Upon exercise of an SAR,
any applicable taxes the Company is required to withhold shall be paid to the
Company.  Shares to be received upon exercise may be surrendered to
satisfy withholding obligations.

    

    (d) 
Termination of Employment

    

    The Committee may
require a period of continued employment before a non-tandem SAR can be
exercised.  That period shall not be less than one year, except that
the Committee may permit a shorter period in the event of termination of
employment by retirement or death.

    

    Termination of
employment with the Company shall terminate remaining rights under non-tandem
SARs then held; provided, however, that a non-tandem SAR grant may provide that
if employment terminates after completion of a specific period, the SAR may be
exercised during a period of time after termination.  That period may
not exceed sixty months where termination of employment is caused by retirement
or death or sixty days where termination results from any other cause provided
that such period shall not extend beyond the original maximum term of the
SAR.  If death occurs after termination of employment but during the
period of time specified, such period may be extended to not more than sixty-six
months after retirement, or thirty-eight months after termination of employment
for any other cause provided that such period shall not extend beyond the
original maximum term of the SAR.  In the event of termination within
two years after a Change of Control as defined in Section 10.2 of the Plan,
non-tandem SARs shall be exercisable for a period of sixty months following the
date of termination or for the maximum term of the SAR, whichever is
shorter.  Notwithstanding the foregoing, the Committee may change the
post-termination period of exercisability of a non-tandem SAR provided that
change does not extend the original maximum term of the SAR.

     

    
      
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    (f) 
Transferability of SARs

     

    (i)  Except as
otherwise permitted in Section 6(f)(ii), non-tandem SARs shall not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or the
Employee Retirement Income Security Act.  Non-tandem SARs are
exercisable during the holder’s lifetime only by the holder, unless the holder
becomes incapacitated or disabled, in which case the SAR may be exercised by the
holder’s authorized representative.  A holder may file with the
Company a written designation of beneficiaries with the authority to exercise
non-tandem SARs in the event of the holder’s death.

     

    (ii) 
Notwithstanding the provisions of Section 6(f)(i), and in addition to the
permissible transfers under that provision, non-tandem SARs granted to persons
at the level of Vice President and above, as well as directors of this
corporation and persons retired from those positions, may be transferred to any
one or more “Permitted Transferees,” as long as those SARs are fully
vested.  Non-tandem SARs granted to employees below the level of Vice
President may be transferred upon prior approval of the Company’s Director of
Compensation and Benefits pursuant to the terms of this section.

     

    (iii)  For
purposes of Section 6(f)(ii), the term "Permitted Transferees" shall mean the
members of the group that consists exclusively of the individual to whom the
non-tandem SAR is granted, the spouse of the individual to whom the non-tandem
SAR is granted, the lineal descendants of the individual to whom the non-tandem
SAR is granted, the spouses of the lineal descendents to whom the non-tandem SAR
is granted, the lineal descendants of any spouse or former spouse of the
individual to whom the non-tandem SAR is granted, the spouses of the lineal
descendants of any spouse or former spouse of the individual to whom the
non-tandem SAR is granted, the estate (and any trust that serves a distributive
function of an estate) of the Permitted Transferee, all trusts that an
individual who is a Permitted Transferee can revoke and all trusts,
corporations, partnerships, limited liability companies and other entities in
which, directly or indirectly, but for the exercise of a power of appointment or
the death of the survivor of the individual who are Permitted
Transferees.  Each owner of an equitable interest is an individual who
is a Permitted Transferee.

    

    6.2  Non-Employee
Directors

    

    (a) 
Terms

    

    The Committee may
grant SARs to non-employee directors.  With respect to the grant of
SARs to non-employee directors and subject to any share ownership requirements,
each year the Committee shall determine (i) the type of such  SAR
grant (i.e., tandem or non-tandem), (ii)  the timing of such SAR grant
and (iii) the number of shares subject to the SAR.  All SARs granted
under this provision of the Plan will be evidenced by an Award
Agreement.

    

    SARs granted to
non-employee directors shall have a term of ten years and become exercisable by
one-third at the end of each of the three successive one-year periods since the
date of grant. The base price of each SAR shall be 100% of the fair market value
of Shares underlying the SAR on the date the SAR is granted.

     

    
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    (b) 
Termination of Directorship

    

    A SAR granted to a
non-employee director may be exercised any time within sixty months of the
date the director terminates such status.  In the event of a
director’s death, the director’s authorized representative may exercise the SAR
within sixty months of the date of death, provided that if the director dies
after cessation of director status, the authorized representative may exercise
the SAR within sixty-six months of such cessation.  In no event shall
a SAR granted to a non-employee director be exercisable beyond the original
expiration date of that SAR.

     

    Section
7.  Restricted Stock

    

    7.1  Company
Employees

    

    (a) 
Eligibility

    

    The Committee may
determine whether restricted stock or restricted stock units shall be awarded to
Company officers and employees, the timing of award, and the conditions and
restrictions imposed on the award.  Restricted stock units are similar
to restricted stock except that no Shares are actually awarded to the employee
on the date of grant.  Shares are awarded only on the date of
exercise.

    

    (b) 
Terms

    

    With respect to
restricted stock grants, during the restriction period the recipient shall have
a beneficial interest in the restricted stock and all associated rights and
privileges of a stockholder, including the right to vote and receive dividends,
subject to any restrictions imposed by the Committee at the time of
grant.  The recipient shall have no voting or dividend rights with
respect to any restricted stock units granted hereunder.  The
Committee may grant dividend equivalents on restricted stock units with such
terms and conditions as the Committee shall specify.

    

    The following
restrictions will be imposed on Shares of restricted stock (and restricted stock
units where specified) until expiration of the restriction period:

     

    (i)  The
recipient shall not be entitled to delivery of the certificates for the
Shares;

     

    (ii)  None of
the restricted stock units or Shares issued as
restricted stock may be transferred other than by will or by the laws of descent
and distribution; and

     

    (iii) 
Restricted stock units or Shares issued as restricted stock shall be forfeited
if the recipient terminates employment with the Company, except for termination
due to retirement after a specified age, disability, death or other special
circumstances approved by the Committee.

     

    
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    Shares awarded as
restricted stock will be issued subject to a restriction period set by the
Committee of no less than two nor more than ten years.  The Committee,
except for restrictions specified in the preceding paragraphs, shall have the
discretion to remove any or all of the restrictions on a restricted stock award
whenever it determines such action appropriate.  Except with respect
to a maximum of five percent of the Shares authorized in Section 2, any awards
of restricted stock or restricted stock units which vest on the basis of the
recipient’s continued employment with or provision of service to the Company
shall not provide for vesting which is any more rapid than annual pro rata
vesting over a three year period and any awards of restricted stock or
restricted stock units which vest upon the attainment of performance goals shall
provide for a performance period of at least twelve months.  Upon
expiration of the restriction period, the Shares will be made available to the
recipient, subject to satisfaction of applicable tax withholding
requirements.

     

    7.2           Non-Employee
Directors

    

    (a)  On
January 1 of each year, 400 Shares of restricted stock shall be granted to each
director who is not currently an employee of the Company.  The stock
will be subject to a restriction period of three years from the date of
grant.  During the restriction period, the recipient shall have a
beneficial interest in the restricted stock and all associated rights and
privileges of a stockholder, including the right to vote and receive
dividends.

    

    The following
restrictions will be imposed on restricted stock until expiration of the
restricted period:

     

    (i)  The
recipient shall not be entitled to delivery of the Shares;

     

    (ii)  None of
the Shares issued as restricted stock may be transferred other than by will or
by the laws of descent and distribution; and

     

    (iii)  Shares
issued as restricted stock shall be forfeited if the recipient ceases to serve
as a director of the Company, except for termination due to death, disability,
or retirement under the Company’s Directors’ Retirement Plan.

    

    Upon expiration of
the restriction period, the Shares will be made available to the recipient,
subject to satisfaction of applicable tax withholding requirements.

    

    (b)  Each
January 1st, 350 shares of restricted stock, in addition to shares described in
Section 7.2(a), shall be awarded to each director who is not currently and has
not been an employee of the Company. Shares awarded under this Section 7.2(b)
will be held in escrow until the director terminates service with the Company.
During the restriction period, the recipient shall have a beneficial interest in
the restricted stock and all associated rights and privileges of a stockholder
except as discussed below.

    

    The following
restrictions will be imposed on restricted stock awarded under this Section
7.2(b) until it is made available to the recipient:

     

    
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        (i)  The
recipient shall not receive dividends on the shares, but an amount equal to such
dividends will be credited to the director’s stock equivalent account in the
Company’s Directors’ Deferred Compensation Plan;

      

    

     

    (ii)  The
recipient shall not be entitled to delivery of the shares;

     

    (iii)  None of
the shares awarded may be transferred other than by will or by the laws of
descent and distribution; and

     

    (iv)  The
right to receive shares shall be subordinate to the claims of general creditors
of the Company.

    

    Upon termination of
service, restricted shares will be made available to the recipient subject to
satisfaction of applicable tax withholding requirements; provided, however, that
if the recipient has not served on the Board for at least five years at the time
of such termination, all restricted shares awarded under this Section 7.2(b)
shall be forfeited.

    

    Pursuant to
termination of the Company’s Directors’ Retirement Plan effective December 31,
1996, each director continuing in office was awarded an amount of restricted
stock equal to the accumulated value of past pension accruals as determined by
the Company’s actuary.  Those shares will be subject to the same
restrictions as shares awarded annually pursuant to this Section
7.2(b).

    
       

      
        (c)  Effective
January 1, 2002, shares of restricted stock shall no longer be granted under
Section 7.2(a) of the Plan or awarded under Section 7.2(b) of the
Plan.  Shares of restricted stock that were granted or awarded prior
to January 1, 2002, shall be subject to the same restrictions and provisions as
determined in 7.2(a) and 7.2(b).

