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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x][X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x][X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Trinity Industries, Inc.TRINITY INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x][X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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2
TRINITY INDUSTRIES, INC.
2525 STEMMONS FREEWAY
DALLAS, TEXAS 75207-2401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 17, 199821, 1999
Notice is hereby given that the Annual Meeting of Stockholders of
Trinity Industries, Inc. (the "Company"), a Delaware corporation, will be held
at the offices of the Company, 2525 Stemmons Freeway, Dallas, Texas 75207, on
Friday,Wednesday, July 17, 1998,21, 1999, at 9:30 a.m., Central Daylight Saving Time, for the
following purposes:
(1) to elect ten (10)nine (9) directors to hold office until the next Annual
Meeting of Stockholders or until their successors are elected and qualified;
(2) to approve the Company's 1998 Stock Option and
Incentive Plan;
and
(3)(2) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on May 29, 199828, 1999
will be entitled to notice of and to vote at the 19981999 Annual Meeting or any
adjournment thereof, notwithstanding the transfer of any stock on the books of
the Company after such record date. A list of the stockholders will be open to
the examination of any stockholder, for any purpose germane to the 19981999 Annual
Meeting, for a period of ten (10) days prior to the meeting at the Company's
offices, 2525 Stemmons Freeway, Dallas, Texas 75207.
You are requested to forward your proxy in order that you will be
represented at the 19981999 Annual Meeting, whether or not you expect to attend in
person. Stockholders who attend the 19981999 Annual Meeting may revoke their
proxies and vote in person, if they so desire.
A Proxy Statement, proxy card and a copy of the Annual Report on the
Company's operations duringfor the fiscal year ended March 31, 19981999 accompany this
Notice of Annual Meeting of Stockholders.
By Order of the Board of Directors
MICHAEL G. FORTADO
Vice President, General Counsel
and Corporate Secretary
June 16, 199818, 1999
3
TRINITY INDUSTRIES, INC.
2525 STEMMONS FREEWAY
DALLAS, TEXAS 75207-2401
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 17, 199821, 1999
This Proxy Statement is furnished to the stockholders of Trinity
Industries, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company to be voted at the Annual Meeting of
Stockholders of the Company to be held at the offices of the Company, 2525
Stemmons Freeway, Dallas, Texas, on Friday,Wednesday, July 17, 199821, 1999, at 9:30 a.m.,
Central Daylight Saving Time (the "1998"1999 Annual Meeting"), or at any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders. The Company's mailing address is P.O. Box 568887,
Dallas, Texas, 75356-8887.
This Proxy Statement and the enclosed form of proxy are being mailed
to stockholders on or about June 16, 1998.18, 1999.
RIGHT TO REVOKE PROXY
Any stockholder giving the proxy enclosed with this Proxy Statement
has the power to revoke such proxy at any time prior to the exercise thereof by
filing with the Company a written revocation at or prior to the 19981999 Annual
Meeting, by executing a proxy bearing a later date or by attending the 19981999
Annual Meeting and voting in person the shares of stock that such stockholder
is entitled to vote. Unless the persons named in the proxy are prevented from
acting by circumstances beyond their control, the proxy will be voted at the
19981999 Annual Meeting and at any adjournment thereof in the manner specified
therein, or if not specified, the proxy will be voted:
(1) FOR the election of the ten (10)nine (9) nominees listed under "Election
of Directors" as nominees of the Company for election as directors to hold
office until the next Annual Meeting of Stockholders or until their successors
are elected and qualified; (2) FOR the approval of the Company's 1998 Stock Option and
Incentive Plan; and
(3)(2) At the discretion of the persons named in the enclosed form of
proxy, on any other matter that may properly come before the 19981999 Annual
Meeting or any adjournment thereof.
BY WHOM AND THE MANNER IN WHICH PROXY IS BEING SOLICITED
The enclosed proxy is solicited by and on behalf of the Board of
Directors of the Company. The expense of the solicitation of proxies for the
19981999 Annual Meeting, including the cost of mailing, will be borne by the
Company. To the extent necessary to assure sufficient representation at the
19981999 Annual Meeting, officers and regular employees of the Company, at no
additional compensation, may request the return of proxies personally, by
telephone, facsimile, mail, or other method. The extent to which this will be
necessary depends entirely upon how promptly proxies are received. Stockholders
are urged to send in their proxies without delay. The Company will supply
brokers, nominees, fiduciaries and other custodians with proxy materials to
forward to beneficial owners of shares in connection with the
request from the beneficial owners of authority to execute such proxies,this solicitation,
and the Company will reimburse such brokers, nominees, fiduciaries and other
custodians for their expenses in making such distribution. Management has no
knowledge or information that any other person will specially engage any
persons to solicit proxies.
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VOTING SECURITIES AND STOCKHOLDERS
The outstanding voting securities of the Company consist entirely of
shares of Common Stock, $1.00 par value per share, each share of which entitles
the holder thereof to one vote. The record date for the determination of the
stockholders entitled to notice of and to vote at the 19981999 Annual Meeting, or
any adjournment thereof, has been established by the Board of Directors as of
the close of business on May 29, 1998.28, 1999. At that date, there were outstanding and
entitled to vote 43,350,78240,551,785 shares of Common Stock.
The presence, in person or by proxy, of the holders of record of a
majority of the outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the 19981999
Annual Meeting, but if a quorum should not be present, the meeting may be
adjourned from time to time until a quorum is obtained. A holder of Common
Stock will be entitled to one vote per share on each matter properly brought
before the meeting. Cumulative voting is not permitted in the election of
directors.
The proxy card provides space for a stockholder to withhold voting for
any or all nominees for the Board of Directors or to abstain from voting for
any proposal if the stockholder chooses to do so.Directors. The election of directors
requires a plurality of the votes cast at the meeting. EachAny other matter to be
submitted to the stockholders requires the affirmative vote of a majority of
the shares present in person or represented by proxy and entitled to vote at
the meeting. Shares of a stockholder who abstains from voting on any or all
proposals will be included for the purpose of determining the presence of a
quorum. However, an abstention with respect to the election of the Company=sCompany's
directors will not be counted either in favor of or against the election of the
nominees. In the case of any other proposal which is being submitted for
stockholder approval, an abstention will effectively count as a vote cast
against such proposal. Broker non-votes on any matter, as to which the broker
has indicated on the proxy that it does not have discretionary authority to
vote, will be treated as shares not entitled to vote with respect to that
matter. However, such shares will be considered present and entitled to vote
for quorum purposes so long as they are entitled to vote on other matters.
At April 30, 1998,May 28, 1999, the companiescompany named below werewas the only personsperson known by
the Company to be beneficial ownersowner of more than 5% of its Common Stock:
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
---------------------------------------- ------------------ -----------
FMR Corp.(1) 4,350,100(1) 10.06%
82 Devonshire Street
Boston, Massachusetts 02109
Pioneering Management Corporation (2) 4,308,800(2) 9.97%Corporation(1) 4,197,600 9.69%
60 State Street
Boston, Massachusetts 02109
- ----------
(1) FMR Corp.Pioneer Management Corporation reported aggregate sole voting and
dispositive power as to 650,000 shares
and sole dipositive power as to 4,350,1004,197,600 shares. This information is based
solely on a Schedule 13G containing information as of January 31, 1998.
(2) Pioneer Management Corporation reported aggregate sole voting and
dispositive power as to 4,308,800 shares. This information is based
solely on a Schedule 13G, containing information as of December 31,
1998.14,
1999.
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The following table shows the number of shares of Common Stock as of
April 30, 1998May 28, 1999 beneficially owned by each director or nominee, by the named
executive officers and by all directors and executive officers as a group,
based upon information supplied by them:
NUMBER OF SHARES EXERCISABLE
BENEFICIALLY OWNED OPTIONS PERCENT OF
NAME AT APRIL 30, 1998(1)MAY 28, 1999(1) INCLUDED CLASS
- ---------------------- ----------------- ---------------- ------------------- ----------- ----------
John L. Adams 2,882 *
Ralph A. Banks, Jr. 5,604 *
David W. Biegler 5,36416,128 14,528 *
Jack L. Cunningham, Jr. 29,071 15,378 *
Michael G. Fortado 6,986 2,750 *
Barry J. Galt 10,16012,000 7,000 *
Clifford J. Grum 4,882(2)13,764(2) 10,764 *
Dean P. Guerin 57,41064,410 7,000 *
Jess T. Hay 11,384(3)10,384(3) 7,000 *
Edmund M. Hoffman 41,681(4)48,681(4) 7,000 *
Jim S. Ivy 19,688 9,375 *
Diana S. Natalicio 2,882 *
F. Dean Phelps 33,56611,764 10,764 *
Mark W. Stiles 29,86034,804 24,197 *
Timothy R. Wallace 239,526227,072 135,948 *
W. Ray Wallace 1,500,178(5) 3.4%1,151,617(5) 482,768 2.77%
Directors and Executive
Officers as a Group 2,031,207 4.6%1,738,717 777,841 4.18%
-
---------
* Less than one percent (1%).
(1) Unless otherwise noted, all shares are owned directly and the owner
has the right to vote the shares, except for shares that officers and
directors have the right to acquire under the Company's stock option
plans as of April 30, 1998May 28, 1999 or within sixty (60) days thereafter which
are included and shown in the next column. Includes shares indirectly
held through the Company's 401(k) Plan for Messrs. Galt, Guerin, HayFortado, Ivy,
Stiles and Hoffman are 9,410 shares each, for
Mr. Biegler is 3,764 shares, for Messrs. Adams, Grum and Dr. Natalicio
are 1,882 shares each, and for Messrs. Banks, Phelps, Stiles, Timothy R. Wallace W. Ray Wallace,of 236, 313, 114 and all directors and executive officers
as a group are -0-, 19,010, 21,873, 189,056, 552,475 and 879,7111,045 shares,
respectively.
(2) Three-thousandIncludes 3,000 shares are owned by Deerfield Corporation of which Mr. Grum
is an owner.
(3) Includes 384 shares owned of record by Mr. Hay's wife as custodian for
their daughter in which Mr. Hay disclaims beneficial ownership.
(4) Includes 1,500 shares held by Mr. Hoffman as trustee of a trust in
which Mr. Hoffman disclaims beneficial ownership.
(5) Includes 775,678455,678 shares held indirectly by limited partnerships which
Mr. Wallace controls and 6,400 shares held by the estate of Minyone M.
Wallace.
PriorIn addition, directors who defer their fees may elect for them to be
credited to an account on the books of the Company in the form of stock units
which are subject to the record date, Mr. Wallace reducedsame market risk as is common stock. The table below
shows the above
listed holdings by 320,000 shares for estate planning purposes and as
partnumber of stock units in the accounts of the administration of the estate of his recently deceased
wife, Minyone M. Wallace.directors with stock
units.
David W. Biegler 1,932
Barry J. Galt 3,798
Clifford J. Grum 2,317
Dean P. Guerin 3,901
Diana Natalicio 2,193
Timothy R. Wallace 773
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ITEM 1 -
ELECTION OF DIRECTORS
At the 19981999 Annual Meeting, ten (10)nine (9) directors are to be elected who
shall hold office until the next Annual Meeting of Stockholders or until their
respective successors are duly elected and qualified. It is the intention of
the persons named in the Company's proxy to vote for the election of each of
the ten (10)nine (9) nominees listed below, unless authority is withheld. All nominees
have indicated a willingness to serve as directors, but if any of them should
decline or be unable to serve as a director, the persons named in the proxy
will vote for the election of another person recommended by the Board of
Directors.
The following biographical information sets forth the name, age,
principal occupation or employment during the past five years, Board committee
membership, certain other directorships held by each nominee for director, the
period during which he or she has served as a director of the Company, and
certain family relationships.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ELECTION OF EACH OF
THE TEN (10)NINE (9) NOMINEES TO THE BOARD OF DIRECTORS SET FORTH BELOW.
NOMINEES
W. RAYTIMOTHY R. WALLACE (75)(45)
Director since 1958.1992. Mr. Wallace is Chairman, President and Chief
Executive Officer of the Company. He is the fatherson of Timothy R.Mr. W. Ray Wallace, a
director and
President of the Company. JOHN L. ADAMS (53)
Director since 1996. Member of the Audit Committee and of the
Corporate Development and Finance Committee. Mr. AdamsWallace is Chairman,
President and Chief Executive Officer of Chase Bank of Texas, National
Association, a national bank providing banking services in various
Texas cities. He serves as an advisory director of TU
Electric-Dallas, a public utility holding company, and a director of Zale Lipshy University Medical Center,Viad Corp. which is
primarily involved in addition to service on the
Board of Directors of several publictravel, trade exhibits and private charitable
organizations in Dallas and Houston.financial services.
DAVID W. BIEGLER (51)(52)
Director since 1992. Chairman of the Corporate Governance and Nominating
Committee and a member of the Human Resources Committee. Mr. Biegler has
served since August 1997 as President and Chief Operating Officer of
Texas Utilities Company, a public utility holding company providing
electric and natural gas utility services, energy marketing and other
energy-related services. Previously thereto he served as the Chairman,
President and Chief Executive Officer of ENSERCH Corporation, an
integrated natural gas company. He is an advisory director of Chase Bank
of Texas, National Association, a national bank.
BARRY J. GALT (64)(65)
Director since 1988. Member of the Audit Committee and of the Corporate
Development and Finance Committee. Mr. Galt is thea director, and prior to
his retirement on March 30, 1999, served as Chairman and Chief Executive
Officer and a director of Ocean Energy, Inc., formerly named Seagull Energy Corporation,
a diversified energy company engaged in oil and gas exploration and
development, as well as natural gas marketing and
distribution.development. He is also a director of Halter Marine Group, Inc., a
director of Standard Insurance Company, a mutual lifeStanCorp Financial Corp., Inc., an insurance company, and a
Houston area advisory director of Chase Bank of Texas, National
Association, a national bank.
