SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)or
Section 240.14a-12
ILLINOIS CENTRAL CORPORATION
(Name of Registrant as Specified In Its Charter)
ILLINOIS CENTRAL CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
(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.
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ILLINOIS CENTRAL CORPORATION
455 NORTH CITYFRONT PLAZA DRIVE
CHICAGO, ILLINOIS 60611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1996
TO THE STOCKHOLDERS OF ILLINOIS CENTRAL CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of
Illinois Central Corporation, a Delaware corporation (the "Corporation"),
will be held in the Stockholder's Room of the Bank of America NT&SA, 231
South LaSalle Street, Chicago, Illinois 60697, on May 8, 1996, at 9:00 AM
local time, for the following purposes:
Proposal No. 1. To elect three directors to a three-year term expiring
at the 1999 Annual Meeting of Stockholders or until
their successors are elected and qualified
Proposal No. 2. To consider and approve the Illinois Central Railroad
Company Incentive 2000 Plan
Proposal No. 3. To consider and approve the Corporation's Directors
Incentive 2000 Option Plan
and to transact such other business as may properly come before the
meeting or any adjournment or adjournments.
Stockholders of record of the Common Stock of the Corporation at the
close of business on March 8, 1996, are entitled to notice of and to vote
at this meeting. A list of such stockholders will be available for
examination during the ten-day period preceding the meeting at the offices
of the Corporation at 455 North Cityfront Plaza Drive, Chicago, Illinois
60611.
By order of the Board of Directors,
Ronald A. Lane
Secretary
PLEASE SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY CARD in the
enclosed envelope which does not require postage if mailed in the United
States or Canada.
Illinois Central Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- MAY 8, 1996
PROXY
This Proxy Statement and the accompanying proxy card are first being
sent on or about April 1, 1996, to holders of Common Stock of Illinois
Central Corporation ("IC" or the "Corporation") in connection with the
solicitation of proxies by IC's Board of Directors (the "Board of
Directors" or the "Board") for the Annual Meeting of Stockholders ("Annual
Meeting"). The Annual Meeting will be held in the Stockholder's Room of
the Bank of America NT&SA, 231 South LaSalle Street, Chicago, Illinois
60697, on May 8, 1996, at 9:00 AM local time. To assure the presence of
a quorum at the Annual Meeting, the Board requests that all stockholders
sign and return promptly the enclosed proxy card. Only stockholders of
record at the close of business on March 8, 1996, will be entitled to vote
at the Annual Meeting.
The shares represented by the proxies will be voted by the persons
named as proxies, and, if the stockholder specifies a choice with respect
to a Proposal, the shares will be voted in accordance with that
specification. If no specification is made, the shares will be voted
"FOR" the nominees described below for election as directors named in
Proposal No. 1 and "FOR" Proposals No. 2 and No. 3. The effects of
abstentions and non-votes by brokers and nominees vary for the different
Proposals and are discussed below. Any stockholder returning a proxy card
has the power to revoke it by written revocation or a later dated proxy
card delivered to the corporate Secretary at any time before it is voted
or by attending the meeting and voting in person.
VOTING SECURITIES OF THE CORPORATION
As of March 8, 1996, there were outstanding 40,950,154 shares of
Illinois Central Corporation Common Stock, $.001 par value per share
("Common Stock"), which is the Corporation's only class of voting
securities. Holders of Common Stock are entitled to one vote per share,
exercisable in person or by proxy, with respect to all matters to come
before the Annual Meeting. Under the Corporation's By-Laws, stockholders
of record of a majority of the outstanding shares of Common Stock entitled
to vote must be present in person or by proxy at the Annual Meeting to
constitute a quorum. Directions to withhold authority, abstentions and
non-votes by brokers and other nominees will be treated as present for
purposes of determining the presence of a quorum. On March 14, 1996, the
3-for-2 stock split announced January 25, 1996 was effected, as of that
date 61,425,093 shares are outstanding. However, voting at the Annual
meeting will be based upon the pre-split number of shares outstanding as
of the record date.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Corporation has three classes of directors with staggered terms,
the members of each class serving a three-year term on the Board. At this
Annual Meeting, the terms of the Class II directors will expire. The
current Class II directors are Thomas A. Barron, William B. Johnson and
John V. Tunney. Mr. Barron has indicated his intention not to seek re-
election as a director and to resign effective with the 1996 Annual
Meeting. As a result of his decision the Board of Directors has allowed
the number of directors to decrease from ten to nine and has nominated
William B. Johnson, Gilbert H. Lamphere and John V. Tunney for re-election
as Class II directors to terms expiring in 1999, or until their successors
are elected and qualified.
Each nominee has consented to his nomination and, if elected, has
indicated his intent to serve as a director. In the event that any
nominee should be unable or unwilling to accept the office of director,
which is not anticipated, the persons named as proxies intend to vote for
the election of such other person(s) as the Board of Directors may
recommend, unless the Board has taken prior action to reduce its membership.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS TO HOLD OFFICE UNTIL 1999
William B. Johnson, 77, has been a director of the Corporation since
1989. He previously served as a director, Chairman and Chief Executive
Officer of IC Industries, Inc. (now known as Whitman Corporation). Until
1989, Whitman owned the Illinois Central Railroad Company (the
"Railroad"). Mr. Johnson was employed by the Corporation as Advisor to
the Chairman in 1990 and 1991. Mr. Johnson serves as a director of
Webster Broadcasting, is a Trustee of the University of Chicago and the
University of Pennsylvania Law School and is a member of the Board of
Governors of Washington College, Chestertown, Maryland. Committees: Audit
(Chairman) and Executive.
Gilbert H. Lamphere, 43, has been a director of the Corporation and
the Railroad since 1989. He has been Chairman of the Board since 1993,
and Chairman of the Executive Committee of the Board since 1990. Mr.
Lamphere is Managing Director of the Fremont Group, a diversified
investment company. He was Co-Chairman and Chief Executive Officer of
The Noel Group, Inc. ("Noel"), a diversified operating company, from 1991
until 1994 and was the Chairman and Chief Executive Officer of The
Prospect Group, Inc. ("Prospect") until 1994, for which he had served in
various capacities since becoming a director in 1983. Mr. Lamphere also
is a director of and Chairman of both Prospect and Belding Heminway, Inc.
and serves as a director of the Fremont Group. Mr. Lamphere is the
brother-in-law of another director, Mr. Lynch. Committee: Executive
(Chairman).
John V. Tunney, 61, has been a director of the Corporation since
1990. He has been Chairman of the Board of Cloverleaf Group, Inc., a real
estate development firm, since 1980. Mr. Tunney served as United States
Senator from the State of California from 1971 to 1977 and as a member of
the United States House of Representatives from 1965 to 1971. Mr. Tunney
is a director of Foamex International, a manufacturer and fabricator of
polyurethane foam, The Forschner Group, Inc., Garnet Resources
Corporation, Logan Manufacturing Company, a manufacturer of wide-track
vehicles, and Prospect. Committees: Audit and Compensation.
CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL 1997
George D. Gould, 68, has been a director of the Corporation since
1990. He has been Vice Chairman of Klingenstein, Fields & Co., L.P., a
money management firm, since 1989. Mr. Gould is a Trustee of the Drexel
Burnham Lambert Liquidating Trust, appointed by the United States Bankruptcy
Court for the Southern District of New York. Mr. Gould is Chairman of the
Hungarian American Enterprise Fund. He previously served as Undersecretary
of the United States Treasury for Finance from 1985 to 1988. Mr. Gould
also serves as a director of the Federal Home Loan Mortgage Corporation.
Committees: Audit, Compensation (Chairman) and Finance.
Alexander P. Lynch, 43, has been a director of the Corporation since
1991. He is Co-Chief Executive Officer and Co-President of The Bridgeford
Group, a financial advisory firm. From 1991 until 1995 he was a Senior
Managing Director of Bridgeford. From 1985 until 1991, Mr. Lynch was a
Managing Director of Lehman Brothers or its predecessors. Mr. Lynch also
serves as a director of Lincoln Snacks Company. Mr. Lynch is the
brother-in-law of another director, Mr. Lamphere. Committees: Audit and
Finance.
F. Jay Taylor, 72, has been a director since 1994. Dr. Taylor is
a Labor-Management Arbitrator in both the public and private sectors. He
served as President of Louisiana Tech University from 1962 to 1987, and
currently serves as President Emeritus of the University. Dr. Taylor is
a member of the Board of Directors of Michael's Stores, Inc. and Pizza
Inn, Inc. and a member of the National Academy of Arbitrators and Society
of Professionals in Dispute Resolution. Committee: Audit.
CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL 1998
E. Hunter Harrison, 51, has been a director of the Corporation and
the Railroad since 1993 and has served as President and Chief Executive
Officer of the Corporation and the Railroad since February 1993. Mr.