      

    

    

    (d)  With
respect to the award of restricted stock units, the Committee in its sole
discretion may determine (i) whether restricted stock units shall be awarded to
non-employee directors, (ii) the timing of award, and (iii) the conditions and
restrictions imposed on the award.

    

    Section
8  Performance Awards

    

    8.1  Eligibility and
Terms

    

    The Committee may
grant awards to officers and other key employees (“Performance Awards”) based
upon Company performance over a period of years (“Performance
Period”).  The Committee shall have sole discretion to determine
persons eligible to participate, the Performance Period, Company performance
factors applicable to the award (“Performance Measures”), and the method of
Performance Award calculation.

    
       

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    At the time the
Committee establishes a Performance Period for a particular award, it shall also
establish Performance Measures and targets to be attained relative to those
measures (“Performance Targets”).  Performance Measures may be based
on any of the following factors, alone or in combination, as the Committee deems
appropriate: (i) return on assets; (ii) return on equity; (iii) return on sales;
(iv) total stockholder return; (v) cash flow; (vi) economic value added; (vii)
net earnings; and (viii) earnings per share relative to a peer
group.  The Committee may establish the peer group referenced above
and amend the peer group as the Committee determines
desirable.  Performance Targets may include a minimum, maximum and
target level of performance with the size of Performance Awards based on the
level attained.  Once established, Performance Targets and Performance
Measures shall not be changed during the Performance Period; provided, however,
that the Committee may eliminate or decrease the amount of a Performance Award
otherwise payable to a participant.  Upon completion of a Performance
Period, the Committee shall determine the Company’s performance in relation to
the Performance Targets for that period and certify in writing the extent to
which Performance Targets were satisfied.

    

    8.2  Payment of
Awards

    

    Performance Awards
may be paid in cash, stock, restricted stock (pursuant to terms applicable to
restricted stock awarded to Company employees as described in the Plan), or a
combination thereof as determined by the Committee. Performance Awards shall be
made not later than ninety days following the end of the relevant Performance
Period. The fair market value of a Performance Award payment to any individual
employee in any calendar year shall not exceed Two Million Five Hundred Thousand
and NO/100 Dollars ($2,500,000.00).  The fair market value of Shares
to be awarded shall be determined by the average of the high and low price of
Shares on the New York Stock Exchange on the last business day of the
Performance Period. Federal, state and local taxes will be withheld as
appropriate.

    

    8.3  Termination

    

    To receive a
Performance Award, the participant must be employed by the Company on the last
day of the Performance Period.  If a participant terminates employment
during the Performance Period by reason of death, disability or retirement, a
payout based on the time of employment during the Performance Period shall be
distributed.  Participants employed on the last day of the Performance
Period, but not for the entire Performance Period, shall receive a payout
prorated for that part of the Performance Period for which they were
participants.  If the participant is deceased at the time of
Performance Award payment, the payment shall be made to the recipient’s
designated representative.

    

    Section
9.  Election to Receive Non-Employee Director Fees in
Shares

    

    Effective April 8,
1998, non-employee directors shall have the option of receiving all or a portion
of their annual retainer fees, as well as fees for attendance at meetings of the
Board and committees of the Board (including any Committee Chairman stipend), in
the form of Shares.

    

    The number of
Shares that may be issued pursuant to such election shall be based on the amount
of cash compensation subject to the election divided by the fair market value of
one Share on the date such cash compensation is payable.  The fair
market value shall be the mean between the high and low prices at which Shares
are traded on the New York Stock Exchange on payable date.

     

    
      Page 11

      
        
          

        

         

      

    

    Shares provided
pursuant to the election shall be held in book-entry form by the Company on
behalf of the non-employee director.  Upon request, the Company shall
deliver Shares so held to the non-employee director.  While held in
book-entry form, the Shares shall have all associated rights and privileges,
including voting rights and the right to receive dividends.

    

    Section
10.  Change of Control

     

    10.1  Effect on Grants and
Awards

    

    Unless the
Committee shall otherwise expressly provide in the agreement relating to a grant
or award under the Plan, upon the occurrence of a Change of Control as defined
below: (i) all options and SARs then outstanding under the Plan shall become
fully exercisable as of the date of the Change of Control; (ii) all terms and
conditions of restricted stock and restricted stock unit awards, and other
stock-based awards for which no performance goals have been established then
outstanding shall be deemed satisfied as of the date of the Change of Control;
and (iii) all Performance Awards or other stock-based awards for which
performance goal(s) have been established for a Performance Period not completed
at the time of the Change of Control shall be payable in an amount equal to the
product of the maximum award opportunity for the Performance Award or other
stock-based award, and a fraction, the numerator of which is the number of
months that have elapsed since the beginning of the Performance Period through
the later of (A) the date of the Change of Control or (B) the date the
participant terminates employment, and the denominator of which is the total
number of months in the Performance Period; provided, however, that if this Plan
shall remain in force after a Change of Control, a Performance Period is
completed during that time, and the participant’s employment has not terminated,
this provision (iii) shall not apply.

    

    10.2  Change of Control
Defined

    

    For purposes of the
Plan, a “Change of Control” shall be deemed to have occurred if:

    

    (a)  Any
person becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifteen percent or more of the combined voting power of the Company’s then
outstanding common stock, unless the Board by resolution negates the effect of
this provision in a particular circumstance, deeming that resolution to be in
the best interests of Company stockholders;

    

    (b)  During
any period of two consecutive years, there shall cease to be a majority of the
Board comprised of individuals who at the beginning of such period constituted
the Board;

    

    (c)  The
stockholders of the Company approve a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) less than fifty percent of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation;
or

    

    (d)  Company
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of its assets.

     

    
      Page 12

      
        
          

      

    

    Section
11.  Amendment and Termination

    

    11.1  Amendment, Modification, Suspension,
and Termination

    

    Subject to Section
11.3, the Committee may, at any time and from time to time, alter, amend,
modify, suspend, or terminate the Plan and any Award Agreement in whole or
in part; provided, however, that, no amendment of the Plan shall be made without
stockholder approval if stockholder approval is required by law, regulation, or
stock exchange rule.

    

    11.2  Adjustment of Awards Upon the
Occurrence of Certain Unusual or Nonrecurring Events

    

    The Committee may
make adjustments in the terms and conditions of, and the criteria included in,
awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 2.3 hereof) affecting the Company or
the financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.  The determination of the Committee as to the
foregoing adjustments, if any, shall be conclusive and binding on Participants
under the Plan.

    

    11.3  Awards Previously
Granted

    

    Notwithstanding any
other provision of the Plan to the contrary, no termination, amendment,
suspension, or modification of the Plan or an Award Agreement shall adversely
affect in any material way any award previously granted under the Plan,
without the written consent of the Participant holding such award.

    

    Section
12.  Regulatory Compliance

    

    Notwithstanding any
other provision of the Plan, the issuance or delivery of any Shares may be
postponed for such period as may be required to comply with any applicable
requirements of any national securities exchange or any requirements under any
other law or regulation applicable to the issuance or delivery of such
Shares.  The Company shall not be obligated to issue or deliver any
Shares if such issuance or delivery shall constitute a violation of any
provision of any law or regulation of any governmental authority or national
securities exchange.

    

    Section
13.  Dividend Equivalents

    

    Any participant
selected by the Committee may be granted dividend equivalents based on the
dividends declared of Shares that are subject to any award, to be credited as of
dividend payment dates, during the period between the date the award is granted
and the date the award is exercised, vests, or expires, as determined by the
Committee in its sole discretion.  Such dividend equivalents shall be
converted to cash or additional Shares by such formula and at such time and
subject to such limitations as may be determined by the Committee in its sole
discretion.

     

    
      Page 13

      
        
          

        

         

      

    

    Section
14.  Beneficiary Designation

    

    Each Participant
under the Plan may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the
Plan is to be paid in case of his or her death before he or she receives any or
all of such benefit.  Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  In the absence of
any such designation, benefits remaining unpaid at the Participant’s death shall
be paid to the Participant’s estate.

    

    Section
15.  Rights of Participants

    

    15.1  Employment

    

    Nothing in the Plan
or an Award Agreement shall interfere with or limit in any way the right of the
Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s
employment or service on the Board at any time or for any reason not prohibited
by law, nor confer upon any Participant any right to continue his or her
employment or service as a Director for any specified period of
time.

    

    Neither an award
nor any benefits arising under this Plan shall constitute an employment contract
with the Company, its Affiliates, and/or its Subsidiaries and, accordingly,
subject to Sections 3 and 11, this Plan and the benefits hereunder may be
terminated at any time in the sole and exclusive discretion of the Committee
without giving rise to any liability on the part of the Company, its Affiliates,
and/or its Subsidiaries.

    

    15.2  Participation

    

    No individual shall
have the right to be selected to receive an award under this Plan, or, having
been so selected, to be selected to receive a future award.

    

    15.3  Rights as a
Stockholder

    

    Except as otherwise
provided herein, a Participant shall have none of the rights of a stockholder
with respect to Shares covered by any award until the Participant becomes the
record holder of such Shares.

    

    15.4  Clawback
Provision

    

    Notwithstanding any
other provision of the Plan to the contrary, including Section 11.3 which
prohibits material and adverse modifications to any award previously granted
under the Plan, any participant who is an officer of the Company whose
negligent, intentional or gross misconduct contributes to the Company’s having
to restate all or a portion of its financial statements, will be required to
forfeit awards granted under this Plan and repay the Company the total amount of
award gain realized by the participant upon the exercise of an option or
settlement of an award, as determined by the Board of Directors, an authorized
committee, or its designee, pursuant to the Caterpillar Inc. Guidelines on
Corporate Governance Issues as adopted on February 14, 2007 and any subsequent
amendments.  Any award granted under this Plan prior to February 14,
2007 is subject to the provisions of this Section 15.4 only with the written
consent of the participant.