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7
CLIFFORD J. GRUM (63)(64)
Director since 1995. Member of the Audit Committee and of the Human
Resources Committee. Mr. Grum is Chairman and Chief Executive Officer and
a director of Temple-Inland, Inc., a holding company with interests in
corrugated containers, bleached paperboard, building products, timber and
timberlands, and financial services. He is also a director of Cooper
Industries, Inc., a company engaged in the businesses of electrical
products, tools and hardware, and automotive products and a director of
Tupperware Corporation, a multinational consumer products company.
4
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DEAN P. GUERIN (76)(77)
Director since 1965. Chairman of the Corporate Development and Finance
Committee and a member of the Corporate Governance and Nominating
Committee and Audit Committee. Mr. Guerin's principal occupation is
investments. Mr. Guerin is a director of Lone Star Technologies, Inc.,
engaged in oil country tubular goods.
JESS T. HAY (67)(68)
Director since 1965. Chairman of the Human Resources Committee and member
of the Corporate Governance and Nominating Committee. Mr. Hay is Chairman
of Texas Foundation for Higher Education and of HCB Enterprises, Inc., a
private investment firm. Prior to retirement on December 31, 1994, Mr.
Hay was Chairman and Chief Executive Officer of Lomas Financial
Corporation, a diversified financial services company engaged principally
in mortgage banking and real estate lending, and of Lomas Mortgage USA, a
mortgage banking institution. Mr. Hay is a director of Viad Corp. which
is primarily involved in travel, trade exhibits, and financial services,
a director of Exxon Corporation, a diversified energy company engaged
principally in the exploration, production and marketing of petroleum
products, and a director of SBC Communications, Inc., a telephone and
wireless communications company.
EDMUND M. HOFFMAN (76)(77)
Director since 1957. Chairman of the Audit Committee and member of the
Corporate Development and Finance Committee. Mr. Hoffman's principal
occupation is investments.
DIANA S. NATALICIO (58)(59)
Director since 1996. Member of the Human Resources Committee and of the
Corporate Governance and Nominating Committee. President of the
University of Texas at El Paso. She is an advisory director of the Chase
Bank of Texas, National Association, a national bank. Dr. Natalicio was
appointed by President Bush to the Commission on Educational Excellence
for Hispanic Americans and by President Clinton to the National Science
Board, currently serving as its Vice-Chair.
TIMOTHY R.W. RAY WALLACE (44)(76)
Director since 1992. Mr. Wallace is President and Chief Operating
Officer of the Company. He is the son of Mr. W. Ray Wallace, a
director and the1958. Retired as Chairman and Chief Executive Officer of
the Company.
Mr.Company in December 1998. Member of the Corporate Development and
Finance Committee. He is the father of Timothy R. Wallace, is a directorChairman,
President and Chief Executive Officer of Viad Corp. which is primarily involved in
travel, trade exhibits and financial services.the Company.
5
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BOARD MEETINGS AND COMMITTEES
The directors hold regular quarterly meetings in addition to a meeting
immediately following the Annual Meeting of Stockholders, attend special
meetings and committee meetings as required, and spend such time on the affairs
of the Company as their duties require. During the fiscal year ended March 31,
1998,1999, the Board of Directors held ten (10)six (6) meetings and all directors of the
Company attended at least seventy-five percent (75%) of the meetings of the
Board of Directors and the committees on which they served.
The standing committees of the Board of Directors are the Audit
Committee, Human Resources Committee, Corporate Governance and Nominating
Committee, and Corporate Development and Finance Committee.
The Audit Committee consists of Messrs. Adams, Galt, Grum, Guerin and
Hoffman. The Audit Committee reviews with management, the director of internal
auditing, and the independent accountants the Company's financial statements,
the accounting principles applied in their preparation, the scope of the audit,
any comments made by the independent accountants upon the financial condition
of the Company and its accounting controls and procedures, and such other
matters as the Audit Committee deems appropriate including reviews with
management relating to compliance with corporate policies, compliance programs,
and internal controls. The Audit Committee also recommends to the Board of
Directors the independent accountant for the Company and reviews audit fees.
The Audit Committee met two (2) times during the fiscal year ended March 31,
1998.1999.
The Human Resources Committee consists of Messrs. Biegler, Grum, and
Hay and Dr. Natalicio. The duties of the Human Resources Committee generally
are to determine and/or recommend the compensation structure for the Company
and its subsidiaries; make recommendations to the Board of Directors as to the
salary of the Chief Executive Officer, and set the salaries of other senior
executives of the Company; grant options, shares of stock, stock units and such
other benefits as may be permitted under the Company's stock related benefit
plan or plans to such officers and employees as the Committee may designate,
and report all such grants to the Board of Directors; review with the Chief
Executive Officer, no less frequently than once a year, the depth and quality
of the Company's management and succession plans related to each critical
operating position of the Company;plans; design and recommend to the Board for approval and administer long,
intermediate and short-term incentive compensation plans of the Company; review and recommend to the Board the
adoption and any amendments of employee benefit plans; administer, interpret,
amend, and carry out such other duties with respect to the Company's employee
benefit plans, as may be authorized or called for by such plans or the Board of
Directors; be kept informed as to administration and management matters in
respect of the Company's qualified pension plans; and make such other reports
and recommendations to the Board of Directors from time to time as the
Committee may deem appropriate.Company. The
Human Resources Committee met five (5)four (4) times during the fiscal year ended March
31, 1998.1999.
The Corporate Governance and Nominating Committee consists of Messrs.
Biegler, Guerin, and Hay and Dr. Natalicio. The duties of the Corporate
Governance and Nominating Committee generally are to recommend to the Board of
Directors the director nominees proposed each year in the Company's proxy
statement for election by the CompanyCompany's stockholders; review the qualifications
of, and recommend to the Board, candidates to fill Board vacancies as they may
occur; consider suggestions from stockholders and other sources regarding
possible candidates for director; define and recommend to the Board appropriate
guidelines and criteria regarding the qualifications of candidates for director
of the Company; review and propose changes, when appropriate, in the
compensation and benefits of non-employee directors of the Company; review and from time to time propose changes inreview
the Company's system of corporate
governance; and make such other reports and recommendations to the Board of
Directors from time to time as the Committee may deem appropriate.Corporate Governance Principles. The Corporate Governance and
Nominating Committee met two (2) timesone (1) time during the fiscal year ended March 31,
1998.1999.
The Corporate Development and Finance Committee consists of Messrs.
Adams, Galt, Guerin, Hoffman, and Hoffman.W. Ray Wallace. The duties of the Corporate
Development and Finance Committee generally are to provide direction for
6
9 the
assessment of future acquisition opportunities; review specific plans regarding
significant acquisitions or dispositions of businesses or assets; authorize,
subject to limits imposed by the Board of Directors, investments in or
acquisition of another company, or the entry into, or termination of, a
partnership, joint venture, or similar investment, or a financial guarantee or
appropriations to subsidiaries of the Company for any of the foregoing
purposes;company; and make such reports and recommendations to the Board of Directors
from time to time as the Committee may deem appropriate. In addition, the
Corporate Development and Finance Committee shall periodically review the financial status of
the Company; consult with the officers of the Company and
the Board of Directors in regard to significant matters involving the finances
of the Company; review financial policy and procedures and make such
recommendations in regard thereto as the Committee may deem appropriate;
approve guidelines for the investment of the Company's cash reserves; and
recommend for approval by the Board of Directors the amount and record date of
dividends, an acceptable range for the debt to equity ratio of the Company, and
Registration Statements to be filed with the SEC in connection with the
Company's securities issuances.Company. The Corporate Development and Finance Committee met one (1) time
during the fiscal year ended March 31, 1998.1999.
6
9
COMPENSATION OF DIRECTORS
Directors are compensated at the rate of $1,250 for each board or
committee meeting attended plus reimbursement for reasonable out-of-pocket
expenses. In addition, each director who is not a compensated officer or
employee of the Company or its subsidiaries receives a fee of $30,000$35,000 per year
for serving as a director, and the Chairman of each of the committees receives
an additional $2,000 per year. Directors may elect, pursuant to a Deferred Plan
for Director Fees, to defer the receipt of all or a specified portion of the
fees to be paid to him or her. Deferred amounts are credited to an account on
the books of the Company and treated as if invested either at the prime rate of
interest as announced from time to time by Chase Bank of Texas or, at the
director's prior election, in units of the Company's Common Stock at the
closing price on the New York Stock Exchange on the date that a payment is
credited to the director's account. Such stock units are credited with amounts
equivalent to dividends paid on the Company's Common Stock. Upon ceasing to
serve as a director, the value of the account will be paid to the director in
annual installments not exceeding ten (10) years according to the director's
prior election.
Following each Annual Meeting of Stockholders, each outside director who is
not also an executive officer of the Company is granted an option to purchase
5,000 shares of the Company's Common stockStock at the fair market value of the
Company's Common Stock on the date of grant.
The Company has a Directors' Retirement Plan that is an unfunded
arrangement through which monthly payments will be paid for a ten (10) year
period towhereby members of the Board of Directors who are not employees of
the Company will receive monthly payments for a ten (10) year period upon
retirement, disability or death. The amount of each monthly payment will be
equal to one-twelfth (1/12) of a percentage of the annual retainer paid to such
director in the year of his retirement, disability or death while serving as a
director. The applicable percentage is dependent upon the number of years of
service as a member of the Board of Directors. If the director has less than
five (5) years of service, the applicable percentage is zero. If the director
has five (5) years of service, the applicable percentage is fifty percent
(50%). The applicable percentage increases at the rate of ten percent (10%) for
each year of service thereafter and reaches one hundred percent (100%) after
ten (10) years of service as a director. However, notwithstanding the number of
years of service, a director's applicable percentage will be one hundred
percent (100%) in the event of a change in control of the Company (as defined).
7
10Commencing January 1, 1999, Mr. W. Ray Wallace was employed by the
Company as a consultant pursuant to an agreement at a monthly rate of $10,000.
The agreement provides for the performance of services as may be required by
the Chief Executive Officer or the Board of Directors and his continuation as a
director as long as he is eligible. He is provided an office, administrative
assistant, limited use of Company aircraft and reimbursement of expenses. In
addition, the Company will provide medical coverage for the remainder of his
life.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the Company's fiscal
years ended March 31, 1999, 1998 1997 and 1996,1997, with regard to the compensation for
their services to the Company and its subsidiaries in all capacities of the
Chief Executive OfficerOfficers and each of the other four (4) most highly compensated
executive officers serving the Company at the close of the Company's most
recently completed fiscal year.
====================================================================================================================================7
10
Summary Compensation Table
====================================================================================================================================
Annual Compensation Long Term Compensation
-------------------------------------- -------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Annual Long TermCompensation Awards Options Compensation
Principal Position Compensation Compensation
------------------------------------------ ---------------------------
Other Restricted Stock
Annual Stock Option All OtherPosition(1) Year Salary Bonus(1) Compensation(2) Awards(3) Awards Compensation(4)
Year($) Bonus ($) ($)(2) ($) ($)(3) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------(4)
--------------------- ---- ---------- --------- ------------- -------------- ------------ -------------
Timothy R. Wallace 1999 $ 600,000 $ 945,000 $ 26,173 $ 393,125 63,574 $ 154,500
Chairman, President & 1998 $ 550,000 $ 791,549 $ 18,101 $ 265,000 49,344 $ 134,155
Chief Executive Officer 1997 $ 475,000 $ 593,750 $ 12,038 $ 94,500 50,000 $ 106,875
Mark W. Stiles 1999 $ 325,000 $ 406,250 $ 16,507 $ 58,969 19,901 $ 73,125
Group Vice President 1998 $ 315,000 $ 263,813 $ 5,046 $ 53,000 12,908 $ 57,881
1997 $ 275,000 $ 69,222 $ 5,500 $ 63,000 16,608 $ 34,422
Jim S. Ivy 1999 $ 330,000 $ 219,450 $ 16,536 $ 78,625 20,000 $ 54,945
Vice President and Chief 1998 $ 50,000 $ 5,000 -- $ 106,000 42,500 $ 5,500
Financial Officer
Jack L. Cunningham, Jr 1999 $ 230,000 $ 152,950 $ 16,081 $ 39,313 11,007 --
Vice President 1998 $ 191,000 $ 95,500 $ 4,795 $ 53,000 14,290 --
1997 $ 185,000 $ 79,091 $ 4,356 -- 7,485 --
Michael G. Fortado 1999 $ 205,000 $ 102,295 $ 10,838 $ 58,969 5,000 --
Vice President, General 1998 $ 116,750 $ 56,882 -- $ 79,500 13,000 --
Counsel and Corporate
Secretary
W. Ray Wallace 1999 $ 780,000 $2,444,853 $ 12,300 -- -- $ 479,228
Chairman & Chief 1998 $1,000,000 $2,500,000 $17,300 - - $525,000
Chairman & Chief$ 17,300 -- -- $ 525,000
Executive Officer 1997 1,000,000 2,495,430$1,000,000 $2,495,430 $ 13,500 --- 75,000 524,315
Officer 1996 1,000,000 2,033,372 10,750 - - 455,006
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Wallace$ 524,315
- -------------------------------------------------------------------------------
(1) As of December 31, 1998, 550,000 791,549 18,101 $265,000 40,000 134,155
President & Chief Operating 1997 475,000 593,750 12,038 94,500 50,000 106,875
Officer 1996 475,000 373,540 12,100 - - 84,854
- ------------------------------------------------------------------------------------------------------------------------------------
Ralph A. Banks, Jr. 1998 280,000 40,000 4,750 - - -
Senior Vice President 1997 280,000 40,000 4,500 - - -
1996 280,000 35,000 4,500 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Mark W. Stiles 1998 315,000 263,813 5,046 53,000 10,000 57,881
Group Vice President 1997 275,000 69,222 5,500 63,000 15,000 34,422
1996 275,000 295,130 2,672 - - 57,013
- ------------------------------------------------------------------------------------------------------------------------------------
F. Dean Phelps 1998 193,500 96,750 4,795 - 3,000 -
Vice President 1997 187,500 80,160 4,331 - 4,500 -
1996 180,000 59,410 4,875 - - -
====================================================================================================================================
(1) An incentive bonus is paid only upon the achievement of a
predetermined financial goal set for each executive by the Human
Resources Committee at the beginning of the fiscal year. The
Committee also predetermines at the beginning of each fiscal year
whether the amount of any incentive bonus earned in excess of a
certain percentage of base salary will be paid within ninety (90) days
after the close of the fiscal year or, at the discretion of the
Committee, deferred and paid in equal annual installments up to three
(3) years after the close of the fiscal year. The Committee elected
to defer and pay the incentive bonus earned for fiscal 1996 in excess
of the applicable percentage in two (2) subsequent annual
installments. No bonuses earned in fiscal 1997 and 1998 were
deferred. If the Committee elects to defer the payment of a portion of
the incentive bonus, the executive will forfeit the deferred portion
if the
8
11
executive's employment with the Company is terminated prior to payment
for any reason other than death, disability, retirement or a change in
control of the Company. The amounts shown for incentive bonuses in
the foregoing table include the amounts deferred and payable to the
executive in succeeding years. The amounts deferred for fiscal 1996
were $1,016,686 for Mr. W. Ray Wallace $186,770, forretired as Chief Executive
Officer and Mr. Timothy R. Wallace, $-0- for Mr. Banks, $147,565 for Mr. Stileswho had been President and $29,705 for
Mr. Phelps.Chief
Operating Officer, was elected to succeed him. Messrs. Jim S. Ivy and
Michael G. Fortado joined the Company in February 1998 and August
1997, respectively.
