SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section 240.14a-12
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JUSTIN INDUSTRIES, INC.
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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March 12, 1999
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Justin Industries, Inc. The meeting will be held on the 12th Floor of the Fort
Worth Club Building, 306 West Seventh Street, Fort Worth, Texas at 10:30 a.m. on
Friday, April 16, 1999.
The Notice of Meeting and Proxy Statement on the following pages cover the
formal requirements for the business of the meeting. Whether or not you find it
possible to attend the meeting personally, we hope you will have your stock
represented by signing your proxy exactly as your name appears thereon and
returning it promptly.
We will have a social period prior to the meeting, beginning at 10:00 a.m.,
to provide an opportunity for shareholders to talk informally with our Officers
and Directors.
Sincerely yours,
/S/JOHN JUSTIN
Chairman of the Board and
Chief Executive Officer
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JUSTIN INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING FRIDAY, APRIL 16, 1999
10:30 a.m.
TO THE SHAREHOLDERS OF JUSTIN INDUSTRIES, INC.:
Notice is hereby given that the annual meeting of the shareholders of Justin
Industries, Inc., a Texas corporation, will be held at 10:30 a.m., Friday, April
16, 1999, on the 12th Floor of the Fort Worth Club Building, 306 West Seventh
Street, Fort Worth, Texas, for the following purposes:
1. To elect a board of eight (8) directors.
2. To approve the 1999 Performance Incentive Plan.
3. To transact such other business as may properly be brought before the
meeting or any adjournments or postponements thereof.
Only Shareholders of record at the close of business on February 23, 1999,
are entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Shareholders are invited to attend the meeting. Whether or not you expect to
attend, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you may vote your
shares in person, after revoking your proxy.
If your shares are held of record by a broker, bank or other nominee and you
wish to attend the meeting, you should obtain a letter from the broker, bank or
other nominee confirming your beneficial ownership of the shares and bring it to
the meeting. In order to vote your shares at the meeting, you must obtain from
the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
BY ORDER OF THE BOARD OF DIRECTORS
Richard J. Savitz
Secretary
March 12, 1999
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JUSTIN INDUSTRIES, INC.
P. O. Box 425
2821 West Seventh Street
Fort Worth, Texas 76101
________________
PROXY STATEMENT
_______________
ANNUAL MEETING OF SHAREHOLDERS
April 16, 1999
This Proxy Statement is furnished by Justin Industries, Inc., a Texas
corporation (the "Company"), to the holders of outstanding shares of the Common
Stock, par value $2.50 per share, of the Company (the "Common Stock") in
connection with the solicitation of proxies by the Company for use at the annual
meeting of shareholders (the "Meeting") to be held on April 16, 1999, and at any
and all adjournments or postponements thereof. This Proxy Statement and the
enclosed proxy card are first being mailed to shareholders on or about March 12,
1999.
THE MEETING
Record Date, Quorum and Voting
The Board of Directors (the "Board") has established the close of business
on February 23, 1999 as the record date (the "Record Date") for determining
shareholders entitled to notice of and to vote at the Meeting or any
adjournments or postponements thereof. At the close of business on such record
date, there were 25,666,887 shares of Common Stock and 100 shares of Series Two
Convertible Voting Preferred Stock, par value $2.50 per share (the "Preferred
Stock"), issued and outstanding. The holders of Common Stock and Preferred
Stock vote together as a single class on all business, including the election of
directors, that properly comes before the Meeting, with each outstanding share
of Common Stock and each outstanding share of Preferred Stock entitled to one
vote. The holders of a majority of a combination of the Common Stock and
Preferred Stock issued and outstanding and entitled to vote at the Meeting must
be represented in person or by proxy in order to constitute a quorum for the
transaction of business.
Shares represented by the enclosed proxy card will be voted in accordance
with the directions indicated thereon, or, if no direction is indicated, in
accordance with the recommendations of the Board contained in this Proxy
Statement as to all shares represented by that proxy card. Any shareholder
executing and delivering the enclosed proxy card may revoke such action by duly
executing a later-dated proxy or an instrument expressly revoking the proxy, or
by declaring its revocation at the Meeting. The persons named as proxies in the
proxy card were selected by the Board and are currently directors of the
Company.
Management knows of no matters to be presented for action at the Meeting
other than those specified in this Proxy Statement and the accompanying Notice
of Annual Meeting. Should any other matter properly come before the Meeting,
proxies will be voted upon these other matters in accordance with the best
judgment of the persons voting such proxies.
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VOTING SECURITIES OUTSTANDING
The following table provides information as to the beneficial ownership of
the Company's Common Stock by each director, the Chief Executive Officer and the
four other most highly compensated executive officers, all directors and
executive officers as a group, and each other person who beneficially owns 5% or
more of the outstanding Common Stock as of the Record Date. In addition, John
Justin owns all the 100 outstanding shares of the Company's Preferred Stock.
Shares of Percent
Common Stock of
Name and Address Beneficially Common
of Beneficial Owner Owned Stock
------------------- ------------ --------
John Justin 5,193,286 (1) 20.23%
J. T. Dickenson 180,087 (2) .70
Marvin Gearhart 13,374 (9) .05
Robert E. Glaze 12,532 (9) .05
Dee J. Kelly 251,046 (3) .98
Joseph R. Musolino 11,250 (9) .04
John V. Roach 30,750 (9) .12
Dr. William E. Tucker 27,450 (9) .11
Richard J. Savitz 192,426 (4) .75
Edward L. Stout, Jr. 304,228 (5) 1.19
Judy B. Hunter 40,573 (6) .16
c/o Justin Industries, Inc.
2821 West Seventh Street
Fort Worth, Texas 76107
All Directors and Executive Officers
as a Group (11 persons) 6,257,002 (7) 24.38
Holders of more than 5% of the Common
Stock:
John Justin 5,193,286 (1) 20.23
Justin Industries, Inc.
2821 West Seventh Street
Fort Worth, Texas 76107
Justin Industries, Inc. Employee
Stock Ownership Plan 2,958,483 (8) 11.53
c/o Merrill Lynch, as Trustee
265 Davidson Avenue, Fourth Floor
Somerset, New Jersey 08873
Page 2
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(1) Includes 32,512 of which Mr. Justin is owner of record and beneficially; 428
shares of which Mr. Justin has a vested interest pursuant to the Justin
Industries, Inc. Employee Stock Ownership Plan (the "ESOP"); 102,552 shares
with respect to which Mr. Justin holds currently exercisable stock options;
2,826 shares which Mr. Justin may acquire upon conversion of the 100 shares
of Preferred Stock held by him; 4,655,067 shares owned beneficially by
reason of Mr. Justin's position as Trustee of the John and Jane Justin
Charitable Remainder Unitrust; and 399,901 shares owned beneficially by
reason of Mr. Justin's position as Trustee of the John S. Justin Charitable
Remainder Trust.
(2) Includes 75,586 shares of which Mr. Dickenson is owner of record and
beneficially; 4,214 shares of which Mr. Dickenson's wife is owner of record
and beneficially to which Mr. Dickenson disclaims beneficial ownership;
27,387 shares of which Mr. Dickenson has a vested interest pursuant to the
Company's ESOP; and 72,900 shares with respect to which Mr. Dickenson holds
presently exercisable stock options. The shares of stock included in the
table do not include 399,901 shares of stock that may be considered
beneficially owned by reason of Mr. Dickenson's position as Trustee of the
John S. Justin Charitable Remainder Trust.
(3) Includes 150,132 shares of which Mr. Kelly is owner of record and
beneficially; 91,914 shares owned by the Dee Kelly Corporation with respect
to which Mr. Kelly disclaims beneficial ownership of 30% or 27,574 shares by
virtue of the equity interest of Mr. Kelly's three children in this
corporation; and 9,000 shares with respect to which Mr. Kelly holds
presently exercisable stock options.
(4) Includes 100,000 shares of which Mr. Savitz is owner of record and
beneficially; 35,366 shares of which Mr. Savitz has a vested interest
pursuant to the Company's ESOP; and 57,060 shares with respect to which Mr.