Harrison joined the Corporation and the Railroad as Vice President and
Chief Transportation Officer in 1989, was elected Senior Vice President-
Transportation in 1991 and was elected Senior Vice President-Operations
in July 1992. Mr. Harrison also is a director of Wabash National
Corporation, a manufacturer of truck trailers. Committee: Executive.
Samuel F. Pryor, IV, 40, has been a director of the Corporation
since 1989. Mr. Pryor has been Managing Director of Noel since 1991. He
also is President of Prospect, for which he has served in various
capacities since 1986. Mr. Pryor is a director of Prospect, Belding
Heminway, Inc. and Health Plan Services, Inc. Committees: Audit,
Compensation and Finance (Chairman).
Alan H. Washkowitz, 55, has been a director of the Corporation since
1991. He has been a Managing Director of Lehman Brothers or its
predecessors since 1978. Mr. Washkowitz also serves as a director of K&F
Industries, Inc., Lear Seating, a manufacturer of automobile seats, and
McBrides, Ltd., a manufacturer of private label household and personal
care products. Committees: Compensation and Finance.
See "OWNERSHIP OF COMMON STOCK AND CERTAIN TRANSACTIONS" for the
beneficial ownership of Common Stock by each director and by all
directors, nominees and executive officers as a group.
Committees of the Board of Directors
There are four standing committees of the Board of Directors.
Committee membership is noted in the biographical section above. The
functions of the various committees are described below.
EXECUTIVE COMMITTEE - With the exception of certain powers that are
reserved exclusively to a board of directors by the Delaware General
Corporation Law (such as approving amendments to the Restated
Certificate of Incorporation, adopting an agreement of merger or
consolidation, and the amendment of the corporation's by-laws), the
Executive Committee, which has three members, may exercise all the
powers and authority of the Board in the management of the business
and affairs of the Corporation. The Committee held four meetings
in 1995 and reported the results of those meetings to the Board.
AUDIT COMMITTEE - The Audit Committee is composed of six outside
directors. The Committee oversees the Corporation's financial
reporting on behalf of the Board. The Committee reviewed the 1995
audit plans of Arthur Andersen LLP, considered the adequacy of audit
scope and reviewed and discussed, with the auditors and management,
the auditors' reports. The Committee recommended to the Board the
selection of the Corporation's independent public accountants. The
Committee reviews compliance with the Corporation's Standards of
Business Conduct policy, environmental conditions and compliance
activities for the Corporation's facilities and the independent
public accountants' review of the expense accounts of principal
executive officers. The independent public accountants and the
Committee have unrestricted access to each other, without management
present, to discuss the results of audit work, including the
adequacy of internal accounting controls, the quality of financial
reporting and any other matter deemed appropriate. The Committee
held two meetings in 1995, reported the results of those meetings
to the Board and made recommendations to the Board.
COMPENSATION COMMITTEE - The Compensation Committee establishes and
administers compensation policies for the Board, sets the compensation
for the Chief Executive Officer and has the responsibility for
establishing and administering compensation policies, plans and
programs for the Corporation and its subsidiaries. The Committee
held three meetings in 1995, reported the results of those meetings
to the Board and made recommendations to the Board.
FINANCE COMMITTEE - The Finance Committee monitors developments in
the financial markets, reviews the financial structure of the
Corporation, including its annual budget and five year plan, and
recommends appropriate financial strategies and transactions. The
Committee held six meetings in 1995, reported the results of those
meetings to the Board and made recommendations to the Board.
Meetings of the Board of Directors
In 1995, the Board of Directors held eight meetings. The number of
meetings held by the committees of the Board of Directors is noted above.
Each director of the Corporation attended at least 75% of the meetings
held by the Board and by the Committees on which he served.
VOTE REQUIRED
The three nominees receiving the greatest number of votes (i.e., a
plurality) will be elected as Directors. Directions to withhold authority
and non-votes by brokers and other nominees will not have any effect upon
the vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the election of the
nominees listed above as directors of the Corporation.
PROPOSAL NO. 2 - APPROVAL OF THE ILLINOIS CENTRAL
RAILROAD COMPANY INCENTIVE 2000 PLAN
At its March 1996 meeting, the Board of Directors adopted, subject
to stockholder approval, the Illinois Central Railroad Company (the
"Railroad") Incentive 2000 Plan (the "Plan"). The Plan is intended to
focus sharply the attention of senior management on the goals of the
Corporation's Plan2000, the five year plan intended to create stockholder
value by increasing revenue, margins, and return on capital. The
philosophy behind the Incentive 2000 Plan is set forth more fully in the
Compensation Committee report below.
The Plan provides that three pre-established performance objectives
must be obtained in order for eligible employees to earn cash awards under
the Plan. The performance objectives relate directly to factors which
drive stockholder value: the Corporation's Common Stock price, based upon
the highest consecutive twenty day average closing sales price of the
Common Stock during the sixteen month period ending April 30, 2001, annual
return on total average capital in the year 2000 ("ROTC") and earnings per
share in the year 2000.
The percentage of an award that may be earned under the Plan
relating to each of the performance objectives is: Common Stock price -
70%, ROTC - 15% and earnings per share - 15%. Awards earned under the
Plan are first determined by the Common Stock price performance objective.
No awards will be earned under the Plan if a minimum Common Stock price
of $43 is not achieved. Thus, the percentage of awards under the Plan
that may be earned relating to ROTC and earnings per share will not be
earned unless the threshold Common Stock price is achieved. Seventy
percent of the threshold, target and maximum awards set forth in the table
below will be earned if the Common Price is $43, $50 or $60, respectively.
An additional fifteen percent of threshold, target and maximum awards set
forth in the table below will be earned if ROTC is 14% or more and another
additional fifteen percent will be earned if earnings per share are $4 or
more. Awards under the Plan between the discrete threshold, target and
maximum levels will be interpolated.
The Common Stock price and earnings per share performance objectives
are subject to adjustment upon the occurrence of a stock dividend, stock
split or certain other capital adjustments. ROTC and earnings per share
performance objectives will be determined on an after award, after tax
basis, before giving effect to special or extraordinary items or changes
in accounting rules.
Employees of the Railroad in it's top ten salary grades are eligible
to receive awards under the Plan. As of March 12, 1996, approximately 75
employees were eligible to participate in the Plan.
The following table sets forth the awards that each of the persons
named in the summary compensation table set forth below who were employed
by the Railroad in March 1996, all executive officers as a group, and all
other eligible employees as a group, will be entitled to receive if the
Plan is adopted by the stockholders and if the threshold, target or
maximum performance objectives are attained.
INCENTIVE 2000 PLAN - POTENTIAL AWARDS
Name and Position Threshold Target Maximum
E. Hunter Harrison
President and Chief
Executive Officer $750,000 $3,000,000 $6,000,000
John D. McPherson
Senior Vice
President-Operations 437,500 1,750,000 3,500,000
Donald H. Skelton
Senior Vice President
Marketing and Sales 437,500 1,750,000 3,500,000
Ronald A. Lane
Vice President and
General Counsel
and Secretary 250,000 1,000,000 2,000,000
Dale W. Phillips
Vice President and
Chief Financial
Officer 250,000 1,000,000 2,000,000
Executive Officers
as a Group (8 persons) 2,687,500 10,750,000 21,500,000
All other Eligible
Employees as a Group
(64 persons) 3,200,000 12,800,000 25,600,000
Maximum allowable awards 7,500,000 30,000,000 60,000,000
Awards will be payable only to those employees who are employed by
the Corporation on April 30, 2001, unless such employee's service
terminates by reason of such employee's death, disability or retirement.
If such employee's service terminates as a result of death, disability or
retirement, the employee will be entitled to receive the award earned
under the Plan, prorated for the number of completed months in the Plan
at the time such employee's service terminates. Notwithstanding any other
provision of the Plan, in the event of a "Change in Control" of the
Corporation as defined in the Plan, awards will be payable at the greater
of target awards or actual awards earned determined by reference to
performance during the proceeding twelve month period, prorated for the
number of completed months in the Plan prior to the Change in Control.
In December 1995, the Internal Revenue Service issued regulations
implementing the provisions of The Omnibus Budget Reconciliation Act of
1993 (the "Act") limiting the deductibility by an employer of executive
compensation, other than "performance based compensation," to $1 million
per year for each of the chief executive officer and the four other most
highly compensated officers of a public company. Pursuant to the outside
director requirements of the Act and the regulations, the Plan will be
administered by the Committee, which must be comprised of two or more
outside directors. The Committee will certify the extent to which the
performance objectives are attained. The Corporation believes that upon
stockholder approval, the Plan will meet the requirements of the Act and
the regulations to qualify as performance-based compensation.
Accordingly, the Board recommended placing the Plan before the
stockholders for approval. If stockholders do not approve the Plan, the
Board of Directors intends to terminate it and explore other approaches
to incentive compensation which may or may not be deductible.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares
present and voting will be required to approve the Proposal, Abstentions
will have the same effect as "against" votes. Non-votes by brokers and
other nominees, are not considered votes cast, are not counted in the vote
totals, and will have no effect on the Proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR Proposal No. 2.