(2) Other annual Compensation consists principallycompensation is composed of the matching amounts under
the Company's Supplemental Profit Sharing Plan and Section 401(k) Plan
(described below under "Retirement Plans"); amounts reimbursed for the
payment of taxes for certain perquisites; and, in the case of Messrs.
W. Ray Wallace and Timothy R. Wallace, directors' meeting fees.
(3) Amounts shown for each year are based on the closing price of the
Common Stock on the date of grant. The total number ofMessrs. Timothy R. Wallace, Stiles,
Ivy, Cunningham and Fortado had restricted shares held,of 18,000, 4,500,
4,000, 2,000, and their3,000 shares, respectively as of March 31, 1999. The
shares had a market value of $528,750, $132,188, $117,500, $58,750,
and $88,125, respectively, at March 31, 1999, based on the closing$29.375 per
share market price of the Company's Common Stock on March 31,
1998, by the two named executives is as follows: Mr. Timothy R.
Wallace, 8,000 shares ($440,000) and Mr. Mark W. Stiles, 3,000 shares
($165,000).that date.
Dividends are paid on these restricted shares at the same rate as paid
on the Company's Common Stock. All such restricted
shares have been granted under the 1993 Plan. The restrictions on transferability
will be lifted upon the recipient's retirement at age 65 or earlier
with the consent of the Human Resources Committee, death or
disability, or upon a change in control of the Company. If the
employment of the recipient is terminated without the consent of the
Human Resources Committee for any reason other than death or
disability prior to the recipient's retirement, then the restricted
shares will be forfeited.
8
11
(4) An amount equal to fifteen percent (15%) of the salary and incentive
bonus of Mr. W. Ray Wallace, and amounts equal to ten percent (10%) of
the salaries and incentive bonuses of Messrs. Timothy R. Wallace
Stiles, and Stiles areIvy were set aside annually pursuant to the long termlong-term deferred
compensation plans for them.
Stock Option Plans
The Company's 1993 Stock Option and Incentive Plan (the "1993 Plan")
permits the grant of stock options, stock appreciation rights, restricted
stock, performance and other stock related awards. The 1993 Plan terminated the
Company's earlier 1989 stock option plan which in turn had terminated the
Company's 1983 stock option plan, except in each case for options granted and
outstanding under the prior plans. Stock options that expire, terminate or are
surrendered unexercised under the prior plans are available for further awards
under the 1993 Plan. At April 30, 1998, options were granted and outstanding
under the 1993 Plan on 1,423,179 shares of the Company's Common Stock and under
the 1989 plan on 531,424 shares.
9
12
The following table contains information concerning the grant of stock
options with respect to fiscal 1998 to each of the executives named in the
Summary Compensation Table:Grants In Last Fiscal Year
==================================================================================================================
Option Grants In Last Fiscal Year(1)
=================================================================================================================
Individual Grants
Potential Realizable Value
at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term(2)Term ($)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -----------------------------------
Number of
Securities
Underlying Percent
Options of Total Options
NumberExercise or
Granted Exercise At 5% At 10%
of to or Annual Annual
Options Employees in Base Price Expiration
Growth Growth
Name (#)(1) Granted Fiscal Year ($/Sh) Date ($) ($)5% 10%
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Wallace 60,000(2) 14.5% $39.313 12/07/08 $1,483,000 $3,759,000
3,574(3) 0.9% $39.313 04/13/03 $30,000 $65,000
Mark W. Stiles 12,000(2) 2.9% $39.313 12/07/08 $297,000 $752,000
6,266(3) 1.5% $36.063 04/13/03 $49,000 $105,000
1,635(4) 0.4% $39.313 04/13/03 $14,000 $30,000
Jim S. Ivy 20,000(2) 4.8% $39.313 12/07/08 $494,000 $1,253,000
Jack L. Cunningham, Jr. 5,000(2) 1.2% $39.313 12/07/08 $124,000 $313,000
2,552(3) 0.6% $52.938 04/13/03 $29,000 $63,000
3,455(4) 0.8% $39.313 04/13/03 $29,000 $63,000
Michael G. Fortado 5,000(2) 1.2% $39.313 12/07/08 $124,000 $313,000
W. Ray Wallace -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Timothy R. Wallace 9,344(4) 2.4% $53.375 04/13/03 $ 138,000 $ 304,000
40,000(3) 10.3% 53.000 03/12/08 1,333,000 3,379,000
- -----------------------------------------------------------------------------------------------------------------
Ralph A. Banks, Jr -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Mark W. Stiles 918(4) 0.2% 31.250 04/13/03 8,000 18,000
1,990(4) 0.5% 45.750 04/13/03 25,000 56,000
10,000(3) 2.6% 53.000 03/12/08 333,000 845,000
- -----------------------------------------------------------------------------------------------------------------
F. Dean Phelps 4,081(4) 1.1% 24.500 04/13/03 28,000 61,200
3,000(3) 0.8% 53.000 03/12/08 100,000 253,000
=================================================================================================================- -
Potential gain for all stockholders at Assumed Appreciation Rates $760,961,000 $1,928,437,000
(1) The Company has not granted any stock appreciation rights.
(2) The potential realizable values for all stockholdersAnnual grants of stock options at the assumed
annual ratesmarket price on the date of
grant which vest 25% each year.
(3) Reload grants made to participants who exercised nonqualified stock
options pursuant to an Executive Stock Purchase Program ("ESPP") who
paid the purchase price appreciationusing shares of 5% and 10% would be
$1,499,061,000 and $3,798,937,000, respectively. These values assume
increases in the valuepreviously owned shares of the
Company's Common Stock. The Reload grant is for the number of shares
equal to the shares utilized in payment of Common Stock outstanding at
March 31, 1998 at the stated percentages over a ten-year period from
an initialpurchase price. The
option price for the reload option is equal to the market value of $55.00, the closing price of the
Company's Common Stock on March 31, 1998.
(3)the date of the exercise of the primary
option and the option period is equal to the remaining period of the
options exercised. The participant may not exercise a reload option
earlier than six months from the date it is granted.
(4) These stock options were original grants pursuanta one-time grant made to certain participants in
the 1993 Plan.
(4) TheseESPP in connection with an amendment of their stock options were granted pursuant tooption
agreements under the reload provisions of
the 1993 Plan.
10ESPP.
9
13
The table below sets forth information concerning each exercise of
stock options by each of the named executive officers during the most recently
completed fiscal year and the number of exercisable and unexercisable stock
options held by them and the fiscal year-end value of the exercisable and
unexercisable options.12
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
====================================================================================================================
Aggregated Option Exercises In Last Fiscal Year And FY-End Option Values
====================================================================================================================
SharesNumber of Value of
Acquired Number ofSecurities Underlying Unexercised
on Value Unexercised in-the-Money
Exercise RealizedIn-the-Money
Options at Fiscal Options at Fiscal
Name ( # ) ( $ ) Year-End Year-End
------------------------- --------------------------Shares
Acquired on Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
Name (#) ($) (#) ($)
- -------------------------------- -------------- -------------- -------------------------- -----------------------------------------------------------------------------------------------------------------------------------------
Timothy R. Wallace 92,945 $2,168,709 126,002 $801,354
203,793 $733,985
Mark W. Stiles 10,635 $157,531 19,492 $61,181
52,810 $162,857
9,375 -
Jim S. Ivy - - 53,125 -
Jack L. Cunningham, Jr. 6,020 19,459 $29,525
$183,592 32,184 $129,142
Michael G. Fortado - - 2,750 -
15,250 -
W. Ray Wallace 125,066 $4,776,587 514,834 $17,951,883
112,924 3,375,29888,528 $1,378,381 482,768 $3,986,870
56,462 $240,810
- -------------------------------- -------------- -------------- -------------------------- -----------------------------------------------------------------------------------------------------------------------------------------
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future Payouts(1)
Under Non-Stock Price Based Plans
Number of Performance ----------------------------------------------------
LTP Period Until
Name Units Payout Threshold (#) Target (#) Maximum (#)
- ---------------------------------------------------------------------------------------------------------------
Timothy R. Wallace 50,687 1,695,859 165,531 6,028,130
193,635 4,771,280
- -------------------------------- -------------- -------------- -------------------------- --------------------------
Ralph A. Banks, Jr.9,000 3 years 0 0 0 0
0 0
- -------------------------------- -------------- -------------- -------------------------- --------------------------7,026 9,000
Mark W. Stiles 6,891 137,712 17,168 530,802
45,868 1,123,6701,885 3 years 0 1,175 1,885
Jim S. Ivy 2,310 3 years 0 1,803 2,310
Jack L. Cunningham, Jr. 1,334 3 years 0 1,041 1,334
Michael G. Fortado 1,189 3 years 0 928 1,189
W. Ray Wallace - -------------------------------- -------------- -------------- -------------------------- --------------------------
F. Dean Phelps 5,688 52,581 28,086 923,147
26,338 776,222
====================================================================================================================- - - -
- ---------------------------------------------------------------------------------------------------------------
Retirement Plans(1) Long-Term Performance Incentive Program Awards are denominated in
Long-Term Performance Units (LTP Units), which are equivalent in value
to the Company's Common Stock. LTP Units are earned for
10
13
achieving specified business objectives based on return on investment,
operating margin, cumulative profit and total shareholder return which
are weighed 22%, 22%, 23% and 33%, respectively. The payout can vary
from nothing to a maximum number of LTP units for each business
objective. The numbers shown under the target and maximum columns are
the LTP units that can be earned if the target and minimum goals are
achieved for all four business objectives. The amount paid in cash
will be determined by multiplying the number of units earned by the
average closing price of the Common Stock for the month of May of the
year of payment. A participant may elect, up to six months in advance
of the end of the performance period, to receive Common Stock in lieu
of cash on the basis of one share for each LTP unit earned.
RETIREMENT PLANS
The Company has noncontributory, defined benefit retirement and death
benefit plans which are available to all eligible employees who have completed
specified periods of employment. The benefits of the plans are funded by
periodic contributions to retirement trusts that invest the Company's
contributions and earnings thereon in order to pay the benefits to the
employees. The plans provide for the payment of monthly retirement benefits
determined under a calculation based on credited years of service and a
participant's compensation. Retirement benefits are paid to participants upon
normal retirement at the age of 65 or later, or upon early retirement. The
plans also provide for the payment of certain disability and death benefits.
The Company has also adopted a Supplemental Pension Plan that permits
the payment of supplemental benefits to certain employees whose annual benefits
under the foregoing retirement plan would exceed those permitted by the
Internal Revenue Code of 1986, as amended (the "Code"). The Supplemental
Pension Plan provides that if at any time the amount of the annual retirement
benefit which would otherwise be payable under the Company's pension plan is or
becomes limited by reason of compliance with the Code, such person shall be
entitled to receive a supplemental pension benefit equal to the difference
between the benefit that such person receives under the Company's pension plan
and the benefit that such person would have received if such limitation had not
been in effect. The benefits are payable from the general assets of the
Company.
The following table reflects the estimated aggregate annual benefits,
computed on the basis of a monthly benefit payable for ten (10) years certain
and life thereafter, payable under such plans to a fully vested participant 11
14
of
the Company upon retirement at age 65 after 10, 20, 30 and 40 credited years of
service at the annual remuneration levels set forth in the table.