Savitz holds presently exercisable stock options.
(5) Includes 179,635 shares of which Mr. Stout is owner of record and
beneficially; 20,000 shares of which Mr. Stout's wife is owner of record and
beneficially to which Mr. Stout disclaims beneficial ownership; 37,493
shares of which Mr. Stout has a vested interest pursuant to the Company's
ESOP; and 67,100 shares with respect to which Mr. Stout holds presently
exercisable stock options.
(6) Includes 7,500 shares of which Ms. Hunter is owner of record and
beneficially; 5,373 shares of which Ms. Hunter has a vested interest
pursuant to the Company's ESOP; and 27,700 shares with respect to which Ms.
Hunter holds presently exercisable stock options.
(7) Includes 106,048 shares in which a vested interest is owned pursuant to the
Company's ESOP and 372,312 shares with respect to which currently
exercisable stock options are held. Directors and executive officers
disclaim any beneficial ownership of shares that are beneficially owned by
family members.
(8) The shares of Common Stock held by the Company's ESOP will be voted by
Merrill Lynch Pierce Fenner & Smith, as Trustee of the ESOP, which will
exercise its independent fiduciary judgment as Trustee to act solely in the
interests of the ESOP's participants, taking into account, among other
facts, the provisions of the ESOP to the effect that shares as to which no
voting instructions are received from ESOP participants are to be voted in
the same proportion as are shares for which voting instructions are
received.
(9) Includes 9,000 shares for each non-employee director with respect to which
each non-employee director holds presently exercisable stock options.
Page 3
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ELECTION OF DIRECTORS
Assuming the presence of a quorum, directors will be elected by the
affirmative vote of the holders of a plurality of the of the shares represented
at the Meeting and entitled to vote in the election of directors. Abstentions
and broker non-votes will be counted as present and entitled to vote in
determining whether a quorum is present. Abstentions and broker non-votes,
however, will not be treated as a vote for or against a particular nominee and
therefore will not affect the outcome of the election of directors. Each
director nominee so elected will hold office until such nominee's successor has
been elected and qualified. The proxies given to the persons named in the
enclosed proxy card will be voted for the election of the nominees listed below.
In case of the inability of any of the nominees to serve, such proxies will be
voted for the balance of those named and for substitute nominees, but the Board
now knows of no reason to anticipate that any substitutions will occur.
Directors elected at the Meeting cannot be removed prior to the next annual
meeting except by a majority vote of the shareholders at any meeting at which a
quorum of shareholders is present. In October 1998, Mr. Friedman passed away.
No replacement for his position on the Board is presently proposed.
The Board unanimously recommends a vote FOR the nominees listed below.
The Board has the responsibility for establishing broad corporate policies
and for the overall performance of the Company, although it is not involved in
day-to-day operations. Members of the Board are kept informed of the Company's
business by various reports and documents sent to them each month, as well as by
operating and financial reports made by the Chairman and other officers at Board
and Committee meetings. During 1998, the Board held five meetings.
The Board has appointed an Audit Committee consisting of three non-employee
directors, Messrs. Gearhart, Glaze and Friedman. Mr. Musolino replaced Mr.
Friedman in December 1998. This Committee is responsible for matters relating
to accounting policies and practices, financial reporting and internal controls.
Each year it recommends to the Board the appointment of a firm of independent
accountants to examine the financial statements of the Company. The Committee
reviews with representatives of the independent accountants the scope of the
examination of the Company's financial statements, results of that examination
and any recommendations with respect to internal controls and financial matters.
In fulfilling its responsibility, it periodically meets with and receives
reports from the Company's management. The Audit Committee met once in 1998.
The Compensation Committee of the Board consists of two non-employee
directors, Messrs. Roach and Tucker. This Committee sets the compensation of
all elected officers, administers the Company's Stock Option Plans, including
the granting of awards under the Plans (except for the Director Plan), and
recommends awards of discretionary bonuses, based on earnings or other
performance criteria, for approval by the full Board. The Compensation
Committee met twice in 1998.
During 1998, the Board appointed a Strategic Planning Committee consisting of
three directors, Messrs. Roach, Friedman, and Dickenson. Mr. Tucker replaced
Mr. Friedman in December 1998. This Committee is responsible for oversight of
long-range strategic planning for the company. The committee will meet
periodically and receive reports from the Company's management. The Strategic
Planning Committee met four times during 1998.
Each member of the Board attended 100% of all meetings of the Board. Each
member of the Board attended 100% of all meetings of the Committees on which he
served, except Mr. Friedman who attended 75% of the Strategic Planning Committee
meetings.
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The names of the Board's director nominees, the year that each nominee first
became a director and certain other information about each nominee are set forth
below:
First
Name, Age and Business Principal Occupation Elected
Address During the Last Five Years Director
- -------------------------- ------------------------------- ----------
John Justin (82) Chairman of the Board and Chief 1968
Justin Industries, Inc. Executive Officer of the
2821 West Seventh Street Company
Fort Worth, Texas 76107
J. T. Dickenson (69) President and Chief Operating 1991
Justin Industries, Inc. Officer of the Company
2821 West Seventh Street
Fort Worth, Texas 76107
Marvin Gearhart (71) Chairman of the Board and Chief 1981
7601 Will Rogers Blvd. Executive Officer of Rock Bit
Fort Worth, Texas 76140 International, Inc. (a
manufacturer of drilling bits);
a director of Dailey
International, Inc. (a oil and
gas services company)
Robert E. Glaze (79) Personal investments; also a 1969
8111 Preston Road director of Calloway's Nursery,
Suite 707 Inc. (a retail nursery)
Dallas, Texas 75225
Dee J. Kelly (70) Shareholder and director of the 1986
201 Main Street law firm of Kelly, Hart &
Suite 2500 Hallman (a professional
Fort Worth, Texas 76102 corporation); a director of AMR
Corp. (an airline holding
company); and a director of The
SABRE Group Holdings, Inc. (a
software company)
Joseph R. Musolino (61) Vice Chairman, Texas, 1986
NationsBank, N.A. NationsBank, N.A. (a commercial
700 Louisiana Street bank); also a director of Pool
Houston, Texas 77002 Energy Services, Inc. (an
energy services company)
John V. Roach (60) Chairman, Tandy Corporation; 1982
100 Throckmorton prior to January 1, 1999,
Suite 480 Chairman and Chief Executive
Fort Worth, Texas 76102 Officer, Tandy Corporation (a
consumer electronics company)
Dr. William E. Tucker (66) Personal investments; Director 1981
100 Throckmorton of Tandy Corporation; prior to
Suite 416 July 1, 1998, Chancellor, Texas
Fort Worth, Texas 76102 Christian University
Page 5
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the last three years to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers, based on salary and bonus earned during 1998.
Long-Term All Other
Compen- Compen-
Annual Compensation sation sation
------------------- ---------- --------
Awards
----------
No. of
Securities
Name and Underlying
Principal Position Year Salary Bonus Options (a)
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John Justin 1998 $620,000 $248,000 22,500 $4,660
Chairman of the Board & 1997 600,000 288,000 22,500 4,410
Chief Executive Officer 1996 575,000 132,250 15,000 4,410
J. T. Dickenson 1998 365,000 146,000 18,000 4,660
President & Chief 1997 350,000 168,000 18,000 4,410
Operating Officer 1996 335,000 77,050 12,000 4,410
Richard J. Savitz 1998 225,000 90,000 15,000 4,660
Vice President - Finance, 1997 213,000 102,240 15,000 4,410
Treasurer and Secretary 1996 204,000 46,920 10,000 4,410
Edward L. Stout, Jr. 1998 300,000 213,000 15,000 4,660
Vice President - Brick 1997 261,000 164,840 15,000 4,410
1996 250,000 237,500 10,000 4,410
Judy B. Hunter 1998 120,000 48,000 12,000 4,426
Vice President - 1997 105,000 50,400 12,000 3,730
Controller 1996 100,000 23,000 8,000 2,998
(a) Amounts include Company ESOP matching contributions paid or accrued on
behalf of Messrs. Justin, Dickenson, Savitz, and Stout of $4,000 in 1998 and
$3,750 in 1996-1997. For Ms. Hunter, Company ESOP matching contributions
paid or accrued were $3,766, $3,070, and $2,998 in 1998, 1997 and 1996,
respectively. In addition, $660 is reflected in each year and for each
named executive officer representing Company paid premiums for $100,000 of
term life insurance coverage, except in 1996 for Ms. Hunter.
