<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
DRESSER INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(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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<PAGE>
DRESSER INDUSTRIES, INC.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 19, 1998
---------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Dresser Industries, Inc., a Delaware
corporation, will be held at the Horchow Auditorium of the Dallas Museum of Art,
1717 North Harwood Street, Dallas, Texas 75201 on Thursday, March 19, 1998, at
10:00 a.m., for the following purposes:
1. To elect nine Directors to serve for the ensuing year or until their
successors are elected and qualified.
2. To consider and approve the Dresser Industries, Inc. Long-Term Incentive
and Retention Plan.
3. To consider and approve the Dresser Industries, Inc. 1998 Executive
Incentive Compensation Plan.
4. To transact any other business as properly may come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business January 26, 1998, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
We hope you will be represented at the meeting by signing and returning the
enclosed proxy card in the accompanying envelope as promptly as possible,
whether or not you expect to be present in person. Your vote is important -- as
is the vote of every shareholder -- and the Board of Directors of the Company
appreciates the cooperation of shareholders in directing proxies to vote at the
meeting.
By order of the Board of Directors
REBECCA R. MORRIS
VICE PRESIDENT -- CORPORATE COUNSEL
AND SECRETARY
February 10, 1998
<PAGE>
DRESSER INDUSTRIES, INC.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
FEBRUARY 10, 1998
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited on behalf of the Board of Directors of
Dresser Industries, Inc. (the "Company"), for use at the Annual Meeting of
Shareholders to be held Thursday, March 19, 1998, at 10:00 a.m. at the Horchow
Auditorium of the Dallas Museum of Art, 1717 North Harwood Street, Dallas, Texas
75201 and at any and all adjournments of the meeting.
OUTSTANDING SHARES AND VOTING RIGHTS
The close of business January 26, 1998, is the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
At January 26, 1998, the Company had outstanding and entitled to vote at the
meeting 175,459,086 shares of Common Stock. Each share entitles the holder to
one vote.
Any shareholder giving a proxy for the meeting may revoke it prior to the
voting thereof on any matter (without affecting, however, any vote taken prior
to revocation) by written notice to the Secretary of the Company.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Except for the following named institutional investment managers, the
Company knows of no person or group believed to own beneficially more than 5% of
any class of the Company's stock entitled to be voted at this meeting.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF OWNERSHIP OF CLASS
- --------------------------------------------------------------- ------------------ -----------
<S> <C> <C>
FMR Corp. 25,772,422 (1) 14.60%
82 Devonshire Street
Boston, Massachusetts 02109
Barrow Hanley Mewhinney & Strauss, Inc. 14,641,300 (2) 8.33%
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204-2429
Vanguard/Windsor II Funds, Inc. 10,009,800 (3) 5.70%
P.O. Box 2600
Valley Forge, Pennsylvania 19482-2600
</TABLE>
- ------------------------
(1) Information obtained from Amendment No. 2 to the joint statement on Schedule
13G as of February 14, 1997 filed with the Securities and Exchange
Commission by FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson, and
Fidelity Management & Research Company. Includes 24,377,297 shares of which
Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp., is the beneficial owner as a result of acting as
investment adviser to various investment companies registered under Section
8 of the Investment Company Act of 1940 (the "Funds"). Edward C. Johnson 3d,
Chairman of FMR Corp., and FMR Corp., through its control of Fidelity, and
the Funds each has sole power to dispose of such shares. Neither FMR Corp.
nor Mr. Johnson, has the sole power to vote or direct the voting of such
shares, which power resides with the Funds' Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established by
the Funds' Boards of Trustees. Also includes 1,391,426 shares of which
Fidelity Management Trust Company ("FMTC"), a wholly owned subsidiary of FMR
Corp., is the beneficial owner as a result of serving as investment manager
of institutional account(s). Mr. Johnson and FMR Corp., through its control
of FMTC, has sole dispositive power over such shares and sole power to vote
or direct the voting of 1,001,926 of such shares, and no power to vote or
direct the voting of 389,500 of such shares.
2
<PAGE>
(2) Information obtained from Amendment No. 1 to the statement on Schedule 13G
as of February 13, 1997 filed with the Securities and Exchange Commission by
Barrow Hanley Mewhinney & Strauss, Inc. ("BHMS"). BHMS has sole power to
dispose of all such shares, sole power to vote or direct the voting of
2,648,400 of such shares and shared power to vote or direct the voting of
11,992,900 of such shares.
(3) Information obtained from the statement on Schedule 13G as of February 7,
1997 filed with the Securities and Exchange Commission by Vanguard/Windsor
II Fund ("VWII"). VWII has sole power to vote and shared power to direct or
dispose of all such shares.
The following table states the number of shares of Common Stock of the
Company owned by each current Director and nominee, each of the executive
officers named in the Summary Compensation Table, and by all Directors and
executive officers as a group as of January 7, 1998. The number of shares
beneficially owned by all Directors and executive officers as a group
represented less than 1% of the outstanding shares. Except as otherwise
indicated, each individual named has sole investment and voting power with
respect to the securities shown.
<TABLE>
<CAPTION>
NAMES NUMBER OF SHARES
- ----------------------------------------------------------------- --------------------------------
<S> <C> <C>
William E. Bradford.............................................. 363,999 (Note A)
Samuel B. Casey, Jr. ............................................ 1,726
Lawrence S. Eagleburger.......................................... 2,377
Sylvia A. Earle.................................................. 2,196
Rawles Fulgham................................................... 19,905
John A. Gavin.................................................... 11,300
Ray L. Hunt...................................................... 121,320 (Note B)
George H. Juetten................................................ 55,236 (Note A)
J. Landis Martin................................................. 91,948
Lionel H. Olmer.................................................. 8,905
Jay A. Precourt.................................................. 5,529
A. Jack Stanley.................................................. 60,000 (Note A)
G. Phillip Tevis................................................. 44,997 (Note A)
Donald C. Vaughn................................................. 134,550 (Note A)
Richard W. Vieser................................................ 16,922
All Directors, Nominees and executive officers as a group (25
persons)........................................................ 1,440,139 (Notes A and C)
</TABLE>
3
<PAGE>
The above information does not include contingent stock units credited to
accounts in the Company's Deferred Compensation Plan which are considered
beneficially owned "derivative securities" for purposes of Section 16 of the
Securities Exchange Act of 1934 but not considered beneficially owned for
purposes of this proxy statement. At January 15, 1998, a total of 93,374,
55,109, 16,772 and 14,408 stock units were credited to the accounts of Messrs.
Bradford, Vaughn, Juetten and Tevis, respectively, and 272,054 stock units were
credited to the accounts of all executive officers as a group. Also excluded
from the above are 4,977, 4,624, 36,871, 5,266, 502, 3,465 and 14,697 stock
equivalent units which were credited to the accounts of Messrs. Eagleburger,
Gavin, Hunt, Martin, Olmer, Precourt and Vieser, respectively, as of January 2,
1998 under the Company's Deferred Compensation Plan for Non-Employee Directors
which are not considered beneficially owned for purposes of this Proxy Statement
but are considered beneficially owned "derivative securities" for purposes of
Section 16 of the Securities Exchange Act of 1934.
NOTE A: Shares shown include stock options issued under the Company's 1982
Stock Option Plan and 1992 Stock Compensation Plan which are exercisable on or
within sixty days after January 7, 1998 to purchase a number of shares of the
Company's Common Stock which together with related Restricted Incentive Stock
Awards under the 1989 Restricted Incentive Stock Plan and 1992 Stock
Compensation Plan total 198,533, 98,000, 12,398 and 19,997 for Messrs. Bradford,
Vaughn, Juetten and Tevis, respectively, and 542,400 for all Directors and
executive officers as a group. Under the Rules of the Securities and Exchange
Commission, such shares are considered to be beneficially owned for purposes of
this Proxy Statement. For the purpose of calculating percentage ownership, such
shares were also considered to be outstanding.
NOTE B: Shares shown include 51,518 shares, in which Mr. Hunt disclaims
beneficial interest, owned by trusts for the benefit of his children. Mr. Hunt
and/or his wife serve as members of an advisory board or trustee for each trust.
NOTE C: Mr. Paul M. Bryant, Vice President -- Human Resources of the
Company, is Trustee of the Company's Stock Purchase Plan which, as of January
26, 1998, owned of record 780,662 shares of Common Stock of the Company. Mr.
Bryant disclaims any beneficial ownership of the shares held by him as Trustee
for the participants of the Stock Purchase Plan. Under terms of the Plan, the
Trustee has discretionary voting authority as to shares allocated to accounts of
Participants from whom he does not timely receive voting instructions.
ELECTION OF DIRECTORS
At the meeting, nine Directors are to be elected, each to hold office for
one year or until a successor is elected and qualified. Unless otherwise
instructed, it is intended that the shares represented by the enclosed proxy
will be voted for the election of the nine nominees named below.
4
<PAGE>
All nominees were previously elected by the shareholders. Under the Board's
retirement policy for Directors, Messrs. Samuel B. Casey, Jr., Rawles Fulgham,
and Richard W. Vieser, who recently became 70 years of age, will not stand for
re-election as Directors of the Company. Accordingly, the Company's By-Laws have
been amended, effective with the election of Directors at the Annual Meeting of
Shareholders, to reduce the number of members of the Board from twelve to nine.