PROPOSAL NO. 3 - APPROVAL OF THE ILLINOIS CENTRAL CORPORATION
DIRECTORS INCENTIVE 2000 OPTION PLAN
At its March 1996 meeting, the Board of Directors adopted, subject
to stockholder approval, the Illinois Central Corporation Directors
Incentive 2000 Option Plan (the "Directors Option Plan"). The Directors
Option Plan is intended to complement the Illinois Central Railroad
Company Incentive 2000 Plan for senior management and to link compensation
of directors who are not employees of the Corporation or its subsidiaries
("Outside Directors") to the goals of the Corporation's Plan2000 and the
stockholders' interests in the creation of stock value.
The total number of shares of the Corporation's Common Stock
authorized for issuance pursuant to the Directors Option Plan is 300,000,
which number of shares of Common Stock is subject to adjustment upon the
occurrence of a stock dividend, stock split, recapitalization or certain
other capital adjustments. The Directors Option Plan will be administered
by the Board of Directors of the Corporation, subject to certain
restrictions set forth in the Directors Option Plan. On March 8, 1996,
each of the eight eligible Outside Directors received, subject to
stockholder approval, a one-time grant of options to purchase 37,500
shares of Common Stock.
Vesting of options mirrors managements' Incentive 2000 Plan
utilizing the same performance objectives for the year 2000. The
percentage of the grant that may vest relating to each of the performance
objectives is: Common Stock price - 70%, ROTC - 15% and earnings per share
- - 15%. Options vesting under the Plan are first determined by the Common
Stock price performance objective. No vesting will occur under the Plan
if the highest consecutive twenty-day average closing price of the Common
Stock during the sixteen month period ending April 30, 2001 does not reach
$43. Thus, the portion of the grants under the Plan that may vest based
on ROTC and earnings per share will not occur unless the threshold Common
Stock price is achieved. The maximum threshold level of vesting at the
Common Stock price of $43 is 9,375 shares, and the maximum target level
of vesting at the price of $50 is the full 37,500 shares. Seventy percent
of the threshold and target levels will vest if the Common Price is $43
or $50, respectively. An additional fifteen percent of threshold and
target levels will vest if ROTC is 14% or more in the year 2000 and
another additional fifteen percent will vest if earnings per share are $4
or more in the year 2000. Options vesting under the Plan between the
discrete threshold and target levels will be interpolated.
Each vested option becomes exercisable on April 30, 2001. The
exercise price for each option is $37.875, which is equal to 150% of the
closing sales price of the Common Stock on the New York Stock Exchange on
March 8, 1996, the date of grant (adjusted to reflect the 3-for-2 stock
split of the Common Stock effective March 14, 1996). On March 15, 1996,
the closing sales price of the Common Stock on the New York Stock Exchange
was $27.375.
An Outside Director may pay the exercise price for an option in
cash, by delivering shares of Common Stock having an aggregate fair market
value on the date of exercise equal to the exercise price, or by directing
the Corporation to withhold such number of shares of Common Stock
otherwise issuable upon exercise of such option having an aggregate fair
market value on the date of exercise equal to the exercise price.
Each vested option granted to an Outside Director will terminate ten
years from the date of grant. If an Outside Director's service as a
director terminates before April 30, 2001, the director will be entitled
to exercise the number of options under the Directors Option Plan that
would have vested but for his termination of employment, prorated for the
number of completed months in the Plan at the time such director's service
terminates. Notwithstanding any other provision of the Directors Option
Plan, in the event of a "Change in Control" of the Corporation, as defined
in the Directors Option Plan, the date upon which each option then
outstanding under the Directors Option Plan first becomes exercisable will
automatically accelerate to the effective date of the Change in Control.
The options granted to the Outside Directors are not incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code
of 1986, as amended ("nonqualified stock options"). A recipient of a
nonqualified stock option does not recognize taxable income at the time
of grant, and the Corporation is not allowed a tax deduction by a reason
of the grant. Such an option holder will recognize ordinary income in the
taxable year in which the option holder exercises the nonqualified stock
option, in an amount equal to the excess of the fair market value of the
shares of Common Stock received upon exercise at the time of exercise of
such option over the exercise price of the option, and the Corporation
then will be allowed a tax deduction in that amount. Upon disposition of
the shares of Common Stock subject to the option, an option holder will
recognize long-term or short-term capital gain or loss, depending upon the
length of time the shares of Common Stock were held prior to disposition,
equal to the difference between the amount realized on disposition and the
option holder's adjusted basis of the shares of Common Stock subject to
the option (which adjusted basis ordinarily is the fair market value of
the shares of Common Stock subject to the option on the date the option
was exercised).
The Directors Option Plan is intended to satisfy conditions relating
to administration of employee stock option plans set forth in Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Rule 16b-3 provides exemptions for officers
and directors from the "short-swing" profit provisions of Section 16(b)
of the Exchange Act with respect to, among other things, the grant of
options under a stock option plan. The Corporation believes that upon
stockholder approval, the Directors Option Plan will meet the requirements
of Rule 16b-3. Accordingly, the Board recommended placing the Plan before
stockholders for approval.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares
present and voting will be required to approve the Proposal, Abstentions
will have the same effect as "against" votes. Non-votes by brokers and
other nominees, are not considered votes cast, are not counted in the vote
totals, and will have no effect on the Proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes it is important to give stockholders
the opportunity to consider and vote upon this Plan. The Board of
Directors recommends a vote FOR Proposal No. 3.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation Committee Report
Executive Compensation Philosophy
The Compensation Committee of the Board of Directors (the "Committee")
has adopted a philosophy that for the management of the Corporation and
its subsidiaries (herein, "the Company") compensation should be tied
directly to the Company's stated business objectives and to the sustained
creation of stockholder value. The Committee believes that stockholder
interests and the Company's compensation programs should be closely aligned
and integrated. Therefore, the Company's compensation program reflects
both a performance and long-term orientation. Further, the performance
measures used to determine compensation levels are the primary,
sustainable drivers of stockholder value among transportation companies
specifically and other publicly-held companies generally. As a result,
the Company's total compensation program is designed to be highly
sensitive to the Company's performance, defined in terms of stockholder
value creation.
Incentive 2000 Plans
In March 1996, the Compensation Committee recommended and the Board
of Directors adopted, subject to stockholder approval, Incentive 2000
Plans for directors and key management employees. The Plans are intended
to focus the directors and senior managers on the goals of the Company's
Plan2000, the five-year plan adopted by the Board in 1995. Plan2000 calls
for increasing Illinois Central's revenue to $900 million in the year 2000
while maintaining an operating ratio (operating expense divided by
operating revenue) under 60% and a return on total capital of 14%. The
Board believes these goals are challenging but achievable, and if attained
will result in substantial appreciation of stockholder value. The
Committee has determined that providing significant incentives to
directors and management conditional on achieving financial measures
linked to Plan2000 will promote the long-term interests of the Company and
its stockholders. The terms are described in detail in Proposals No. 2
and No. 3 in connection with the request for stockholders' approval. It
is the Committee's intention that neither directors nor management will
benefit from these Incentive 2000 Plans unless the Company's Common Stock
reaches a stable price of at least $43 in the year 2000.
Performance Compensation Program
The Company's Performance Compensation Program consists of four
components: (1) Base Salary, (2) Performance Awards, (3) Stock Options and
(4) Incentive 2000 Plan Awards. The program is designed to emphasize
risk-based compensation which rewards Company and individual performance.
Each of these components and its respective role in total direct
compensation, as well as the basis for determining the compensation of the
President and Chief Executive Officer ("CEO"), Mr. Harrison, are described
below:
(1) Base Salary
Salary and annual adjustments are determined by several factors,
including: the Company's performance, the individual's contribution to
that performance, the individual's position within his/her salary grade
and competitive pay levels. To emphasize risk-based compensation, the
overall target for base salary has been set at 90% of the size-adjusted
median for the railroad industry. On an annual basis, the Committee
reviews the salary of the CEO and all other officers.
(2) Performance Awards and Bonuses
Approximately 415 management employees participate in the Company's
annual incentive program. Each participant is assigned a target
Performance Award according to the individual's level of responsibility
(salary grade). Target award levels range from 10% to 75% of annual base
salary. Actual award levels vary depending upon the Corporation's
performance relative to predetermined objectives for annual revenue growth
and return on total capital ("ROTC"), and range from 0% to 150% of target
awards. Award levels are weighted two-thirds on ROTC and one-third on
revenue growth. Performance awards under the program for management
employees other than the CEO and four other most highly compensated
officers contain a second component for individual performance for the
year as well as Company performance. The individual component of
performance awards vary from 0% to 50% of the target award.
The Company performance objectives are the same for all management
employees and relate directly to those measures which drive stockholder
value -- annual return on average total capital, calculated on an after-
award after-tax basis, and annual revenue growth. Specific performance
objectives are set by the Committee annually in relation to the Company's
fiscal budget after it has been reviewed and approved by the Board.