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Approval of the 1999 Performance Incentive Plan
On December 16, 1998, the Board adopted the 1999 Performance Incentive Plan
(the "1999 Plan"), subject to shareholder approval. A copy of the 1999 Plan is
attached hereto as Exhibit A. Assuming the presence of a quorum, the
affirmative vote of the holders of a majority of the shares present and entitled
to vote on the matter is required for the approval of the 1999 Plan. Broker
non-votes will not be counted in determining the number of shares voted for or
against the approval of the 1999 Plan, and therefore will be disregarded. A
shareholder's abstention from voting will be counted as present and voting for
purposes of approval of the 1999 Plan, thus having the effect of a vote against
the 1999 Plan.
The Board unanimously recommends a vote FOR approval of the 1999 Plan.
The 1999 Plan is intended to replace the Company's 1992 Stock Option Plan
(the "1992 Plan"). Subject to shareholder approval of the 1999 Plan, options
will be primarily granted under the 1999 Plan, but may also be granted under the
1992 Plan when shares become available as a result of the termination or
cancellation of options previously granted under the 1992 Plan. Under the
proposed 1999 Plan, the Company may grant to key employees stock options, stock
appreciation rights, restricted stock, and other stock-based awards, as well as
cash-based annual and long-term incentive awards. The Board believes that the
1999 Plan will form an important part of the Company's overall compensation
program. The Board further believes that the 1999 Plan will attract, motivate
and retain key employees and will give the Company the ability to provide those
employees with incentives that are directly linked to the profitability of the
Company's businesses and increases in shareholder value. The following general
description of certain features of the 1999 Plan is qualified in its entirety by
reference to Exhibit A.
Eligibility. Officers and other key salaried employees of the Company, its
subsidiaries and its affiliates who are responsible for or contribute to the
management, growth and profitability of the Company, its subsidiaries and
affiliates will be eligible to receive awards under the 1999 Plan. No
determination has been made as to which of the Company's eligible employees
(currently, approximately 150) will receive grants under the 1999 Plan and,
therefore, the benefits to be allocated to any individual or to various groups
of employees are not presently determinable.
Administration. It is currently anticipated that the 1999 Plan will be
administered by the Compensation Committee. This Committee will select the
individuals to whom awards will be granted and will set the terms of such
awards. The Committee may delegate its authority under the 1999 Plan to
officers of the Company, subject to Board-approved guidelines, with respect to
employees who are not "executive officers" of the Company.
Shares Reserved for Distribution. Up to 1,000,000 shares of Common Stock
may be issued under the 1999 Plan. The total number of shares of Restricted
Stock and other shares of Common Stock subject to or underlying Stock Options,
SARS and Other Stock-Based Awards awarded to any participant during the term of
this Plan shall not exceed 20% of the shares of the Common Stock reserved for
distribution pursuant to the Plan. The shares of Common Stock subject to any
award that terminates, expires or is cashed out without payment being made in
the form of Common Stock will again be available for distribution under the 1999
Plan, as will shares that are used by an employee to pay withholding taxes or as
payment for the exercise price of an award. In the event of any change in
corporate structure affecting the Common Stock, the Board is authorized to make
adjustments in the number and kind of shares reserved for issuance under the
1999 Plan that are consistent with the treatment of shares of Common Stock that
are not subject to the 1999 Plan.
Cash-Based Annual and Long-Term Incentive Awards. Cash-based annual and
long-term incentive awards may be granted under the 1999 Plan. Such awards will
be earned only if corporate, business unit or individual performance objectives
over performance cycles established by or under the direction of the
Compensation Committee are met. The performance objectives may vary from
participant to participant, group to group and period to period. The
performance objectives for awards that are intended to constitute "qualified
performance-based compensation" (see discussion below under the heading Federal
Income Tax Consequences) will be based upon one or more of the following:
earnings per share, total shareholder return, operating income, net income, cash
flow, return on equity, return on capital, economic value added measures, stock
price and return on sales.
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Stock Options. The 1999 Plan will permit the granting of incentive stock
options ("ISOs"), which qualify for special tax treatment, and nonqualified
stock options. The exercise price for ISOs will not be less than the fair
market value of Common Stock on the date of grant. The 1999 Plan permits the
Compensation Committee to elect to cancel an option upon exercise by the holder
and pay the holder, in cash or Common Stock, the difference between the fair
market value of the shares covered by the option and the exercise price.
Stock Appreciation Rights ("SARs"). SARs may also be granted either singly
or in combination with underlying stock options. SARs entitle the holder upon
exercise to receive an amount in any combination of cash or Common Stock (as
determined by the Compensation Committee) equal in value to the excess of the
fair market value of the shares covered by such right over the grant price. The
grant price for SARs will not be less than the fair market value of the Common
Stock on the date of grant.
Restricted Stock. Shares of restricted Common Stock may also be awarded.
The restricted stock would vest and become transferable upon the satisfaction of
conditions set forth in the applicable award agreement. Restricted stock awards
may be subject to forfeiture if, for example, the recipient's employment
terminates before the award vests. Except as specified at the time of grant,
holders of restricted stock will have voting rights and the right to receive
dividends on their restricted shares.
Other Stock-Based Awards. The 1999 Plan also provides for awards that are
denominated in, valued by reference to, or otherwise based on or related to,
Common Stock. These awards may include, without limitation, performance shares
and restricted stock units entitle the recipient to receive, upon satisfaction
of performance goals or other conditions, a specified number of shares of Common
Stock or the cash equivalent thereof.
Change in Control Provisions. The 1999 Plan provides that in the event of a
"Change in Control" (as defined in the plan), all stock options and SARs will
become immediately exercisable, the restrictions applicable to outstanding
restricted stock and other stock-based awards will lapse, and, unless otherwise
determined by the Compensation Committee, the value of outstanding stock
options, SARs, restricted stock and other stock-based awards will be cashed out
on the basis of the highest price paid (or offered) during the preceding 60-day
period. In addition, outstanding incentive awards will be vested and paid out
on a prorated basis, based on the maximum award opportunity of such awards and
the number of months elapsed compared with the total number of months in the
performance cycle.
Federal Income Tax Consequences. (i) Nonqualified stock options granted
under the 1999 Plan are not taxable to an employee at grant but result in
taxation at exercise, at which time the employee will recognize ordinary income
in an amount equal to the difference between the option exercise price and the
fair market value of the shares on the exercise date. The Company will be
entitled to deduct a corresponding amount as a business expense in the year the
employee recognizes this income.
(ii) An employee will generally not recognize income on receipt or exercise
of an ISO as long as he or she has been an employee of the Company or its
subsidiaries from the date the option was granted until three months before the
date of exercise; however, the amount by which the fair market value of the
stock at the time of exercise exceeds the option price is a required adjustment
for purposes of the alternative minimum tax applicable to the employee. If the
employee holds the stock received on exercise of the option for one year after
exercise (and for two years from the date of grant of the option), any
difference between the amount realized upon the disposition of the stock and the
amount paid for the stock will be treated as long-term capital gain (or loss, if
applicable) to the employee. If the employee exercises an ISO and satisfies
these holding period requirements, the Company may not deduct any amount in
connection with the ISO.
In contrast, if an employee exercises an ISO but does not satisfy the
holding period requirements with respect to the stock acquired on exercise, the
employee generally will recognize ordinary income in the year of the disposition
equal to the excess, if any, of the fair market value of the stock on the date
of exercise over the option price; and any excess of the amount realized on the
disposition over the fair market value on the date of exercise will be taxed as
long- or short-term capital gain (as applicable). If, however, the fair market
value of the stock on the date of disposition is less than on the date of
exercise, the employee will recognize ordinary income equal only to the
difference between the amount realized on disposition and the option price. In
either event, the Company will be entitled to deduct an amount equal to the
amount constituting ordinary income to the employee in the year of the premature
disposition.