The Board of Directors has no reason to believe that any nominee will be unable
to serve if elected. In the event that any nominee shall become unavailable for
election, it is intended that such shares will be voted for the election of a
substitute nominee selected by the persons named in the enclosed proxy unless
the Board should determine to reduce the number of Directors pursuant to the
By-Laws of the Company.
The nine nominees for Director receiving the affirmative vote of a plurality
of the shares present in person or represented by proxy at the meeting and
entitled to vote will be elected. Votes will be tabulated by inspectors of
election appointed by the Company's Board of Directors. Except for quorum
purposes, abstentions and votes withheld will have no legal effect.
The following includes certain information concerning the nominees furnished
by them to the Company.
<TABLE>
<CAPTION>
YEAR FIRST
BUSINESS EXPERIENCE DURING PAST ELECTED
NAME (AGE) 5 YEARS AND OTHER INFORMATION DIRECTOR
- --------------------------------- ------------------------------------------------------------- -----------
<S> <C> <C>
William E. Bradford (63) Chairman of the Board of the Company since December 1996 and 1992
Chief Executive Officer since November 1995, President March
1992 - December 1996, Chief Operating Officer, March 1992 -
November 1995; President and Chief Executive Officer of
Dresser-Rand Company, Corning, New York, 51% joint venture
partnership, February 1988 - March 1992; Senior Vice
President - Operations of the Company, March 1984 - March
1992; Director, Ultramar Diamond Shamrock Corporation; and
Oryx Energy Company.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
Lawrence S. Eagleburger (67) Senior Foreign Policy Advisor, Baker, Donelson, Bearman & 1993
Caldwell, Washington, D.C., law firm, since January 1993;
United States Secretary of State, Department of State,
December 1992 - January 1993, Acting Secretary of State,
August 1992 - December 1992, Deputy Secretary of State,
February 1989 - August 1992; Director, Phillips Petroleum
Company; Stimsonite; Universal Corporation; Corning Corp.;
and COMSAT.
Sylvia A. Earle, Ph.D. (62) Explorer in Residence, National Geographic Society, 1995
Washington D.C., since January, 1998; Consultant to Sea Web,
a non-profit communications organization since July, 1997;
Founder, Deep Ocean Engineering, Inc., San Leandro,
California, designer and manufacturer of underwater equipment
and Director 1994 - 1997; Founder and Chairman since 1994,
President 1992 - 1994, Deep Ocean Exploration and Research,
Inc., Oakland, California, a consulting firm; Chief
Scientist, National Oceanic and Atmospheric Administration,
1990 - 1992, Advisor to the Administrator, 1992 - 1993;
Director, Oryx Energy Company.
John A. Gavin (66) For more than five years, Chairman of the Board, President, 1986
and Chief Executive Officer, Gamma Services International,
Los Angeles, California, venture capital and international
consulting firm; Managing Director (Latin America), Hicks,
Muse, Tate & Furst, a private investment firm since 1995;
Director, Atlantic Richfield Company; Pinkerton's, Inc.;
Krause's Furniture Co.; Apex Mortgage Capital, Inc.;
International Wire Holdings; Hotchkis and Wiley, Mutual
Funds; and Kap Resources (Canadian).
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
Ray L. Hunt (54) For more than five years, Chairman of the Board and Chief 1984
Executive Officer, Hunt Oil Company, Dallas, Texas, oil and
gas exploration and development; Chairman of the Board, Chief
Executive Officer, and President, Hunt Consolidated, Inc.,
Dallas, Texas; Chairman of the Board, Chief Executive Officer
and President, RRH Corporation, Dallas, Texas; Director,
Electronic Data Systems Corporation; PepsiCo, Inc.; Ergo
Science Incorporated; Security Capital Group Incorporated;
and Federal Reserve Bank of Dallas.
J. Landis Martin (52) For more than five years, President and Chief Executive 1994
Officer of NL Industries, Inc., Houston, Texas, a
manufacturer and marketer of titanium dioxide pigments;
Chairman of the Board and Chief Executive Officer of Baroid
Corporation (and its predecessor), Houston, Texas, acquired
by the Company effective January 21, 1994, August 1990 -
January 1994; for more than five years Chairman of Titanium
Metals Corporation, Denver, Colorado, an integrated producer
of titanium metals, Chief Executive Officer since January
1995; Director, NL Industries, Inc.; Titanium Metals
Corporation; Tremont Corporation; and Apartment Investment
and Management Corporation (a real estate investment trust).
Lionel H. Olmer (63) For more than five years, partner, Paul, Weiss, Rifkind, 1986
Wharton & Garrison, law firm, Washington, D.C.; Director,
SIPEX Corp.
Jay A. Precourt (60) For more than five years, Vice Chairman and Chief Executive 1994
Officer, and, since October 1996, President of Tejas Gas
Corporation, Houston, Texas, a natural gas pipeline company;
Director, Coral Energy, L.P.; Founders Funds, Inc.; Tejas Gas
Corporation; and the Timken Company.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Donald C. Vaughn (61) President and Chief Operating Officer of the Company since 1996
December 1996, Executive Vice President November 1995 -
December 1996, Senior Vice President - Operations January
1992 - November 1995; Chairman, President and Chief Executive
Officer of M. W. Kellogg, Inc. June 1995 - June 1996;
Chairman and Chief Executive Officer of The M.W. Kellogg
Company September 1986 - June 1996, President November 1983 -
June 1995; Director, The Houston Exploration Company.
</TABLE>
ADDITIONAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
The Company has standing Audit and Finance, Executive Compensation,
Executive and Board Policy and Nominating Committees of the Board of Directors.
The Audit and Finance Committee consists of Messrs. Casey (Chairman),
Eagleburger, Gavin, Martin and Dr. Earle. The functions of the Committee, which
held two meetings during fiscal 1997, are to recommend to the Board of Directors
independent accountants, whose duty it is to audit the books and accounts of the
Company and its subsidiaries for the fiscal year for which they are appointed,
review and approve the extent and scope of the annual audit activities of the
independent accountants and the Company's internal accountants and evaluate
financial planning as requested.
The Executive Compensation Committee is composed of Messrs. Fulgham
(Chairman), Hunt, Olmer, Precourt and Vieser. The Committee, which held five
meetings during fiscal 1997, and acted on two occasions by written consent,
reviews and recommends to the Board salaries of officers, reviews the key
employees of the Company and recommends to the Board those to be granted options
and related Restricted Incentive Stock Awards under the Company's 1992 Stock
Compensation Plans and administers the Company's incentive compensation plans,
the Deferred Compensation Plan, the Stock Option and Stock Compensation Plans
and the Restricted Incentive Stock Plans.
The Executive Committee, consisting of Messrs. Bradford (Chairman), Fulgham,
Hunt and Vaughn, exercises, during the intervals between meetings of the Board
of Directors, all powers, except to the extent limited by law, of the Board of
Directors. The Executive Committee held one meeting during fiscal 1997.
The Board Policy and Nominating Committee, consisting of Messrs. Hunt
(Chairman), Casey, Fulgham, Gavin, and Vieser, searches for and recommends
candidates for election as Director. It will also consider nominees recommended
by shareholders for election as Director. Any such recommendation, together with
the nominee's qualifications and consent to be considered as a nominee, should
8
<PAGE>
be sent to the Secretary of the Company. This committee also reviews and makes
recommendations regarding Board policy and corporate governance matters. The
Board Policy and Nominating Committee held three meetings during fiscal 1997.
During fiscal 1997, there were seven meetings of the Board of Directors.
Each member of the Board of Directors attended 75% or more of the aggregate
number of the meetings of the Board and of any Committee of which he or she is a
member. A Director who is an employee of the Company receives no fees or
remuneration, as such, for services as a member of the Board of Directors or any
Committee of the Board. During fiscal 1997, each Director of the Company who was
not an employee received an annual retainer equal to $31,000 for Board
membership, $2,500 for each Committee membership, $1,000 for service as Chairman
of a Committee and $1,250 for each day on which one or more meetings of the
Board of Directors or any Committee thereof was attended. A fee of $350 was paid
for meetings attended by telephone conference. In addition, each non-employee
Director may be paid a fee of $1,000 for each day engaged in Company business,
other than attendance at meetings of the Board of Directors or any Committee
thereof, at the request of the Chairman of the Board. Directors may elect to
defer payment of all or a portion of the foregoing fees through a deferred cash
or common stock equivalent account. During fiscal 1997 Mr. Gavin was paid
$10,000 quarterly under an agreement pursuant to which he served as chair of the
Dresser Industries de Mexico Advisory Board. The agreement has been extended
through January 31, 1998.
In addition, the Company's 1989 Director Retirement Plan provided shares of
the Company's Common Stock in lieu of retirement benefits to members of the
Company's Board of Directors who are not also employees. Awards under the Plan
consist of grants of shares of the Company's Common Stock in August of each
odd-numbered year approximately equal in value to 60% of the annual retainer
payable for services as a Director during the period for which the award is
made. Directors may elect to defer awards otherwise payable under the Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's acquisition of Baroid Corporation in 1994,
Mr. Martin received $1,290,000 from Baroid under an advisory agreement among
Baroid, Mr. Martin and other Baroid executives, for services in connection with
the merger. If any amount paid to Mr. Martin under the advisory agreement
subjects him to federal excise tax in respect of such amount, Baroid has agreed
to provide a commercially reasonable defense to Mr. Martin and to indemnify him
for up to 70% of the excise tax, interest and penalties, plus any federal income
or excise taxes imposed because of the indemnification.