     

    
      Page 14

      
        
          

      

    

    Section
16.  Successors

    

    All obligations of
the Company under the Plan with respect to awards granted hereunder shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the
Company.

    

    Section
17.  Nonexclusivity of the Plan

    

    The adoption of
this Plan shall not be construed as creating any limitations on the power of the
Board or Committee to adopt such other compensation arrangements as it may deem
desirable for any Participant.

    

    Section
18.  No Constraint on Corporate Action

    

    Nothing in this
Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s
or a Subsidiary’s or an Affiliate’s right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer
all or any part of its business or assets; or, (ii) limit the right or power of
the Company or a Subsidiary or an Affiliate to take any action which such entity
deems to be necessary or appropriate.

    

    Section
19.  Governing Law

    

    The Plan and each
Award Agreement shall be governed by the laws of the State of Illinois,
excluding any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of the Plan to the substantive law of
another jurisdiction.  Unless otherwise provided in the Award
Agreement, recipients of an award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of Illinois, to
resolve any and all issues that may arise out of or relate to the Plan or any
related Award Agreement.

    

    Section
20.  Duration of the Plan

    

    Unless sooner
terminated as provided herein, the Plan shall terminate ten years from the date
it was initially adopted. After the Plan is terminated, no awards may be granted
but awards previously granted shall remain outstanding in accordance with their
applicable terms and conditions and the Plan’s terms and
conditions.

    

    Section
21.  Effective Date

    

    This Plan
Restatement shall be effective February 14, 2007.

    

    

    

      Page 15ex_10-2.htm

    Exhibit
10.2

    Caterpillar
Inc.

     

    2006
Long-Term Incentive Plan

     

    (Amended and
Restated through Third Amendment)

     

     

                Section
1.                      

    Establishment,
Objectives and Duration

     

    1.1. 
Establishment.  Subject to the approval of
the stockholders of Caterpillar Inc., a Delaware corporation (the “Company”),
the Company has established the Caterpillar Inc. 2006 Long-Term Incentive Plan
(the “Plan”), as set forth herein.  The Plan supersedes and replaces
all prior equity and non-equity long-term incentive compensation plans or
programs maintained by the Company; provided that, any prior plans of the
Company shall remain in effect until all awards granted under such prior plans
have been exercised, forfeited, canceled, expired or otherwise terminated in
accordance with the terms of such grants.

     

    1.2. 
Purpose.  The
Plan is intended to provide certain present and future employees and Directors
cash-based incentives, stock-based incentives and other equity interests in the
Company thereby giving them a stake in the growth and prosperity of the Company
and encouraging the continuance of their services with the Company or its
Subsidiaries.

     

    1.3. 
Effective
Date. The Plan is effective as of the later of (a) the date the Plan is
adopted by the Board or (b) the date the Company’s stockholders approve the Plan
(the “Effective Date”).  The Plan will be deemed to be approved by the
stockholders if it receives the affirmative vote of the holders of a majority of
the shares of stock of the Company present or represented and entitled to vote
at a meeting duly held in accordance with the applicable provisions of the
Certificate of Incorporation or Bylaws of the Company.

     

    1.4. 
Duration.  The Plan shall remain
in effect, subject to the right of the Company’s Board of Directors to amend or
terminate the Plan at any time pursuant to Section 16, until all Shares subject
to the Plan shall have been purchased or granted according to the Plan’s
provisions.  However, in no event may an Award be granted under the
Plan on or after the tenth anniversary of the Effective Date.  Upon
termination of the Plan, no Awards may be granted but Awards previously granted
shall remain outstanding in accordance with the terms of the Plan and the
applicable Award Document.

     

                Section
2.                      

    Definitions
and Construction

     

    When a word or
phrase appears in the Plan with the initial letter capitalized, and the word or
phrase does not commence a sentence, the word or phrase shall generally be given
the meaning ascribed to it in this Section unless a clearly different meaning is
required by the context.  The following words and phrases shall have
the following meanings:

     

    2.1. 
“Award” means,
individually or collectively, a grant under the Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares or Performance Units.

     

    2.2. 
“Award
Document” means
any agreement, contract, or other written instrument that evidences an Award
granted to the Participant under the Plan and sets forth the terms and
provisions applicable to such Award.

     

     
Page 1

      
        

      

    

     

    2.3. 
“Award
Gain” means (a) with respect to a
given Option exercise, the product of (X) the excess of the Fair Market Value of
a Share on the date of exercise over the Option Price times (Y) the number of
shares as to which the Option was exercised at that date, and (b) with respect
to any other settlement of an Award granted to the Participant, the Fair Market
Value of the cash or Shares paid or payable to the Participant (regardless of
any elective deferral pursuant to Section 13) less any cash or the Fair Market
Value of any Shares or property (other than an Award that would have itself then
been forfeitable hereunder and excluding any payment of tax withholding) paid by
the Participant to the Company as a condition of or in connection such
settlement.

     

    2.4. 
“Board”. means the
Board of Directors of the Company.

     

    2.5. 
“Cause”. means,
except as otherwise provided in an Award Document, a willful engaging in gross
misconduct materially and demonstrably injurious to the Company.  For
this purpose, “willful” means an act or omission in bad faith and without
reasonable belief that such act or omission was in or not opposed to the best
interests of the Company.

     

    2.6. 
“Change
of Control”. means the occurrence of any of
the following events: (a) any person becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 15 percent or more of the combined voting power of the
Company’s then outstanding common stock, unless the Board by resolution negates
the effect of this provision in a particular circumstance, deeming that
resolution to be in the best interests of Company stockholders; (b) during any
period of two consecutive years, there shall cease to be a majority of the Board
comprised of individuals who at the beginning of such period constituted the
Board; (c) the stockholders of the Company approve a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto representing (either by remaining outstanding or by
being converted into voting securities of the surviving entity) less than fifty
percent of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or (d) Company stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.

     

    2.7. 
“Code”. means the
Internal Revenue Code of 1986, as amended from time to time, or any successor
legislation thereto.

     

    2.8. 
“Committee”. means the
Compensation Committee of the Board, appointed to administer the Plan, as
provided in Section 3.

     

    2.9. 
“Company”. means Caterpillar Inc., a
Delaware corporation, and any successor to such entity as provided in Section
18.

     

    2.10. 
“Director”. means any individual who is a
member of the Board.

     

    2.11. 
“Disability”. means, unless otherwise
provided for in an employment, change of control or similar agreement in effect
between the Participant and the Company or a Subsidiary or in an Award Document,
(a) in the case of an Employee, the Employee qualifying for long-term disability
benefits under any long-term disability program sponsored by the Company or
Subsidiary in which the Employee participates, and (b) in the case of a
Director, the inability of the Director to engage in any substantial gainful
business activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death, or which has lasted or can
be expected to last for a continuous period of not less than 12 months, as
determined by the Committee, based upon medical evidence.

     

    2.12. 
“Effective
Date”. means the
date specified in Section 1.3.

     

      
Page 2

      
        

      

    

     

    2.13. 
“Employee”. means any
employee of the Company or any Subsidiary.

     

    2.14. 
“Exchange
Act”. means the Securities Exchange
Act of 1934, as amended from time to time, or any successor act
thereto.

     

    2.15. 
“Fair
Market Value”. means, as of any given date,
the fair market value of a Share on a particular date determined by such methods
or procedures as may be established from time to time by the
Committee.  Unless otherwise determined by the Committee, the Fair
Market Value of a Share as of any date shall be the mean between the high and
low prices at which the Share is traded on the New York Stock Exchange for that
date or, if no prices are reported for that date, the prices on the next
preceding date for which prices were reported.  Notwithstanding the
foregoing, unless otherwise determined by the Committee, for purposes of Section
6.5(d) of the Plan, Fair Market Value means the actual price at which the Shares
used to acquire Shares are sold.

     

    2.16. 
“Family
Member” means
any (a) child; (b) stepchild; (c) grandchild; (d) parent; (e) stepparent; (f)
grandparent; (g) spouse; (h) former spouse; (i) sibling; (j) niece; (k) nephew;
(l) mother-in-law; (m) father-in-law; (n) son-in-law; (o) daughter-in-law; (p)
brother-in-law; or (q) sister-in-law of the Participant (including adoptive
relationships).  Family Member also shall mean any person sharing in
the Participant’s household (other than a tenant or an employee).

     

    2.17. 
“Good
Reason”. means,
except as otherwise provided in an Award Document, the occurrence of any of the
following circumstances (unless such circumstances are fully corrected by the
Company before a Participant’s termination of employment):

     

    (a) the Company’s
assignment of any duties materially inconsistent with the Participant’s position
within the Company, or which have a significant adverse alteration in the nature
or status of the responsibilities of the Participant’s employment;
or

     

    (b) a material
reduction by the Company in the Participant’s annual base salary, unless such
reduction is part of a compensation reduction program affecting all similarly
situated management employees.

     

    2.18. 
“Incentive
Stock Option”. or “ISO” means
the right to purchase Shares pursuant terms and conditions that provide that
such right will be treated as an incentive stock option within the meaning of
Code Section 422, as described in Section 6.

     

    2.19. 
“Long
Service Separation” means,
except as otherwise provided in an Award Document, a termination of employment
with the Company or a Subsidiary after the attainment of age 55 and the
completion of ten or more years of service with the Company and/or its
Subsidiaries.

     

    2.20. 
“Named
Executive Officer”. means a
Participant who is one of the group of covered employees as defined in the
regulations promulgated under Code Section 162(m), or any successor provision or
statute.