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(iii) There are no immediate tax consequences to an employee when a SAR is
granted. When an employee exercises the right to the appreciation in fair
market value of stock represented by a SAR, payments made, whether in cash or
stock, are includible in the employee's gross income. The Company will be
entitled to deduct the same amount as a business expense at the time. When
payments are made in stock, the includible amount and corresponding deduction
equal the fair market value of the stock on the date of exercise.
(iv) The federal income tax consequences of restricted stock awards depend
on the restrictions imposed on the stock. Generally, the fair market value of
the stock received will be includible in the employee's gross income at receipt
unless the property is subject to a substantial risk or forfeiture (and is
either nontransferable or after transfer remains subject to such risk of
forfeiture). In this case, taxation will be deferred until the first taxable
year the stock is no longer subject to substantial risk of forfeiture. The
employee may, however, make a tax election to include the value of the stock in
gross income in the year of receipt despite such restrictions. Generally, the
Company will be entitled to deduct the fair market value of the stock
transferred to the employee as a business expense in the year the employee
includes the compensation in income.
(v) Any cash payments or the fair market value of any Common Stock or other
property an employee receives in connection with other stock-based awards,
incentive awards, or as unrestricted payments equivalent to dividends on
unfunded awards or on restricted stock are includible in income in the year
received or made available to the employee without substantial limitations or
restrictions. Generally, the Company will be entitled to deduct the amount the
employee includes in income as a business expense in the year of payment.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a $1
million annual limit on the deductible compensation of certain executives of
publicly traded corporations. The limit, however, does not apply to "qualified
performance-based compensation." The Company believes that awards of options,
SARs and certain other "performance-based compensation" awards under the 1999
Plan will qualify for the performance-based compensation exception to the
deductibility limit, assuming that the 1999 Plan is approved by the
shareholders.
State tax consequences may in some cases differ from those described above.
Other Information. If approved by shareholders, the 1999 Plan will be
effective as of the date of its adoption by the Board, December 16, 1998, and
will expire on December 15, 2008, unless terminated earlier, or extended, by the
Board. Any awards granted before the 1999 Plan expires or is terminated may
extend beyond the expiration or termination date. The Board may amend the 1999
Plan at any time, provided that no such amendment will be made without
shareholder approval if such approval is required under applicable law, or if
such amendment would: (i) decrease the minimum exercise or grant price for
stock options, SARs and similar awards to less than the fair market value on the
date of grant; or (ii) increase the number of shares that may be issued under
the plan.
The 1999 Plan provides that awards are not transferable except (i) in the
event of the participant's death, (ii) as otherwise required by law, (iii) as a
result of the disability of a participant or (iv) that the Compensation
Committee may permit transfers of awards by gift or otherwise to a member of a
participant's immediate family, or to such other persons or entities as may be
approved by the Compensation Committee. Other terms and conditions of each
award will be set forth in award agreements, which can be amended by the
Committee. The Compensation Committee may require or permit deferral of the
payment of awards and may provide for the payment of interest or other earnings
on deferred amounts or the payment of dividend equivalents where the deferred
amounts are denominated in stock equivalents. Awards under the 1999 Plan may
earn dividends or dividend equivalents, as determined by the Compensation
Committee.
Under the 1999 Plan, no employee may receive awards that cover in the
aggregate more than 10% of the shares reserved for distribution. The value of
an employee's annual incentive award may not exceed $1,000,000; individual long-
term incentive awards are limited to $500,000 times the number of years in the
applicable performance cycle.
Page 9
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It is presently intended that the 1999 Plan constitute an "unfunded" plan
for incentive compensation. The plan authorizes the creation of trusts and
other arrangements to facilitate or ensure payment of the Company's obligations.
On March 3, 1999, the closing price of the Common Stock as reported on the
Nasdaq National Market System was $10.75.
STOCK OPTION PLANS
Option Grants During 1998
The following table provides information related to options granted to the
named executive officers during 1998.
Individual Grants
- -----------------------------------------------------------------
No. of % of Total
Securites Options
Underlying Granted to Exercise Grant
Options Employees Or Base Expira- Date
Granted In Fiscal Price Per tion Value
Name (a)(b) Year Share (c) Date (d)
- -------------------- ---------- ---------- --------- -------- -------
John Justin 22,500 8.41% $11.75 12/17/08 $99,225
J. T. Dickenson 18,000 6.73 11.75 12/17/08 79,380
Richard J. Savitz 15,000 5.61 11.75 12/17/08 66,150
Edward L. Stout, Jr. 15,000 5.61 11.75 12/17/08 66,150
Judy B. Hunter 12,000 4.49 11.75 12/17/08 52,920
(a) Options vest at 20% per year on the first through the fifth anniversary
dates of the grant. If the optionee dies or retires from the Company for
reasons of age or disability, the Compensation Committee may approve the
exercise of all options, whether or not currently vested. In addition, in
the event of a dissolution or liquidation of the Company or a merger or a
consolidation in which the Company is not the surviving corporation, each
optionee has the right to exercise all options granted at least one year
prior to the event, whether or not vested.
(b) Options granted are for a term of 10 years, subject to earlier termination
in certain events related to termination of employment.
(c) All options above were granted at market value at date of grant. The
exercise price and tax withholding obligations related to exercise may be
paid by cash, delivery of already owned shares, offset of the underlying
shares, or a combination of any of the foregoing, subject to certain
conditions in the case of current stock holdings.
(d) Grant date value for these options was estimated at the date of grant using
a binomial option pricing model with the following assumptions: risk-free
interest rate of 6.4%; dividend yield of 1.5%; volatility factors of the
expected market price of the Company's common stock of .342; and a weighted-
average expected life of the option of five and one half years.
Binomial option valuation models are used in estimating the fair value of
traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options. In addition, gains are reported net of the option exercise price,
but before taxes associated with the exercise. Actual gains, if any, on
stock option exercises are dependent on the future performance of the Common
Stock, overall stock market conditions, as well as the optionholders'
continued employment through the vesting period. The amounts reflected in
this table may not be necessarily achieved.
Page 10
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Option Exercises During 1998 and Year End Option Values
The following table provides information related to options exercised and
options available at year end to the named executive officers.
No. of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Fiscal Options at
Shares Year-End Fiscal Year-End
Acquired Value ----------------- -----------------
on Realized Exer- Unexer- Exer- Unexer-
Name Exercise (a) cisable cisable cisable cisable
- -------------------------------------------------------------------------------
John Justin 31,576 $264,935 102,552 54,000 $492,469 $56,430
J. T. Dickenson 9,000 104,250 72,900 43,200 334,106 45,144
Richard J. Savitz 4,640 39,225 57,060 36,000 249,246 37,620
Edward L. Stout, Jr. --- --- 67,100 36,000 328,760 37,620
Judy B. Hunter --- --- 27,700 28,800 81,440 30,096
(a) Market value of underlying securities at exercise date minus the exercise
price, not reduced for taxes payable upon exercise.
Pension Plan Table
The following table provides information related to the Company's defined
benefit pension plan in which the named executive officers participate.
<TABLE>
<CAPTION>
Average
Compen-
sation Years of Service
- -------- ---------------------------------------------------------------------------------
5 10 15 20 25 30 35 40 50
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$125,000 $7,813 $15,625 $23,438 $31,250 $39,063 $46,875 $54,688 $62,500 $78,125
150,000 9,375 18,750 28,125 37,500 46,875 56,250 65,625 75,000 93,750
175,000 9,625 20,563 31,500 42,438 53,375 64,313 75,250 86,188 108,063
200,000 9,625 22,125 34,625 47,125 59,625 72,125 84,625 97,125 122,125
225,000 9,625 23,688 37,750 51,813 65,875 79,938 94,000 108,063 126,100
250,000
and up 9,625 24,365 39,105 53,845 68,585 83,325 98,065 112,805 126,100
</TABLE>
Compensation covered by the plan includes salary, bonus and deferred
compensation payments up to $160,000 for 1997 and 1998 and $150,000 for 1994-
1996. Gains realized upon exercise of stock options are not covered. The
estimated credited years of service for each of the named executive officers is
as follows: Mr. Justin - 62; Mr. Dickenson - 24; Mr. Savitz - 19; Mr. Stout -
49; and Ms. Hunter - 7.