9
<PAGE>
Baroid has outstanding approximately $6.1 million and $9.1 million in
letters of credit under a bank facility which was established in connection with
certain insurance relationships of NL Industries, Inc. ("NL"), of which Mr.
Martin is a director and executive officer, and Tremont Corporation ("Tremont"),
of which Mr. Martin is a director, respectively. NL and Tremont are obligated to
indemnify Dresser for any losses or expenses in respect of these letters of
credit.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee of the Company is composed of Messrs.
Fulgham (Chairman), Hunt, Olmer, Precourt and Vieser. Business entities in which
Mr. Hunt and certain members of his immediate family own substantial interests
have in the past fiscal year made purchases from the Company in the ordinary
course of business and on the same basis as transactions with other customers of
the Company. The Company anticipates that similar transactions are likely to
occur in the future.
APPROVAL OF THE DRESSER INDUSTRIES, INC. LONG-TERM
INCENTIVE AND RETENTION PLAN (PROXY ITEM NO. 2.)
The Board of Directors has adopted and recommends the shareholders approve
the Dresser Industries, Inc. Long-Term Incentive and Retention Plan (the "LTIR
Plan"). The LTIR Plan generally provides for grants of performance shares
("Performance Shares") which convert into shares of Company restricted stock
("Restricted Stock") upon the achievement of pre-established performance goals.
As of February 10, 1998, 400,000 Performance Shares have been granted under the
Plan. It is anticipated that all compensation attributable to Performance Shares
granted under the LTIR Plan will qualify as "performance-based compensation" as
defined under Section 162(m) of the Internal Revenue Code. If shareholder
approval of the LTIR Plan is not obtained, all outstanding Performance Shares
granted under the Plan will be deemed null and void.
PURPOSE
In furtherance of its belief that the continued success of the Company and
maximization of shareholder value depends on its ability to attract and motivate
its key management group for an extended period of time, the Company has
established a long-term compensation program. The LTIR Plan is designed to link
Performance Shares to target performance goals to be achieved over a five year
period based on the Company's stock price. The Performance Shares awarded under
the LTIR Plan will be converted into Restricted Stock if the performance goal
for a specific performance year or subsequent performance years is met.
Generally, the restrictions on the Restricted Stock
10
<PAGE>
lapse on the third anniversary of the date the shares of Restricted Stock were
issued, thus assisting in the retention of the key executives participating in
the LTIR Plan.
SUMMARY OF THE LTIR PLAN
The following is a summary of the material provisions of the LTIR Plan. This
summary is in all respects qualified in its entirety by reference to the
complete text of the LTIR Plan attached hereto as Exhibit A.
ADMINISTRATION. The LTIR Plan vests broad powers in the Executive
Compensation Committee of the Board of Directors (the "Committee") to administer
and interpret the Plan. It is intended that the Committee will consist of two or
more members of the Company's Board of Directors who qualify as "outside
directors" within the meaning of the Treasury Department Regulations under
Section 162(m) of the Internal Revenue Code. The Committee has complete
authority to interpret all provisions of the LTIR Plan consistent with
applicable laws including the authority to find facts, to reach conclusions of
law, to interpret and apply ambiguous terms and to supply missing terms
reasonably necessary to interpret the LTIR Plan.
ELIGIBILITY. Individuals recommended by the Committee and approved by the
Board of Directors of the Company shall be eligible for participation in the
LTIR Plan. Eight executive officers of the Company each have been granted 50,000
Performance Shares.
AWARD MAXIMUM. Each participant under the LTIR Plan is granted 50,000
Performance Shares. Generally, Performance Shares will be converted into
Restricted Stock as soon as practicable following the designated performance
year if and when the performance goal for a performance year has been achieved.
Performance goals are as follows:
<TABLE>
<CAPTION>
SHARE PRICE
PERFORMANCE YEAR TARGET PERFORMANCE SHARES CONVERTED
- ------------------- ----------------- -----------------------------
<S> <C> <C>
1997...... $ 39.00 5,000
1998...... $ 45.00 10,000
1999...... $ 53.00 15,000
2000...... $ 61.00 20,000
</TABLE>
A performance goal is met for a performance year, if the average price per
share of Dresser common stock exceeds the Share Price Target for (i) at least 90
trading days (not necessarily consecutive days) within the applicable
performance year, or (ii) at least 20 trading days (also, not necessarily
consecutive days) within a period of 30 consecutive trading days, which ends on
or before the last day of the applicable performance year. Trading days prior to
the date on which an individual
11
<PAGE>
is designated a participant shall not be taken into account in determining
whether a Share Price Target has been met. If the performance goal for the
performance year is not met, 50% of the Performance Shares which would have been
converted into Restricted Stock will be forfeited and the remainder of the
Performance Shares granted for that performance year will be added to the
Performance Shares for the next performance year. Carryovers will continue on
this basis each year until the LTIR Plan terminates January 1, 2001. The
performance goal has been met for the 1997 performance year.
Unless specifically provided for by the Committee, unconverted Performance
Shares will be forfeited upon the earlier of (i) the termination of the
participant's employment or (ii) January 1, 2001.
RESTRICTED STOCK. Restricted Stock is not transferable until restrictions
lapse. Generally, all restrictions on a share of Restricted Stock shall lapse
upon the third anniversary of the date the share was issued, the participant's
termination of employment after attainment of age 65 or disability, a change in
control of the Company or such earlier date as the Board of Directors may
determine.
AMENDMENT AND TERMINATION. The Board of Directors of the Company may amend
or terminate the LTIR Plan in whole or in part at its sole discretion provided
that such amendment or termination shall not cause the forfeiture of the
Restricted Stock already outstanding under the LTIR Plan. Shareholder approval
is required for any material amendment to the Plan.
The affirmative vote of the holders of a majority of shares of Dresser
Common Stock, present in person or by proxy, voted at the meeting is required
for approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THIS PLAN.
APPROVAL OF THE DRESSER INDUSTRIES, INC. 1998 EXECUTIVE INCENTIVE
COMPENSATION PLAN (PROXY ITEM NO. 3)
The Board of Directors of the Company has adopted and recommends the
shareholders approve the Dresser Industries, Inc. Executive Incentive
Compensation Plan (the "Plan"). The Plan generally provides for annual awards
based upon achievement of pre-established Economic Value Added Improvement
goals. It is anticipated that all compensation attributable to awards granted
under the Plan will qualify as "performance-based compensation" as defined under
Section 162(m) of the Internal Revenue Code. If shareholder approval of the Plan
is not obtained, no awards will be paid under the Plan.
12
<PAGE>
PURPOSE
In furtherance of its belief that the continued success of the Company and
maximization of shareholder value depends on its ability to attract and motivate
key management, the Company has established an annual incentive program based on
Economic Value Added ("EVA"). EVA is equal to net operating profit after taxes
minus a capital charge for all capital employed in the business including the
Company's equity capital. The Plan is designed to link EVA improvements achieved
each year to management's annual earned incentive award.
SUMMARY OF THE PLAN
The following is a summary of the material provisions of the Plan. This
summary is in all respects qualified in its entirety by reference to the
complete text of the Plan attached hereto as Exhibit B.
ADMINISTRATION. The Plan vests broad powers in the Executive Compensation
Committee of the Board of Directors (the "Committee") to administer and
interpret the Plan. It is intended that the Committee will consist of two or
more members of the Company's Board of Directors who qualify as "outside
directors" within the meaning of the Treasury Department Regulations under
Section 162(m) of the Internal Revenue Code. The Committee has complete
authority to interpret all provisions of the Plan consistent with applicable
laws including the authority to find facts, to reach conclusions of law, to
interpret and apply ambiguous terms and to supply missing terms reasonably
necessary to interpret the Plan.
ELIGIBILITY. Executive officers and, in the discretion of the Committee,
other key employees are eligible for participation in the Plan. For fiscal 1998,
the Committee has granted awards under the Plan to 15 officers and 62 key
managers.
AWARDS. Each participant under the Plan will be given a target incentive
award (the "Target Award") expressed as a percent of base salary and established
based on an assessment of competitive compensation practices. Awards will be
calculated based on actual EVA improvement as soon as the results are determined
after the fiscal year end (the "Earned Award"). A participant may have a reserve
balance (the "Reserve Balance") which is not paid in the current year but
carried forward and used in the calculation of a participant's paid award (the
"Paid Award"). The Paid Award will be an amount determined by adding the Earned
Award to the opening Reserve Balance, if any, from the prior year as follows:
(1) If the sum of the Earned Award and the opening Reserve Balance is
greater than the Target Award, the Paid Award is an amount equal to the
Target Award plus one-third of the excess above the Target Award. The
new Reserve Balance is an amount equal to two-thirds of the
13
<PAGE>
excess above the Target Award. Should a calculated Paid Award exceed
five million dollars ($5,000,000), the maximum Paid Award will be five
million dollars ($5,000,000) and the excess credited to the Reserve
Balance.
(2) If the sum of the Earned Award and the opening Reserve Balance is
greater than zero and less than or equal to the Target Award, the Paid
Award is an amount equal to the sum of the Earned Award and the opening
Reserve Balance. The new Reserve Balance is zero.
(3) If the sum of the Earned Award and the opening Reserve Balance is
negative, the Paid Award is zero. The new Reserve Balance is the sum of
the Earned Award and the opening Reserve Balance. No Awards are paid
when the Reserve Balance is negative and negative Reserve Balances are
carried forward to offset future Earned Awards.