     

    2.21. 
“Nonqualified
Stock Option”. or “NQSO”. means the right to purchase
Shares pursuant to terms and conditions that provide that such right will not be
treated as an Incentive Stock Option, as described in Section 6.

     

    2.22. 
“Option”.
means an Incentive Stock Option or a Nonqualified Stock Option, as described in
Section 6.

     

    2.23. 
“Option
Price”. means the
per share price of a Share available for purchase pursuant to an
Option.

     

    2.24. 
“Participant”.
means an Employee, prospective Employee, Director, beneficiary or any other
person who has outstanding an Award granted under the Plan, and includes those
former Employees and Directors who have certain post-termination rights under
the terms of an Award granted under the Plan.

     

     Page
3

    
      
        

      

       

    

    2.25. 
“Performance-Based
Exception”. means the
exception for performance-based compensation from the tax deductibility
limitations of Code Section 162(m).

     

    2.26. 
“Performance
Period”. means the
time period during which performance goals must be achieved with respect to an
Award, as determined by the Committee.

     

    2.27. 
“Performance
Share”. means an Award granted to a
Participant, as described in Section 9.

     

    2.28. 
“Performance
Unit”. means an
Award granted to a Participant, as described in Section 9.

     

    2.29. 
“Period
of Restriction”. means the period during which
the transfer of Shares of Restricted Stock is limited in some way, and the
Shares are subject to a substantial risk of forfeiture, as provided in Section
8.

     

    2.30. 
“Permitted
Transferee” means
any one or more of the following: (a) Family Members; (b) a trust in which the
Participant and/or Family Members have more than fifty percent of the beneficial
interest; (c) a foundation in which the Participant and/or Family Members
control the management of the assets; or (d) any other entity in which the
Participant and/or Family Members own more than fifty percent of the voting
interests.

     

    2.31. 
“Plan”. means the Caterpillar Inc. 2006
Long-Term Incentive Plan, as set forth herein.

     

    2.32. 
“Restricted
Stock”. means an
Award granted to a Participant pursuant to Section 8.

     

    2.33. 
“Section
16 Officer” means
any Employee who is considered an officer of the Company for purposes of Section
16 of the Exchange Act.

     

    2.34. 
“Share” or “Shares”. means shares
of common stock of the Company. 

     

    2.35. 
“Stock
Appreciation Right” or “SAR”. means an Award, granted alone
or in connection with a related Option, designated as an SAR, pursuant to the
terms of Section 7.

     

    2.36. 
“Subsidiary”. means any corporation,
partnership, joint venture, affiliate, or other entity in which the Company is
at least a majority-owner of all issued and outstanding equity interests or has
a controlling interest.

     

    2.37. 
“Tandem
SAR”. means a SAR that is granted in
connection with a related Option pursuant to Section 7, the exercise of which
shall require forfeiture of the right to purchase a Share under the related
Option (and when a Share is purchased under the Option, the Tandem SAR shall
similarly be forfeited).

     

    2.38. 
“Non-Tandem
SAR”. means a SAR
that is granted independently of any Options, as described in Section
7.

     

    
       

    

                Section
3.                      

    Administration

     

    3.1. 
 Plan
Administration.  The Committee, or
any other committee appointed by the Board, shall administer the
Plan.  The Committee or other committee appointed to administer the
Plan shall consist of not less than two non-Employee Directors of the Company,
within the meaning of Rule 16b-3 of the Exchange Act and not less than two
outside directors, within the meaning of Code Section 162(m).  The
Board may, from time to time, remove members from, or add members to, the
Committee.  Members of the Board shall fill any vacancies on the
Committee.  Acts of a majority of the Committee at a meeting at which
a quorum is present, or acts reduced to or approved in writing by unanimous
consent of the members of the Committee, shall be valid acts of the
Committee.

     

     Page
4

    
      
        

      

       

    

    3.2. 
Authority
of the Committee.  Except
as limited by law or by the Certificate of Incorporation or Bylaws of the
Company, and subject to the provisions herein, the Committee shall have full
power to select Employees, prospective Employees and Directors who shall
participate in the Plan; determine the sizes and types of Awards; determine the
terms and conditions of Awards in a manner consistent with the Plan; construe
and interpret the Plan and any agreement or instrument entered into under the
Plan; establish, amend, or waive rules and regulations for the Plan’s
administration; and amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the sole discretion of the
Committee as provided in the Plan and subject to Section 16.  Further,
the Committee shall make all other determinations, which may be necessary or
advisable for the administration of the Plan.  As permitted by law,
the Committee may delegate the authority granted to it herein.

     

    3.3. 
Electronic
Administration. The Committee may, in its discretion, utilize a system
for complete or partial electronic administration of the Plan and may replace
any written documents described in the Plan with electronic counterparts, as
appropriate.

     

    3.4. 
Decisions
Binding.  All
determinations and decisions made by the Committee pursuant to the provisions of
the Plan and all related orders and resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its stockholders,
Employees, Participants, and their estates and beneficiaries.

     

                Section
4.                      

    Shares
Subject to the Plan and Maximum Awards

     

    4.1.  Shares
Available for Awards.

    
    

     

    (a) The Shares
available for Awards may be either authorized and unissued Shares or Shares held
in or acquired for the treasury of the Company.  The aggregate number
of Shares that may be issued or used for reference purposes under the Plan or
with respect to which Awards may be granted shall not exceed twenty million
(20,000,000) Shares, subject to adjustment as provided in Section
4.3.  In addition, seventeen million six hundred thousand (17,600,000)
Shares authorized but unissued pursuant to the Caterpillar Inc. 1996 Stock
Option and Long-Term Incentive Plan shall be reserved and available for grant
under the Plan.  Notwithstanding the foregoing, the aggregate number
of Shares with respect to which ISOs may be granted shall not exceed the number
specified above, and provided further, that up to an aggregate of twenty percent
(20%) of the authorized Shares under the Plan may be issued with respect to
Awards of Restricted Stock and up to an aggregate of twenty percent (20%) of the
authorized Shares under the Plan may be issued with respect to Awards of
Performance Shares.

     

    (b) Upon:

     

    (i) a payout of a Non-Tandem SAR or Tandem
SAR in the form of cash;

     

    (ii) a cancellation,
termination, expiration, forfeiture, or lapse for any reason (with the exception
of the termination of a Tandem SAR upon exercise of the related Options, or the
termination of a related Option upon exercise of the corresponding Tandem SAR)
of any Award; or

     

    (iii) payment of an
Option Price or payout of any Award with previously acquired Shares or by
withholding Shares which otherwise would be acquired on exercise or issued upon
such payout,

     

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    the number of
Shares underlying any such Award that were not issued as a result of any of the
foregoing actions shall again be available for the purposes of Awards under the
Plan.  In addition, in the case of any Award granted in substitution
for an award of a company or business acquired by the Company or a Subsidiary,
Shares issued or issuable in connection with such substitute Award shall not be
counted against the number of Shares reserved under the Plan, but shall be
available under the Plan by virtue of the Company’s assumption of the plan or
arrangement of the acquired company or business.

     

    4.2. 
Individual
Participant Limitations.  Unless
and until the Committee determines that an Award to a Named Executive Officer
shall not be designed to comply with the Performance-Based Exception, the
following rules shall apply to grants of such Awards under the
Plan:

     

    (a) Subject to
adjustment as provided in Section 4.3, the maximum aggregate number of Shares
(including Options, SARs, Restricted Stock and Performance Shares to be paid out
in Shares) that may be granted in any one fiscal year to a Participant shall be
800,000 Shares.

     

    (b) Except as otherwise
provided in Section 7.5(b) regarding SAR exercise, the maximum aggregate cash
payout (including Performance Units and Performance Shares paid out in cash)
with respect to Awards granted in any one fiscal year that may be made to any
Participant shall be $5 million.

     

    4.3. 
Adjustments
in Authorized Shares.  In
the event of any change in corporate capitalization, such as a stock split, or a
corporate transaction, such as any merger, consolidation, separation, including
a spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company, an adjustment shall be made in the number and class of Shares available
for Awards, the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan and the number of Shares set forth in
Sections 4.1 and 4.2, to prevent dilution or enlargement of
rights.  Such adjustment shall be made in a manner determined by the
Committee, in its sole discretion, to be appropriate and equitable; provided,
however, that (a) no such adjustment shall cause an increase in the fair value
of an Award for purposes of Statement of Financial Accounting Standards No. 123
(revised 2004) or any successor thereto; and (b) the number of Shares subject to
any Award shall always be a whole number by rounding any fractional Share (up or
down) to the nearest whole Share.

     

    

     

                Section
5.                     

    Eligibility
and Participation

     

    5.1. 
Eligibility.  Persons eligible to
participate in the Plan include all current and future Employees (including
officers), persons who have been offered employment by the Company or a
Subsidiary (provided that such prospective Employee may not receive any payment
or exercise any right relating to an Award until such person begins employment
with the Company or Subsidiary), and Directors, as determined by the
Committee.

     

    5.2.  
Participation.  Subject to the
provisions of the Plan, the Committee shall determine and designate, from time
to time, the Employees, prospective Employees, and Directors to whom Awards
shall be granted, the terms of such Awards, and the number of Shares subject to
such Award.

     

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    5.3.   Foreign
Participants.  In order to assure the viability of Awards
granted to Participants employed in foreign countries, the Committee may provide
for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy, or
custom.  Moreover, the Committee may approve such supplements to, or
amendments, restatements, or alternative versions of the Plan as it may consider
necessary or appropriate for such purposes without thereby affecting the terms
of the Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions shall increase
the share limitations contained in Section 4 of the Plan.

     

    

     

                Section
6.                      