Except as to the CEO and the four other most highly compensated
individuals, the Committee has the ability to adjust the Company payout
through a discretionary factor of plus or minus 20% of target award by
evaluating other business measures (e.g., safety, operating ratio,
earnings per share, or other measures). For the CEO and the four other
most highly compensated officers, only Company performance, subject to
potential reduction by the Committee, determines the Performance Award.
The CEO's target award is 75% of base salary and the targets for the
other four most highly compensated officers range from 60% to 65%. To
comply with IRS regulations limiting the deductibility of executive
compensation, the CEO and the four other most highly compensated officers
are not eligible to receive any performance award based on individual
performance. The Committee also cannot adjust upward the Company
performance award for these individuals. However, the Committee has
retained the option of awarding cash bonuses (which are subject to the
deductibility cap) to those individuals.
(3) Stock Options
The Company maintains a long-term stock option program for
approximately 75 senior managers to provide an equity-like interest in the
Company. This program is intended to motivate senior management to improve
the long-term performance of the Company's stock price and total return
to stockholders.
The number of stock options available for grant in any given year
to all eligible employees will vary between .3% and .9% of common shares
outstanding, depending on Company performance. Company performance is
determined based upon three measures: the Company's 3-year total
stockholder return relative to the S&P Midcap 400 index, its 3-year ROTC
relative to Class I railroads and its annual compound revenue growth over
a 3-year period relative to Class I railroads. The measures are weighted
50% on comparative stockholder return, 25% on ROTC and 25% on revenue
growth. Stock options are granted at fair market value on the date of
grant and vest 25% each year over four years. Actual awards to individual
participants are based upon Company performance, individual performance
and individual responsibility (salary grade) within the Company. The
maximum award which can be made in one year to a participant under this
program is options on 150,000 shares.
(4) Incentive 2000 Plan Awards
To provide added incentive for senior management to achieve the
goals of Plan2000, the Board of Directors has implemented a program,
subject to stockholder approval, to award cash payments in the year 2001
based upon the extent to which specified performance criteria have been
attained. For full description of the program see Proposal No. 2.
Results for 1995
Actual results for 1995 exceeded the ROTC and revenue growth
objectives of 12% and 5.0%, respectively . Actual 1995 ROTC was 12.1% and
revenue growth was 8.4%. Based on this performance level the Company
performance portion of the Performance Award was 120.0% of target award
levels. In January 1996, the Committee after reviewing and considering
the recommendations of the CEO and their own observations, awarded
additional cash bonuses to the executive officers reflecting the
contributions these individuals made to the overall performance of the
Company for the year and competitive compensation currently paid by other
railroads. In aggregate, approximately $7.1 million in Performance Awards
and bonuses were paid to all management employees for 1995.
The Company's stockholder return for those three years was 21.2%
compared to 10.3% for the S&P Midcap 400 index. ROTC for the three years
ending 1995 was 11.5% compared to 7.2% for all Class I railroads. The
annual compound revenue growth for those years was 5.6% compared to 4.9%
for Class I railroads. Accordingly, the Committee determined that options
for a maximum 368,000 shares (552,000 post-split), or .9% of shares
outstanding on grant date, should be awarded pursuant to the senior
management stock option plan with respect to 1995 performance.
Based on the 1996 Budget and the Company's strategic plans,
including Plan2000, the Committee established the Company's 1996 ROTC
objective at 12.5% and the annual revenue growth objective at 5%.
CEO Compensation
Mr. Harrison was the highest compensated officer of the Company in
1995. Mr. Harrison's salary for 1995 was $500,000, unchanged from 1994.
Pursuant to the Performance Compensation Plan, based on Company performance
in 1995, Mr. Harrison received a Performance Award of $450,000. In
March 1995, Mr. Harrison was granted an option for 90,000 (post-split)
shares of Common Stock based on the Company's performance in 1994.
The Committee also awarded Mr. Harrison a cash bonus of $200,000
with respect to his individual performance in 1995. In determining the
amount of this bonus, the Committee considered Mr. Harrison's individual
contribution toward the achievement of significant corporate objectives
including, among others, the acquisition of the Chicago Central and
Pacific, negotiation of labor contracts, settlement of matters related to
the Union Pacific/Southern Pacific merger and development of important
growth opportunities. Additionally, consideration was given to the
magnitude of Mr. Harrison's personal award in relation to other employees.
Finally, the Committee noted that Mr. Harrison did not receive a salary
increase for 1995 and that his total direct compensation (salary plus cash
bonus) was comparable to compensation for CEOs of Class I railroads.
Nondeductible Compensation
The Company believes that Performance Awards and Incentive 2000 Plan
Awards will be fully deductible for federal income tax purposes. The
Committee does not currently anticipate that any executive officer's
nonperformance-based compensation will exceed $1 million. For 1995, no
executive officer received nonperformance-based compensation which
exceeded $1 million. It is anticipated that all executive compensation
to be paid in 1996 will be fully deductible as well. However, the
Committee and the Board of Directors retain the discretion to grant
nondeductible compensation if that would be in the best interests of the
Company and stockholders under the circumstances.
Respectfully submitted,
Mr. George D. Gould, Chairman
Mr. Samuel F. Pryor, IV
Mr. John V. Tunney
Mr. Alan H. Washkowitz
Executive Compensation
All of the cash compensation received by IC's executive officers
during fiscal years 1995, 1994 and 1993 was paid or accrued by the Railroad;
none was paid by IC. The following table sets forth information
concerning the Chief Executive Officer and the four other most highly
compensated executive officers for the year ended December 31, 1995 and
for one executive officer who retired at the end of 1995. The following
table has been restated to give affect to a 3-for-2 stock split declared
in January 1996.
<TABLE>
Summary Compensation Table
Long-Term
<CAPTION> Annual Compensation Compensation
Restricted Securities
Other Annual Stock Underlying All Other
Name and Principal Compensation(2) Awards(3) Options Compensation
Position(s) Year Salary(1) Bonus($)(1)($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
E. Hunter Harrison 1995 500,000 650,000 14,857 - 90,000 156,739(4)
President and Chief 1994 496,154 630,000 15,424 - - 108,522(4)
Executive Officer 1993 357,342 350,000 19,965 - 412,500 70,252(4)
John D. McPherson 1995 201,925 195,000 9,568 - 30,112 42,705(5)
Senior Vice 1994 174,660 190,000 7,909 - - 31,936(5)
President-Operations 1993 56,896 65,000 1,380 650,000 - 4,968(5
Gerald F. Mohan 1995 202,673 195,000 9,517 - 30,112 66,654(6)
Senior Vice President 1994 180,049 190,000 9,425 - - 42,097(6)
Marketing (a) 1993 173,721 165,000 8,762 - 18,000 39,892(6)
Donald H. Skelton 1995 166,984 158,000 108,835(7) - 19,800 16,285(8)
Senior Vice President 1994 19,039 10,000 958 642,500 - 1,552(8)
Marketing and Sales
Ronald A. Lane 1995 164,562 158,000 11,320 - 19,800 38,055(9)
Vice President and 1994 154,328 157,000 11,504 - - 30,648(9)
General Counsel and 1993 149,013 135,000 9,105 - 16,500 29,203(9)
Secretary
Dale W. Phillips 1995 164,562 158,000 8,863 - 19,800 37,957(10)
Vice President and Chief1994 154,328 157,000 8,399 - - 30,856(10)
Financial Officer 1993 148,822 135,000 8,319 - 16,500 29,368(10)
</TABLE>
Notes to Summary Compensation Table
(a) Mr. Mohan retired effective December 31, 1995. Mr. Skelton has
been promoted to his position.
(1) Bonus amounts include, but are not limited to, Performance Awards
(see "Compensation Committee Report"). Amounts shown in a given year
reflect amounts awarded with respect to that year but may have been paid
the following year. Salary and Bonus amounts, where applicable, have not
been reduced by the officers election to defer compensation pursuant to
the Executive Deferred Compensation Plan.
(2) Generally includes federal and state tax "gross ups" for various
perquisites such as company cars and club dues and initiation fees, and,
when they exceeded the lesser of $50,000 or 10% of the total of annual
salary and bonus, the value of perquisites. Excludes the value of the
Company paid portion of the price for shares purchased under the
Management Employee Discounted Stock Purchase Plan as same discount is
available to all management employees.
(3) Restricted stock awards were granted in 1993 to Mr. McPherson and
in 1994 to Mr. Skelton. Shares awarded are restricted for a period of
four years from the date of purchase or award. On each of the first four
year anniversary dates of purchase or award, if employment has not
previously been terminated, 25% of the shares originally awarded become
unrestricted. Dividends paid on unvested restricted shares are not
included in this table because they do not exceed regular dividends. As
of December 31, 1995, Mr. Harrison owned 7,500 unvested shares of the
shares granted in 1992 which had a current value of $191,825 and Messrs.