The normal retirement benefit, at age 65, is calculated based upon each
employee's years of service and final average compensation, reduced by
anticipated social security benefits. Benefit payments are computed using the
straight life annuity method. Certain reductions are made for employees
electing alternative payment options or early retirement. Generally, the
maximum annual benefit payable by the Pension Plan to any one employee upon
retirement is limited to $126,100 in 1998. However, since Mr. Stout and Mr.
Dickenson have exceeded normal retirement age, their benefit will be slightly
higher than the tables indicate above due to delayed receipt of benefits. Mr.
Justin's benefit was determined under special phase-in rules of the Tax Reform
Act of 1986. Payments to Mr. Justin began in April 1988 under minimum
distribution requirements in the annual amount of $114,600. Payments will
continue until the death of either Mr. or Mrs. Justin, with 66.67% thereof
payable for the life of the survivor.
Page 11
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Executive Supplemental Retirement, Death and Disability Income Benefit Program
and Supplemental Executive Retirement Plan of 1992
The Executive Supplemental Retirement, Death and Disability Income Benefit
Program and Supplemental Executive Retirement Plan of 1992 (the "Supplemental
Programs") are applicable to selected key employees of the Company and its
divisions or subsidiaries, including all named executives. Under the
Supplemental Programs, the Company will pay to each named executive upon
retirement, death or disability an estimated $25,000 per year for a period of
ten years. The Supplemental Programs are partially funded by life insurance
policies covering certain participants, with the Company paying all costs of the
policies. Insurance policies cover four of the five named executives and are
designed so that if assumptions made as to mortality, policy dividends and
certain other factors are realized, the Company will recover substantially all
premium payments plus a factor for the use of the Company's money. The Company
is the owner of all such policies. Mr. Justin's maximum benefits under the
Supplemental Programs are reduced by benefits payable under his employment
contract.
Compensation of Directors
The following table provides information related to compensation and security
grants for non-employee directors.
Cash Compensation Security Grants
-------------------------- ---------------------
Number of
Annual Number Securities
Retainer Meeting Total of Underlying
Name Fees Fees Fees Shares Options
- ------------------------------------------------- ---------------------
Bayard H. Friedman $12,500 $4,000 $16,500 3,000 3,000
Marvin Gearhart 15,000 2,500 17,500 3,000 3,000
Robert E. Glaze 15,000 2,500 17,000 3,000 3,000
Dee J. Kelly 15,000 2,500 17,500 3,000 3,000
Joseph R. Musolino 15,000 2,500 17,500 3,000 3,000
Dr. William E. Tucker 15,000 3,000 18,000 3,000 3,000
John V. Roach 15,000 5,000 20,000 3,000 3,000
Employment Contracts
Mr. Justin and the Company have entered into an employment contract,
effective until November 30, 1999, under which Mr. Justin is to receive an
annual salary of not less than $620,000 and is to render such duties for the
Company as are assigned by the Board, subject to certain limitations. The
employment contract may be terminated by the Company if Mr. Justin resigns,
dies, becomes disabled or is discharged for cause. If Mr. Justin should die or
suffer a long-term disability during the term of the contract, he, his widow or
his estate, as applicable, is entitled to receive 50% of his then current
salary, which is currently set at $645,000, for one year.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
The Compensation Committee of the Board has furnished the following report on
executive compensation:
Under the direction of the Compensation Committee of the Board, the
Company has developed and administers compensation policies and plans
that are intended to enhance the profitability of the Company, and
thus shareholder value, by aligning closely the financial interests of
its officers and key executives with those of its shareholders.
Remuneration in 1998 for each of the Company's officers consisted of a
base salary, annual incentive bonus and awards of options to purchase
Company stock, which become exercisable in annual twenty percent
increments and expire after ten years. The incentive bonus component
was determined in accordance with the terms of the Company's Target
Incentive Plan (the "Plan") and in light of the Company's operating
results compared to its financial performance goals. The Committee,
however, had complete discretion in determining certain remuneration
amounts (including whether any annual discretionary bonus component
under the Plan or stock option awards are made and, if so, the amounts
thereof) regardless of whether corporate or individual performance
goals are achieved. The Committee exercised its complete discretion
in setting base salary amounts, stock option awards, as well as
corporate and individual performance goals under the Plan.
Page 12
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In evaluating the Company's performance for purposes of setting the
salary and incentive compensation of the Chief Executive Officer and
the Company's other officers, the Committee gave first consideration
to company-wide performance in terms of sales and earnings. The
Committee has taken note of management's continued success in
achieving record levels of earnings in the Building Materials segment
and maintaining its strengths in market share through new product
development in the footwear segment despite diminished sales of
western products. The Committee viewed all the foregoing items as
elements of company, and not individual, performance. Salary and
other compensation decisions for each officer were based primarily on
overall Company performance, except in the case of the Vice President-
Brick Operations, whose compensation is based primarily on the
performance of Acme Brick Company.
Although, as stated above, the Committee considered Company
performance as the primary factor in its compensation decisions, the
Committee also considered individual performance. However, the
Committee does not apply any specific weighting to elements of
individual performance in relation to total compensation, nor in
relation to determining the discretionary bonus amount, if any, under
the Plan.
Immediately prior to the end of each year, the Committee reviews
with the Chief Executive Officer and the Company's human resources
executive and approves an annual salary plan for the ensuing year. The
Committee considers an officer's total compensation in establishing
each element of compensation.
Annual base salaries are based primarily upon a review of past and
present corporate and individual performance, with reference to salary
data in similar-sized corporations in all industries and in
manufacturing industries, so that such salaries are generally
competitive. The survey data used by the Committee was selected due
to its consistent inclusion of a large number of companies of
comparable size. The Committee also reviewed subsets of these data
including All Industry and All Manufacturing summaries. In addition,
Mr. Justin's employment agreement requires that his annual base salary
equal or exceed $620,000. The Committee has complete discretion in
setting Mr. Justin's compensation above this amount and in setting the
compensation of the other four named executive officers (none of whom
have employment agreements with the Company).
Annual incentive bonus payments for 1998 were based on the Company's
year-end operating results versus the financial performance goals
established under the Plan at the beginning of the year, and consisted
primarily of earnings and sales targets. Strategic and management
performance are also considered, and are included as a discretionary
component under the Plan, but to a far lesser degree than earnings and
sales targets. Strategic performance consists principally of such
factors as new product development, new business initiatives and
increasing market share. Management performance criteria include
productivity and quality improvement, management development,
environmental management and control of casualty losses. In
exercising its discretion with respect to the annual discretionary
incentive components amounts, the Committee reviewed achievement of
these performance goals and determined that the Vice President-Brick
Operations would be awarded a discretionary bonus of 5% of his base
compensation for 1998 in addition to the award for sales and earnings
targets. The Chief Executive Officer and three other named executive
officers did not receive any discretionary amounts. Their total bonus
was based on achieving sales and earnings targets. The bonuses
awarded each year to the Company's officers appear as "Bonus"
compensation in the Summary Compensation Table on page 6.
Page 13
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With respect to stock option awards, it is the Company's belief that
grants of options to purchase common stock of the Company, at the
market price in effect on the day prior to the date of such grant, has
successfully focused the Company's officers and other key executives
on building profitability and shareholder value. In determining the
grants of stock options to the officers, including the Chief Executive
Officer, the Committee reviewed and approved individual awards, taking
into account the same qualitative and quantitative factors discussed
above in determining other components of compensation. The Committee
does not consider the number of options already outstanding in
determining option awards.