    Stock
Options

     

    6.1.  Grant of
Options.

     

    
    

    (a) Option
Grant. Subject to the terms and
provisions of the Plan, Options may be granted to one or more Participants in
such number, upon such terms and provisions, and at any time and from time to
time, as determined by the Committee, in its sole discretion.  The
Committee may grant either Nonqualified Stock Options or (in the case of Options
granted to Employees) Incentive Stock Options, and shall have complete
discretion in determining the number of Options of each granted to each
Participant, subject to the limitations of Section 4.  Each Option
grant shall be evidenced by a resolution of the Committee approving the Option
grant.

     

    (b) Award
Document.  All Options shall be
evidenced by an Award Document.  The Award Document shall specify the
Option Price, the term of the Option, the number of Shares subject to the
Option, and such other provisions as the Committee shall determine, and which
are not inconsistent with the terms and provisions of the Plan.  The
Award Document shall also specify whether the Option is to be treated as an ISO
within the meaning of Code Section 422.  If such Option is not
designated as an ISO, such Option shall be a NQSO.

     

    6.2. 
Option
Price.  The Committee shall
designate the Option Price for each Share subject to an Option under the Plan,
provided that such Option Price shall not be less than 100% of the Fair Market
Value of Shares subject to an Option on the date the Option is granted, and
which Option Price may not be subsequently changed by the Committee except
pursuant to Section 4.3.  With respect to a Participant who owns,
directly or indirectly, more than 10% of the total combined voting power of all
classes of the stock of the Company or any Subsidiary, the Option Price of
Shares subject to an ISO shall be at least 110% of the Fair Market Value of such
Shares on the ISO’s grant date.

     

    6.3. 
Term
of Options.  Each Option granted to
a Participant shall expire at such time as the Committee shall determine at the
time of grant, but in no event shall be exercisable later than the 10th
anniversary of the grant date.  Notwithstanding the foregoing, with
respect to ISOs, in the case of a Participant who owns, directly or indirectly,
more than 10% of the total combined voting power of all classes of the stock of
the Company or any Subsidiary, no such ISO shall be exercisable later than the fifth anniversary of
the grant date.

     

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    6.4. 
Exercise
of Options. Options granted under
this Section 6 shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance approve,
which need not be the same for each grant or for each Participant, and shall be
set forth in the applicable Award Document.  Notwithstanding the
preceding sentence, the Fair Market Value of Shares to which ISOs are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company and its Subsidiaries) may not exceed
$100,000.  Any ISOs that become exercisable in excess of such amount
shall be deemed NQSOs to the extent of such excess.  If the Award
Document does not specify the time or times at which the Option shall first
become exercisable, such an Option shall become fully vested and exercisable by
the Participant on the third anniversary of the grant date.

     

     

    6.5. 
Payment. Options granted under
this Section 6 shall be exercised by the delivery of a notice of exercise to the
Company (or its designated agent(s)), setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.  The Option Price upon exercise of any Option shall be
payable to the Company in full either:

     

    (a) in cash or its
equivalent, or

     

    (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or

     

    (c) by cashless
exercise through delivery of irrevocable instructions to a broker to promptly
deliver to the Company the amount of proceeds from a sale of shares having a
Fair Market Value equal to the purchase price.

     

    6.6. 
Termination
of Employment or Service as a Director.  The Committee, in its
sole discretion, shall set forth in the applicable Award Document the extent to
which a Participant shall have the right to exercise the Option or Options
following termination of his or her employment with the Company or any
Subsidiary or following termination of his or her service as a
Director.  Such provisions need not be uniform among all Options
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for such termination, including, but not limited to, termination for Cause or
for Good Reason, or reasons relating to the breach or threatened breach of
restrictive covenants.  Subject to Section 15, in the event that
a Participant’s Award Document does not set forth such provisions, the following
provisions shall apply:

     

    (a) Long
Service Separation, Death or Disability. If a Participant’s
employment with the Company and/or any Subsidiary or service as a Director
terminates by reason of Long Service Separation, death or Disability, to the
extent that the Option is not exercisable, all Shares covered by his or her
Options shall immediately become fully vested and shall remain exercisable until
the earlier of (i) the remainder of the term of the Option, or (ii) 60 months
from the date of such termination.  In the case of the Participant’s
death, the Participant’s beneficiary or estate may exercise the
Option.

     

    (b) Termination
for Cause. If a
Participant’s employment with the Company and/or any Subsidiary or service as a
Director terminates for Cause, all Options granted to such Participant shall
expire immediately and all rights to purchase Shares (vested or nonvested) under
the Options shall cease upon such termination.

     

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      (c) Other
Termination. If
a Participant’s employment with the Company and/or any Subsidiary or service as
a Director terminates for any reason other than Long Service Separation, death,
Disability, or for Cause, all Options shall remain exercisable until the earlier
of (i) the remainder of the term of the Option, or (ii) 60 days from the date of
such termination.  In such circumstance, the Option shall only be
exercisable to the extent that it was exercisable as of such termination date
and shall not be exercisable with respect to any additional
Shares.

    

     

    6.7. 
Restrictions
on Shares. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Section 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state or foreign securities laws
applicable to such Shares.

     

    6.8.  Transferability
of Options.

    
    

     

    (a) Incentive
Stock Options. No ISO granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution.  Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant.

     

    (b) Nonqualified
Stock Options.
NQSOs may only be transferred in accordance with this Section
6.8(b).

     

    (i)  Except
as otherwise provided in paragraph (ii) below or in an Award Document, no NQSO
shall be assignable or transferable by a Participant other than by will, by the
laws of descent and distribution or pursuant to a Domestic Relations Order (as
such term is defined in Section 414(p)(1)(B) of the Code).

     

    (ii)  NQSOs
(whether vested or unvested) held by (A) Participants who are Section 16
Officers; (B) Participants who are Directors; or (C) any Participants who
previously held the positions in clauses (A) and (B) may be transferred by gift
or by domestic relations order to one or more Permitted
Transferees.  NQSOs (whether vested or unvested) held by all other
Participants and by Permitted Transferees may be transferred by gift or by
domestic relations order only to Permitted Transferees upon the prior written
approval of the Company’s Director of Compensation + Benefits.

     

    6.9.  Accleration
of Vesting.   Notwithstanding
anything in this Section 6 to the contrary, the Committee, in its sole
discretion, shall have the authority to accelerate the vesting of Options at any
time.

     

                Section
7.                     

    Stock
Appreciation Rights

     

    7.1.  Grant of
SARs.

    
    

     

    (a) SAR
Grant.  Subject to the terms and
provisions of the Plan, SARs may be granted to Participants in such number, upon
such terms and provisions, and at any time and from time to time, as determined
by the Committee in its sole discretion.  The Committee may grant
Non-Tandem SARs, Tandem SARs, or any combination of these forms of
SARs.  The Committee shall have complete discretion in determining the
number of SARs granted to each Participant (subject to Section 4) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs.  The Committee shall designate, at
the time of grant, the grant price of a Non-Tandem SAR, which grant price shall
not be less than 100% of the Fair Market Value of a Share on the grant date of
the SAR.  The grant price of Tandem SARs shall equal the Option Price
of the related Option.  Grant prices of SARs shall not subsequently be
changed by the Committee, except pursuant to Section 4.3.

     

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      (b) Award
Document.  All SARs shall
be evidenced by an Award Document.  The Award Document shall specify
the grant price, the term of the SAR, and such other provisions as the Committee
shall determine, and which are not inconsistent with the terms and provisions of
the Plan.

    

     

    7.2. 
Term
of SARs.  The term of a SAR
granted under the Plan shall be determined by the Committee, in its sole
discretion; provided, however, that unless otherwise designated by the
Committee, such term shall not exceed ten years from the grant
date.

     

    7.3. 
Exercise
of Tandem SARs. Tandem SARs may be
exercised for all or part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the related
Option.  A Tandem SAR may be exercised only with respect to the Shares
for which its related Option is then exercisable.  Notwithstanding any
other provision of the Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO:  (i) the Tandem SAR will expire no
later than the expiration of the underlying ISO; (ii) the value of the payout
with respect to the Tandem SAR may be for no more than 100% of the difference
between the Option Price of the underlying ISO and the Fair Market Value of the
Shares subject to the underlying ISO at the time the Tandem SAR is exercised;
and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the
Shares subject to the ISO exceeds the Option Price of the ISO.

     

    7.4. 
Exercise
of Non-Tandem SARs.  Non-Tandem SARs may be
exercised upon whatever terms and conditions the Committee, in its sole
discretion, imposes upon them.

     

    7.5. 
Payment
of SAR Amount.

     

    (a) Upon exercise of a
SAR, a Participant shall be entitled to receive payment from the Company in an
amount determined by multiplying:

     

    (i) The excess of the
Fair Market Value of a Share on the date of exercise over the grant price;
by

     

    (ii) The number of
Shares with respect to which the SAR is exercised.

     

    (b) Unless otherwise
provided in the Award Document, the payment upon SAR exercise may be in cash, in
Shares of equivalent value, or in some combination thereof.  If, and
to the extent that the payment upon SAR exercise is made in cash, such cash
payment shall not be subject to the limitation of Section 4.2(b).

     

    7.6. 
Termination
of Employment or Service as a Director. The Committee, in its
sole discretion, shall set forth in the applicable Award Document the extent to
which a Participant shall have the right to exercise the SAR or SARs following
termination of his or her employment with the Company or any Subsidiary or
following termination of his or her service as a Director.  Such
provisions need not be uniform among all SARs issued pursuant to the Plan, and
may reflect distinctions based on the reasons for such termination, including,
but not limited to, termination for Cause or for Good Reason, or reasons
relating to the breach or threatened breach of restrictive
covenants.  Subject to Section 15, in the event that a Participant’s
Award Document does not set forth such provisions, the following provisions
shall apply:

     

    (a) Long
Service Separation, Death or Disability. If a Participant’s
employment with the Company and/or any Subsidiary or service as a Director
terminates by reason of Long Service Separation, death or Disability, to the
extent that the SARs are not exercisable, all of his or her SARs shall
immediately become fully vested and shall remain exercisable until the earlier
of (i) the remainder of the term of the SAR, or (ii) 60 months from the date of
such termination.  In the case of the Participant’s death, the
Participant’s beneficiary or estate may exercise the SAR.