Lane and Phillips each owned 6,750 unvested shares of the shares granted
in 1992 which had a current value of $172,688. Mr. McPherson's unvested
15,000 shares had a current value of $383,750 and Mr. Skelton's unvested
16,875 shares had a current value of $431,718.75. The Company vested the
remaining 7,500 shares of Mr. Mohan's 1992 grant upon his retirement on
December 31, 1995. Current value is computed by multiplying the closing
NYSE market price of unrestricted stock on December 31, 1995, by the
number of shares still subject to restrictions and netting out any
consideration paid by award recipient. See "Employment Contracts and
Termination of Employment and Change in Control Arrangements."
(4) Includes: (i) Railroad contributions to defined contribution plan
of $3,000, $3,000, and $4,717 for fiscal years 1995, 1994, and 1993,
respectively; (ii) Railroad contributions to 401(k) plan of $4,620,
$4,620, and $4,497 for fiscal years 1995, 1994, and 1993, respectively;
(iii) amounts accrued under an executive account balance plan of $124,559,
$84,652 and $50,735 for fiscal years 1995, 1994 and 1993, respectively;
and (iv) amounts accrued under an excess benefit plan of $24,560, $16,250
and $10,303 for fiscal years 1995, 1994 and 1993, respectively.
(5) Includes: (i) Railroad contributions to defined contribution plan
of $3,000, $3,000 and $825 for fiscal years 1995, 1994 and 1993,
respectively; (ii) Railroad contributions to 401(k) plan of $4,620, $4,001
and $1,239 for fiscal years 1995, 1994 and 1993, respectively; (iii)
amounts accrued under an executive account balance plan of $31,982,
$23,778 and $2,904 for fiscal years 1995, 1994 and 1993, respectively;
and (iv) amount accrued under an excess benefit plan of $3,143 and $1,157
in 1995 and 1994, respectively.
(6) Includes: (i) Railroad contributions to defined contribution plan
of $3,000, $3,000 and $3,504 for fiscal years 1995, 1994 and 1993,
respectively; (ii) Railroad contributions to 401(k) plan of $4,620, $4,620
and $4,358 for fiscal years 1995, 1994 and 1993, respectively; (iii)
amounts accrued under an executive account balance plan of $43,712.
$32,910 and $31,135 for fiscal years 1995, 1994 and 1993, respectively;
and (iv) amounts accrued under an excess benefit plan of $3,143, $1,567
and $895 for fiscal years 1995, 1994 and 1993, respectively. Amounts
accrued under this executive account balances plan and the excess benefit
plan were paid upon retirement in 1995 and 1996, respectively.
(7) Includes perquisites, including club dues and initiation fees of
$50,905.
(8) Includes (i) Railroad contributions to defined contribution plan
of $3,000 and $275 for fiscal 1995 and 1994, respectively; (ii) Railroad
contributions to 401(k) plan of $4,620 and $207 for fiscal 1995 and 1994,
respectively; (iii) amounts accrued under an executive account balance
plan of $7,925 and $1,070 for fiscal years 1995 and 1994, respectively;
and (iv) amounts accrued under the excess benefit plan of $740 in 1995.
(9) Includes: (i) Railroad contributions to defined contribution plan
of $3,000 for each fiscal year 1995, 1994 and 1993; (ii) Railroad
contributions to 401(k) plan of $4,620, $4,620 and $4,475 for fiscal years
1995, 1994 and 1993, respectively; (iii) amounts accrued under an
executive account balance plan of $29,656, $22,924 and $21,728 for
fiscal years 1995, 1994 and 1993, respectively; and (iv) amounts accrued
under the excess benefit plan of $779 and $104 in 1995 and 1994,
respectively.
(10) Includes: (i) Railroad contributions to defined contribution
plan of $3,000 for each fiscal year 1995, 1994 and 1993; (ii) Railroad
contributions to 401(k) plan of $4,222, $4,620 and $4,463 for fiscal
years 1995, 1994 and 1993, respectively; (iii) amounts accrued under an
executive account balance plan of $29,953, $23,132 and $21,905 for fiscal
years 1995, 1994 and 1993, respectively; and (iv) amounts accrued under
the excess benefit plan of $782 and $104 in 1995 and 1994, respectively.
Options/Grants
During 1995 the first awards under the Executive Performance
Compensation Program were made.
<TABLE>
OPTIONS/ GRANTS IN LAST FISCAL YEAR
Potential Realizable
Price Appreciation
Individual Grants for Option Terms(3)
<CAPTION>
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/SH) Date(1) 5% ($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
E. Hunter Harrison 90,000 17.19% 23.167 3/16/2005 1,311,245 3,322,953
John D. McPherson 30,112 5.75 23.167 3/16/2005 438,714 1,111,786
Gerald F. Mohan 30,112 5.75 23.167 12/31/1998(2) 438,714 1,111,786
Donald H. Skelton 19,800 3.78 23.167 3/16/2005 288,474 731,050
Ronald A. Lane 19,800 3.78 23.167 3/16/2005 288,474 731,050
Dale W. Phillips 19,800 3.78 23.167 3/16/2005 288,474 731,050
</TABLE>
(1) Options vest at 25% per year on March 16, 1996, March 16, 1997,
March 16, 1998 and March 16, 1999.
(2) Options vested on date of retirement (12-31-95) and must be
exercised prior to 12-31-98.
(3) Potential realizable value is reported net of the option exercise
price but before taxes associated with exercise. These amounts
assume annual compounding results in total appreciation of 63% (5%
per year) and 159% (10% per year). Actual gains, if any, on stock
option exercises and common stock are dependent on the future
performance of the common stock and overall market conditions.
There can be no assurance that the amounts reflected in this table
will be achieved.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<CAPTION> AND FY-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired on Value FY-End (#) FY-End($)(2)
Name Exercise(#) Realized($) Exercisable Unexercisable(1) xercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
E. Hunter Harrison 0 0 206,250 296,250 1,776,563 1,994,062
John D. McPherson 0 0 9,000 39,112 42,750 115,521
Gerald F. Mohan 0 0 48,112 0 158,271 -
Donald H. Skelton 0 0 0 19,800 - 47,850
Ronald A. Lane 0 0 8,250 28,050 39,188 87,037
Dale W. Phillips 0 0 8,250 28,050 39,188 87,037
</TABLE>
(1) Includes shares exercisable on February 17, 1996, (93,750) and March
16, 1996 (44,878).
(2) Based on the year-end price of $25.583.
Pension and Retirement Plans
Executive Account Balance Plan. The Railroad's Executive Account
Balance Plan provides for a sum equivalent to 10% of an executive's
combined salary and performance awards in excess of a wage offset factor
to be accrued annually (but not funded), and is payable upon the
retirement from the Railroad or termination of employment. The wage
offset factor is adjusted annually by the percentage increase in the
social security wage base. For 1995, the wage offset factor was $102,000.
Amounts accrued earn interest in accordance with the plan.
Defined Contribution Plan. All management employees of the Railroad
are eligible to participate in a defined contribution plan to which the
Railroad contributes 2% of each participant's earnings (as defined in the
plan). All contributions are fully vested upon contribution and are
invested in various investment funds as selected by the employees.
Contributions are designated as Employer Contributions in the Savings
Plan.
Supplemental Retirement and Savings Plans. All management employees
of the Railroad are eligible to participate in the Supplemental Retirement
and Savings Plan (the "Savings Plan"), which is a qualified salary
reduction 401(k) plan. Eligible employees may make "pre-tax"
contributions to the Savings Plan of up to 15% of their salary subject to
limitations imposed by the Internal Revenue Code. Those contributions are
partially matched by the Railroad. The matching contribution is limited
to 50% of the first 6% of an employee's pre-tax salary (i.e., the matching
contribution is limited to 3% of his or her salary). All contributions
are fully vested upon contribution and are invested in various investment
funds as selected by the employees.
Excess Benefit Plan. Under the Railroad's Excess Benefit Plan,
amounts are accrued for each executive officer on an unfunded basis to
offset the limitations imposed by the Internal Revenue Code with respect
to certain benefit plans as a result of the level of the recipient's
compensation. Currently, the Excess Benefit Plan provides for the accrual
of a sum equivalent to the employer matching contribution under the
Supplemental Retirement and Savings Plan which is restricted by the limits
of Section 402(g) of the Internal Revenue Code. The amounts accrued will
be distributed at the same time and on the same terms as the amounts paid
under the Savings Plan.
Executive Deferred Compensation Plan. The Corporation established
the Illinois Central Corporation Executive Deferred Compensation Plan
effective as of January 1, 1994. The plan is available to all officers
of the Railroad and such management employees as specified from time to
time by the Railroad. Eligible employees may elect to defer up to 50% of
base salary and 100% of annual bonus. Participants' account balances are
fully vested and earn interest at a specified, variable rate. Distributions
under the plan will be made in a lump sum or installments after the
participant's retirement or other termination of employment. Subject to a
penalty, a participant may elect to withdraw all or a portion of his or her
account under the plan in the event of an unforeseen financial emergency.