Finally, it is anticipated that all such compensation will be fully
deductible by the Company for federal income tax purposes under
Section 162 of the Internal Revenue Code.
The foregoing report has been furnished by the members of the Board
of Directors' Compensation Committee.
John V. Roach
William E. Tucker
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference in any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five years
ended December 31, 1998 with the cumulative total return on the NASDAQ Index and
a derived peer group index comprised of companies in the footwear and building
materials industries. The comparison assumes $100 was invested on December 31,
1993 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
CRSP
Justin Peer Group Total Return
------ ---------- ------------
1993 100 100 100
1994 82 74 256
1995 77 82 362
1996 81 109 446
1997 98 151 546
1998 95 182 767
Page 14
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The broad market index selected for comparison is the CRSP Total Return Index
for The NASDAQ Stock Market (U.S. Companies). The peer group used in the
performance graph above consists of six companies -- three in the footwear
industry and three in the building materials industry. This index is based on
the cumulative total return of each company, assuming reinvestment of dividends,
weighted according to the respective issuer's stock market capitalization at the
beginning of each year and weighted by industry to the Company's actual ratio of
footwear to building materials sales each year. Management believes weighting
by industry is relevant since the ratio of sales by industry within the Company
from year-to-year is subject to the cyclical nature of the building materials
business. The companies used in the peer group index are as follows:
Footwear Building Materials
-------- ------------------
Genesco, Inc. Elcor Corporation
Timberland Company Morgan Products, Ltd.
Brown Group, Inc. Republic Group, Inc.
The foregoing chart 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 under 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NationsBank, N.A. participates with three other banks in a $52,000,000
revolving credit agreement with the Company. Mr. Joseph R. Musolino, a director
of the Company, is Vice Chairman of NationsBank, N.A. At December 31, 1998,
$14,000,000 was outstanding to the Company under the credit agreement, of which
NationsBank, N.A. provided $6,460,000. During 1998, the Company paid or accrued
approximately $656,000 in interest and fees to NationsBank, N.A.
The law firm of Kelly, Hart & Hallman, a professional corporation, of which
Mr. Dee J. Kelly, a director of the Company, is a shareholder and director,
acted as the Company's principal outside legal counsel in 1998 and is continuing
to do so in 1999.
OTHER MATTERS
The Solicitation
The cost of solicitation of proxies will be borne by the Company. Proxies
may be solicited by mail, advertisement, telephone and in person. Directors and
employees of the Company may, without additional compensation, make
solicitations through personal contact or by telephone or telegraph, and
arrangements may be made with brokerage houses or other custodians, nominees and
fiduciaries to send proxy material to their principals. The Company will
reimburse any such persons for their reasonable expenses.
Auditors
Ernst & Young LLP, the Company's independent public accountants for the past
twenty-seven years, has been selected by the Board as the Company's independent
public accountants for the current year. Representatives of Ernst & Young LLP
are expected to be present at the Meeting and will be available to respond to
appropriate questions. They will have an opportunity to make a statement if
they desire to do so.
Annual Report
A copy of the Company's 1998 Annual Report is being mailed to shareholders
contemporaneously with the mailing of this Proxy Statement.
Page 15
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Proposals to be Presented at the 2000 Annual Meeting of Shareholders
Any qualified shareholder of the Company wishing to present a proposal for
consideration by all shareholders at the 2000 annual meeting must notify the
Company by November 5, 1999 to have the proposal considered for inclusion in the
Proxy Statement and form of proxy related to that meeting. Any such notification
should be addressed to the Corporate Secretary, Justin Industries, Inc., P. O.
Box 425, Fort Worth, Texas 76101. Any such proposal must comply in all respects
with the rules and regulations of the Securities and Exchange Commission.
By Order of the Board of Directors
/S/JOHN JUSTIN
Chairman of the Board and
Chief Executive Officer
March 12, 1999
Page 16
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EXHIBIT A
JUSTIN INDUSTRIES, INC.
1999 Performance Incentive Plan
SECTION 1. Purpose; Definitions.
The purpose of the Plan is to attract, motivate and retain selected
employees of the Company and to provide the Company with the ability to provide
incentives more directly linked to the profitability of the Company's businesses
and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Annual Incentive Award" means an Incentive Award made pursuant to
Section 5(e) with a Performance Cycle of one year or less.
b. "Awards" mean grants under this Plan of Incentive Awards, Stock
Options, Stock Appreciation Rights, Restricted Stock or Other Stock-Based
Awards.
c. "Board" means the Board of Directors of the Company.
d. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
e. "Commission" means the Securities and Exchange Commission or any
successor agency.
f. "Committee" means the Compensation Committee of the Board or a
subcommittee thereof, any successor thereto or such other committee or
subcommittee as may be designated by the Board to administer the Plan.
g. "Common Stock" or "Stock" means the $2.50 par value Common Stock
of the Company.
h. "Company" means Justin Industries, Inc., a corporation organized
under the laws of the State of Texas, and its subsidiaries.
i. "Exercise Period" means the 60-day period from and after a Change
in Control.
j. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
k. "Fair Market Value" means, as of any given date, the last sale
price or the closing "asked" price of the Common Stock in the over-the-
counter market as reported by the National Association of Securities
Dealers Automatic Quotation System ("Nasdaq") or other national quotation
service or, if no such sale of Common Stock is reported on such date, the
fair market value of the Stock as determined by the Committee in good
faith. Under no circumstances shall the Fair Market Value be less than the
par value of the Common Stock.
l. "Incentive Award" means any Award that is either an Annual
Incentive Award or a Long-Term Incentive Award.
m. "Incentive Stock Option" means any Stock Option that complies with
Section 422 of the Code.
Page A-1
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n. "Long-Term Incentive Award" means an Incentive Award made pursuant
to Section 5(e) with a Performance Cycle of more than one year.
o. "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
p. "Other Stock-Based Award" means an Award made pursuant to Section
5(d).
q. "Performance Cycle" means the period selected by the Committee
during which the performance of the Company or any subsidiary, affiliate or
unit thereof or any individual is measured for the purpose of determining
the extent to which an Award subject to Performance Goals has been earned.
r. "Performance Goals" mean the objectives for the Company or any
subsidiary or affiliate or any unit thereof or any individual that may be
established by the Committee for a Performance Cycle with respect to any
performance-based Awards contingently Awarded under the Plan. The
Performance Goals for Awards that are intended to constitute "performance-
based" compensation within the meaning of Section 162(m) of the Code shall
be based on such criteria as the Committee may establish, including, but
not limited to, one or more of the following criteria: earnings per share,
total shareholder return, operating income, net income, cash flow, return
on equity, return on capital, economic value added measures, stock price
and return on sales.
s. "Plan" means this 1999 Performance Incentive Plan, as amended from
time to time.
t. "Restricted Period" means the period during which an Award may not
be sold, assigned, transferred, pledged or otherwise encumbered.
u. "Restricted Stock" means an Award of shares of Common Stock
pursuant to Section 5(c).
v. "Spread Value" means, with respect to a share of Common Stock
subject to an Award, an amount equal to the excess of the Fair Market
Value, on the date such value is determined, over the Award's exercise or
grant price, if any.
w. "Stock Appreciation Right" or "SAR" means a right granted pursuant
to Section 5(b).
x. "Stock Option" means an option granted pursuant to Section 5(a).
In addition, the terms "Business Combination," "Change in Control," "Change
in Control Price," "Incumbent Board," "Outstanding Company Stock," "Outstanding
Company Voting Securities" and "Person" have the meanings set forth in Section
6.
SECTION 2. Administration.
The Plan shall be administered by the Committee, which shall have the power
to interpret the Plan and to adopt such rules and guidelines for carrying out
the Plan as it may deem appropriate. The Committee shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with the laws, regulations, compensation practices and tax
and accounting principles of the countries in which the Company, a subsidiary or
an affiliate may operate to assure the viability of the benefits of Awards made
to individuals employed in such countries and to meet the objectives of the
Plan.
Subject to the terms of the Plan, the Committee shall have the authority to
determine those employees eligible to receive Awards and the amount, type and
terms of each Award and to establish and administer any Performance Goals
applicable to such Awards.