     

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      (b) Termination
for Cause. If a
Participant’s employment with the Company and/or any Subsidiary or service as a
Director terminates for Cause, all SARs shall expire immediately and all rights
thereunder shall cease upon such termination.

    

     

    (c) Other
Termination. If
a Participant’s employment with the Company and/or any Subsidiary or service as
a Director terminates for any reason other than Long Service Separation, death,
Disability, or for Cause, all SARs shall remain exerciseable until the earlier
of (i) the remainder of the term of the SAR, or (ii) 60 days from the date of
such termination.  In such circumstance, the SAR shall only be
exercisable to the extent it was exercisable as of such termination date and
shall not be exercisable with respect to any additional SARs.

     

    7.8.  Acceleration
of Vesting.  Notwithstanding
anything in this Section 7 to the contrary, the Committee, in its sole
discretion, shall have the authority to accelerate the vesting of SARs at any
time.

     

    

     

                Section
8.                      

    Restricted
Stock

    8.1.  Grant
of Restricted Stock.

    
    

     

    (a) Grant of
Restricted Stock.
 Subject to
the terms and provisions of the Plan, the Committee, at any time and from time
to time, may grant Shares of Restricted Stock to Participants in such amounts as
the Committee shall determine.

     

    (b) Award
Document.  All
shares of Restricted Stock shall be evidenced by an Award
Document.  The Award Document shall specify the Period or Periods of
Restriction (consistent with the next sentence), the number of Shares of
Restricted Stock granted, and such other provisions as the Committee shall
determine pursuant to Section 8.3 or otherwise, and which shall not be
inconsistent with the terms and provisions of the Plan.  Shares of
Restricted Stock not in excess of five percent of the number of shares that may
be issued with respect to Awards of Restricted Stock, as provided in Section
4.1, may have a Period or Periods of Restriction as determined by the Committee
in its sole discretion, and any other shares of Restricted Stock shall have a
Period of Restriction, as determined by the Committee, that shall not lapse in
any respect until on or after the third anniversary of the grant
date.  If no Period of Restriction is set forth in the Award Document,
the transfer and any other restrictions shall lapse (i) to the extent of
one-third of the Shares (rounded to the nearest whole) covered by the Restricted
Stock Award on the third anniversary of the grant date, (ii) to the extent of
two-thirds of the Shares (rounded to the nearest whole) covered by the
Restricted Stock Award on the fourth anniversary of the grant date, and (iii) to
the extent of 100% of the Shares covered by the Restricted Stock Award on the
fifth anniversary of the grant date.

     

    8.2. 
Other
Restrictions.  Subject to Section 10 herein, the Committee may
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including without
limitation, a requirement that Shares will not be issued until the end of the
applicable Period of Restriction, a requirement that Participants pay a
stipulated purchase price for each Share of Restricted Stock, restrictions based
upon the achievement of specific performance goals (Company-wide,
Subsidiary-wide, divisional, and/or individual), time-based restrictions on
vesting, which may or may not be following the attainment of the performance
goals, sales restrictions under applicable shareholder agreements or similar
agreements, and/or restrictions under applicable Federal or state securities
laws.  The Company shall retain the certificates representing Shares
of Restricted Stock in the Company’s possession until such time as all
conditions and/or restrictions applicable to such Shares have been
satisfied.  Except as otherwise provided in this Section 8 or in any
Award Document, Shares of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely transferable by the Participant
after the last day of the applicable Period of Restriction.

     

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    8.3. 
Voting
Rights.  Unless otherwise
designated by the Committee at the time of grant, Participants to whom Shares of
Restricted Stock have been granted hereunder may exercise full voting rights
with respect to those Shares during the Period of Restriction.

     

    8.4. 
Dividends
and Other Distributions.  Unless otherwise
designated by the Committee at the time of grant, Participants holding Shares of
Restricted Stock granted hereunder shall be credited with regular cash dividends
paid with respect to the underlying Shares while they are so held during the
Period of Restriction.  The Committee may apply any restrictions to
the dividends that the Committee deems appropriate.  Without limiting
the generality of the preceding sentence, if the grant or vesting of Shares of
Restricted Stock granted to a Named Executive Officer is designed to comply with
the requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Shares of Restricted Stock, such that the dividends and/or the
Shares of Restricted Stock maintain eligibility for the Performance-Based
Exception.  In the event that any dividend constitutes a derivative
security or an equity security pursuant to the rules under Section 16 of the
Exchange Act, such dividend shall be subject to a vesting period equal to the
remaining vesting period of the Shares of Restricted Stock with respect to which
the dividend is paid.

     

    8.5. 
Termination
of Employment or Service as a Director. The Committee, in its
sole discretion, shall set forth in the applicable Award Document the extent to
which the Participant shall have the right to receive unvested Shares of
Restricted Stock following termination of the Participant’s employment with the
Company and/or its Subsidiaries or termination of service as a
Director.  Such provisions need not be uniform among all Shares of
Restricted Stock issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination of employment including; but not limited to,
termination of employment for Cause or for Good Reason, or reasons relating to
the breach or threatened breach of restrictive covenants; provided, however
that, except in the cases of terminations connected with a Change of Control and
terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock that qualify for the Performance-Based Exception and that are
held by Named Executive Officers shall not occur before the time they otherwise
would have, but for the employment termination.  Subject to Section
15, in the event that a Participant’s Award Document does not set forth such
termination provisions, the following termination provisions shall
apply:

     

    (a) Death and
Disability.
Unless the Award qualifies for the Performance-Based Exception, if a
Participant’s employment with the Company and/or any Subsidiary or service as a
Director is terminated due to death or Disability, all Shares of Restricted
Stock of such Participant shall immediately become fully vested on the date of
such termination and any restrictions shall lapse.

     

    (b) Other
Termination. If
a Participant’s employment with the Company and/or any Subsidiary or service as
a Director is terminated for any reason other than death or Disability all
Shares of Restricted Stock that are unvested at the date of termination shall be
forfeited to the Company.

     

    8.6. 
Acceleration
of Vesting.  Notwithstanding anything in this Section 8 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of Shares of Restricted Stock at any time.

     

    8.7. 
Transferability.  Except as
provided in this Section 8, the Shares of Restricted Stock granted herein may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, voluntarily or involuntarily, until the end of the applicable
Period of Restriction established by the Committee and specified in the Award
Document, or upon earlier satisfaction of any other conditions, as specified by
the Committee in its sole discretion and set forth in the Award
Document.  All rights with respect to the Restricted Stock granted to
a Participant under the Plan shall be available during his or her lifetime only
to such Participant.

     

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            Section
9.                      

    Performance
Units and Performance Shares

     

    9.1.  Grant of
Performance Units/Shares.

    
    

     

    (a) Grant of
Performance Unit/Shares.  Subject to the terms of
the Plan, Performance Units and/or Performance Shares may be granted to
Participants in such amounts and upon such terms, and at any time and from time
to time, as shall be determined by the Committee, which shall not be
inconsistent with the terms and provisions of the Plan and shall be set forth in
an Award Document.

     

    (b) Award
Document. All
Performance Units and Performance Shares shall be evidenced by an Award
Document.  The Award Document shall specify the initial value of the
Award, the performance goals and the Performance Period, as the Committee shall
determine, and which are not inconsistent with the terms and provisions of the
Plan.

     

    9.2. 
Value
of Performance Units/Shares.  Each Performance Unit
shall have an initial value (which may be $0) that is established by the
Committee at the time of grant.  Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the grant
date.  The Committee shall set performance goals in its sole
discretion which, depending on the extent to which they are met will determine
the number and/or value of Performance Units and/or Performance Shares that will
be paid out to the Participant.  For purposes of this Section 9, the
time period during which the performance goals must be met shall be called a
Performance Period.  Performance Shares not in excess of five percent
of the number of shares that may be issued with respect to Awards of Performance
Shares, as provided in Section 4.1, may have a Performance Period as determined
by the Committee in its sole discretion, and any other Performance Shares shall
have a Performance Period, as determined by the Committee, of not less than one
year.

     

    9.3. 
Earning
of Performance Units/Shares.  Subject to the terms of
the Plan, after the applicable Performance Period has ended, the holder of
Performance Units and/or Performance Shares shall be entitled to receive payout
on the number and value of Performance Units and/or Performance Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance goals have been achieved, as
established by the Committee.

     

    9.4. 
Form
and Timing of Payment of Performance Units/Shares.  Except as provided
below, payment of earned Performance Units and/or Performance Shares shall be
made in a single lump sum as soon as reasonably practicable following the close
of the applicable Performance Period.  Subject to the terms of the
Plan, the Committee, in its sole discretion, may pay earned Performance Units
and/or Performance Shares in the form of cash or in Shares (or in a combination
thereof) which have an aggregate Fair Market Value equal to the value of the
earned Performance Units and/or Performance Shares at the close of the
applicable Performance Period.  Such Shares may be granted subject to
any restrictions deemed appropriate by the Committee.  At the sole
discretion of the Committee, Participants may be entitled to receive any
dividends declared with respect to Shares which have been earned in connection
with grants of Performance Units and/or Performance Shares which have been
earned, but not yet distributed to Participants.