The Reserve Balance shall be paid to a participant in the event of
termination due to normal or early retirement, death or disability but will be
forfeited upon termination for cause or resignation, except as determined by the
Committee. Determination of final Paid Award and distribution of the Reserve
Balance, if any, will be made the end of the fiscal year following termination.
No awards will be earned under the Plan for fiscal years beginning after
October 31, 2002.
AMENDMENT AND TERMINATION. The Committee may amend or terminate the Plan in
whole or in part at its sole discretion. Shareholder approval is required in
order to amend the Plan to modify the requirements for eligibility, the business
criteria on which the performance goal is based or the maximum amount of
compensation that could be paid to any participant.
The affirmative vote of the holders of a majority of shares of Dresser
Common Stock, present in person or by proxy, voted at the meeting is required
for approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THIS PLAN.
14
<PAGE>
NEW PLAN BENEFITS UNDER THE DRESSER INDUSTRIES, INC. LONG-TERM
INCENTIVE AND RETENTION PLAN AND THE DRESSER INDUSTRIES, INC. 1998
EXECUTIVE INCENTIVE COMPENSATION PLAN
The following table sets forth awards made under the Dresser Industries,
Inc. Long-Term Incentive and Retention Plan and The Dresser Industries, Inc.
1998 Executive Incentive Compensation Plan which are determinable.
<TABLE>
<CAPTION>
1998
EXECUTIVE
LONG-TERM INCENTIVE AND INCENTIVE
RETENTION PLAN COMPENSATION
------------------------ PLAN
DOLLAR VALUE NUMBER -------------
NAME AND POSITION (1) OF UNITS DOLLAR VALUE
- ------------------------------------------------------------------ ------------- --------- -------------
<S> <C> <C> <C>
W. E. Bradford, Chairman and Chief Executive Officer.............. $ 207,187.50 50,000 $ 1,156,250
D. C. Vaughn, President and Chief Operating Officer............... 207,187.50 50,000 687,500
G. H. Juetten, Sr. Vice President and Chief Financial Officer..... 207,187.50 50,000 381,250
A. J. Stanley, Sr. Vice President................................. 207,187.50 50,000 450,000
G. P. Tevis, Sr. Vice President................................... 207,187.50 50,000 375,000
Executive Officer Group........................................... 16,575,000 400,000 5,481,590
Non-Executive Director Group...................................... -0- -0- -0-
Non-Executive Officer Employee Group.............................. -0- -0- 4,067,282
</TABLE>
- ------------------------
(1) The value reflected in the table represents the dollar value of 5,000
Performance Shares, for which the 1997 performance target has been achieved,
which were deemed to be converted into Restricted Stock for purposes of
proxy statement disclosure under the terms of the Long-Term Incentive and
Retention Plan based on the closing price of the Company's common stock on
January 2, 1998 of $41.4375. January 2, 1998 is the first trading day
following the end of the 1997 performance year.
OTHER MATTERS
The Board of Directors is not aware of any other matter to be presented for
action at the meeting. However, if any other matter is properly presented, it is
the intention of the persons named in the enclosed form of proxy to vote in
accordance with their judgment on such matter.
15
<PAGE>
INFORMATION ON INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has unanimously reappointed the firm
of Price Waterhouse LLP as independent accountants for the 1998 fiscal year. A
representative of Price Waterhouse LLP will be present at the Annual Meeting to
answer appropriate questions from the shareholders and will be afforded an
opportunity to make any statement on behalf of Price Waterhouse LLP that he may
desire.
OTHER INFORMATION FURNISHED PURSUANT TO REGULATIONS
OF THE SECURITIES AND EXCHANGE COMMISSION
EXPENSE OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition,
the Company will reimburse brokers or other persons holding stock in their names
or in the names of their nominees for charges and expenses in forwarding proxies
and proxy material to the beneficial owners. Solicitations may further be made
by officers and regular employees of the Company, without additional
compensation, by use of the mails, telephone, telegraph or by personal calls.
The Company has retained D.F. King & Co., Inc., New York, New York, to assist in
the solicitation at a cost of $10,000 (plus reasonable out-of-pocket expenses).
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1998 Annual Meeting of Shareholders of the
Company must be received no later than October 14, 1998, at the Company's
principal executive office, 2001 Ross Avenue, Dallas, Texas 75201, directed to
the attention of the Secretary.
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors administers
the Company's executive compensation program. The Committee is comprised of five
independent, non-employee directors. The Committee is committed to a strong,
positive link between business performance, strategic goals, shareholder value
and total compensation programs.
16
<PAGE>
OVERALL EXECUTIVE COMPENSATION POLICY
Our compensation policy is designed to support the overall objective of
enhancing value for our shareholders by:
- Attracting, developing, rewarding and retaining highly qualified and
productive individuals.
- Directly relating compensation to both Company and individual performance.
- Ensuring compensation levels are externally competitive and internally
equitable.
- Encouraging executive stock ownership to enhance a mutuality of interest
with other shareholders.
The Committee considers all elements of compensation when determining
individual components of pay. The Committee relies in part on recommendations
from the Chairman of the Board regarding compensation levels for executive
officers excluding him. Following is a description of the elements of Dresser
executive compensation and how each relates to the objectives and policy
outlined above.
BASE SALARY
The Committee reviews each executive officer's salary annually. In
determining appropriate salary levels, we consider level and scope of
responsibility, experience, a subjective evaluation of overall Company
performance, individual performance, internal equity, as well as pay practices
of other companies relating to executives of similar responsibility. No specific
weightings are assigned to these criteria.
By design, we strive to pay executives salaries in line with appropriate
competitive market levels. In defining the competitive market, we include
companies in the energy services industry as well as major equipment producers
with a median size comparable to the Company. These companies are representative
of those with whom the Company competes for executive talent, and as such are a
broader group of companies than those comprising the S & P Oil Well Equipment &
Services Index included in the Performance Graph. To provide an additional point
of reference, the Committee also reviews available survey data on general
industry practices. We review the size-adjusted median (50th percentile) of the
competitive market, which serves as a reference point in determining base salary
levels.
We believe maximum performance can be encouraged through the use of
appropriate incentive programs. Incentive programs for executives are as
follows:
17
<PAGE>
ANNUAL INCENTIVES
The annual incentive plan emphasizes a positive link between enhanced
shareholder value and incentive compensation. Incentive payments under the plan
are based solely on achievement of specified levels of Return on Equity (ROE).
The Committee believes incentive opportunities are commensurate with the
performance required to achieve increasingly higher levels of ROE. Performance
above a specified ROE threshold level is required before any incentives are
paid. For 1997, the level of ROE produced incentive payments amounting to 122%
of aggregate base salaries of senior executive officers.
The named executives, as a group, excluding Mr. Bradford whose compensation
is discussed later, fall within the market median for base salary and total cash
compensation.
LONG-TERM INCENTIVES
The Company's long-term compensation philosophy is that long-term incentives
should be related to improvement in long-term shareholder value, thereby
creating a mutuality of interest with shareholders. In furtherance of this
objective, the Company awards to its executive officers Performance Stock Units
and stock options usually coupled with restricted stock awards. The objective is
to provide a competitive total long-term incentive opportunity, utilizing the
market survey data previously described.
STOCK OPTIONS
Stock options encourage and reward effective management that results in
long-term corporate financial success, as measured by stock price appreciation.
The Stock Option Program is compatible with shareholder interests and
encourages executives to maintain a long-term equity interest. Target stock
option grant levels are established subjectively based on assessment of each
executive's scope of responsibilities and level within the organization. Stock
holdings of the executive group resulting from option exercises were considered
when determining the size of the current awards. At time of grant, two-thirds of
the stock options had an exercise price greater than the fair market value at
grant date. Such options are exercisable in three equal installments beginning
six months after date of grant. To encourage increased equity holdings, the
Committee's guidelines called for stock option awards to be granted each January
equal to the number of options exercised in the preceding year if the executive
who paid the exercise price in cash continued to hold at least one-half of the
shares received. If previously owned shares were used to pay the exercise price,
one hundred percent of the shares were required to be held to be eligible for
such grants. Under terms of the Program, the Committee has full and sole
authority to change the
18
<PAGE>
guidelines for grant of stock options at any time subject only to the express
provisions of the Program.
RESTRICTED INCENTIVE STOCK AWARDS
To further encourage executive officers to exercise stock options and hold
the stock following exercise, stock option grants to executive officers usually
are made in tandem with restricted incentive stock awards. Recipients of
Restricted Incentive Stock awards are issued, upon exercise of the related
option, one share of restricted stock for every five-option shares exercised
which the Committee believes is an appropriate inducement for promoting enhanced
equity interest by executives. Provided the related option shares are held on
that date, restrictions on Restricted Incentive Stock lapse on the third
anniversary of the date of issue or, if earlier, upon termination of employment
by reason of death, disability or approved retirement. If the related option
shares are sold or otherwise transferred prior to lapse of restrictions, the
Restricted Incentive Stock is forfeited.
RESTRICTED STOCK GRANT PLANS
This program is intended to reward and retain selected executives aligning
them with shareholder interests. The Chairman and Chief Executive Officer and
President and Chief Operating Officer participate in the Special Restricted
Incentive Stock Grant Plan and received 30,000 and 15,000 shares, respectively.
Restrictions lapse three years from date of grant, or, if earlier, upon
termination of employment by reason of death, disability or approved retirement.