Supplemental Executive Retirement Plan. The Corporation has no tax-
qualified defined benefit retirement plan for employees. However, the
Corporation established the Illinois Central Corporation Supplemental
Executive Retirement Plan effective as of January 1, 1994 (the "SERP").
The SERP covers all officers of the Railroad and such other management
employees as specified from time to time by the Railroad. The monthly
benefit payable pursuant to the SERP is equal to a maximum of 35% of the
participant's final average compensation (defined as the average annual
compensation paid for the highest 36 consecutive months out of the last
60 months prior to retirement) offset by the amount of annual annuity that
could be purchased with the sum of: (i) the portion of the participant's
account in the Savings Plan which is attributable solely to Employer
contributions and the earnings thereon; (ii) the participant's account in
the Excess Benefit Plan; and (iii) the participant's account balance in
the Executive Account Balance Plan. Participants vest after five years
of participation in the SERP. The following table shows benefits payable
to those executives who are eligible for early retirement at age 55 or above
with 10 years of credited service, or upon normal retirement at age 65.
Average Pension Plan Table
Final Estimated Annual Benefit for Years of Credited Service
Earnings 5 10 15 20 25
$100,000 $ 17,500 $ 35,000 $ 35,000 $ 35,000 $ 35,000
200,000 35,000 70,000 70,000 70,000 70,000
300,000 52,500 105,000 105,000 105,000 105,000
400,000 70,000 140,000 140,000 140,000 140,000
500,000 87,500 175,000 175,000 175,000 175,000
600,000 105,000 210,000 210,000 210,000 210,000
700,000 122,500 245,000 245,000 245,000 245,000
800,000 140,000 280,000 280,000 280,000 280,000
900,000 157,500 315,000 315,000 315,000 315,000
The above table sets forth the estimated annual benefits payable on
a single-life annuity basis if participant does not have a spouse at the
time payment is to commence and a joint and 50% survivor annuity basis in
the event the participant has a spouse at the time of commencement. For
1995, covered compensation for the executive officers named in the Summary
Compensation Table consists of salary, bonus and any deferred compensation
has been added back in the table.
The number of years of credited service as of December 31, 1995, is
two (2) years for each of Messrs. Harrison, McPherson, Lane, and Phillips.
Mr. Skelton has one (1) year of credited service at December 31, 1995.
Mr. Mohan retired before vesting and is not covered by the SERP.
Directors' Compensation
Under the compensation program for Outside Directors the annual
retainer for the Chairman is $170,000 and the annual retainer for other
Board members is $20,000. Because of the extra demands placed on each
committee's chairman a supplemental annual retainer of $3,000 is paid.
Each director receives $2,000 for each board or committee meeting attended
and is reimbursed for expenses incurred in attending those meetings. No
director fees are paid to Mr. Harrison since he is an employee. A
Directors Deferral Plan permits directors to defer up to 100% of their
cash compensation until they terminate their services as directors.
The Outside Directors also receive an annual grant of stock options
to purchase 2,250 shares at the fair market value on the date of grant.
Stock options are granted to each continuing director (whether as a result
of such director's re-election or by reason of the continuation of such
director's term) on the date of each Annual Meeting. Such options are
exercisable in full six months following their grant date and expire 10
years following grant date or if earlier, one year after termination of
service as a director for any reason other than death or disability.
In March 1996, each Outside Director received a conditional option
to purchase 37,500 shares which may vest on April 1, 2001 if specified
Company performance objectives are achieved in the year 2000. See
Proposal No. 3.
The Outside Directors participate in a non-qualified retirement
plan which provides for annual payment of an amount equal to the annual
retainer at the time of a director's retirement (see above) to be paid for
as many years as the director served in that capacity up to a maximum of
10 years.
IC has an Indemnification Agreement with each of the directors.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
No officer has an employment contract or a termination of employment
or change in control arrangement related to continued employment.
However, in the event of a change in control, any unvested restricted
stock and options granted to Employee Participants will be subject to
accelerated vesting.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The following independent directors are members of IC's Compensation
Committee: George D. Gould (Chairman), Samuel F. Pryor, IV, John V.
Tunney and Alan H. Washkowitz. No executive officer serves as a director
of any entity whose executive officers serve on IC's Compensation
Committee.
Performance Graph
The following performance graph compares the Corporation's change
in total stockholder return on its Common Stock since August 1990 when
public trading in the Common Stock began with the S&P Midcap Index in
which the Corporation is included and the S&P Railroad Index which
includes other Class I railroads but not the Railroad. Dividend
reinvestment has been assumed.
Stock Performance Table
S & P S & P
Period IC Stock Midcap 400 Railroads
12-90 100 100 100
12-91 282 150 163
12-92 313 168 183
12-93 470 191 227
12-94 413 185 196
12-95 530 242 287
OWNERSHIP OF COMMON STOCK AND CERTAIN TRANSACTIONS
OWNERSHIP
The following table sets forth certain information with respect to
persons known by the Corporation to beneficially own (as defined by the
Securities Exchange Act of 1934) as of March 8, 1996, five percent or more
of Common Stock, and with respect to each director and named executive
officer of the Corporation and all directors and executive officers of the
Corporation as a group. Share amounts have been adjusted for the 3-for-2
stock split effective in March 1996. The stock split has no impact on
ownership percentages.
Name and Address Amount and Percentage of
(if applicable) Nature of Beneficial Common Stock
of Beneficial Owner Ownership(2) Outstanding(1)
FMR Corporation
82 Devonshire Street
Boston Massachusetts 02109 574,564(2) 9.08%
MacKay Shields Financial
Corporation
9 West 57th Street
New York, New York 10019 3,887,175(3) 6.33%
George D. Gould 56,250 *
William B. Johnson 45,708 *
Gilbert H. Lamphere 870,847(4) 1.42%
Alexander P. Lynch 386,295(5) *
Samuel F. Pryor, IV 419,190(6) *
F. Jay Taylor 32,998(7) *
John V. Tunney 13,743(8) *
Alan H. Washkowitz 54,000(9) *
E. Hunter Harrison 519,258 *
John D. McPherson 59,460 *
Ronald A. Lane 163,336 *
Dale W. Phillips 181,189 *
Donald H. Skelton 25,724 *
All directors and executive
officers of IC as a group
(16 persons) 3,078,240(10) 4.96%
Gerald F. Mohan 52,127 *
* under 1%
(1) Based on 61,425,093 shares after adjusting the
40,950,154 shares of Common Stock outstanding on
March 8, 1996 for the 3-for-2 stock split effective
March 14, 1996. Shares issuable currently or within
sixty days upon exercise of options are treated as
outstanding for the purposes of stating the amount of
beneficial ownership and computing the percentage of
beneficial ownership of shares by such person (or of
the group). See 1990 Incentive Plan for a summary
of shares purchasable upon exercise of options granted.
(2) According to a Schedule 13G, Amendment No. 5, dated
February 14, 1996, Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR
Corporation, has dispositive power for 5,396,064
shares in its capacity as an investment advisor to
several investment companies (i.e., Funds) controlled
by FMR Corporation. Voting rights are vested with
the Fund's Board of Trustees. Fidelity Management
Trust Company, a wholly owned subsidiary of FMR
Corporation, has sole dispositive power for 175,500
shares and sole voting power for 87,000 shares in its
capacity as trustee or managing agent on several
private investment accounts. Fidelity International
Limited has sole disposition and voting power for 3,000
shares in its capacity as an investment advisor to
various investment companies (the "International Funds").
(3) According to a Schedule 13G dated February 13, 1996,
MacKay Shields Financial Corporation, in its capacity
as an investment manager for various clients, has
shared voting and shared disposition power for
3,887,175 shares.
(4) Excludes 209,112 shares held by a trust for the
benefit of Mr. Lamphere's descendants, of which
Messrs. Alexander P. Lynch and Richard G. Woolworth,
Jr. are co-trustees. Mr. Lamphere disclaims
beneficial ownership of these shares. Includes
84,831 shares held by a trust for benefit of Mr.
Pryor's children, of which Mr. Lamphere is a co-trustee.
(5) Includes 209,112 shares held by a trust for the benefit
of Mr. Lamphere's descendants, of which Messrs. Alexander
P. Lynch and Richard G. Woolworth, Jr. are co-trustees.
(6) Excludes 84,831 shares held by a trust for the benefit of
Mr. Pryor's children, of which Mr. Lamphere and Mr. Samuel
F. Pryor, III, Mr. Pryor's father, are trustees. Mr. Pryor
disclaims beneficial ownership of these shares.
(7) Includes 1,500 shares held by Dr. Taylor's spouse.
Dr. Taylor disclaims beneficial ownership of these shares.
(8) Includes 4,500 shares held in trust for Mr. Tunney's
mother, for which Mr. Tunney is Trustee.
(9) Under an arrangement with Lehman Brothers, Mr. Washkowitz
must remit to Lehman Brothers any gain upon exercise of
the options for 24,750 shares of the total.