Page A-2
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The Committee may delegate its authority and power under the Plan to one or
more officers of the Company, subject to guidelines prescribed by the Committee
and approved by the Board, with respect to participants who are not subject to
Section 16 of the Exchange Act.
Any determination made by the Committee or pursuant to delegated authority
in accordance with the provisions of the Plan with respect to any Award shall be
made in the sole discretion of the Committee or such delegate, and all decisions
made by the Committee or any appropriately designated officer pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and Plan participants.
SECTION 3. Eligibility.
Key salaried employees of the Company, its subsidiaries and affiliates who
are responsible for or contribute to the management, growth and profitability of
the business of the Company, its subsidiaries or its affiliates are eligible to
be granted Awards under the Plan.
SECTION 4. Common Stock Subject to Plan.
The total number of shares of Common Stock reserved and available for
distribution pursuant to the Plan shall be 1,000,000 shares, all of which may be
issued pursuant to the exercise of Stock Options Awarded under the Plan. If any
Award is exercised, cashed out or terminates or expires without a payment being
made to the participant in the form of Common Stock, the shares subject to such
Award, if any, shall again be available for distribution in connection with
Awards under the Plan. Any shares of Common Stock that are used by a
participant as full or partial payment of withholding or other taxes or as
payment for the exercise or conversion price of an Award shall be available for
distribution in connection with Awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, split-up or other change in
corporate structure affecting the Common Stock after adoption of the Plan by the
Board, the Board is authorized to make substitutions or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan, in the
number, kind and price of shares subject to outstanding Awards and in the Award
limits set forth in Section 5; provided, however, that any such substitutions or
adjustments shall be, to the extent deemed appropriate by the Board, consistent
with the treatment of shares of Common Stock not subject to the Plan, and that
the number of shares subject to any Award shall always be a whole number.
SECTION 5. Awards.
The types of Awards that may be granted under the Plan are set forth below.
Awards may be granted singly, in combination or in tandem with other Awards.
Each Award will be set forth in a separate agreement with the person receiving
the Award and will indicate the type, terms and conditions of the Award. Any
Awards granted pursuant to the Plan may be in the form of performance-based
Awards through the application of Performance Goals and Performance Cycles.
(a) Stock Options. (i) A Stock Option represents the right to purchase a
share of Stock at a predetermined grant price. Stock Options granted under this
Plan may be in the form of Incentive Stock Options or Nonqualified Stock
Options, as specified in the Award agreement. The terms of each Stock Option
shall be set forth in the Award agreement. Subject to the applicable Award
agreement, Stock Options may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the Company may
accept (including a copy of instructions to a broker or bank acceptable to the
Company to deliver promptly to the Company an amount of sale or loan proceeds
sufficient to pay the purchase price). As determined by the Committee, payment
in full or in part may also be made in the form of Common Stock already owned by
the optionee valued at the Fair Market Value on the date the Stock Option is
exercised; provided, however, that such Common Stock shall not have been
acquired within the preceding six months upon the exercise of a Stock Option or
stock unit or similar Award granted under the Plan or any other plan maintained
at any time by the Company or any subsidiary.
Page A-3
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(ii) Incentive Stock Options will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, Incentive Stock Options must have an
exercise price not less than the Fair Market Value of a share of Common Stock on
the date of grant, must expire within a specified period of time following the
optionee's termination of employment, and must be exercised within ten years
after the date of grant; but may be subsequently modified to disqualify them
from treatment as Incentive Stock Options. In the case of an Incentive Stock
Option granted to an individual who owns (or is deemed to own) at least 10% of
the total combined voting power of all classes of stock of the Company, the
exercise price must be at least 110% of the Fair Market Value of a share of
Common Stock on the date of grant and the Incentive Stock Option must expire no
later than the fifth anniversary of the date of its grant. The aggregate Fair
Market Value (determined at the time the option was granted) of the Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by a participant during any calendar year shall not exceed $100,000 (or such
other limit as may be required by the Code).
(iii) Nonqualified Stock Options will provide for the right to purchase
Common Stock at a specified price which, except with respect to Nonqualified
Stock Options intended to qualify as performance-based compensation under
Section 162(m) of the Code, may be less than Fair Market Value on the date of
grant (but not less than 85% of fair market value) and usually will become
exercisable (in the discretion of the Committee) in one or more installments
after the grant date, subject to the satisfaction of individual or Company
performance targets established by the Committee.
(b) Stock Appreciation Rights. A SAR represents the right to receive a
payment, in cash, shares of Common Stock or both (as determined by the
Committee), equal to the Spread Value on the date the SAR is exercised. The
grant price of an SAR shall be set forth in the applicable Award agreement and
shall not be less than 100% of the Fair Market Value on the date of grant.
Subject to the terms of the applicable Award agreement, an SAR shall be
exercisable, in whole or in part, by giving written notice of exercise to the
Company.
(c) Restricted Stock. Shares of Restricted Stock are shares of Common
Stock that are Awarded to a participant and that during the Restricted Period
may be forfeitable to the Company upon such conditions as may be set forth in
the applicable Award agreement. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Restricted Period.
Except as provided in this subsection (c) and in the applicable Award
agreement, a participant shall have all the rights of a holder of Common Stock,
including the rights to receive dividends and to vote during the Restricted
Period. Dividends with respect to Restricted Stock that are payable in Common
Stock shall be paid in the form of Restricted Stock.
(d) Other Stock-Based Awards. Other Stock-Based Awards are Awards, other
than Stock Options, SARs or Restricted Stock, that are denominated in, valued in
whole or in part by reference to, or otherwise based on or related to, Common
Stock. The purchase, exercise, exchange or conversion of Other Stock-Based
Awards granted under this subsection (d) shall be on such terms and conditions
and by such methods as shall be specified by the Committee. Where the value of
an Other Stock-Based Award is based on the Spread Value, the grant price for
such an Award will not be less than 100% of the Fair Market Value on the date of
grant.
(e) Incentive Awards. Incentive Awards are performance-based Awards that
are expressed in U.S. currency. Incentive Awards shall either be Annual
Incentive Awards or Long-Term Incentive Awards.
(f) Award Maximums. The total number of shares of Restricted Stock and
other shares of Common Stock subject to or underlying Stock Options, SARS and
Other Stock-Based Awards awarded to any participant during the term of this Plan
shall not exceed 20% of the shares of the Common Stock reserved for distribution
pursuant to the Plan. An Annual Incentive Award paid to a participant with
respect to a Performance Cycle shall not exceed $1,000,000. A Long-Term
Incentive Award paid to a participant with respect to a Performance Cycle shall
not exceed $500,000 times the number of years in the Performance Cycle.
Page A-4
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SECTION 6. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) All Stock Options and Stock Appreciation Rights outstanding as
of the date such Change in Control occurs shall become fully vested and
exercisable.
(ii) The restrictions and other conditions applicable to any
Restricted Stock or Other Stock-Based Awards, including vesting
requirements, shall lapse, and such Awards shall become free of all
restrictions and fully vested.
(iii) The value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock and Other Stock-Based Awards shall, unless
otherwise determined by the Committee at or after grant, be cashed out on
the basis of the "Change in Control Price," as defined in Section 6(c), as
of the date such Change in Control occurs or such other date as the
Committee may determine prior to the Change in Control.
(iv) Any Incentive Awards relating to Performance Cycles prior to
the Performance Cycle in which the Change in Control occurs that have been
earned but not paid shall become immediately payable in cash. In addition,
each participant who has been Awarded an Incentive Award shall be deemed to
have earned a pro rata Incentive Award equal to the product of (y) such
participant's maximum Award opportunity for such Performance Cycle, and (z)
a fraction, the numerator of which is the number of full or partial months
that have elapsed since the beginning of such Performance Cycle to the date
on which the Change in Control occurs, and the denominator of which is the
total number of months in such Performance Cycle.