===========================================================================================================================
Pension Plan Table
===========================================================================================================================
Years of Service
---------- ---------- ---------- ---------- --------------------------------------------------------------------------------------------------------
Remuneration 10 20 30 40
- ---------------------------------------------------------------------- ------------ ------------ ------------ -----------
-- -- -- --
$250,000........................................................ 24,760 49,520 74,280 99,040
$300,000........................................................
$ 300,000 $ 29,760 $ 59,520 $ 89,280 $ 119,040
$400,000 .......................................................400,000 39,760 79,520 119,280 159,040
$500,000 ....................................................... 49,760 99,520 149,280 199,040
$600,000 .......................................................600,000 59,760 119,520 179,280 239,040
$700,000 ....................................................... 69,760 139,520 209,280 279,040
$800,000 .......................................................800,000 79,760 159,520 239,280 319,040
$900,000 ....................................................... 89,760 179,520 269,280 359,040
$1,000,000 .......................................................1,000,000 99,760 199,520 299,280 399,040
$1,100,000 ....................................................... 109,760 219,520 329,280 439,040
$1,200,000 .......................................................1,200,000 119,760 239,520 359,280 479,040
$1,300,000 ....................................................... 129,760 259,520 389,280 519,040
$1,400,000 .......................................................1,400,000 139,760 279,520 419,280 559,040
$1,500,000 ....................................................... 149,760 299,520 449,280 599,040
$1,600,000 .......................................................1,600,000 159,760 319,520 479,280 639,040
===========================================================================================================================1,800,000 179,760 359,520 539,280 719,040
2,000,000 199,760 399,520 599,280 799,040
11
14
The compensation covered under those plans is the same as the salary
and bonus reported earlier in the Summary Compensation Table. The annual benefits shown
are not subject to any deduction for Social Security benefits or other offset
amounts. Mr. Timothy R. Wallace has 2324 credited years of service under the
plans under which he is covered; Mr.Messrs. Stiles, has 6Ivy, Cunningham and Fortado
have 7 years, 1 year, 23 years, and 1 year, respectively. Mr.
Phelps has 19 years. Messrs. W. Ray Wallace and Ralph A. Banks, Jr.
began receiving pension payments at age 65 of $126,933 and $76,848, respectively, per year from the
Company's regular retirement plan.
TheIn 1990 the Company also is obligatedagreed to pay supplemental retirement benefits
toprovide Mr. W. Ray Wallace Chairman andwith a
supplemental pension benefit upon his retirement as Chief Executive Officer of the Company,
under an agreement made by the Company in 1990 which provides that the Company
will supplement, commencing at his actual retirement, his other retirement
benefits from the Company so
that his aggregate retirement benefits from the Company willwould equal eighty
percent (80%) of the average of his annual compensation earned during his most
highly compensated five (5) consecutive years of employment. At MarchDecember 31,
1998, the estimated annual benefit payable to him upon his retirement under this unfunded
supplemental retirement program was $2,683,000.$2,875,000. Pursuant to the agreement, Mr.
Wallace elected to receive a discounted lump sum payment of the supplemental
benefit.
The Company maintains a Section 401(k) plan that permits employees to
elect to set aside up to tenfourteen percent (10%(14%) of their compensation (subject
to the maximum limit on the amount of compensation permitted by the Code to be
deferred for this purpose) in a trust to pay future retirement benefits.
TheDepending upon years of service, the Company matches from twenty-five (25%) to
fifty percent (50%) of the lesser of (i) the amount that the
employee electsup to set aside for this purpose or (ii) six
12
15 percent (6%) of the employee's compensation.compensation
set aside for this purpose. The Company also maintains a Supplemental Profit
Sharing Plan for its "highly compensated employees", as defined in the Code.
The highly compensated employees are not limited as to the percentage of their
compensation which may be contributed to the plan; however, the Company only
matches fifty percent (50%) ofup to the lesser of (i) thesame amount that the employee elects to set aside for this purpose or (ii) six
percent (6%) of the employee's compensation (but the Company never contributes
more thanas it would have contributed if the "highly compensated employees" had
participatedfor full participation in the
Section 401(k) plan). Participation in the Section 401(k)
plan by all such "highly compensated employees" would have an adverse effect on
the Section 401(k) plan.
Contributions under the latter plan are also made to
a trust, but unlike the contributions by the Company to the trust created
pursuant to the Section 401(k) plan (which are deductible by the Company when
paid to the trust), the contributions of the Company to the trust for the
"highly compensated employees" are not deductible by the Company for federal
income tax purposes until such amounts are paid out by the trust. Further, the
assets of the trust created under the plan for the "highly compensated
employees" are considered part of the general assets of the Company that can be
attached by its creditors.
Change in Control AgreementsCHANGE IN CONTROL AGREEMENTS
Each named executive officer has executed a change in control
agreement with the Company that provides certain benefits in the event his or
her employment is terminated subsequent to a change in control of the Company
(as defined in the agreements). The agreements are for continuous two-year
terms until terminated by the Company upon specified notice and continue for
two years following a change in control. The agreements provide that if there
is a change in control of the Company and if the Company terminates the
executive's employment other than as a result of the executive's death,
disability or retirement, or for cause (as defined in the agreements), or if
the executive terminates his or her employment under certain circumstances,
then the Company will pay to such executive a lump sum equal to three (3) times
the amount of the executive's base salary and bonus paid by the Company and its
subsidiaries to the executive during the twelve (12) months prior to
termination or, if higher, the twelve (12) months prior to the change in
control of the Company.
The severance benefits provided by the agreements also include certain
fringe benefits to which each executive would have been entitled if the
executive had continued in the employment of the Company for thirty-six (36)
months after the executive's termination, and a supplemental benefit based on
the Company's retirement plan, which benefit is payable in a series of cash
payments.
The agreements further provide that if any payment to which the
executive is entitled would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code, of 1986, as amended, then the Company will pay to the executive an additional
amount so that the net amount retained by the executive is equal to the amount
that otherwise would be payable to the executive if no such excise tax had been
imposed.
12
15
REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Human Resources Committee ("the Committee") of the Board of Directors. The
Committee, which is composed entirely of independent outside directors, is
responsible for setting and overseeing the administration of policies that
govern the compensation of the Company's executives. It establishes the base
salary, the incentive compensation, the deferred compensation, the stock options,
the performance awardsunits and other stock based awards for each executive officer and
certain key operating officers of the Company, except the salary of the Chief
Executive Officer is decided by the Board, after recommendation by the
Committee. The Committee retains a consultant to advise on matters related to
executive compensation.
It is the Committee's policy to provide a competitive and
comprehensive compensation program to attract, motivate, reward and retain the
key executives needed to enhance the profitability of the Company and to 13
16
create
value for its stockholders. The Committee believes that the Company's executive
compensation should consist of competitive base salaries and incentive
compensation plans that reward both short-short and long-term performance. The key
components of the Company's short-term executive compensation program in the
last fiscal year were a base salary and incentive compensation,compensation. The long-term
program consists of stock options, long-term performance units ("LTP Units"),
restricted stock awards, and in some cases deferred compensation, stock options, performance awards and restricted stock
awards.compensation. The Committee
periodically reviews each component of the Company's executive compensation
program to ensure that pay levels and incentive opportunities are competitive,
directly linked to performance and aligned with the interest of stockholders.
The Committee determines each executive's compensation based upon past and
expected future performance, the executive's responsibilities within the
Company, and the executive's value to the Company as determined by the
Committee.
Base Salary
The Committee each year reviews each executive's performance and
establishes each executive's base salary based upon past and expected future
performance, and the executive's responsibilities within the Company. In fixing
base salaries, the Committee also considers salaries of senior executives of
other comparable companies as reflected in a survey provided by an independent
outside consultant.
Incentive Compensation
Incentive bonuses awarded annually to the Company's executive officers
and key operating officers are tied to the Company's success in achieving
significant performance goals. An incentive bonus is determined for each
executive upon the basis of the achievement of certain financial and specific group goals set each year by the Committee at
the beginning of the year.
Financial performance targets for the Company's corporate executives are
directly related to the Company's normalized consolidated income before federal
income tax and financial performance targets of division executives responsible
for the operation of a division or segment of the Company are directly related
to normalized operating profits achieved by that division or segment. The
performance goals are determined on the basis of the Company's past performance
and anticipated future performance. Specific group targets are tied to specific
short-term goals applicable to the executive's job assignment and, in the case
of Mr. Timothy R. Wallace, also to the Committee's evaluationCompany's consolidated performance and
enhancement of total
shareholder return in relation to general market conditions. In the case of
both corporate and division executives, the total amount of incentive
compensation that may be earned by any executive in any year is limited to a
predetermined maximum percentage of his or her base salary.stockholder value.
Stock Options, Performance Awards,LTP Units, Restricted Stock Grants and Deferred Compensation
Long-term incentive awards provided by the stockholder-approved 1993
Stock Optionstock
option and Incentive Planincentive plans are designed to develop and retain strong management
through stock ownership, deferred compensation, stock options and other stock based incentive awards.
Stock options historically have been, and in fiscal 19981999 were, the
significant portion of long-term incentive grantedgrants to 1217 executive officers 11
key operating officers and
68business group presidents and 106 key employees. Options to purchase a total of
389,218346,910 shares were granted in fiscal 1998.1999. The Committee believes that a
significant portion of senior executives' compensation should be dependent on
value created for the shareholders.stockholders. Options are an excellent vehicle to
accomplish this by tying the executives' interest directly to the shareholders'stockholders'
interests. Options are granted at the fair market value of the Company's Common
Stock on the date of grant and vest in
13
16
annual increments over four to eight years after such date if the optionee is
still employed or vest fully at the date of normal retirement.
The number of options that the Committee grants to executive officers
is based on individual performance and level of responsibility. The award
level must be sufficient in size to provide a strong incentive for executives
to work for long-term business interests and become meaningful owners of the
business. The number of
options
14
17 currently held by an executive is not a factor in determining
individual grants
since suchgrants.
The Committee has established a factor would create anLong Term Performance Incentive
Program and has granted LTP Units that cover a three-year period with targeted
goals based two-thirds on specific group performance improvement and one-third
on total stockholder return. The Committee believes that this Program provides
incentive for long-term sustained growth while making a portion of the
executive's compensation dependent upon total stockholder return. These
performance awards are payable in cash based on the value of the Company's
Common Stock at the end of the three-year period or, at the election of the
executive, in stock that is equivalent to exercise optionsthe number of units awarded. The
number of units awarded is based on a percentage of the executive's base pay
divided by the stock price at the beginning of the three-year period. The
Committee awarded a total of 31,246 LTP Units to 15 executive and sell the
shares.operating
officers for fiscal 1999.
A limited number of senior executives also received grants of Career
Shares in 1998.Shares. Career Shares are shares of the Company's Common Stock granted with
a restrictionrestrictions designed to promote long-term retention, as well as superior
long-term performance, of key strategic and operating management. TheseThe
restrictions generally expire after the executive reaches normal retirement
age. The number of Career Shares granted to senior executives also recognizes
the increased responsibility and complexity of senior positions. Individual grants are based on personal contribution and level of
responsibility within the organization. The number of shares currently held by
an executive is not a factor in determining individual grants since Career
Shares are primarily designed to promote long-term retention and steadily
increasing stock ownership by the Company's key executives. AThe Committee
granted a total of 24,00042,000 Career Shares were granted
to 1823 key executives in 1998.fiscal 1999.
To encourage the retention of certain key and strategically important
executives focused on continuous improvement and growth of the Company, the
Company has established a deferred compensation plan for certain key officers
of the Company including Messrs. Timothy R. Wallace, Jim S. Ivy and Mark W. Stiles.
Under the deferred compensation plan, an amount equal to ten percent (10%) of
each participant's annual base salary and incentive compensation is accrued to
his deferred account on the books of the Company. All such deferrals bear
interest at the prime rate from time to time at Chase Bank of Texas.Texas' prime lending rate.
Chief Executive Officer Compensation
TheW. Ray Wallace retired from the position of Chief Executive Officer on
December 31, 1998. He remains with the Company on a consulting basis. For the
nine months he served as Chief Executive Officer, his base pay and
participation in a deferred compensation plan and supplemental retirement plan
were unchanged from the previous year. Incentive compensation was based on a
performance goal that was higher than the prior year and the amount earned was
derived from a formula directly related to the Company's normalized pretax
income.
Timothy R. Wallace became Chief Executive Officer of the Company on
January 1, 1999. His base salary, incentive compensation, and stock option grants,
to Mr.
W. Ray Wallace, the Company's Chief Executive Officer,Career Share awards and stock-based performance awards are set within the
philosophy and policies enunciated above for all other executives of the
Company. His base salary was unchanged in fiscal 1998.
Mr. Wallace's incentive compensation in fiscal 1998 was derived from a
formula directly related to the Company's normalized pretax income from
continuing operations, which in fiscal 1998 totaled $236 million, up from $181
million in fiscal 1997. His incentive compensation for the year is payable
currently.
Mr. Wallace also has a long term deferred compensation plan under
which the Company awards annually an amount equal to fifteen percent (15%) of
Mr. Wallace's combined salary and incentive compensation in each fiscal year.
These deferrals bear interestincreased at the prime rate from timebeginning of fiscal 1999 to
time at Chase Bank
of Texas.
Pursuant to an agreement between the Company and Mr. Wallace dated
July 18, 1990, the Company is obligated to supplement his pension plan and
other retirement benefits from the Company so that the aggregate annual amount
of all his retirement benefits from the Company for life will equal eighty
percent (80%)$600,000 in recognition of his average annual compensation during the five (5)
consecutive years in which he was most highly compensated byincreased management role and value to the
Company.