(10) See Notes (4) - (9) above. Amount does not include
Mr. Mohan's shares.
CERTAIN TRANSACTIONS
Lehman Brothers Inc.
Mr. Washkowitz has been a Managing Director of Lehman
Brothers or its predecessors since 1978. Lehman Brothers has
provided services to the Corporation and the Railroad in the past
and is expected to do so in the future. Lehman Brothers managed
(i) the public debt offerings in 1995, (ii) the debt tender offer
and public debt offering of the Railroad in 1993 and (iii) is one
of the designated dealer's for the Railroad's commercial paper
program which started in November 1993.
The Bridgeford Group
Mr. Lynch is Co-Chief Executive Officer and Co-President of
The Bridgeford Group and served as a Senior Managing Director
there from 1991 until 1995. The Bridgeford Group has provided
services to the Corporation and the Railroad in the past and is
expected to do so in the future. The Bridgeford Group assisted
in the evaluation of and negotiations with Kansas City Southern
Industries in 1994 and the evaluation of and negotiations with
CCP Holdings, Inc. in 1995 and 1996.
GENERAL
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT
The Corporation's executive officers and directors are
required under the Securities Exchange Act of 1934, as amended,
to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock
Exchange. Copies of those reports must be furnished to the
Corporation as well.
Based solely on a review of the copies of reports furnished
to the Corporation and written representations that no other
reports were required, the Corporation believes that during the
preceding year all executive officers and directors have complied
with applicable filing requirements.
ANNUAL REPORTS
A copy of the Corporation's 1995 Annual Report, which
includes the Corporation's Consolidated Financial Statements for
the three years ended December 31, 1995, was mailed to all
stockholders of record as of March 8, 1996. The 1995 Annual
Report is not to be regarded as part of the proxy soliciting
materials.
PROXY SOLICITATION
The cost of the solicitation of proxies will be paid by the
Corporation. In addition to the use of the mails, proxies may be
solicited personally, or by telephone or by telegraph, by directors,
officers and employees of the Corporation or its subsidiaries,
without extra remuneration. The Corporation will reimburse brokers,
banks, nominees and other fiduciaries for their reasonable expenses
for forwarding proxy materials to principals.
In addition, the Corporation has retained Corporate Investor
Communications, Inc. at a fee of $4,500, to assist in the
distribution of proxy material and the solicitation of proxies.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be included in next
year's proxy statement must be received by the corporate Secretary
at the Corporation's principal executive offices in Chicago, Illinois,
no later than the close of business on December 3, 1996.
FURTHER BUSINESS
To the best of the Board of Directors' knowledge, there are
no matters to come before the Annual Meeting other than those set
forth in this Proxy Statement. If any further business is
presented to the Annual Meeting, the persons named in the proxies
will act on behalf of the stockholders they represent according
to their judgment.
By order of the Board of Directors
Ronald A. Lane
Secretary
April 1, 1996
SIDE 1
ILLINOIS CENTRAL CORPORATION
ILLINOIS CENTRAL CORPORATION
P SAVINGS PLANS
R
O Instructions Solicited on Behalf of the Trustee of the Savings
X Plans for Voting at Illinois Central Corporation's
Y Annual Meeting of Stockholders - May 8, 1996
The undersigned hereby instructs the Continental Trust
Company, the Trustee under the Savings Plans to vote all
shares subject to the participant's direction under such
Plans, at the Annual Meeting of Stockholders of Illinois
Central Corporation to be held in The Stockholder's Room of
the Bank of America, NT&SA, 231 South LaSalle Street,
Chicago, Illinois 60697 on Wednesday, May 8, 1996, and at
any adjournments thereof, as indicated on the reverse side
of this card, and on all other matters coming before said
Meeting in the Trustee's discretion.
(1) Election of Directors, Nominees:
William B. Johnson, Gilbert H. Lamphere, John V. Tunney
(2) To consider and vote upon the Incentive 2000 Plan.
(3) To consider and vote upon the Directors' Incentive 2000
Stock Option Plan.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE. SEE
REVERSE
SIDE
SIDE II
IC
LOGO
HERE
March 8, 1996, was the record date set by the Board
of Directors for determining stockholders eligible to
vote at the 1996 Annual Meeting. This date was prior
to the effective date for the 3-for-2 stock split
declared by the Board of Directors in January 1996.
As a result, stockholders of record on March 8, 1996,
will be voting pre-split shares, which DO NOT reflect
the stockholders' share ownership after the 3-for-2
split for all matters voted upon at the 1996 Annual
Meeting.
X
Please mark votes as in this example.
These instructions when properly executed will enable
the Trustee to vote your shares in the manner
directed herein. If no direction to the contrary is
made, your shares may be voted by the Trustee in
accordance with the terms of the Plan documents.
The Board of Directors recommends a vote FOR proposals 1, 2 and 3
For Against Abstain
1. Election of Directors
(see reverse).
2. Adopt Incentive 2000 Plan
3. Adopt Directors' Incentive
2000 Stock Option Plan
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
For all nominees except as noted above.
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.
Mark here for address change and note at left
The signer hereby revokes all proxies
heretofore given by the signer to
vote at said meeting or any
adjournments thereof. Signature: Date:
Signature: Date:
SIDE 1
ILLINOIS CENTRAL CORPORATION
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
R ANNUAL MEETING
O OF STOCKHOLDERS - MAY 8, 1996
X
Y
The undersigned hereby appoints E. Hunter Harrison and
Ronald A. Lane, and each of them, as proxies with the powers
the undersigned would possess if personally present and with
full power of substitution, to vote all shares the undersigned
is entitled to vote, at the Annual Meeting of Stockholders of
Illinois Central Corporation to be held in The Stockholder's
Room of the Bank of America, NT&SA, 231 South LaSalle Street,
Chicago, Illinois, 60697 on Wednesday, May 8, 1996, and at
any adjournments thereof, as indicated on the reverse side of
this card, and on all other matters coming before said Meeting
in their discretion.
(1) Election of Directors, Nominees:
William B. Johnson, Gilbert H. Lamphere, John V. Tunney
(2) To consider and vote upon the Incentive 2000 Plan.
(3) To consider and vote upon the Directors' 2000 Stock
Option Plan.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE. SEE REVERSE SIDE
SIDE II
IC
LOGO
HERE
March 8, 1996, was the record date set by the Board of
Directors for determining stockholders eligible to vote
at the 1996 Annual Meeting. This date was prior to the
effective date for the 3-for-2 stock split declared by
the Board of Directors in January 1996.
As a result, stockholders of record on March 8, 1996,
will be voting pre-split shares, which DO NOT reflect
share ownership after the 3-for-2 split, for all matters
voted upon at the 1996 Annual Meeting.
X
Please mark votes as in this example.
These instructions when properly executed will be voted
in the manner directed herein. If no direction to the
contrary is made this proxy will be voted FOR proposal 1
The Board of Directors recommends a vote FOR proposals 1, 2 and 3
For Against Abstain
1. Election of Directors
(see reverse).
2. Adopt Incentive 2000 Plan
3. Adopt Directors' Incentive
2000 Stock Option Plan
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
For all nominees except as noted above.
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.
Mark here for address change and note at
left
The signer hereby revokes all
proxies heretofore given by the
signer to vote at said meeting
or any adjournmentsthereof. Signature: Date:
Signature: Date:
APPENDIX I
ILLINOIS CENTRAL CORPORATION
DIRECTORS INCENTIVE 2000 OPTION PLAN
Article 1
Establishment, Purpose and Duration
1.1 Establishment of the Plan. Illinois Central
Corporation (the "Company") hereby establishes an incentive
compensation plan to be known as the Illinois Central Corporation
Directors Incentive 2000 Option Plan (the "Plan") for certain non-
employee directors of the Company. The Plan provides for the grant
of non-qualified stock options, subject to the terms and provisions
set forth herein.
1.2 Purpose of the Plan. The purpose of the Plan is
to promote the achievement of the Company's Plan2000 by linking the
personal financial interests of the non-employee directors to
attainment of those goals. This incentive will promote creation of
stockholder value, reward high performance and assist in unifying
the efforts of directors and senior managers. This Plan is intended
to mirror the Illinois Central Railroad Company Incentive
2000 Plan with the purpose that Directors benefits hereunder will
vest in the year 2001 only and in the same proportion that senior
management Awards become payable thereunder.
1.3 Effective Date and Duration of the Plan. The Plan
has been adopted and authorized by the Board of Directors of the
Company for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of a majority of the shares
of the voting stock of the Company entitled to be voted by the
holders of stock represented at a duly held stockholders' meeting,
it shall be deemed to have become effective as of March 8, 1996
(the"Effective Date"). The date of grant of the options granted
under the Plan prior, but subject, to approval of the Plan by
stockholders of the Company shall be determined without reference to
the date of approval of the Plan by the stockholders of the Company.