(b) Definition of Change in Control. A "Change in Control" means the
happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person"))
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 40% or more of either (A) the then outstanding
shares of Common Stock (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (1) any
acquisition directly from the Company, (2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (4) any acquisition by any corporation pursuant to a transaction
described in clauses (A), (B) and (C) of paragraph (iii) of this Section
6(b); or
(ii) Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to such effective date whose
election, or nomination for election by the stockholders of the Company,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger, share exchange or consolidation (a "Business
Combination"), unless, in each case following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation that as a result of such transaction owns the
Company through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 40% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such Person owned 40% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities
prior to the Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
Page A-5
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(iv) Approval by the stockholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation with respect to which, following such sale or other
disposition, (1) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) less than 40% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation), except to the extent that such Person owned 40% or more of
the Outstanding Company Common Stock or Outstanding Company Voting
Securities prior to the sale or disposition and (3) at least a majority of
the members of the board of directors of such corporation were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such sale or other disposition
of assets of the Company or were elected, appointed or nominated by the
Board.
(c) Change in Control Price. "Change in Control Price" means the highest
last sale price or closing "asked" price per share paid for the purchase of
Common Stock in the over-the-counter market as reported by Nasdaq or other
national quotation service at any time during the preceding 60-day period ending
on the date the Change in Control occurs, except that, in the case of Incentive
Stock Options, such price shall be based only on transactions reported for the
date on which such Incentive Stock Options are cashed out.
(d) Notwithstanding any other provision of this Plan, upon a Change in
Control, unless the Committee shall determine otherwise at grant, an Award
recipient shall have the right, by giving notice to the Company within the
Exercise Period, to elect to surrender all or part of the Stock Option, SAR or
Other Stock-Based Award to the Company and to receive in cash, within 30 days of
such notice, an amount equal to the amount by which the "Change in Control
Price" on the date of such notice shall exceed the exercise or grant price under
such Award, multiplied by the number of shares of Stock as to which the right
granted under this Section 6 shall have been exercised.
(e) Notwithstanding the foregoing, if any right granted pursuant to this
Section 6 would make a Change in Control transaction ineligible for pooling of
interests accounting under generally accepted accounting principles that but for
this Section 6 would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute the cash payable pursuant to this
Section 6 with Common Stock with a Fair Market Value equal to the cash that
would otherwise be payable hereunder.
Page A-6
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SECTION 7. Plan Amendment and Termination.
The Board may amend or terminate the Plan at any time, provided that no
such amendment shall be made without stockholder approval if such approval is
required under applicable law, or if such amendment would: (i) decrease the
grant or exercise price of any Stock Option, SAR or Other Stock-Based Award to
less than the Fair Market Value on the date of grant; or (ii) increase the total
number of shares of Common Stock that may be distributed under the Plan.
Except as set forth in any Award agreement, no amendment or termination of
the Plan may materially and adversely affect any outstanding Award under the
Plan without the Award recipient's consent.
SECTION 8. Payments and Payment Deferrals.
Payment of Awards may be in the form of cash, Stock, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit deferral of the payment of Awards
under such rules and procedures as it may establish. It also may provide that
deferred settlements include the payment or crediting of interest or other
earnings on the deferred amounts, or the payment or crediting of dividend
equivalents where the deferred amounts are denominated in Common Stock
equivalents.
SECTION 9. Dividends and Dividend Equivalents.
The Committee may provide that any Awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's Plan account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
shares of Common Stock or Common Stock equivalents.
SECTION 10. Transferability.
No Award shall be transferable or assignable, or payable to or exercisable
by, anyone other than the participant to whom it was granted, except (i) by law,
will or the laws of descent and distribution, (ii) as a result of the disability
of a participant or (iii) that the Committee may permit transfers of Awards by
gift or otherwise to a member of a participant's immediate family and/or trusts
whose beneficiaries are members of the participant's immediate family, or to
such other persons or entities as may be approved by the Committee.
Notwithstanding the foregoing, in no event shall Incentive Stock Options be
transferable or assignable other than by will or by the laws of descent and
distribution.
SECTION 11. Award Agreements.
Each Award under the Plan shall be evidenced by a written agreement (which
need not be signed by the recipient unless otherwise specified by the Committee)
that sets forth the terms, conditions and limitations for each Award. Such
terms may include, but are not limited to, the term of the Award, vesting and
forfeiture provisions, and the provisions applicable in the event the
recipient's employment terminates. The Committee may amend an Award agreement,
provided that no such amendment may materially and adversely affect an Award
without the Award recipient's consent.
SECTION 12. Effective Date; Term.
The Plan shall become effective as of the date of its adoption by the
Board, December 16, 1998, subject to the approval by the holders of a majority
of the shares of common stock then outstanding. Except as otherwise provided by
the Board, no Awards shall be granted after December 15, 2008, but any Awards
granted theretofore may extend beyond that date.
Page A-7
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SECTION 13. General Provisions.
(a) The Committee may require each person acquiring shares of Common
Stock pursuant to an Award to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend that the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange upon which the
Common Stock is then listed and any applicable Federal, state or foreign
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Common Stock or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
(c) Nothing contained in this Plan shall prevent the Company, a
subsidiary or an affiliate from adopting other or additional compensation
arrangements for its employees.
(d) The adoption of the Plan shall not confer upon any employee any right
to continued employment nor shall it interfere in any way with the right of the
Company, a subsidiary or an affiliate to terminate the employment of any
employee at any time.
(e) No later than the date as of which an amount first becomes includible
in the gross income of the participant for Federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising from an Award may be settled with
Common Stock, including Common Stock that is part of, or is received upon
exercise or conversion of, the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements, and the Company, its subsidiaries and its
affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. The Committee may
establish such procedures as it deems appropriate, including the making of
irrevocable elections, for the settling of withholding obligations with Common
Stock.
(f) On receipt of written notice of exercise, the Committee may elect to
cash out all or a portion of the shares of Common Stock for which a Stock Option
is being exercised by paying the optionee an amount, in cash or Common Stock,
equal to the Spread Value of such shares on the date such notice of exercise is
received.
(g) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Texas.
(h) If any provision of the Plan is held invalid or unenforceable, the
invalidity or unenforceability shall not affect the remaining parts of the Plan,
and the Plan shall be enforced and construed as if such provision had not been
included.
Page A-8
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Appendix A
JUSTIN INDUSTRIES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 16, 1999
THE UNDERSIGNED hereby appoints JOHN JUSTIN, DEE J. KELLY and DR. WILLIAM E.
TUCKER and each of them, proxies with full power of substitution, to represent
and to vote as set forth herein all the shares of the Common Stock of Justin
Industries, Inc. held of record by the undersigned on February 23, 1999, at the
annual meeting of shareholders to be held at 10:30 a.m. local time on April 16,
1999, at the Fort Worth Club Building, 306 West Seventh Street, Fort Worth,
Texas, and any adjournment thereof.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors recommendations. The Board of Directors recommends a
vote "FOR" all nominees in Proposal 1, and "FOR" approval of Proposal 2. The
Proxies cannot vote your shares unless you sign and return this card.
It is important that you vote, date, sign, and return this Proxy promptly using
the enclosed postage prepaid envelope.
===============================================================================
1. Election of Directors FOR WITHHELD EXCEPTIONS
Nominees: John Justin, J. T. Dickenson, Marvin Gearhart, Robert E. Glaze, Dee J.
Kelly, Joseph R. Musolino, John V. Roach, Dr. William E. Tucker
2. Justin Industries, Inc. 1999 Performance Incentive Plan
FOR WITHHELD ABSTAIN
This proxy, when properly executed, will be
voted in the manner directed by the
undersigned shareholder; if no direction is
made this proxy will be voted "FOR" the
election of nominees listed above, and "FOR"
approval of the 1999 Performance Incentive
Plan. As to such other matters as may
properly come before the annual meeting, this
proxy will be voted by the proxies on the
reverse hereof according to their discretion.
Receipt of the notice of the meeting and the
accompanying proxy statement is hereby
acknowledged.
SIGNATURE(S)________________________________ DATE ____________________.
SIGNATURE(S)________________________________ DATE ____________________.
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