Selected executives participate in the Restricted Stock Grant Plan and
received 10,000 shares. Restrictions lapse over a period of time as per
following schedule:
<TABLE>
<CAPTION>
RESTRICTED STOCK VESTED AND RESTRICTION
NUMBER OF YEARS FROM GRANT LIFTED
- --------------------------------- -------------------------------------------
<S> <C>
2 2,500
4 2,500
6 5,000
</TABLE>
or, if earlier, upon termination of employment by reason of death, disability or
approved retirement.
PERFORMANCE STOCK UNITS
This program was intended to reward executives when the Company attained
preset goals over a period of four years, thus encouraging and rewarding
long-term planning and performance. Such awards were made every second year. The
objectives for the four-year periods ending October 31, 1997 and 1999 are to
achieve, an average of not less than 15% Return on Equity. Performance Stock
19
<PAGE>
Unit Awards are based upon each individual executive's responsibilities and
level within the organization. Each unit has a maximum value based on the value
of the Company's Common Stock at the beginning of the award cycle. Payment is
made only if the objective is met and is correspondingly reduced if the value of
the Company's Common Stock is lower at the end than at the beginning of the
award cycle. In addition, earned awards are paid in installments, 50% at the end
of the cycle and 50% one year later, subject to continued employment, except in
cases of death, disability or approved termination of employment, in an effort
to retain executives. The objective of not less than 15% Return on Equity for
the four-year period ending October 31, 1997 was met with a 18.3% Return on
Equity. Awards will be generated and paid to eligible executives in January,
1998 and January, 1999 as per plan guidelines. The last performance period of
this plan ends October 31, 1999 and no subsequent performance periods will be
established. If performance goals are met for the four-year period ending
October 31, 1999, awards will be generated and paid to eligible executives in
January, 2000 and January, 2001.
LONG-TERM INCENTIVE AND RETENTION PLAN
This program was implemented, subject to shareholder approval, to reward
selected executives when the Company creates additional shareholder value. The
plan directly aligns selected executives with shareholders through share price
targets that drive actual earning of the award. Each key executive was awarded
50,000 performance shares to be converted into restricted stock if performance
goals for a performance year or subsequent performance years is/are met. An
executive's performance shares shall be converted into Restricted Stock as soon
as practicable following the designated performance year. However, if the
performance goal is met in advance of the designated performance year,
performance shares will be earned at that time, but will not be converted until
following the designated performance year. Converted Restricted Stock shall
lapse on the third anniversary date shares were issued. Performance Goals are as
follows:
<TABLE>
<CAPTION>
SHARE PRICE
PERFORMANCE YEAR TARGET PERFORMANCE SHARES CONVERTED
- ------------------- ----------------- -----------------------------
<S> <C> <C>
1997 $ 39.00 5,000
1998 $ 45.00 10,000
1999 $ 53.00 15,000
2000 $ 61.00 20,000
</TABLE>
RATIONALE FOR CEO COMPENSATION
Mr. Bradford was named Chairman of the Board and Chief Executive Officer
December 1, 1996. His compensation package was designed to encourage short and
long-term performance in line
20
<PAGE>
with the interests of our shareholders. The majority of his compensation is at
risk, in the form of performance bonuses, stock options, restricted stock awards
and performance stock units.
Mr. Bradford's salary was increased $100,000 to $850,000 effective December
1, 1996, and is below the competitive market median. The factors which the
Committee considered in determining Mr. Bradford's base salary for fiscal 1997
were his scope of responsibility, experience and individual performance, a
subjective evaluation of overall Company performance, and pay practices of other
companies relating to executives of similar responsibility. No specific
weightings are assigned to these criteria. The annual incentive paid to Mr.
Bradford for fiscal year 1997, determined as explained above, was $1,037,000,
which was equivalent to 122% of his base salary. Mr. Bradford's total cash
compensation (base salary plus bonus) is below the competitive market median for
fiscal 1997.
In fiscal 1997, Mr. Bradford was granted options to purchase 34,575 shares
of common stock, which is equivalent to the number of options exercised during
the previous calendar year. In addition, Mr. Bradford was granted 30,000 shares
of restricted stock in recognition of his promotion and expanded role.
POLICY REGARDING SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction to one million dollars for compensation paid to a person who on the
last day of the fiscal year is either the Chief Executive Officer or among the
four most highly compensated officers other than the Chief Executive Officer,
except for qualified performance-based compensation. The Stock Option Program,
the Performance Stock Unit Program, the 1995 Executive Incentive Compensation
Plan, the Restricted Stock Grant Plans and the Long-Term Incentive and Retention
Plan are believed to qualify as performance-based compensation under IRS rules.
EXECUTIVE COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Rawles Fulgham Jay A. Precourt
Ray L. Hunt Richard W.
Lionel H. Olmer Vieser
</TABLE>
The Board Compensation Committee Report on Executive Compensation shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
21
<PAGE>
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company at the end of the last completed
fiscal year. No information is given as to any person for any fiscal year during
which such person was not an executive officer of the Company.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- ---------------------------------------
AWARDS
OTHER --------------------------- PAYOUTS
ANNUAL RESTRICTED ---------
COMPEN- STOCK SECURITIES LONG TERM ALL OTHER
NAME AND SATION AWARDS UNDERLYING INCENTIVE COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) ($)(2) OPTIONS (#) PAYOUTS SATION ($)(4)
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- ----------------------------- ---- ----------- ------------- ------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Bradford, 1997 $841,667 $1,037,000 $-0- $1,149,288(6) 34,575 $-0- $471,551
Chairman and Chief 1996 741,833 660,000 -0- -0- 182,233 -0- 320,739
Executive Officer 1995 546,000 315,780 -0- 148,235 7,000 -0- 87,948
Donald C. Vaughn, 1997 525,833 671,000 -0- 538,125(6) -0- -0- 55,260
President and Chief 1996 441,293 413,600 -0- -0- 34,100 -0- 30,890
Operating Officer 1995 365,404 508,722(3) -0- -0- -0- -0- 9
George H. Juetten, 1997 291,250 372,100 -0- 28,400 13,000 -0- 40,164
Senior Vice President 1996 252,500 228,800 -0- 54,025 5,000 -0- 31,688
and Chief Financial Officer 1995 237,500 139,650 -0- 21,625 -0- -0- 10,372
A. Jack Stanley, 1997 353,333 443,250 -0- 170,625 -0- -0- 45,042
Senior Vice President 1996 391,410(5) 458,187(3) -0- -0- 75,000 -0- 4,092
G. Phillip Tevis, 1997 283,333 354,300 -0- -0- -0- -0- 35,596
Senior Vice President 1996 241,000 137,400 -0- -0- 25,000 -0- 31,607
</TABLE>
- --------------------------
(1) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or 10 percent of the total amount of annual salary and
bonus for any named individual.
(2) Since 1989, Restricted Incentive Stock Awards have been coupled with most
stock option grants to officers of the Company. Recipients of Restricted
Incentive Stock Awards are issued, upon the exercise of the related option,
one share of Restricted Incentive Stock for every five option shares
exercised. Provided the related option shares are held on that date,
restrictions on Restricted Incentive Stock lapse on the third anniversary of
the date of issue or, if earlier, upon termination of employment by reason
of death, disability or approved retirement. If the related option shares
are sold or otherwise transferred prior to lapse of restrictions, the
Restricted Incentive Stock is forfeited. Restricted stock awards shown in
the table represent
22
<PAGE>
Restricted Incentive Stock issued upon exercise of related stock options and
are valued at the closing price of the Company's unrestricted stock on the
New York Stock Exchange on the date of issue. Dividend and voting rights of
such stock are the same as all other shares of the Company's outstanding
Common Stock. At the end of the last completed fiscal year, the number and
value (at the closing price of the Company's unrestricted stock on the New
York Stock Exchange on October 31, 1997, the last trading day of the
Company's fiscal year) of the aggregate restricted stock holdings of the
named individuals were 38,723 ($1,631,206), 15,000 ($631,875), 3,600
($151,650) and 5,000 ($210,625) for Messrs. Bradford, Vaughn, Juetten and
Stanley, respectively.
(3) Includes $254,361 for Mr. Vaughn and $168,067 for Mr. Stanley non-elective
deferral under terms of an unfunded plan in lieu of normal pension benefits
which provides for vesting in one-third of the award on each of the
crediting date and the next two anniversaries thereof. The plan generally
provides for payment of vested benefits in a lump sum or ten equal annual
installments following retirement, death or termination of employment.
However, the Executive Compensation Committee has discretion to distribute
all or a portion of vested benefits in certain emergencies, to fully vest
all benefits upon death, disability and termination of employment other than
resignation or termination for cause, and all benefits may be forfeited
under certain circumstances, all as defined in the plan.
(4) Company contributions to qualified defined contribution retirement plans and
related liabilities to non-qualified plans.
(5) Includes $59,038 in accrued benefits which were paid in cash on Mr.
Stanley's promotion to Vice President.
(6) Includes 30,000 and 15,000 shares of restricted stock awarded to Messrs.
Bradford and Vaughn, respectively, which will vest November 21, 1999.