In determining the compensation of the Chief Executive Officer, the
Committee reviews the performance of the Company, considers the positioning of
the Company for future years, assesses his past and ongoing personal
performance in the position of Chief Executive Officer, and considers the
report of a nationally recognized consulting firm employed to survey the
compensation of chief executive officers of other companies, with particular
emphasis on companies comparable to that of the Company.
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Limitation on Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code denies a publicly heldpublicly-held
corporation a federal income tax deduction for the compensation of certain
executive officers exceeding $1 million per year. "Performance based"
compensation, is not subject to the limitation on deductibility and the
Committee strives to structure compensation 15
18
so as to qualify for deductibility.
Provisions have been included in the
proposed 1998 Stock Option and Incentive Plan that
are designed to qualify future awards of stock options, performance awards, and
performance-based restricted stock as "performance based." The Committee will
continue to monitor future deductibility options. However, the Committee will
authorize compensation that may not be deductible when it deems it to be in the
best interest of the Company.Company and its stockholders.
Conclusion
The Committee believes that the Company's compensation policies and
practices are appropriately designed to attract, retain and motivate key
executives to guide the Company in the future and to produce results which will
enhance the Company's long-term prospects, thereby ultimately enriching
shareholder values.
Jess T. Hay, Chairman David W. Biegler, Member
Human Resources
Jess T. Hay, Chairman David W. Biegler, Member
Human Resource Committee Clifford J. Grum, Member
Diana Natalicio, Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jess T. Hay, David W. Biegler, Clifford J. Grum and Diana Natalicio
served on the Human Resources Committee during the last completed fiscal year.
There were no interlocks or insider participation during such year.
PERFORMANCE GRAPH
The following graph shows a comparison of the five (5) year cumulative
return (assuming reinvestment of any dividends) for the Company, the New York
Stock Exchange Index and the Dow Jones Transportation Equipment Index. The
sources for the information contained in this table in respect to the return
for the Company and for the Dow Jones Transportation Equipment Index are Dow
Jones & Company, Inc. and, in respect to the New York Stock Exchange Index, is
Media General Financial Services.
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FIVE YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
=========================================================================================================
1993 1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------
Trinity Industries, Inc. 100 126 127 121 107 198
- ---------------------------------------------------------------------------------------------------------
Dow Jones Transportation Equipment 100 115 103 110 131 233
- ---------------------------------------------------------------------------------------------------------
NYSE Index 100 104 115 151 176 256
=========================================================================================================
ITEM 2 - ADOPTION OF 1998 STOCK OPTION AND INCENTIVE PLAN
Upon recommendation of the Human Resources Committee, the Board of
Directors of the Company has adopted, subject to stockholder approval, the
Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (Hereinafter
called the "1998 Plan") providing for the granting of stock options and stock
related awards. The 1998 Plan is intended to enable the Company to remain
competitive and innovative in its ability to attract, motivate, reward and
retain a strong management team of superior capability and to encourage a
proprietary interest in the Company by persons who occupy key positions in the
Company or its affiliates by enabling the Company to make awards that recognize
the creation of value for the stockholders of the Company and promote the
Company's growth and success. In furtherance of that purpose, eligible persons
may receive stock options, stock appreciation rights, restricted stock,
performance awards, dividend equivalent rights, and other awards, or any
combination thereof. The 1998 Plan is expected to provide flexibility to the
Company's compensation methods in order to adapt the compensation of key
employees to a changing business environment, after giving due consideration to
competitive conditions and the impact of federal tax laws. A copy of the 1998
Plan is attached as Annex A to this Proxy Statement, to which reference is made
for the detailed provisions thereof.
The maximum number of shares of Common Stock with respect to which
awards may be granted pursuant to the 1998 Plan is 2,000,000 shares with no
more than 600,000 shares available for awards to be issued
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in the aggregate as restricted stock or in satisfaction of Performance Awards
or Other Awards. However, as awards under the 1998 Plan or stock options
granted under prior plans expire, terminate or are surrendered unexercised, the
shares underlying such awards and options are available for further awards
under the 1998 Plan.
The 1998 Plan will be administered by a committee consisting of not
less than three (3) members of the Board of Directors who shall be appointed
by, and shall serve at the pleasure of, the Board. Unless the Board determines
otherwise, the members of the Committee shall be "non-employee directors"
within the meaning of Rule 16b-3 of the General Rules and Regulations of the
Exchange Act, and "outside directors" within the meaning of Section 162(m) of
the Code and regulations thereunder. The Board has designated the Human
Resources Committee (the "Committee") to administer the 1998 Plan. Awards
under the 1998 Plan will be determined by the Human Resources Committee and may
be made only to a person who is a director or officer of the Company or one of
its affiliates or who is in a managerial or other key position in the Company
or one of its affiliates. The Human Resources Committee will determine the
person to whom an award will be granted, the type of award, and, if applicable,
the number of shares to be covered by the award. In making that determination,
the Committee will consider the position and responsibilities of the person,
his or her importance to the Company and its affiliates, the duties of such
person, his or her past, present and potential contributions to the growth and
success of the Company and its affiliates, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purpose of
the 1998 Plan.
Stock Options. The Committee may grant either an incentive stock
option (as that term is used in Section 422 of the Internal Revenue Code of
1986) or any other stock option. In the case of an incentive stock option, the
option exercise price must be not less than one hundred percent (100%) of the
last reported sales price of the Company's Common Stock on the New York Stock
Exchange on the date of grant. The maximum number of options that may be
granted to any one individual during any fiscal year of the Company may not
exceed 300,000, subject to adjustment as provided in the 1998 Plan. The
Committee may not reprice underwater stock options by canceling and regranting
stock options or by lowering the exercise price except for adjustments provided
in the 1998 Plan. Recipients of stock options may pay the option exercise
price in cash or by delivering to the Company shares to of the Company's Common
Stock already owned by the optionee having a fair market value equal to the
aggregate option exercise price.
If an optionee delivers shares of Common Stock of the Company already
owned by the optionee in full or partial payment of the exercise price for any
stock option granted under the 1998 Plan or any prior stock option plan of the
Company, the Human Resources Committee may authorize the automatic grant of a
new option (a "Reload Option") on that number of shares as is equal to the
number of shares of Common Stock surrendered in full or partial payment of the
option exercise price of the underlying stock option being exercised. The
option exercise price of the Reload Option will be the closing price of the
Company's Common Stock on the date of the exercise of the underlying stock
option. A reload Option cannot be exercised earlier than six (6) months from
the date of its grant nor later than the time when the underlying option
exercised by the surrender of the already owned shares could have been last
exercised. The Human Resources Committee may impose additional terms,
conditions and restrictions on any Reload Option and the shares acquired upon
the exercise of the Reload Option.
Stock options will be exercisable as set forth in the option
agreements pursuant to which they are issued, but in no event are incentive
stock options exercisable after the expiration of ten (10) years from the date
of grant. Regardless of any vesting schedule contained in an option agreement,
the 1998 Plan provides for the acceleration of the vesting of stock options in
certain events, including the optionee's death, disability, retirement or a
change in control of the Company (as defined). All rights to exercise a stock
option terminate immediately if an optionee is discharged for cause, after ten
(10) days in the event of an optionee's resignation, after three (3) months in
the case of an optionee's disability or retirement in the case of an incentive
stock option and thirty-six (36) months in the case of a non-qualified option;
and after twelve (12) months in the case of an optionee's death. Options are
not transferable other than by will or the laws of descent and distribution,
except that with the approval of the Committee, an option that is not an
incentive stock option may be transferred to one or more members of the
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21
immediate family of the optionee, a trust for the benefit of the immediate
family of the optionee, or to a family partnership.
An optionee will not be taxed at the time an incentive stock option is
granted. In general, an optionee exercising an incentive stock option will not
be taxed at the time an incentive stock option is exercised if the stock
purchased is held for at least one year after the exercise date and at least
two years after the date of grant provided however, the exercise of an
incentive stock option may increase the optionee's alternative minimum tax
liability, if any. If such holding periods are satisfied, the difference
between the option price and the amount realized upon subsequent disposition of
the stock will constitute long-term capital gain or loss. Stock held at least
18 months following the date of exercise of the incentive stock option will be
taxed as long-term capital gain. Stock held more than one year but less than
18 months will be taxed as mid-term gain and stock held for one year or less as
short-term capital gain. If such holding periods are not satisfied, the
employee will recognize ordinary income to the extent of the lesser of the gain
realized and the excess of the fair market value of the stock on the exercise
date over the option price. Any gain realized in excess of the amount
recognized as ordinary income by the employee will be capital gain. The
Company will not recognize income, gain or loss upon the disposition of an
incentive stock option if the holding periods referred to above are satisfied.
If such holding periods are not satisfied, the Company will be entitled to a
deduction equal to the amount of the ordinary income recognized by the
employee. An optionee will not be taxed at the time a non-qualified stock
option is granted. In general, an optionee exercising a non-qualified stock
option will recognize ordinary income equal to the excess of the fair market
value on the exercise date of the stock purchased over the option price. Upon
subsequent disposition of the stock purchased, the difference between the
amount realized and the fair market value of the stock on the exercise date
will constitute capital gain or loss. The Company will not recognize income,
gain or loss upon the granting of a non-qualified stock option. Upon the
exercise of such an option, the Company is entitled to an income tax deduction
equal to the amount of ordinary income recognized by the employee.
Stock Appreciation Rights. A stock appreciation right may be granted
in conjunction with or independent of a stock option. A stock appreciation
right is the right to receive an amount equal to the excess of the fair market
value of a share of the Company's Common Stock on the date of exercise over the
fair market value of a share of Common Stock on the date of grant (or other
value specified in the agreement granting the stock appreciation right). A
stock appreciation right granted in tandem with a stock option will require the
holder, upon exercise, to surrender the related stock option, or a portion
thereof, with respect to the number of shares as to which such stock
appreciation right is exercised.
A stock appreciation right granted independent of a stock option will
be exercisable as determined by the Committee. An independent stock
appreciation right will entitle the holder, upon exercise, to receive payment
as described above either in cash or in shares of Common Stock of the Company,
or a combination thereof, as specified in the grant of the stock appreciation
right. The Human Resources Committee may limit the amount payable upon
exercise of any stock appreciation right. Any such limitation will be
specified in the grant. The maximum number of shares for which grants of stock
appreciation rights may be made to an individual in any fiscal year of the
Company shall not exceed 300,000 subject to adjustment as provided in the 1998
Plan.
In the case of a dividend equivalent right, the Company is of the
opinion that the recipient of the dividend equivalent right will realize
compensation income in an amount equal to the cash or fair market value of the
shares as and when the same becomes payable to the recipient. The Company is
also of the opinion that it will be entitled to a deduction under the Internal
Revenue Code at the time and equal to the amount that compensation income is
realized by the recipient.
Other Awards. Other forms of awards based upon, payable in, or
otherwise related in whole or in part to Common Stock of the Company may be
granted under the 1998 Plan if the Human Resources Committee determines that
such awards are consistent with the purposes and restrictions of the 1998 Plan.
The terms and conditions of such awards shall be specified by the grant. Such
awards shall be granted for no cash consideration,
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22
for such minimum consideration as may be required by applicable law, or for
such other consideration as may be specified by the Human Resources Committee.
The federal income tax consequences of such other awards will depend upon the
form that such awards may take.
Adjustments upon Changes in Capitalization. The number of shares
subject to an award will be adjusted for any subdivision or consolidation of
shares of Common Stock of the Company or upon stock dividends payable in stock
of the Company or in case of any change from par value stock to stock of a
different par value or without par value.
Amendments. All provisions of the 1998 Plan (including any award
under the plan) may at any time or from time to time be modified or amended by
the Board of Directors. However, no outstanding award may be adversely
modified, impaired or canceled without the consent of the holder thereof, and
the 1998 Plan cannot be amended, without stockholder approval, to increase the
maximum number of shares subject to the 1998 Plan, or to materially modify the
requirements as to eligibility for participation in the 1998 Plan or materially
increase the benefits accruing to persons eligible to participate in the 1998
Plan, or if stockholder approval is necessary in order to comply with Rule
16b-3 under the Securities Exchange Act of 1934 or to comply with any other
applicable law, regulation, or listing requirement or to qualify for an
exemption or characterization deemed desirable by the Company's Board of
Directors.
Termination. The 1998 Plan will terminate only by resolution of the
Board of Directors. However, no incentive stock option may be granted under
the 1998 Plan after July 17, 2008.
As described above, the selection of employees who will receive awards
under the 1998 Plan, if it is approved by the stockholders, and the size and
type of awards will be determined by the Committee in its discretion. No
awards have been made under the 1998 Plan, nor are any such awards now
determinable; therefore, it is not possible to predict the benefits or amounts
that will be received by, or allocated to, particular individuals or groups of
employees in 1998. The number of shares of Common Stock covered by options and
the number of shares of restricted stock which were granted in the last fiscal
year pursuant to the 1993 Plan to the Named Officers is set forth above under
"Executive Compensation".
Approval of the 1998 Plan requires the affirmative vote of the holders
of a majority of the shares of Common Stock present in person or by proxy at
the 1998 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF
THE 1998 STOCK OPTION AND INCENTIVE PLAN.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and persons who own more
than ten percent (10%) of the Company's Common Stock to file initial reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). These reports are also filed with the New York Stock Exchange and a
copy of each report is furnished to the Company.