     

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    9.5. 
Termination
of Employment or Service as a Director. The Committee, in its
sole discretion, shall set forth in the applicable Award Document the extent to
which the Participant shall have the right to receive payment for Performance
Units and/or Performance Shares following termination of the Participant’s
employment with the Company and/or its Subsidiaries or termination of service as
a Director.  Such provisions need not be uniform among all Performance
Units and/or Performance Shares granted pursuant to the Plan, and may reflect
distinctions based on the reasons for such termination including; but not
limited to, termination for Cause or for Good Reason, or reasons relating to the
breach or threatened breach of restrictive covenants.  Subject to
Section 15, in the event that a Participant’s Award Document does not set forth
such termination provisions, the following termination provisions shall
apply:

     

    (a) Long
Service Separation, Death or Disability. Subject to Section 15, if a
Participant’s employment with the Company and/or any Subsidiary or service as a
Director is terminated during a Performance Period due to Long Service
Termination, death or Disability, the Participant shall receive a prorated
payout of the Performance Units and/or Performance Shares, unless the Committee
determines otherwise.  The prorated payout shall be determined by the
Committee, shall be based upon the length of time that the Participant held the
Performance Units and/or Performance Shares during the Performance Period, and
shall further be adjusted based on the achievement of the preestablished
performance goals.  Unless the Committee determines otherwise in the
event of a termination due to death, Disability or Long Service Separation,
payment of earned Performance Units and/or Performance Shares shall be made at
the same time as payments are made to Participants who did not terminate
employment during the applicable Performance Period.

     

    (b) Other
Termination. If
a Participant’s employment with the Company and/or any Subsidiary or service as
a Director is terminated during a Performance Period for any reason other than
Long Service Termination, death or Disability all Performance Units and/or
Performance Shares shall be forfeited by the Participant to the
Company.

     

    9.6. 
Nontransferability.  Except as otherwise
provided in a Participant’s Award Document, Performance Units and/or Performance
Shares may not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and
distribution.  Further, except as otherwise provided in a
Participant’s Award Document, a Participant’s rights under the Plan shall be
exercisable during the Participant’s lifetime only by the Participant or the
Participant’s legal representative.

     

    9.7. 
Acceleration
of Vesting.  Notwithstanding anything in this Section 9 to the
contrary, the Committee, in its sole discretion, shall have the authority to
accelerate the vesting of Performance Units and/or Performance Shares at any
time.

     

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            Section
10.             

    Performance
Measures

     

    10.1. 
Performance
Measures.  Unless and until the Committee proposes for
stockholder vote and stockholders approve a change in the general performance
measures set forth in this Section 10, the attainment of which may determine the
degree of payout and/or vesting with respect to Awards to Named Executive
Officers that are designed to qualify for the Performance-Based Exception, the
performance goals to be used for purposes of such grants shall be established by
the Committee in writing and stated in terms of the attainment of specified
levels of or percentage changes in any one or more of the following
measurements: (a) revenue; (b) primary or fully-diluted earnings per Share; (c)
earnings before interest, taxes, depreciation, and/or amortization; (d) pretax
income; (d) cash flow from operations; (e) total cash flow; (f) return on
equity; (g) return on invested capital; (h) return on assets; (i) net operating
profits after taxes; (j) economic value added; (k) total stockholder return; (l)
return on sales; or (m) any individual performance objective which is measured
solely in terms of quantifiable targets related to the Company or the Company’s
business; or any combination thereof.  In addition, such performance
goals may be based in whole or in part upon the performance of the Company, a
Subsidiary, division and/or other operational unit under one or more of such
measures.

     

    10.2. 
Performance
Procedures.  The degree of payout and/or vesting of such Awards
designed to qualify for the Performance-Based Exception shall be determined
based upon the written certification of the Committee as to the extent to which
the performance goals and any other material terms and conditions precedent to
such payment and/or vesting have been satisfied.  The Committee shall
have the sole discretion to adjust the determinations of the degree of
attainment of the preestablished performance goals; provided, however, that the
performance goals applicable to Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Named Executive Officers, may
not be adjusted so as to increase the payment under the Award (the Committee
shall retain the sole discretion to adjust such performance goals upward, or to
otherwise reduce the amount of the payment and/or vesting of the Award relative
to the pre-established performance goals).  In the event that
applicable tax and/or securities laws change to permit Committee sole discretion
to alter the governing performance measures without obtaining stockholder
approval of such changes, the Committee shall have sole discretion to make such
changes without obtaining stockholder approval.  In addition, in the
event that the Committee determines that it is advisable to grant Awards which
shall not qualify for the Performance-Based Exception, the Committee may make
such grants without satisfying the requirements of Code Section 162(m) and,
thus, which use performance measures other than those specified
above.

     

       
Section 11.      

    Award
Forfeitures

     

    11.1. 
Forfeiture
of Options and Other Awards.  Each Award granted
hereunder shall be subject to the following additional forfeiture conditions, to
which the Participant, by accepting an Award hereunder, agrees.  If
any of the events specified in Section 11.2 occurs (a “Forfeiture Event”), all
of the following forfeitures will result:

     

    (a) The unexercised
portion of any Option, whether or not vested, and any other Award not then
settled (except for an Award that has not been settled solely due to an elective
deferral pursuant to Section 13 by the Participant and otherwise is not
forfeitable in the event of any termination of service of the Participant) will
be immediately forfeited and canceled upon the occurrence of the Forfeiture
Event; and

     

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      (b) The Participant
will be obligated to repay to the Company, in cash, within five business days
after demand is made therefor by the Company, the total amount of Award Gain (as
defined herein) realized by the Participant upon each exercise of an Option or
settlement of an Award (regardless of any elective deferral pursuant to Section
13) that occurred on or after (i) the date that is six months before the
occurrence of the Forfeiture Event, if the Forfeiture Event occurred while the
Participant was employed by the Company or a Subsidiary, or (ii) the date that
is six months before the date the Participant’s employment by, or service as a
Director with the Company or a Subsidiary terminated, if the Forfeiture Event
occurred after the Participant ceased to be so employed.

    

     

    11.2. 
Events
Triggering Forfeiture. The forfeitures
specified in Section 11.1 will be triggered upon the occurrence of any one of
the following Forfeiture Events at any time during the Participant’s employment
by or service as a Director with the Company or a Subsidiary or during the
one-year period following termination of such employment or
service:

     

    (a) Non-Solicitation.  The Participant,
for his or her own benefit or for the benefit of any other person, company or
entity, directly or indirectly, (i) induces or attempts to induce or hires or
otherwise counsels, induces or attempts to induce or hire or otherwise counsel,
advise, encourage or solicit any person to leave the employment of or the
service for the Company or any Subsidiary, (ii) hires or in any manner employs
or retains the services of any individual employed by or providing services to
the Company or any Subsidiary as of the date of his or her termination of
employment, or employed by or providing services to the Company or any
Subsidiary subsequent to such termination, (iii) solicits, pursues, calls upon
or takes away, any of the customers of the Company or any Subsidiary, (iv)
solicits, pursues, calls upon or takes away, any potential customer of the
Company or any Subsidiary that has been the subject of a bid, offer or proposal
by the Company or any Subsidiary, or of substantial preparation with a view to
making such a bid, proposal or offer, within six months before such
Participant’s termination of employment with the Company or any Subsidiary, or
(v) otherwise interferes with the business or accounts of the Company or any
Subsidiary.

     

    (b) Confidential
Information. The
Participant discloses to any person or entity or makes use of any “confidential
or proprietary information” (as defined below in this subparagraph (b)) for his
or her own purpose or for the benefit of any person or entity, except as may be
necessary in the ordinary course of employment with or other service to the
Company or any Subsidiary.  Such “confidential or proprietary
information” of the Company or any Subsidiary, includes, but is not limited to,
the design, development, operation, building or manufacturing of products
manufactured and supplied by the Company and its Subsidiaries, the identity of
the Company’s or any Subsidiary’s customers, the identity of representatives of
customers with whom the Company or any Subsidiary has dealt, the kinds of
services provided by the Company or any Subsidiary to customers and offered to
be performed for potential customers, the manner in which such services are
performed or offered to be performed, the service needs of actual or prospective
customers, pricing information, information concerning the creation, acquisition
or disposition of products and services, customer maintenance listings, computer
software and hardware applications and other programs, personnel information,
information identifying, relating to or concerning investors in the Company or
any Subsidiary, joint venture partners of the Company or any Subsidiary,
business partners of the Company or any Subsidiary or other entities providing
financing to the Company or any Subsidiary, real estate and leasing
opportunities, communications and telecommunications operations and processes,
zoning and licensing matters, relationships with, or matters involving,
landlords and/or property owners, and other trade secrets.

     

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    11.3. 
Agreement
Does Not Prohibit Competition or Other Participant Activities.  Although the
conditions set forth in this Section 11 shall be deemed to be incorporated into
an Award, the Plan does not thereby prohibit the Participant from engaging in
any activity, including but not limited to competition with the Company and its
Subsidiaries.  Rather, the non-occurrence of the Forfeiture Events set
forth in Section 11.2 is a condition to the Participant’s right to realize and
retain value from his or her compensatory Awards, and the consequence under the
Plan if the Participant engages in an activity giving rise to any such
Forfeiture Event are the forfeitures specified herein.  This provision
shall not preclude the Company and the Participant from entering into other
written agreements concerning the subject matter of Sections 11.1 and 11.2
and, to the extent any terms of this Section 11 are inconsistent with any
express terms of such agreement, this Section 11 shall not be deemed to modify
or amend such terms.

     

    11.4. 
Committee
Discretion.  The Committee may, in
its sole discretion, waive in whole or in part the Company’s right to forfeiture
under this Section 11, but no such waiver shall be effective unless evidenced by
a writing signed by a duly authorized officer of the Company.  In
addition, the Committee may impose additional conditions on Awards, by inclusion
of appropriate provisions in the Award Document.  Nothing contained
herein shall require the Committee to enforce the forfeiture provisions of this
Section 11.  Failure to enforce these forfeiture provisions against
any individual shall not be construed as a waiver of the Company’s right to
forfeiture under this Section 11.