23
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all individual grants of stock options under the
Company's 1992 Stock Compensation Plan to the named executive officers of the
Company during the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO OPTION TERM (3)
OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR PRICE ($/SH)(2) DATE 5% 10%
(A) (B) (C) (D) (E) (F) (G)
- -------------------- --------------- ----------------- ------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. E. Bradford...... 11,525 1.23 $ 35.875 01/15/2007 $ 260,479 $ 657,400
11,525 1.23 $ 37.875 01/15/2007 237,429 634,350
11,525 1.23 $ 39.875 01/15/2007 214,379 611,300
D. C. Vaughn........ -0-
G. H. Juetten....... 4,333 .46 $ 35.875 01/15/2007 97,931 247,160
4,333 .46 $ 37.875 01/15/2007 89,265 238,494
4,334 .46 $ 39.875 01/15/2007 80,618 229,881
A. J. Stanley....... -0-
G. P. Tevis......... -0-
</TABLE>
- ------------------------
(1) Stock options are shown at the price and in the sequence they first become
exercisable, respectively: July 16, 1997, January 16, 1998 and January 16,
1999 for Messrs. Bradford and Juetten. Terms of the Plan allow acceleration
of exercisability of stock options and lapse of restrictions on Restricted
Incentive Stock in circumstances described beginning on page 28. Stock
Options granted were coupled with a total of 6,915 and 2,598 Restricted
Incentive Stock ("RIS") Awards to Messrs. Bradford and Juetten,
respectively. Recipients of RIS Awards will be issued, upon the exercise of
the related option while actively employed by the Company, one share of
restricted stock for every five option shares exercised. Provisions for
lapse of restrictions are described in Note 2 to the Summary Compensation
Table. Guidelines currently used by the Executive Compensation Committee for
grant of subsequent options are described beginning on page 18.
(2) Option grants in 1997 were made in approximately 3 equal installments. The
option price of the first installment of each grant is the average of the
high and low trading prices of the Company's Common Stock as shown by New
York Stock Exchange quotations on the date of grant, and the option price of
the second and third installments are, respectively, $2 and $4 higher than
that of the first installment.
(3) As required by rules of the Securities and Exchange Commission ("SEC"),
potential values stated are based on the prescribed assumption that the
Company's Common Stock will appreciate in value from the date of grant to
the end of the option term (ten years from the date of grant) at annualized
rates of 5% and 10%
24
<PAGE>
(total appreciation of 63% and 159%), respectively, and therefore are not
intended to forecast future appreciation, if any, in the price of the
Company's Common Stock. The total of all stock options granted to employees,
including executive officers, during fiscal 1997 was less than 54% of total
shares outstanding during the year. Accordingly, the potential realizable
value of such options for all optionees under the prescribed assumptions is
less than 54% of the potential realizable value of all shareholders for the
same period under the same assumptions. As an alternative to the assumed
potential realizable values stated in Columns (f) and (g), SEC rules would
permit stating the present value of such options at the date of grant.
Methods of computing present value suggested by different authorities can
produce significantly different results. Moreover, since stock options
granted by the Company are not transferrable, there is no objective criteria
by which any computation of present value can be verified. Consequently, the
Company's management does not believe there is a reliable method of
computing the present value of such stock options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information concerning each option exercised
during the last fiscal year by each of the named executive officers and the
value of unexercised options held by such executive officers at the end of the
fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS AT OPTIONS AT FISCAL
SHARES ACQUIRED REALIZED FISCAL YEAR END (#) YEAR END ($)(1)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(A) (B) (C) (D) (E)
- -------------------------- --------------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
165,980/ 3,101,782/
W. E. Bradford............ 34,575 385,445 83,795 1,046,779
88,339/ 1,850,678/
D. C. Vaughn.............. -0- -0- 11,368 179,704
39,666/ 621,055/
G. H. Juetten............. 4,000 40,560 10,334 51,922
25,000/ 293,750/
A. J. Stanley............. 25,000 143,750 25,000 243,750
66,666/ 1,061,742/
G. P. Tevis............... -0- -0- 8,334 81,257
</TABLE>
- ------------------------
(1) Values stated are based on the closing price of $42.125 per share of the
Company's Common Stock as listed on the New York Stock Exchange on October
31, 1997, the last trading day of the fiscal year.
25
<PAGE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table shows grants of Performance Shares ("Awards") under the
Dresser
Industries, Inc. Long-Term Incentive and Retention Plan to the named executive
officers of the Company during the last fiscal year.
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF SHARES, UNITS OTHER PERIOD
OR UNTIL
OTHER RIGHTS (#) MATURATION OR
NAME (1) PAYOUT
- -------------------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
W. E. Bradford................................................ 50,000 1997-2000
D. C. Vaughn.................................................. 50,000 1997-2000
G. H. Juetten................................................. 50,000 1997-2000
A. J. Stanley................................................. 50,000 1997-2000
G. P. Tevis................................................... 50,000 1997-2000
</TABLE>
- ------------------------
(1) These Awards are subject to shareholder approval. For a description of the
material terms and conditions of these Awards, please see the text of
"Approval of Dresser Industries, Inc. Long-Term Incentive and Retention Plan
(Proxy Item No. 2)" beginning on page 10.
26
<PAGE>
DRESSER RETIREMENT PLANS
The estimated total annual retirement benefits payable under defined benefit
pension plans are set forth below. The chart illustrates benefits accrued to
October 31, 1997.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------------
REMUNERATION* 10 15 20 25 30 35
- ----------------------------- ---------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000.................... $ 38,750 $ 63,750 $ 88,750 $ 113,750 $ 138,750 $ 163,750
300,000.................... 46,500 76,500 106,500 136,500 166,500 196,500
450,000.................... 69,750 114,750 159,750 204,750 249,750 294,750
600,000.................... 93,000 153,000 213,000 273,000 333,000 393,000
750,000.................... 116,250 191,250 266,250 341,250 416,250 491,250
900,000.................... 139,500 229,500 319,500 409,500 499,500 589,500
1,050,000................... 162,750 267,750 372,750 477,750 582,750 687,750
1,200,000................... 186,000 306,000 426,000 546,000 666,000 786,000
1,350,000................... 209,250 344,250 479,250 614,250 749,250 884,250
1,500,000................... 232,500 382,500 532,500 682,500 832,500 982,500
1,800,000................... 279,000 459,000 639,000 819,000 999,000 1,179,000
1,900,000................... 294,500 484,500 674,500 864,500 1,054,500 1,244,500
2,000,000................... 310,000 510,000 710,000 910,000 1,110,000 1,310,000
2,100,000................... 325,500 535,500 745,500 955,500 1,165,500 1,375,500
2,200,000................... 341,000 561,000 781,000 1,001,000 1,221,000 1,441,000
2,300,000................... 356,500 586,500 816,500 1,046,500 1,276,500 1,506,500
</TABLE>
- ------------------------
* As of October 31, 1997, assuming attained age 65.
The gross amounts represented above include sums accrued under Dresser's
qualified and non-qualified defined benefit plans. However, amounts credited to
Dresser's qualified and non-qualified defined contribution plans will be paid
from those plans and thus represent deductions to the above gross amounts.
Likewise, applicable Social Security benefits, and "pension benefit equivalents"
credited under Dresser's deferred compensation plan, also represent deductions.
Less than 10% of the amounts shown in columns (c) and (d) of the Summary
Compensation Table for each of the named individuals (except Messrs. Vaughn and
Stanley who are not participants in the Company's qualified defined benefit
plans) is excluded in determining benefits. Years of
27
<PAGE>
credited service used in determining benefits for the individuals named in the
Summary Compensation Table are as follows: Mr. Bradford 34.25 years, Mr. Vaughn
1.9166 years, Mr. Juetten 4.5 years, Mr. Stanley 1.25 years and Mr. Tevis 3.4167
years. Benefits are computed as straight-life annuity amounts which may be paid
in various forms.
The covered compensation, years of credited service and estimated total
annual retirement benefits payable to Messrs. Vaughn and Stanley at age 65 under
defined benefit pension plans of a Company subsidiary are set forth below,
respectively. Covered compensation differs more than 10% from amounts shown in
columns (c) and (d) of the Summary Compensation Table because the Plans were
frozen several years ago.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
30 YEARS OF
REMUNERATION SERVICE
- ---------------------------------------------------------------------------- -----------
<S> <C>
$230,000.................................................................... $ 67,513
$161,600.................................................................... $ 20,870
</TABLE>
Benefits are computed as a straight-life annuity which may be paid in
various forms and is not subject to any deduction for Social Security or other
offset amounts.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
Pursuant to the 1992 Stock Compensation and 1982 Stock Option Plans, in the
case of an impending merger, reorganization, or liquidation of the Company, or
of a sale of substantially all of its business or property, the Board may at its
discretion and without shareholder approval, declare some or all outstanding
Options to be immediately exercisable in full (except for required abatements in
the case of combinations of Options), without regard for prescribed waiting
periods contained in said Options.
Pursuant to the 1992 Stock Compensation and the 1989 Restricted Incentive
Stock Plans, in the event of a change in control of the Company without approval
of the majority of members of the Board of Directors in office immediately prior
to the event, all restrictions on outstanding Restricted Stock shall immediately
lapse if the related Option Shares have not been disposed of prior to such
change in control.
28
<PAGE>
Pursuant to the Restricted Stock Grant Plans and Long-Term Incentive and
Retention Plan (as discussed in the Board Compensation Committee Report on
Executive Compensation on page 20), in the event of a sale of all or a majority
of the Company's assets, the liquidation or dissolution of the Company, the
purchase of at least 30% of the combined voting power of the Company's then
outstanding voting securities by any person or entity or shareholder approval of
a reorganization, merger or consolidation resulting in ownership after the
transaction, by the ownership immediately before the transaction, of 50% or less
of the surviving entity's then outstanding voting securities, all restrictions
on outstanding Restricted Stock shall lapse.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16 of the Securities and Exchange Act of 1934 requires Directors,
executive officers and persons, if any, owning more than ten percent of a class
of the Company's equity securities to file with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange initial reports of ownership
and reports of changes in ownership of the Company's equity and derivative
securities.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Forms
5 were required, the Company believes that during the fiscal 1997 year all
filing requirements applicable to its officers and Directors were met except one
report on Form 5 of Mr. Judd, reflecting one transaction relating to the
expiration of employee stock options in 1994, which was filed late.