Additionally, SEC regulations require that the Company identify any
individuals for whom one of the referenced reports was not filed on a timely
basis during the most recent fiscal year. To the Company's knowledge, based
solely on review of reports furnished to it and written representations that no
other reports were required during and with respect to the fiscal year ended
March 31, 1998,1999, each individual who was required to file such reports during
the fiscal year complied with the applicable filing requirements.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, or a predecessor of that
firm, have been the auditors of the accounts of the Company each year since
1958, including the fiscal year ended March 31, 1998.1999. It is anticipated that
representatives of Ernst & Young LLP will be present at the 19981999 Annual
Meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions raised at the 19981999 Annual
Meeting or submitted to them in writing before the 19981999 Annual Meeting.
Ernst & Young LLP has informed15
18
PERFORMANCE GRAPH
The following graph shows a comparison of the five (5) year cumulative
return (assuming reinvestment of any dividends) for the Company, that it does not have any
direct financial interestthe New York
Stock Exchange Index and the Dow Jones Transportation Equipment Index. The
source for the information contained in this table in respect to the return for
the Company and that it has not had any direct
connection with the Company in the capacity of promoter, underwriter, director,
officer or employee.
As is customary, auditors for the current fiscal year will be
appointed byDow Jones Transportation Equipment Index is Dow Jones &
Company, Inc. and, in respect to the Board of Directors at their meeting immediately following the
1998 Annual Meeting upon recommendation of the Audit Committee.New York Stock Exchange Index, is Media
General Financial Services.
[GRAPH]
1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------
Trinity Industries, Inc. 100 100 96 85 157 85
Dow Jones Transportation Equipment Index 100 90 95 113 202 154
New York Stock Exchange Index 100 111 145 169 246 264
OTHER MATTERS
Management of the Company is not aware of other matters to be
presented for action at the 19981999 Annual Meeting; however, if other matters are
presented for action, it is the intention of the persons named in the
accompanying form of proxy to vote in accordance with their judgment on such
matters.
STOCKHOLDER PROPOSALS
Stockholders' proposals to be presented at the 19992000 Annual Meeting of
Stockholders, for inclusion in the Company's Proxy Statement and form of proxy
relating to the meeting, must be received by the Company at its offices in
Dallas, Texas, addressed to the Secretary of the Company, no later than
February 16, 1999.18, 2000. Upon timely receipt of any such proposal, the Company will
determine whether or not to include such proposal in the
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proxy statement and proxy in accordance with applicable regulations and
provisions governing the solicitation of proxies.
Under the Bylaws of the Company, stockholders entitledcertain procedures are provided which
a stockholder must follow to vote in the
election of directors may nominate one or more persons for election as directors only if notice in writingor to
the Secretaryintroduce an item of the Companybusiness at an annual meeting of such
stockholder's intentstockholders. These
procedures provide, generally, that stockholders desiring to make such nomination nominations
for directors, and/or nominations has been delivered
to, or mailed andbring a proper subject of business before the meeting,
must do so by a written notice timely received at, the principal office of the Company not(not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting. Such notice must set forth
(a) as to each person whommeeting) by the stockholder proposes to nominate for election as
a director, (i)Secretary of the Company containing the name
age, business address and residence address of the person, (ii)stockholder, the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the corporation which are
beneficially owned by the person, and (iv) any other information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i)
the name and record address of the stockholder, (ii) the class and number of
shares of capital stock of the Company which are
beneficially owned by the stockholder, (iii)and a descriptionrepresentation that the
stockholder intends to appear in person or by proxy at the meeting. If the
notice relates to a nomination for director, it must also set forth the name
and address of any nominee(s), all arrangements or understandings between suchthe
stockholder and each proposed nominee and any other person or personsperson(s) (including their
names) pursuant to which the nomination(s) are to be made, by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other
information relating to such stockholder thatregarding each nominee as would behave been required to be disclosedincluded
in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directorsfiled pursuant to Section 14the proxy rules of the Securities and
Exchange ActCommission had each nominee been nominated by the Board, and the
rules and regulations
promulgated thereunder.consent of each nominee to serve. The Company may require any proposed nominee
to furnish such other information as may reasonably be required by the Company
to determine the eligibility of such proposed nominee to serve as director.
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No person is eligible for election asNotice of an item of business shall include a directorbrief description of the Company unless
nominatedproposed
business and any material interest of the stockholder in accordancesuch business.
The Chairman of the meeting may refuse to allow the transaction of any
business not presented, or to acknowledge the nomination of any person not
made, in compliance with the procedures set forth inforegoing procedures. Copies of the Bylaws.Company's
Bylaws are available from the Secretary of the Company.
REPORT ON FORM 10-K
Upon written request from any stockholder of record, the Company will
furnish to such stockholder, without charge, its Annual Report on Form 10-K for
the fiscal year ended March 31, 1998,1999, as filed with the Securities and Exchange
Commission, including financial statements. The Company may impose a reasonable
fee for its expenses in connection with providing exhibits referred to in such
Form 10-K if the full text of such exhibits is specifically requested. Requests
should be directed to: Mr. Michael G. Fortado, Vice President, General Counsel
and Corporate Secretary, Trinity Industries, Inc., P. O. Box 568887, Dallas,
Texas 75356-8887.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY TO AVOID UNNECESSARY
EXPENSE. THEREFORE, STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES
OWNED, TO DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED BUSINESS
REPLY ENVELOPE.
By Order of the Board of Directors
MICHAEL G. FORTADO
Vice President, General Counsel
and Corporate Secretary
June 16, 1998
2218, 1999
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ANNEX A
1998 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of Plan. The Trinity Industries, Inc. 1998 Stock
Option and Incentive Plan is intended to enable the Company to remain
competitive and innovative in its ability to attract, motivate, reward and
retain a strong management team of superior capability and to encourage a
proprietary interest in the Company by persons who occupy key positions in the
Company or its Affiliates by enabling the Company to make awards that recognize
the creation of value for the stockholders of the Company and promote the
Company's growth and success. In furtherance of that purpose, eligible persons
may receive stock options, stock appreciation rights, restricted stock,
performance awards, dividend equivalent rights, and other awards, or any
combination thereof.
2. Definitions. Unless the context otherwise requires, the
following terms when used herein shall have the meanings set forth below:
"Affiliate" - Any corporation, partnership or other entity in
which the Company, directly or indirectly, owns a fifty percent (50%)
or greater interest.
"Award" - A stock option, stock appreciation right, restricted
stock, performance award, dividend equivalent right or other award
under this Plan.
"Board" - The Board of Directors of the Company, as the same
may be constituted from time to time.
"Code" - The Internal Revenue Code of 1986, as amended from
time to time.
"Committee" - A committee designated by the Board of Directors
which shall consist of not less than three members of the Board who
shall be appointed by, and shall serve at the pleasure of, the Board.
Unless the Board determines otherwise, the members of the Committee
shall be "non-employee directors" within the meaning of Rule 16b-3 of
the General Rules and Regulations of the Exchange Act, and "outside
directors" within the meaning of Section 162(m) of the Code and the
regulations thereunder.
"Company" - Trinity Industries, Inc., a Delaware corporation.
"Disability" - Permanent and total inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment.
"Dividend equivalent right" - The right of the holder thereof
to receive credits based on the cash dividends that would have been
paid on the Shares specified in the Award if the Shares were held by
the eligible employee to whom the Award is made.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" - The last reported sales price per share
of Shares on the New York Stock Exchange on the date of determination
or, if no sale is made on such date, on the last sale date immediately
preceding the date of determination. If Shares are not listed on such
exchange on that date, the Fair Market Value shall be the highest
reported bid price on the date of determination or, if such bid price
is not available for such date, on the closest preceding date when
such bid price is available.
"Incentive Stock Option" - A stock option meeting the
requirements of Section 422 of the Code or any successor provision.
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26
"Non-qualified Stock Option" - A stock option other than an
incentive stock option.
"Optionee" - A person who has been granted a stock option
under this Plan and who has executed a written stock option agreement
with the Company.
"Plan" - The Plan set forth herein.
"Performance Award" - An Award hereunder of Shares, units or
rights based upon, payable in, or otherwise related to, Shares.
"Retirement" - Termination of employment, other than discharge
for cause, after age 65 or on or before age 65 if pursuant to the
terms of any retirement plan maintained by the Company or any of
Affiliates in which such person participates.
"Share" - A share of the Company's Common Stock, par value
$1.00 per share, and any share or shares of capital stock or other
securities of the Company hereafter issued or issuable upon, in
respect of or in substitution or exchange for each such share.
"Stock Appreciation Right" - The right to receive an amount in
cash or Shares equal to the excess of the Fair Market Value of a Share
on the date of exercise over the Fair Market Value of a Share on the
date of the grant (or other value specified in the agreement granting
the Stock Appreciation Right).
3. Administration of the Plan. The Plan shall be administered by
the Committee. Subject to the provisions of the Plan and directions from the
Board, the Committee is authorized to:
(a) determine the persons to whom Awards are to be
granted;
(b) determine the type of Award to be granted, the number
of Shares to be covered by the Award, the pricing of the Award, the
time or times when the Award shall be granted and may be exercised,
any restrictions on the exercise of the Award, and any restrictions on
Shares acquired pursuant to the exercise of an Award;
(c) conclusively interpret the Plan provisions;
(d) prescribe, amend and rescind rules and regulations
relating to the Plan or make individual decisions as questions arise,
or both;
(e) rely upon employees of the Company for such clerical
and record-keeping duties as may be necessary in connection with the
administration of the Plan; and
(f) make all other determinations and take all other
actions necessary or advisable for the administration of the Plan.
All questions of interpretation and application of the Plan or
pertaining to any question of fact or Award granted hereunder shall be decided
by the Committee, whose decision shall be final, conclusive and binding upon
the Company and each other affected party.
4. Shares Subject to Plan. The maximum number of Shares that may
be issued pursuant to Awards under this Plan shall not exceed 2,000,000 unless
such maximum shall be increased or decreased by reason of changes in
capitalization of the Company as hereinafter provided. Notwithstanding the
foregoing, no more than 600,000 Shares available for Awards shall be issued in
the aggregate as Restricted Stock or in satisfaction of Performance Awards or
Other Awards, subject to adjustment as provided in Section 20 hereof. The
Shares issued pursuant to the Plan may be authorized but unissued Shares, or
may be issued Shares which have been reacquired by the Company.
A-2
27
To the extent that any Award under this Plan or any stock option
granted under any prior stock option plan of the company shall be forfeited,
shall expire or be canceled, in whole or in part, then the number of Shares
covered by the Award or stock option so forfeited, expired or canceled may
again be awarded pursuant to the provisions of this Plan. In the event that
previously acquired Shares are delivered to the Company in full or partial
payment of the exercise price for the exercise of a stock option granted under
this Plan or any prior stock option plan of the Company, the number of Shares
available for future Awards under this Plan shall be reduced only by the net
number of Shares issued upon the exercise of the option. Awards that may be
satisfied either by the issuance of Shares or by cash or other consideration
shall be counted against the maximum number of Shares that may be issued under
this Plan only during the period that the Award is outstanding or to the extent
the Award is ultimately satisfied by the issuance of Shares. Awards will not
reduce the number of Shares that may be issued pursuant to this Plan if the
settlement of the Award will not require the issuance of Shares, as, for
example, a Stock Appreciation Right that can be satisfied only by the payment
of cash.
5. Eligibility. Eligibility for participation in the Plan shall
be confined to a limited number of persons who are employed by the Company, or
one or more of its Affiliates, and who are directors or officers of the Company
or one or more of its Affiliates, or who are in managerial or other key
positions in the company or one or more of its Affiliates, and non-employee
directors of the Company. In making any determination as to persons to whom
Awards shall be granted, the type of Award; and/or the number of Shares to be
covered by the Award, the committee shall consider the position and
responsibilities of the person, his or her importance to the Company and its
Affiliates, the duties of such person, his or her past, present and potential
contributions to the growth and success of the Company and its Affiliates, and
such other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan.
6. Grant of Stock Options. The Committee may grant stock options
to any eligible person. Each person so selected shall be offered an option to
purchase the number of Shares determined by the Committee. The maximum number
of options that may be granted to any one individual during any fiscal year of
the Company shall not exceed 300,000 (subject to adjustment pursuant to Section
20 of this Plan). The Committee shall specify whether such option is an
Incentive Stock Option or Non-qualified Stock Option. Each such person so
selected shall have a reasonable period of time within which to accept or
reject the offered option. Failure to accept within the period so fixed by the
Committee may be treated as a rejection. Each person who accepts an option
shall enter into a written agreement with the Company, in such form as the
Committee may prescribe, setting forth the terms and conditions of the option,
consistent with the provisions of this Plan. The Optionee and the Company
shall enter into separate option agreements for Incentive Stock Options and
Non-qualified Stock Options. At any time and from time to time, the Optionee
and the company may agree to modify an option agreement in order that an
Incentive Stock Option may be converted to a Non-qualified Stock Option. The
Committee may not reprice underwater stock options by canceling and regranting
stock options or by lowering the exercise price except for adjustments pursuant
to Section 20 hereof.
The Committee may require that an Optionee meet certain conditions
before the option or a portion thereto may be exercised, as, for example, that
the Optionee remain in the employ of the company or one of its Affiliates for a
stated period or periods of time before the option, or stated portions thereof,
may be exercised.
7. Option Exercise Price of Stock Options. The option exercise
price of the Shares covered by each stock option shall be determined by the
Committee; provided, however, that the option exercise price shall not be less
than one hundred percent (100%) of the Fair Market Value of Shares on the date
of the grant.