     

    11.5. 
Clawback
Provision.  Notwithstanding
any other provision of the Plan to the contrary, including Section 16.1 which
prohibits material- and adverse changes to any outstanding Award, any
Participant who is an officer of the Company whose negligent, intentional or
gross misconduct contributes to the Company’s having to restate all or a portion
of its financial statements, will be required to forfeit Awards granted under
this Plan and repay the Company the total amount of Award Gain realized by the
Participant upon the exercise of an Option or settlement of an Award, as
determined by the Board of Directors, an authorized committee, or its designee,
pursuant to the Caterpillar Inc. Guidelines on Corporate Governance Issues, as
adopted on February 14, 2007 and any subsequent amendments.  Any
Awards granted under this Plan prior to February 14, 2007 are subject to the
provisions of this Section 11.5 only with the written consent of the
Participant.

     

           
Section 12.         

    Beneficiary
Designation

     

    12.1. 
Beneficiary
Designations.  Each Participant under the Plan may, from time
to time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of his or
her death before he or she receives any or all of such benefit.  Each
such designation shall revoke all prior designations by the same Participant,
shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participant’s
lifetime.  In the absence of any such designation, benefits remaining
unpaid at the Participant’s death shall be paid to the Participant’s
estate.

     

                Section
13.                      

    Deferrals

     

    13.1. 
Deferrals.  The
Committee may permit a Participant to defer such Participant’s receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant upon the exercise of any Option or by virtue of the lapse or waiver
of restrictions with respect to Restricted Stock, or the satisfaction of any
requirements or goals with respect to Performance Units/Shares.  If
any such deferral election is required or permitted, the Committee shall, in its
sole discretion, establish rules and procedures for such payment
deferrals.  All such deferrals (and rules and procedures) shall be
consistent with Code Section 409A and any other applicable law.

     

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                Section
14.                      

    Rights
and Obligations of Parties

     

    14.1. 
No
Guarantee of Employment or Service Rights.  Nothing in the Plan
shall interfere with or limit in any way the right of the Company to terminate
any Participant’s employment at any time, nor confer upon any Participant any
right to continue in the employ of the Company or any Subsidiary.

     

    14.2. 
Temporary
Absence.  For
purposes of the Plan, temporary absence from employment because of illness,
vacation, approved leaves of absence, and transfers of employment among the
Company and its Subsidiaries, shall not be considered to terminate employment or
to interrupt continuous employment.

     

    14.3. 
Participation. No Employee or Director
shall have the right to be selected to receive an Award under the Plan, or,
having been so selected, to be selected to receive a future Award.

     

    14.4. 
Right
of Setoff.  The Company or any
Subsidiary may, to the extent permitted by applicable law, deduct from and set
off against any amounts the Company or Subsidiary may owe to the Participant
from time to time, including amounts payable in connection with any Award, owed
as wages, fringe benefits, or other compensation owed to the Participant, such
amounts as may be owed by the Participant to the Company, although the
Participant shall remain liable for any part of the Participant’s payment
obligation not satisfied through such deduction and setoff.  By
accepting any Award granted hereunder, the Participant agrees to any deduction
or setoff under this Section 14.

     

    14.5. 
Section
83(b) Election.  No election under Section
83(b) of the Code (to include in gross income in the year of transfer the
amounts specified in Code Section 83(b)) or under a similar provision of the
laws of a jurisdiction outside the United States may be made, unless expressly
permitted by the terms of the Award Document or by action of the Committee in
writing before the making of such election.  In any case in which a
Participant is permitted to make such an election in connection with an Award,
the Participant shall notify the Company of such election within ten days of
filing notice of the election with the Internal Revenue Service or other
governmental authority, in addition to any filing and notification required
pursuant to regulations issued under Code Section 83(b) or other applicable
provision.

     

    14.6. 
Disqualifying
Disposition Notification.  If any Participant
shall make any disposition of Shares delivered pursuant to the exercise of an
Incentive Stock Option under the circumstances described in Code Section 421(b)
(relating to certain disqualifying dispositions), such Participant shall notify
the Company of such disposition within ten days thereof.

     

    

     

                Section
15.                      

    Change
of Control

     

    15.1. 
Change
of Control.  If a Participant’s employment or service with the
Company and/or any Subsidiary terminates either without Cause or for Good Reason
within the 12 month period following a Change of Control, unless otherwise
specifically prohibited under applicable laws, or by the rules and regulations
of any governing governmental agencies or national securities
exchanges:

     

    (a) Any and all Options
and SARs granted hereunder shall become immediately exercisable, and shall
remain exercisable throughout their entire term;

     

    (b) Any Period of
Restriction and other restrictions imposed on Restricted Stock shall lapse;
and

     

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      (c) Unless otherwise
specified in an Award Document, the maximum payout opportunities attainable
under all outstanding Awards of Performance Units and Performance Shares shall
be deemed to have been fully earned for the entire Performance Period(s) as of
the effective date of the Change of Control.  The vesting of all such
Awards shall be accelerated as of the effective date of the Change of Control,
and in full settlement of such Awards, there shall be paid out in cash to
Participants within 30 days following the effective date of the Change of
Control the maximum of payout opportunities associated with such outstanding
Awards.

    

     

                Section
16.                      

    Amendment,
Modification, and Termination

     

    16.1. 
Amendment,
Modification, and Termination.  The Board may amend,
suspend or terminate the Plan or the Committee’s authority to grant Awards under
the Plan without the consent of stockholders or Participants; provided, however,
that any amendment to the Plan shall be submitted to the Company’s stockholders
for approval not later than the earliest annual meeting for which the record
date is after the date of such Board action if such stockholder approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Shares may then be listed or
quoted and the Board may otherwise, in its sole discretion, determine to submit
other amendments to the Plan to stockholders for approval; and provided further,
that, without the written consent of an affected Participant, no such Board
action may materially and adversely affect the rights of such Participant under
any outstanding Award.  The Committee shall have no authority to waive
or modify any other Award term after the Award has been granted to the extent
that the waived or modified term was mandatory under the Plan.

     

                Section
17.                      

    Withholding

     

    17.1. 
Tax
Withholding.  The Company shall have
the power and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy Federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of the Plan.

     

    17.2. 
Share
Withholding.  With respect to
withholding required upon the exercise of Options or SARs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable event arising as a
result of Awards granted hereunder, the withholding requirement shall be
satisfied by the Company withholding Shares having a Fair Market Value on the
date the tax is to be determined equal to the minimum statutory total tax which
would be imposed on the transaction.

     

                Section
18.                      

    Miscellaneous

     

    18.1. 
Unfunded
Plan.  The Plan is intended to
constitute an “unfunded” plan for incentive and deferred
compensation.  With respect to any payments not yet made to a
Participant or obligation to deliver Shares pursuant to an Award, nothing
contained in the Plan or any Award shall give any such Participant any rights
that are greater than those of a general creditor of the Company; provided that
the Committee may authorize the creation of trusts and deposit therein cash,
Shares, other Awards or other property, or make other arrangements to meet the
Company’s obligations under the Plan.  Such trusts or other
arrangements shall be consistent with the “unfunded” status of the Plan unless
the Committee otherwise determines with the consent of each affected
Participant.  No such funding shall be established that would cause an
amount to be taxable under Code Section 409A before it is received by a
Participant or cause an amount to be subject to additional tax under such
Section.

     

    
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    18.2. 
Forfeitures;
Fractional Shares.  Unless otherwise
determined by the Committee, in the event of a forfeiture of an Award with
respect to which a Participant paid cash consideration, the Participant shall be
repaid the amount of such cash consideration.  No fractional Shares
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.

     

    18.3. 
Compliance
with Code Section 162(m).  The Company intends
that Options and SARs granted to Named Executive Officers and other Awards
designated as Awards to Named Executive Officers shall constitute qualified
“performance-based compensation” within the meaning of Code Section 162(m) and
regulations thereunder, unless otherwise determined by the Committee at the time
of allocation of an Award.  Accordingly, the terms of Sections 4.2, 6,
7, 8.5, 8.6, 9 and 10, including the definitions of Named Executive Officer and
other terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder.  The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given Participant will be a Named Executive Officer with respect to a fiscal
year that has not yet been completed, the Committee may, in its discretion,
extend the terms of such Sections to any Participant that the Committee deems
appropriate.  If any provision of the Plan or any Award Document
relating to a Performance Award that is designated as intended to comply with
Code Section 162(m) does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements, and
no provision shall be deemed to confer upon the Committee or any other person
sole discretion to increase the amount of compensation otherwise payable in
connection with any such Award upon attainment of the applicable performance
objectives.

     

    18.4. 
Gender
and Number; Headings.  Except where otherwise
indicated by the context, any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular shall include
the plural.  Headings are included for the convenience of reference
only and shall not be used in the interpretation or construction of any such
provision contained in the Plan.

     

    18.5. 
Severability.  In the event any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

     

    18.6. 
Successors.  All
obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.

     

    18.7. 
Requirements
of Law.  The granting of Awards
and the issuance of Shares under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.

     

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    18.8. 
Securities
Law Compliance. With respect to
“insiders,” transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange
Act.  To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.  An “insider”
includes any individual who is, on the relevant date, an officer, Director or
more than 10% beneficial owner of any class of the Company’s equity securities
that is registered pursuant to Section 12 of the Exchange Act, all as defined
under Section 16 of the Exchange Act.

     

    18.9. 
Governing
Law. To the extent not
preempted by Federal law, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Illinois
without regard to the conflict of law provisions thereof.

     

    Section
19.  Effective Date

    

    This Plan
Restatement shall be effective January 1, 2008.

     

    Page 21

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