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
The graph compares the yearly percentage change in the cumulative total
shareholder return on the Company's Common Stock (as measured by dividing: (i)
the sum of: (A) the cumulative amount of dividends for the measurement period,
assuming dividend reinvestment and (B) the difference between the Company's
share price at the end and the beginning of the measurement period; by (ii) the
share price at the beginning of the measurement period) with the cumulative
total return assuming reinvestment of dividends of (1) the S&P 500 Index and (2)
the S&P Oil Well Equipment & Service Index.
29
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN TO SHAREHOLDERS
<S> <C> <C> <C>
Reinvested Dividends
Dresser S&P 500 S&P Oil & Gas Drilling
Industries,
Inc. Index & Equipment
1992 $100.00 $100.00 $100.00
1993 $115.94 $114.94 $105.60
1994 $119.59 $119.39 $104.52
1995 $121.19 $150.96 $108.97
1996 $196.41 $187.33 $178.75
1997 $255.85 $247.48 $299.85
</TABLE>
The foregoing notice and proxy statement are sent by order of the Board of
Directors.
REBECCA R. MORRIS
VICE PRESIDENT -- CORPORATE COUNSEL
AND SECRETARY
February 10, 1998
30
<PAGE>
EXHIBIT A
DRESSER INDUSTRIES, INC.
LONG-TERM INCENTIVE AND RETENTION PLAN
ARTICLE 1: PREAMBLE
Effective as of July 17, 1997, Dresser Industries, Inc. establishes the
Dresser Industries, Inc. Long-Term Incentive and Retention Plan. This Plan is
intended to be a bonus program, as described in 29 CFR Section2510.3-2(c), and,
accordingly, is not a plan described in the Employee Retirement Income Security
Act of 1974. This Plan is also intended to qualify as a "performance-based"
program under Section 162(m) of the Internal Revenue Code. As such, the Plan
will be submitted for shareholder approval.
ARTICLE 2: DEFINITIONS
Words and phrases appearing in this Plan shall have the respective meanings
set forth in this Article, unless the context clearly indicates to the contrary.
(a) AVERAGE PRICE. The price per share on a Trading Day determined by
adding the high and low prices for the Trading Day and dividing their sum by
two.
(b) CHANGE IN CONTROL.
(1) The sale of all or a majority of Dresser's assets;
(2) Dresser's liquidation or dissolution;
(3) The purchase by any persons or entities of beneficial ownership of
at least 30% of Dresser's common stock (or 30% of the combined voting power
of Dresser's then outstanding voting securities entitled to vote generally
in the election of directors); or
(4) The approval by Dresser's stockholders of a reorganization, merger
or consolidation, the result of which is that the persons or entities which
were stockholders immediately before the transaction do not own more than
50% of the combined voting power of the surviving entity's then outstanding
voting securities entitled to vote generally in the election of directors.
(c) DISABILITY. Any physical or mental condition which renders a
Participant incapable of performing the work for which the Participant was
employed by Dresser or similar work for Dresser, as certified in writing by a
doctor of medicine and as approved by Dresser.
(d) DRESSER. Dresser Industries, Inc., a Delaware corporation.
A-1
<PAGE>
(e) PARTICIPANT. An individual to whom Restricted Stock is awarded under
this Plan. A management employee who terminates employment shall cease to be a
Participant, notwithstanding the designation in Article 3.
(f) PERFORMANCE SHARE. A hypothetical share of Dresser common stock, as
described in the Plan.
(g) PERFORMANCE YEAR. The calendar year.
(h) PLAN. Dresser Industries, Inc. Long-Term Incentive and Retention Plan.
(i) RESTRICTED STOCK. Dresser common stock, restricted in the manner
described in Article 6.
(j) SHARE PRICE TARGET. The target price of a share of Dresser common
stock, determined according to the following chart:
<TABLE>
<CAPTION>
SHARE PRICE
PERFORMANCE YEAR TARGET
- ------------------- -----------------
<S> <C> <C>
1997 $ 39.00
1998 $ 45.00
1999 $ 53.00
2000 $ 61.00
</TABLE>
The Share Price Target shall be adjusted, if necessary, to take into account
any stock splits.
(k) TRADING DAY. A day on which Dresser common stock is traded on the New
York Stock Exchange.
ARTICLE 3: ELIGIBILITY
Individuals designated by the Board of Directors of Dresser Industries, Inc.
as Participants shall participate in the Plan. The grants described in the Plan
are made subject to shareholder approval of the Plan.
ARTICLE 4: PERFORMANCE SHARES
As soon as practicable after July 17, 1997, each Participant shall receive a
grant of 50,000 Performance Shares. Generally, Performance Shares shall be
converted to Restricted Stock in accordance with Article 5, as long as the
objective performance goals of that Article are met. Unless specifically
provided for by the Executive Compensation Committee of the Board of Directors,
unconverted Performance Shares shall be forfeited upon the earlier of:
(a) Termination of the Participant's employment for any reason; or
(b) January 1, 2001.
A-2
<PAGE>
ARTICLE 5: PERFORMANCE GOALS
If the performance goal for a Performance Year or subsequent Performance
Years is/are met, a Participant's Performance Shares shall be converted to
Restricted Stock as soon as practicable following the designated Performance
Year in accordance with the following schedule:
<TABLE>
<CAPTION>
PERFORMANCE
PERFORMANCE YEAR SHARES CONVERTED
- ------------------- -----------------
<S> <C> <C>
1997 5,000
1998 10,000
1999 15,000
2000 20,000
</TABLE>
However, if a Share Price Target is met in advance of the designated
Performance Year, Performance Shares shall be earned at that time, but will not
be converted until immediately following the designated Performance Year.
A performance goal is met for a Performance Year, if the average price per
share of Dresser common stock exceeds the Share Price Target:
(a) At least 90 Trading Days (not necessarily consecutive) within the
Performance Year; or
(b) At least 20 Trading Days (not necessarily consecutive) within a period
of 30 consecutive Trading Days, which ends on or before the last day of
the Performance Year; provided that Trading Days prior to the date on
which an individual is designated a Participant shall not be taken into
account in determining whether (with respect to an award to that
Participant), a Share Target has been met.
If the performance goal for the Performance Year is not met, 50% of the
Performance Shares which would have been converted to Restricted Stock shall be
forfeited. The remainder of these Performance Shares shall be added to the
schedule of Performance Shares for the next Performance Year. This carryover
shall continue on this basis each year until the plan concludes January 1, 2001.
ARTICLE 6: RESTRICTED STOCK
Stock certificates evidencing the award of Restricted Stock in accordance
with Article 5 shall be registered on Dresser's books in the name of the
Participant on the date Performance Shares are converted to Restricted Stock.
Each certificate evidencing Restricted Stock shall bear an appropriate legend
referring to the terms, conditions and restrictions described in the Plan. Any
attempt to dispose of such shares of Restricted Stock in contravention of such
terms, conditions and restrictions shall be invalid.
A-3
<PAGE>
All restrictions on a share of Restricted Stock shall lapse after a period
ending on the earliest of:
(a) The third anniversary of the date the share was issued;
(b) The Participant's termination of employment after attainment of age 65;
(c) The Participant's Disability;
(d) A Change in Control; or
(e) Such earlier date as the Board of Directors may determine.
If a Participant's employment terminates before the end of this period of
restriction, the Participant shall forfeit the Restricted Stock.
During the period of restriction, the Participant shall be entitled to all
other rights of a shareholder of Dresser common stock, including the right to
vote the shares of Restricted Stock and the right to receive dividends on those
shares. Subject to Article 10, once the restriction period ends, the Participant
shall be entitled to physical custody of the stock, which, at such time, shall
become fully transferable.
ARTICLE 7: ADMINISTRATION
The Executive Compensation Committee of the Board of Directors of Dresser
Industries, Inc. shall have full discretionary authority to interpret and apply
the terms of this Plan document. This grant of authority shall be broadly
construed and shall include the authority to find facts, to reach conclusions of
law, to interpret and apply ambiguous terms, and to supply missing terms
reasonably necessary to interpret the Plan.
ARTICLE 8: AMENDMENT OR TERMINATION
The Plan may be amended or terminated in whole or in part by Dresser's Board
of Directors in its sole discretion, provided that such amendment or termination
shall not cause the forfeiture of Restricted Stock awarded to a Participant
prior to the date of amendment or termination. In addition, shareholder approval
is required for any material amendment of the Plan.
ARTICLE 9: RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall confer on a Participant any right to continue in
Dresser's employment or in any way affect Dresser's right to terminate the
Participant's employment without prior notice at any time for any or no reason.
A-4
<PAGE>
ARTICLE 10: WITHHOLDING
Dresser shall meet the tax withholding obligations imposed by any government
with respect to grants of Restricted Stock, or the lapse of restrictions on such
stock. To meet this obligation, Dresser may withhold from other cash payments
due the Participant. If the amount so withheld is not sufficient, Dresser will
withhold from any distribution of stock released to the Participant in
accordance with Article 6 a number of shares with a market value not less than
the withholding obligation and cancel (in whole or in part) the shares so
withheld in order to reimburse Dresser for the payment of withholding taxes.