8. Limitations on Grant of Incentive Stock Options.
(a) Incentive Stock Options shall not be granted to a
non-employee director or more than 10 years after the Effective Date of this
Plan, and the aggregate Fair Market Value (determined as of the date of grant)
of the Shares with respect to which any Incentive Stock Option is exercisable
for the first time by an Optionee during any calendar year under the Plan and
all such plans of the Company (as defined in Section 425 of the Code) shall not
exceed $100,000.
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(b) Notwithstanding anything herein to the contrary, in
no event shall any employee owning more than ten percent (10%) of the total
combined voting power of the Company or any Affiliate corporation be granted an
Incentive Stock Option hereunder unless (1) the option exercise price shall be
at least one hundred ten percent (110%) of the Fair Market Value of the Shares
at the time that the option is granted and (2) the term of the option shall not
exceed five (5) years.
(c) In no event shall the Number of Shares issued
pursuant to the exercise of Incentive Stock Options granted hereunder exceed
2,000,000.
9. Term of Stock Options. The term of a stock option shall be
for such period of months or years from the date of its grant as may be
determined by the committee; provided, however, that no stock option shall be
exercisable later than ten (10) years from the date of its grant. Unless
otherwise determined by the Committee, each option shall otherwise be subject
to earlier termination as hereinafter provided:
(a) If the Optionee ceases to be an officer, director, or
employee of the company or any Affiliates by reason of the fact that the
Optionee is discharged for cause, as determined solely and exclusively by the
Committee, all rights of the Optionee to exercise an option shall terminate,
lapse, and be forfeited at the time of the Optionee's discharge for cause.
(b) If the Optionee ceases to be an officer, director, or
employee of the Company or any Affiliate by reason of the Optionee's
resignation, all rights of the Optionee to exercise an option shall terminate,
lapse, and be forfeited ten (10) days after the date of such resignation by the
Optionee; except that in case the Optionee shall die within ten (10) days after
the date of such resignation, the personal representatives, heirs, delegatees,
or distributees of the Optionee, as appropriate, shall have the right up to
twelve (12) months from the date of such resignation to exercise any such
option to the extent that the option was exercisable prior to death and had not
been so exercised.
(c) If the Optionee ceases to be an officer, director, or
employee of the Company or any Affiliate by reason of the Optionee's
retirement, all rights of the Optionee to exercise an option shall terminate,
lapse, and be forfeited (i) in the case of an Incentive Stock Option, three (3)
months after the date of the Optionee's retirement, and (ii) in the case of a
Non-Qualified Stock Option, thirty-six (36) months after the date of the
Optionee's retirement; provided however, if the Optionee shall die during the
applicable period provided under clause (i) or (ii), the personal
representatives, heirs, legatees, or distributees of the Optionee, as
appropriate, shall have the right up to twelve (12) months from the date of
death to exercise any such option to the extent that the option was exercisable
prior to death and had not been so exercised.
(d) If the Optionee ceases to be an officer, director,
or employee of the Company or any Affiliates by reason of the Optionee's
disability, all rights of the Optionee to exercise an option shall terminate,
lapse, and be forfeited three (3) months after the date that the Optionee
ceased, on account of such disability, to be an officer, director, or employee
of the Company or any Affiliates; except that in case the Optionee shall die
within three (3) months after the Optionee ceases to be an officer, director,
or employee by reason of the Optionee's disability, the personal
representatives, heirs, legatees, or distributees of the Optionee, as
appropriate, shall have the right up to twelve (12) months from such cessation
of service to exercise any such option to the extent that the Optionee was
exercisable prior to death and had not been so exercised.
(e) If the Optionee ceases to be an officer, director, or
employee of the company or any Affiliates by reason of death, the personal
representatives, heirs, legatees, or distributees of the Optionee, as
appropriate, shall have the right up to twelve (12) months from the termination
of service to exercise any such option to the extent that the option was
exercisable prior to death and had not been so exercised.
(f) If the Optionee ceases to be an officer, director, or
employee of the company or any Affiliates by reason other than discharge for
cause, resignation, retirement, disability, or death, all rights of the
Optionee to exercise an option shall terminate, lapse and be forfeited three
(3) months after the date that the
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Optionee ceased to be an officer, director, or employee of the Company or an
Affiliate; except that in case the Optionee shall die within three (3) months
thereafter the personal representatives, heirs, legatees, or distributees of
the Optionee, as appropriate, shall have the right up to twelve (12) months
from such cessation of service to exercise any such option to the extent that
the Optionee was exercisable prior to death and had not been so exercised.
(g) Despite the provisions of paragraphs (b), (c), (d),
(e), and (f) of this Section, no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date of its grant.
10. Vesting of Stock Options.
(a) Each stock option granted hereunder may only be
exercised to the extent that the Optionee is vested in such option. Each stock
option shall vest separately in accordance with the option vesting schedule
determined by the Committee, in its sole discretion, which will be incorporated
in the stock option agreement. The option vesting schedule will be accelerated
if, in the sole discretion of the Committee, the Committee determines that
acceleration of the option vesting schedule would be desirable for the Company.
(b) If an Optionee ceases to be an officer, director, or
employee of the Company or any Affiliate by reason of death, disability, or
retirement, the Optionee or the personal representatives, heirs, legatees, or
distributees of the Optionee, as appropriate, shall become fully vested in each
stock option granted to the Optionee and shall have the immediate right to
exercise any such option to the extent not previously exercised.
(c) In the event of a Change in Control (as hereinafter
defined), each stock option granted under the Plan shall become fully vested
and exercisable.
For purposes hereof, a "Change in Control" shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its Affiliates) representing 30%
or more of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i) of paragraph
(III) below; or
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the Effective Date of this Plan, constitute the
Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation,
relating to the election of directors of the company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors on the Effective Date of this Plan or whose
appointment, election or nomination for election was previously so
approved or recommended; or
(III) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any
other corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
(not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates other
than in
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connection with the acquisition by the Company or its Affiliates of a
business) representing 30% or more of the combined voting power of the
company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership
of the Company immediately prior to such sale.
For purposes hereof:
"Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange
Act.
"Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
"Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant
to an offering of such securities or (iv) a
corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the
Company.
(d) Notwithstanding any provision of this Plan, in the
event of a Change in Control in connection with which the holders of
Shares receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding options shall
immediately be exercisable in full and there shall be substituted for
each Share available under this Plan, whether or not then subject to
an outstanding option, the number and class of shares into which each
outstanding Share shall be converted pursuant to such Change in
Control. In the event of any such substitution, the purchase price
per share of each option shall be appropriately adjusted by the
Committee, such adjustments to be made without an increase in the
aggregate purchase price.
(e) Notwithstanding any provision of this Plan, in the
event of a Change in Control in connection with which the holders of
Shares receive consideration other than shares of common stock that
are registered under Section 12 of the Exchange Act, each outstanding
option shall be surrendered to the Company by the holder thereof, and
each such option shall immediately be canceled by the Company, and the
holder shall receive, within ten (10) days of the occurrence of such
Change in Control, a cash payment from the Company in an amount equal
to the number of Shares then subject to such option, multiplied by the
excess, if any, of (i) the greater of (A) the highest per share price
offered to stockholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a Share
on the date of occurrence of the Change in Control over (ii) the
purchase price per Share subject to the option. The Company may, but
is not required to, cooperate with any person who is subject to
Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance
with Section 16 of the Exchange Act and the rules and regulations
thereunder.
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11. Non-transferability of Stock Options. A stock option shall
not be transferable otherwise than by will or the laws of descent and
distribution, and a stock option may be exercised, during the lifetime of the
Optionee, only by the Optionee; provided, however, that with the approval of
the Committee, a Non-qualified Stock Option may be transferred to one or more
members of the immediate family of the Optionee, to a trust for the benefit of
one or more members of the immediate family of the Optionee or to a
partnership, the sole partners of which are the Optionee and members of the
immediate family of the Optionee. Any attempted assignment, transfer, pledge,
hypothecation, or other disposition of a stock option contrary to the
provisions hereof, or the levy of any execution, attachment, or similar process
upon a stock option shall be null and void and without effect.
12. Exercise of Stock Options.
(a) Stock options may be exercised as to Shares only in
minimum quantities and at intervals of time specified in the written option
agreement between the Company and the Optionee. Each exercise of a stock
option, or any part thereof, shall be evidenced by a notice in writing to the
Company. The purchase price of the Shares as to which an option shall be
exercised shall be paid in full at the time of exercise, and may be paid to the
Company either:
(1) in cash (including check, bank draft, or
money order); or
(2) by the delivery of Shares (including
Restricted Stock when and as agreed to by the Company) already owned
by the Optionee for a period of at least 6 months having a Fair Market
Value equal to the aggregate option price;
(3) by a combination of cash and Shares; or
(4) by providing with the notice of exercise an
order to a designated broker to sell part or all of the Shares and to
deliver sufficient proceeds to the Company, in cash or by check
payable to the Company, to pay the full purchase price of the Shares
and all applicable withholding taxes.
(b) If an Optionee delivers Shares already owned by him
or her in full or partial payment of the exercise price for any stock option
granted under this Plan or any prior stock option plan of the Company, the
Committee may authorize the automatic grant of a new option (a "Reload Option")
for that number of Shares as shall equal the number of already owned Shares
surrendered in payment of the option exercise price of the underlying stock
option being exercised. The grant of a Reload Option will become effective
upon the exercise of the underlying stock option. The option exercise price of
the Reload Option shall be the Fair market Value of a Share on the effective
date of the grant of the Reload Option. Each Reload Option shall be
exercisable no earlier than six (6) months from the date of its grant and no
later than the time when the underlying stock option being exercised could be
last exercised. The Committee may also specify additional terms, conditions
and restrictions for the Reload Option and the Shares to be acquired upon the
exercise thereof.
(c) An Optionee shall not have any of the rights of a
stockholder of the Company with respect to the Shares covered by a stock option
except to the extent that one or more certificates of such Shares shall have
been delivered to the Optionee, or the Optionee has been determined to be a
stockholder of record by the Company's Transfer Agent, upon due exercise of the
option.
13. Date of a Stock Option Grant. The granting of a stock option
shall take place only when the Committee approves the granting of such option.
Neither any action taken by the Board nor anything contained in the Plan or in
any resolution adopted or to be adopted by the Board or stockholders of the
Company shall constitute the granting of a stock option under this Plan.
14. Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to any eligible employee, either as a separate Award or in
connection with a stock option. Stock Appreciation Rights shall be subject to
such terms and conditions as the Committee shall impose. The grant of the
Stock Appreciation Right
A-7
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may provide that the holder may be paid for the value of the Stock Appreciation
Right either in cash or in Shares, or a combination thereof. In the event of
the exercise of a Stock Appreciation Right payable in Shares, the holder of the
Stock Appreciation Right shall receive that number of whole Shares of stock of
the company having an aggregate Fair Market Value on the date of exercise equal
to the value obtained by multiplying (i) the difference between the Fair Market
Value of a Share on the date of exercise over the Fair Market Value on the date
of the grant (or other value specified in the agreement granting the Stock
Appreciation Right) by (ii) the number of Shares as to which the Stock
Appreciation Right is exercised. If a Stock Appreciation Right is granted in
tandem with a stock option, there shall be surrendered and canceled from the
option at the time of exercise of the Stock Appreciation Right, in lieu of
exercise under the option, that number of Shares as shall equal the number of
shares as to which the Stock Appreciation Right shall have been exercised.
However, notwithstanding the foregoing, the Committee, in its sole discretion,
may place a ceiling on the amount payable upon exercise of a Stock Appreciation
Right, but any such limitation shall be specified at the time that the Stock
Appreciation Right is granted. Notwithstanding the foregoing, the maximum
number of Shares for which grants of Stock Appreciation Rights may be made to
an individual in any fiscal year of the Company shall not exceed 300,000
(subject to adjustment pursuant to Section 20 of this Plan), and the exercise
price of any Stock Appreciation Right shall in no event be less than the Fair
Market Value of the Shares at the time of the grant.
15. Restricted Stock.
(a) The Committee may grant Awards of restricted stock to
any eligible employee, for no cash consideration, for such minimum
consideration as may be required by applicable law, or for such other
consideration as may be specified by the grant. The terms and conditions of
restricted stock shall be specified by the grant. The committee, in its sole
discretion, shall determine what rights, if any, the person to whom an Award of
restricted stock is made shall have in the restricted stock during the
restriction period and the restrictions applicable to the particular Award,
including whether the holder of the restricted stock shall have the right to
vote the Shares and receive all dividends and other distributions applicable to
the Shares. The Committee shall determine when the restrictions shall lapse or
expire and the conditions, if any, under which the restricted stock will be
forfeited or sold back to the Company. Each Award of restricted stock may have
different restrictions and conditions. The Committee, in its discretion, may
prospectively change the restriction period and the restrictions applicable to
any particular Award of restricted stock. Restricted stock may not be disposed
of by the recipient until the restrictions specified in the Award expire.
(b) Any restricted stock issued hereunder may be
evidenced in such manner as the Committee, in its sole discretion, shall deem
appropriate, including, without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any stock certificate is
issued in respect of Shares of restricted stock awarded hereunder, such
certificate shall bear an appropriate legend with respect of the restrictions
applicable to such Award. The company may retain, at its option, the physical
custody of the restricted stock during the restriction period or require that
the restricted stock be placed in an escrow or trust, along with a stock power
endorsed in blank, until all restrictions are removed or expire.
(c) The following provisions shall apply to any
performance-based awards of Restricted Stock made under this Plan to any
Executive Officer of the Company:
(i) the performance criteria upon which vesting of the
Restricted Stock is contingent shall be such objective performance
goals as the Committee shall establish in writing prior to the
expiration of 90 days after the commencement of the performance period
to which the performance goal or goals relate and while the outcome is
substantially uncertain, and shall be based on total shareholder
return, total shareholder return compared to a group of peer companies
specified by the Committee, earnings per share, or operating income
before federal income taxes; and
(ii) the maximum number of Shares that may be awarded to
any Executive Officer with respect to all performance periods
beginning in a calendar year shall not exceed 50,000 (subject to
adjustment pursuant to Section 20 hereof).
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(d) Holders of Restricted Stock may elect to satisfy any
federal, state or local tax withholding obligation which is due in connection
with the removal of restrictions on the Shares either (i) in cash or (ii) by
the retention by the Company of a number of Shares of the Restricted Stock on
which the restrictions are being lifted having a Fair Market Value equal to the
amount to be withheld. The Committee shall determine, from time to time, the
amount to be withheld and the time and manner in which a holder of Restricted
Stock may elect to satisfy such withholding obligation. Such amount shall be
not less than the minimum withholding obligation of the Company and not more
than the amount determined by application of the maximum in effect for
withdrawals under applicable federal, state or local tax law.
16. Performance Awards.
(a) The Committee may grant Performance Awards to any
eligible employee, for no cash consideration, for such minimum consideration as
may be required by applicable law, or for such other consideration as may be
specified at the time of the grant. The terms and conditions of Performance
Awards shall be specified at the time of the grant and may include provisions
establishing the performance period, the performance criteria to be achieved
during a performance period, and the maximum or minimum settlement values.
Each Performance Award shall have its own terms and conditions. If the
Committee determines, in its sole discretion, that the established performance
measures or objectives are no longer suitable because of a change in the
Company's business, operations, corporate structure, or for other reasons that
the Committee deemed satisfactory, the committee may modify the performance
measures or objectives and/or the performance period.
(b) Performance Awards may be valued by reference to the
Fair Market Value of a Share or according to any formula or method deemed
appropriate by the Committee, in its sole discretion, including, but not
limited to, achievement of specific financial, production, sales or cost
performance objectives that the committee believes to be relevant to the
Company's business and/or remaining in the employ of the company for a
specified period of time. Performance Awards may be paid in cash, Shares, or
other consideration, or any combination thereof. If payable in Shares, the
consideration for the issuance of the Shares may be the achievement of the
performance objective established at the time of the grant of the Performance
Award. Performance Awards may be payable in a single payment or in
installments and may be payable at a specified date or dates or upon attaining
the performance objective. The extent to which any applicable performance
objective has been achieved shall be conclusively determined by the committee.
(c) The following provisions shall apply to any
Performance Awards made under this Plan to any Executive Officer of the
Company:
(i) the performance criteria upon which realization of a
Performance Award is contingent shall be such objective performance goals as
the Committee shall establish in writing prior to the expiration of 90 days
after the commencement of the performance period to which the performance goal
or goals relate and while the outcome is substantially uncertain, and shall be
based on operating profit, income before federal income tax, earnings per
share, gross revenues, return on investment, or total shareholder return; and
(ii) if paid in Shares, the maximum number of Shares that
may be awarded to any Executive Officer with respect to all performance periods
beginning in a calendar year shall not exceed 300,000 (subject to adjustment
pursuant to Section 20 hereof ) and if paid in cash the maximum amount payable
with respect to all performance periods beginning in a fiscal year shall not
exceed $1,000,000.
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17. Dividend Equivalent Rights.
(a) The Committee may grant a Dividend Equivalent Right
to any eligible employee, either as a component of another Award or as a
separate Award. The terms and conditions of the Dividend Equivalent Right shall
be specified by the grant. Dividend equivalents credited to the holder of a
Dividend Equivalent Right may be paid currently or may be deemed to be
reinvested in additional Shares (which may thereafter accrue additional
dividend equivalents). Any such reinvestment shall be at the Fair Market Value
at the time thereof. Dividend Equivalent Rights may be settled in cash or
Shares, or a combination thereof, in a single payment or in installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other Award, and that such
Dividend Equivalent Right granted as a component of another Award may also
contain terms and conditions different from such other Award.
(b) Any Award under this Plan that is settled in whole or
in part in cash on a deferred basis may provide for interest equivalents to be
credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be specified
by the grant.
18. Other Awards. The Committee may grant to any eligible
employee other forms of Awards based upon, payable in, or otherwise related to,
in whole or in part, Shares if the Committee determines that such other form of
Award is consistent with the purpose and restrictions of this Program. The
terms and conditions of such other form of Award shall be specified by the
grant. Such Awards may be granted for no cash consideration, for such minimum
consideration as may be required by applicable law, or for such other
consideration as may be specified by the grant.
19. Compliance with Securities and Other Laws. In no event shall
the company be required to sell or issue Shares under any Award if the sale or
issuance thereof would constitute a violation of applicable federal or state
securities law or regulation or a violation of any other law or regulation of
any governmental authority or any national securities exchange. As a condition
to any sale or issuance of Shares, the Company may pledge legends on Shares,
issue stop transfer orders, and require such agreements or undertakings as the
Company may deem necessary or advisable to assure compliance with any such law
or regulation, including, if the Company or its counsel deems it appropriate,
representations from the person to whom an Award is granted that he or she is
acquiring the Shares solely for investment and not with a view to distribution
and that no distribution of the Shares will be made unless registered pursuant
to applicable federal and state securities laws, or in the opinion of counsel
of the Company, such registration is unnecessary.
20. Adjustments Upon Changes in Capitalization. The value of an
Award in Shares shall be adjusted from time to time as follows:
(a) Subject to any required action by stockholders, the
number of Shares held in reserve for the Plan, the number of Shares subject to
Options or Stock Appreciation Rights that may be granted to any individual in
any calendar year, the number of Shares of Restricted Stock that may be awarded
to an Executive Officer with respect to all performance periods beginning in
any calendar year, the aggregate number that may be awarded under the Plan of
Shares of Restricted Stock and Shares that may be paid in satisfaction of a
Performance Award or Other Award, the maximum number of Shares that may be paid
in satisfaction of a Performance Award with respect to all performance periods
beginning in a calendar year, the number of Shares covered by each outstanding
Award, and the exercise price, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of the Company resulting
from a subdivision or consolidation of Shares or the payment of a stock
dividend (but only on Shares) or any other increase or decrease in the number
of Shares effected without receipt of consideration by the Company.
(b) Subject to any required action by stockholders, if
the Company shall be the surviving corporation in any merger or consolidation,
each outstanding option shall pertain to and apply to the securities to which a
holder of the number of Shares subject to the option would have been entitled.
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(c) In the event of a change in the Shares of the Company
as presently constituted, which is limited to a change of par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Shares within
the meaning of this Plan.
(d) In the event of a distribution by this Company of
shares of stock in another corporation the aggregate number of shares covered
by each outstanding option, and the option exercise price of a share under each
outstanding option, may be equitably adjusted by the Board of Directors, in its
sole discretion, for any increase or decrease in the value of the outstanding
shares of this Company resulting from such distribution by this Company of
shares of stock in another corporation.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board, whose
determination shall be final, binding, and conclusive.
Except as hereinbefore expressly provided in this Plan, any person to
whom an Award is granted shall have no rights by reason of any subdivision or
consolidation of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, reorganization, merger, or
consolidation or spin-off of assets or stock of another corporation, and any
issue by the company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect, and no adjustment by
reason thereof shall be made without respect to the number or exercise price of
Shares subject to an Award.
The grant of an Award pursuant to this Plan shall not affect in any
way the right or power of the company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merger
or to consolidate or to dissolve, liquidate, or sell or transfer all or any
part of its business or assets.
21. Effective Date. The Plan shall be effective as of July 17,
1998; provided, however, that if the Plan is not approved by the holders of a
majority of the Shares of the Company represented and voting at the next Annual
Meeting of Stockholders after such date, this Plan and all Awards granted
hereunder shall be void.
22. Amendment of the Plan. All provisions of the Plan (including
any Award made under the Plan) may at any time or from time to time be modified
or amended by the Board; provided, however, (i) no Award at any time
outstanding under the Plan may be modified, impaired, or canceled adversely to
the holder of the Award without the consent of such holder, and (ii) the Plan
may not be amended without approval by the holders of a majority of the Shares
of the Company (a) to increase the maximum number of Shares subject to the
Plan, (b) to change the class of persons eligible to receive Incentive Stock
Options, or (c) if such approval is necessary to comply with applicable law,
regulation, or listing requirement, or to qualify for an exemption or
characterization that is deemed desirable by the Board.
23. Termination of Plan. The Board may terminate the Plan at any
time. However, termination of the Plan shall not affect any Award previously
granted hereunder and the rights of the holder of the Award shall remain in
effect until the Award has been exercised in its entirety or has expired or
otherwise has been terminated.
24. No Employment Rights. Nothing in the Plan or in any Award
shall confer upon any recipient of an Award any right to remain in the employ
of the Company or one of its Affiliates, and nothing herein shall be construed
in any manner to interfere in any way with the right of the Company or its
Affiliates to terminate such recipient's employment or directorship at any
time.
25. Tax Withholding and 83(b) Election.
(a) The amount, as determined by the Committee, of any
federal, state, or local tax required to be withheld by the Company due to the
grant or exercise of an Award shall be satisfied, at the election of the
recipient of the Award, but subject to the consent of the Committee, either (a)
by payment by the recipient to the Company of the amount of such withholding
obligation in cash (the "Cash Method"), or (b) through the
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36
retention by the Company of a number of Shares out of the Shares being acquired
through the grant or exercise of any Award having a Fair Market Value equal to
the amount of the withholding obligation (the "Share Retention Method"). The
cash payment or the amount equal to the Fair Market Value of the Shares so
withheld, as the case may be, shall be remitted by the Company to the
appropriate taxing authorities. The Committee shall determine the time and
manner in which the recipient may elect to satisfy a withholding obligation by
either the Cash Method or the Share Retention Method.
(b) Unless otherwise expressly provided in the Award, if
a holder is transferred an Award subject to a "substantial risk of forfeiture"
as defined in Section 83 of the Code and related regulations, then such holder
may elect under Section 83(b) of the Code to include in his gross income, for
his taxable year in which the Award is transferred to such holder, the excess
of the Fair Market Value (determined without regard to any restriction other
than one which by its terms will never lapse), of such Award at the date of
grant, over the amount (if anything) paid for such Award. If the Holder makes
the Section 83(b) election described above, the Holder shall (i) make such
election in a manner that is satisfactory to the Committee, (ii) provide the
Committee with a copy of such election, (iii) agree to promptly notify the
Company if any Internal Revenue Service or state tax agent, on audit or
otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to such
federal and state income withholding as the Committee may reasonably require in
its sole and absolute discretion.
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37
TRINITY INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - JULY 17, 199821, 1999
The undersigned hereby appoints W. RayTimothy R. Wallace, Dean P. Guerin and
Michael G. Fortado and each of them with full power of substitution, attorneys,
agents and proxies of the undersigned to vote as directed below the shares of
stock which the undersigned would be entitled to vote, if personally present,
at the Annual Meeting of Stockholders of Trinity Industries, Inc. to be held at
its offices, 2525 Stemmons Freeway, Dallas, Texas 75207, on Friday,Wednesday, July 17, 199821,
1999 at 9:30 a.m. Central Daylight Saving Time, and at any adjournment or
adjournments thereof. If more than one of the above attorneys shall be present
in person or by substitution at such meeting or at any adjournment thereof, the
majority of said attorneys so present and voting, either in person or by
substitution, shall exercise all of the powers hereby given. The undersigned
hereby revokes any proxy or proxies heretofore given to vote upon or act with
respect to such shares of stock and hereby ratifies and confirms all that said
attorneys, their substitutes, or any of them, may lawfully do by virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE ABOVE NAMED NOMINEES FOR DIRECTOR AND FOR THE APPROVAL OF THE
COMPANY'S 1998 STOCK OPTION AND INCENTIVE PLAN.DIRECTOR.
(Continued and to be marked, dated and signed on reverse side)
TRINITY INDUSTRIES, INC.
P.O. BOX 11369
NEW YORK, N.Y. 10203-0369
3821
(1) Election of ten (10)nine (9) Directors:
FOR all nomineesALL NOMINEES [ ] WITHHOLD AUTHORITY to vote [ ] EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: John L. Adams, David W. Biegler, Barry J. Galt, Clifford J. Grum, Dean P. Guerin,
Jess T. Hay, Edmund M. Hoffman, Diana S. Natalicio, Timothy R. Wallace and W.
Ray Wallace.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME.)
(2) Approval of the Company's 1998 (3) In their discretion on
Stock Option and Incentive Plan. such other matters as may properly come before the
meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
CHANGE OF ADDRESS AND
OR COMMENTS MARK HEREChange of Address and or Comments
Mark Here [ ]
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THE PROXY. IF YOUR
STOCK IS JOINTLY OWNED, BOTH
PARTIES MUST SIGN. FIDUCIARIES AND
REPRESENTATIVES SHOULD SO INDICATE
WHEN SIGNING, AND WHEN MORE THAN
ONE IS NAMED, A MAJORITY SHOULD
SIGN. IF SIGNED BY A CORPORATION,
ITS SEAL SHOULD BE AFFIXED.
DATED:
------------------------
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----------------------------------
SIGNATURE
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SIGNATURE
VOTES MUST BE INDICATED [ ]
(x) in Black or Blue ink.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.