ARTICLE 11: FORCE AND EFFECT
The various provisions of this Plan are severable in their entirety. Any
determination of invalidity or unenforceability of any one provision shall have
no effect on the continuing force and effect of the remaining provisions.
ARTICLE 12: PREVAILING LAWS
This Plan shall be construed and enforced in accordance with and governed by
the laws of the State of Texas, to the extent not governed by the laws of the
State of Delaware applicable to corporations and the issuance of stock by
Delaware corporations.
A-5
<PAGE>
EXHIBIT B
DRESSER INDUSTRIES, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE.
The principal purposes of the Dresser Industries, Inc. 1998 Executive
Incentive Compensation Plan (the "Plan") are to provide incentives and rewards
to officers and key employees of Dresser Industries, Inc. ("Dresser"), who have
significant responsibility for the success and growth of Dresser and to assist
Dresser in attracting, motivating, and retaining key employees on a competitive
basis.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Executive Compensation Committee of
the Board of Directors of Dresser (the "Committee"). The Committee shall be
appointed by the Board of Directors and shall consist of two or more outside,
disinterested members of the Board.
The Committee shall have the authority to select the persons to be granted
awards under the Plan, to determine when awards will be granted, to determine
whether objectives and conditions for earning awards have been met, to determine
whether awards will be paid at the end of the award period or deferred, and
determine whether an award or payment of an award should be reduced or
eliminated.
The Committee shall have the authority to administer and interpret the Plan
and to adopt rules, regulations, agreements and guidelines for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable. The Committee's interpretations of the Plan, and
all actions taken and determinations made by the Committee shall be conclusive
and binding on all parties concerned, including Dresser, its shareholders and
any person receiving an award under the Plan.
3. ELIGIBILITY.
Executive officers of Dresser will be granted awards under the Plan. The
Committee, in its discretion, may also grant awards to other key employees.
B-1
<PAGE>
4. AWARDS.
(a) TYPES OF AWARDS. Executive officers of Dresser shall be granted annual
incentive awards under this Plan in November of each year, however, if an
individual becomes an executive officer during a year that individual shall be
granted an incentive award for that year upon his or her becoming an executive
officer. The Committee may, in its discretion, grant annual incentive awards to
other key employees.
(b) EXPECTED IMPROVEMENT TARGET. The Committee will establish a target
Economic Value Added ("EVA") Expected Improvement, which will be the basis for
determining Earned Awards under this Plan. The Committee may establish other
target(s) from time to time.
(c) TARGET AWARD. The level of award generated for achievement of the
Expected Improvement Target. Target Award levels are based on market data, by
position, and stated as a percent of base salary.
(d) EARNED AWARD. The level of award generated based on actual EVA
Improvement.
(e) NO MINIMUM OR MAXIMUM AWARDS. The plan has no floor or cap on the
level of Earned Awards.
(f) RESERVE BALANCE. Reserve Balances are not paid in the current year but
rather carried forward and added to the next year's Earned Award to determine
the Paid Award as described in 4(g) below. The Reserve Balance is designed to
promote sustained performance as well as minimize the peaks and troughs of
business cycles.
(g) PAID AWARD. An amount determined by adding the Earned Award to the
opening Reserve Balance from the prior year, as follows:
(i) If the sum of the Earned Award and the opening Reserve Balance is
greater than the Target Award, the Paid Award is an amount equal to
the Target Award plus one-third of the excess above the Target
Award. The new Reserve Balance is an amount equal to two-thirds of
the excess above the Target Award.
Should a calculated Paid Award exceed five million dollars
($5,000,000), the maximum Paid Award will be five million dollars
($5,000,000) and the excess credited to the Reserve Balance.
(ii) If the sum of the Earned Award and the opening Reserve Balance is
greater than zero and less than or equal to the Target Award, the
Paid Award is an amount equal to the
B-2
<PAGE>
4. AWARDS. (CONTINUED)
sum of the Earned Award and the opening Reserve Balance. The new
Reserve Balance is zero.
(iii) If the sum of the Earned Award and the opening Reserve Balance is
negative, the Paid Award is zero. The new Reserve Balance is the
sum of the Earned Award and the opening Reserve Balance. No Awards
are paid when the Reserve Balance is negative and negative Reserve
Balances are carried forward to offset future Earned Awards.
(h) PAYMENT OF AWARDS. Paid Awards will be payable in cash each year upon
certification by the Committee that Dresser achieved the specified performance
target for the preceding year.
(i) DISCRETION. The Committee has the discretion, by participant, to
reduce some or all of an award that would be otherwise earned and/or paid.
5. MISCELLANEOUS PROVISIONS.
(a) GUIDELINES. The Committee shall adopt from time to time written
policies for its implementation of the Plan.
(b) CHANGE OF STATUS DURING PLAN YEAR. Awards will not be earned by
employees who are discharged during the Plan Year. Pro rata awards MAY be earned
by a newly hired, transferred, promoted, demoted, disabled or resigned employee.
Pro rata awards will be earned by employees who retired or died during the Plan
Year.
(c) RESERVE ACCOUNT UPON TERMINATION. The Reserve Balance shall be paid to
an employee in the event of termination due to normal or early retirement, death
or disability. Determination of final Paid Award and distribution of Reserve
Balance, if any, will be made the end of the fiscal year following termination.
Any Reserve Balance will be forfeited upon termination for cause or resignation,
except as determined by the Committee.
(d) WITHHOLDING TAXES. Dresser shall have the right to deduct from all
awards any federal, state, local or foreign taxes required by law to be
withheld.
(e) NO RIGHTS TO AWARDS. Except as stated, no employee or other person
shall have any claim or right to be granted an award under the Plan. Neither the
Plan nor any action taken shall be construed as giving any employee any right to
be retained in the employ of Dresser or any of its subsidiaries, divisions or
affiliates.
B-3
<PAGE>
5. MISCELLANEOUS PROVISIONS. (CONTINUED)
(f) COSTS AND EXPENSES. The cost and expenses of administering the Plan
shall be paid by Dresser and not charged to any award nor to any employee
receiving an award.
(g) FUNDING OF PLAN. The Plan shall be unfunded. Dresser shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any award under the Plan.
6. EFFECTIVE DATE, AMENDMENTS AND TERMINATION.
(a) EFFECTIVE DATE. Once approved by Dresser's shareholders, the Plan
shall become effective for the 1998 fiscal year.
(b) AMENDMENTS. The Committee may at any time terminate or from time to
time amend the Plan in whole or in part, but no such action shall adversely
affect any rights or obligations with respect to any awards theretofore made
under the Plan.
Unless the shareholders of Dresser have first approved, no amendment of the
Plan shall be effective which would modify the requirements for eligibility, the
business criteria on which the performance goal is based or the maximum amount
of compensation that could be paid to any participant.
(c) TERMINATION. No awards shall be earned under the Plan after October
31, 2002.
B-4
<PAGE>
--------------------------------
--------------------------------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD
MARCH 19, 1998
AND
PROXY STATEMENT
[LOGO]
DRESSER INDUSTRIES, INC.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
--------------------------------------
--------------------------------------
<PAGE>
DRESSER INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
WILLIAM E. BRADFORD and DONALD C. VAUGHN, or either of them, with power
of substitution to each, are hereby authorized to represent the undersigned
at the Annual Meeting of Shareholders of Dresser Industries, Inc., to be held
in the Horchow Auditorium of the Dallas Museum of Art, 1717 North Harwood
Street, Dallas, Texas, on March 19, 1998 at 10:00 a.m., and to vote the
number of shares which the undersigned would be entitled to vote if
personally present on all matters properly coming before the meeting or
any adjournment thereof. The proxies are authorized to vote in their
discretion upon such other business as may properly come before the Meeting
and any and all adjournments thereof.
To vote in accordance with the Board of Directors' recommendation, just
sign the reverse side, no boxes need to be checked.
This proxy will be voted as you direct; in the absence of such
direction, it will be voted "FOR" all nominees.
(Continued and to be dated and signed on the reverse side.)
DRESSER INDUSTRIES, INC.
P.O. BOX 11113
NEW YORK, N.Y. 10203-0113
<PAGE>
<TABLE>
<S> <C> <C>
The Board of Directors recommends a vote "FOR" Proposals 1, 2 and 3.
(1) ELECTION OF DIRECTORS: FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
listed below / / for all nominees listed below / / / /
Nominees: W. Bradford, L. Eagleburger, S. Earle, J. Gavin, R. Hunt, L. Martin, L. Olmer, J. Precourt, and D. Vaughn
[INSTRUCTIONS: To withhold authority to vote for any one or more individual nominees, mark the "Exceptions" box and
write the nominee name(s) in the space provided below.]
*Exceptions
--------------------------------------------------------------------------------------------------------
(2) THE LONG-TERM INCENTIVE AND RETENTION PLAN. (3) THE 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
This proxy will be voted as you direct, in the absence
of such direction, it will be voted "FOR" Proposals 1, 2 and 3.
CHANGE OF ADDRESS AND
OR COMMENTS MARKED HERE / /
Please sign your name as it appears hereon. Joint owners should
each sign. Executors, administrators, Trustees, etc. should give
full title, as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer.
DATED: , 1998
--------------------------------------------
- --------------------------------------------------------
Signature
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