The Plan shall remain in effect, subject to the right of the Board
of Directors to terminate the Plan at any time pursuant to Article
7 hereof, until all Shares (as defined in Section 2.21 hereof)
subject to the Plan shall have been purchased or acquired or shall
have expired or otherwise been terminated in accordance with this
Plan. For purposes of operating the Plan, the Company intends to
rely on Rule 16b-3 (as defined in Section 2.22 hereof) as in effect
on April 30, 1991, until the Commission (as defined in Section 2.6)
may otherwise require.
Article 2
Definitions
Whenever used in the Plan, the following terms shall have
the meanings set forth below:
2.1 Award Agreement. "Award Agreement" shall mean any
written agreement entered into by and between the Company and an
Outside Director, or other document or instrument, setting forth the
terms and provisions applicable to an Option granted under the Plan.
2.2 Beneficial Owner. "Beneficial Owner" shall have
the meaning given such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act.
2.3 Board or Board of Directors. "Board" or "Board of
Directors" shall mean the board of directors of the Company.
2.4 Change in Control. A "Change in Control" of the
Company shall be deemed to have occurred upon the occurrence of any
of the following:
(a) any Person is or becomes the Beneficial Owner
(except that a person shall be deemed to be the "beneficial
owner" of all shares that any such person has the right to
acquire pursuant to any agreement or arrangement or upon
exercise of conversion rights, warrants, options or otherwise,
without regard to the sixty day period referred to in Rule
13d-3), directly or indirectly, of securities representing 25%
or more of the combined voting power of the Company's then
outstanding securities; provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by
the Company or (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company; or
(b) at any time during any period of two consecutive
years (not including any period prior to January 1, 1996)
individuals who at the beginning of such period constituted
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 date whose election, or nomination for election by the
Company's stockholders, 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 either an actual or threatened election contest (as
such terms are used in Rule 14a-11 or Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a person other than the Board.
2.5 Code. "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
2.6 Commission. "Commission" shall mean the United States
Securities and Exchange Commission or any successor agency thereto.
2.7 Committee. "Committee" shall mean the Compensation
Committee of the Board of Directors.
2.8 Company. "Company" shall mean Illinois Central
Corporation, a Delaware corporation, or any successor thereto as
provided in Section 8.5 herein.
2.9 Director. "Director" shall mean any individual
who is a member of the Board of Directors of the Company.
2.10 Disability. "Disability" shall mean disabled as
determined in the sole discretion of the Committee.
2.11 Effective Date. "Effective Date" shall have the
meaning set forth in Section 1.3 hereof.
2.12 Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to time, or
any successor act thereto.
2.13 Fair Market Value. "Fair Market Value" shall mean
the closing sales price of the Shares on the relevant date, as
reported on the consolidated tape of the New York Stock Exchange.
2.14 Measurement Area. "Measurement Areas" shall mean
the areas of IC's performance that are measured for purposes of
determining whether Options will vest under the Plan, as follows:
(a) The return on total capital, for the year
ended December 31, 2000, calculated as follows: (i) the
Company's net income after giving effect to both the
financial impact, if any, of the options granted herein
and awards earned pursuant to the Illinois Central
Railroad Company Incentive 2000 Plan but before giving
effect to special or extraordinary items or changes in
accounting rules, plus after-tax interest expense;
divided by (ii) the average of the Company's total
assets less non-interest bearing current liabilities at
the beginning and end of such year ("ROTC");
(b) The Company's primary earnings per share for
the year ended December 31, 2000, as reported in the
Company's audited financial statements, after giving
effect to both the financial impact, if any, of the
options granted herein and awards earned pursuant to the
Illinois Central Railroad Company Incentive 2000 Plan
but before giving effect to special or extraordinary
items or changes in accounting rules ("EPS"); and
(c) The highest consecutive average twenty-day
closing price of the Common Stock for the
sixteen-month period ending April 30, 2001, determined
concurrently with or after the period when such closing
price has been not less than $43 for twenty consecutive
days, as such closing prices are reported on the consolidated
tape of the New York Stock Exchange ("Stock Price").
2.15 Option. "Option" shall mean a nonqualified stock
option to purchase Shares, granted pursuant to Article 6 herein.
2.16 Option Price. "Option Price" shall mean the price
at which a Share may be purchased under an Option.
2.17 Outside Director. "Outside Director" shall mean
any individual who is a member of the Board of Directors of the
Company, but who is not otherwise an employee of the Company or any
of the Company's subsidiaries.
2.18 Participant. "Participant" shall mean an Outside
Director who has outstanding an Option granted under the Plan.
2.19 Permitted Transferee. "Permitted Transferee"
shall have the meaning set forth in Section 6.11 hereof.
2.20 Person. "Person" shall have the meaning ascribed
to such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
2.21 Plan. "Plan" shall mean the Illinois Central
Corporation Directors Incentive 2000 Option Plan, as set forth
herein and as hereinafter amended from time to time.
2.22 Retirement. "Retirement" shall mean the voluntary
termination of further service as a director after completion of one
or more full three-year terms as determined in the sole discretion
of the Committee.
2.23 Rule 16b-3. Rule 16b-3 shall mean Rule 16b-3
promulgated by the Commission under the Exchange Act, or any
successor rule or regulation thereto.
2.24 Securities Act. "Securities Act" shall mean the
Securities Act of 1933, as amended from time to time, or any
successor act thereto.
2.25 Shares. "Shares" shall mean shares of common
stock of the Company, par value $.001 per share.
Article 3
Administration of the Plan
3.1 Appointment of the Committee. The Plan shall be
administered by the Committee, subject to the restrictions set forth
herein.
3.2 Authority of the Committee. The Committee shall
have all power, discretion, and authority necessary to interpret and
administer the Plan in a manner which is consistent with the Plan's
provisions; provided, however, that in no event shall the Committee
have the power to determine the criteria for eligibility to
participate in the Plan, the number of Options or Shares subject to
Options granted under the Plan, the timing of the grant of Options
under the Plan or the Option Price, all of which determinations
shall be automatically made pursuant to the provisions of the Plan.
The Committee may, subject to the provisions of the Plan, establish
such rules and regulations as it deems necessary or advisable for
the proper administration of the Plan, and may make determinations
and may take such other action in connection with or in relation to
the Plan as it deems necessary or advisable. Each determination and
decision made by the Committee shall presumptively be final,
conclusive, and binding for all purposes and upon all Persons.
Article 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as
provided in Section 4.2 herein, the total number of Shares available
for grant under the Plan shall be three hundred thousand (300,000).
Shares issued pursuant to the Plan may consist of authorized and
unissued Shares or Shares which have been or may be held by the
Company in treasury, as determined from time to time by the Board.
The grant of an Option shall reduce the number of Shares available
for grant under the Plan by the number of Shares subject to such Option.
4.2 Adjustments in Authorized Shares. The number of
Shares subject to the Plan and to Options granted under the Plan
shall be adjusted as follows: (a) in the event that the number of
outstanding Shares is changed by any stock dividend, stock split or
combination of Shares, the number of Shares subject to the Plan and
to Options previously granted thereunder shall be proportionately
adjusted, (b) in the event of any merger, consolidation or
reorganization of the Company with any other corporation or
corporations, there shall be substituted on an equitable basis as
determined by the Board of Directors, in its sole discretion, for
each Share then subject to the Plan and for each Share then subject
to an Option granted under the Plan, the number and kind of shares
of stock, other securities, cash or other property to which the
holders of Shares of the Company are entitled pursuant to the
transaction, and (c) in the event of any other change in the
capitalization of the Company, the Committee shall provide for an
equitable adjustment in the number of Shares then subject to the
Plan and to each Share then subject to an Option granted under the
Plan. In the event of any such adjustment, the exercise price per
Share shall be proportionately adjusted.
Article 5
Eligibility
5.1 Eligibility. Persons eligible to participate in
the Plan are Outside Directors serving on the Board on March 8, 1996
and continuing in office after the 1996 Annual Meeting of Stockholders.
Article 6
Options
6.1 Grant of Options. Subject to the subsequent
approval of the Plan by the stockholders of the Company as set forth
in Section 1.3, each individual who is an Outside Director on the
Effective Date and continuing in office after the 1996 Annual
Meeting of Stockholders shall be granted, on the Effective Date, an
Option to purchase thirty-seven thousand five hundred (37,500) Shares.
6.2 Limitation on Grant of Options. Other than those
grants of Options set forth in Section 6.1 herein, no additional
Options shall be granted under the Plan.
6.3 Award Agreement. Each Option shall be evidenced
by a written Award Agreement that shall specify the Option Price,
the terms for payment of the Option Price, the expiration date of
the Option, and the number of Shares subject to the Option, and such
other terms and conditions established by the Committee, in its sole
discretion, not inconsistent with the Plan.
6.4 Option Price. The exercise price per Share for
each Share which may be purchased pursuant to an Option shall equal
150% of the Fair Market Value of a Share on the date the Option is
granted, which is $37.875.
6.5 Expiration of Options. Each Option shall expire,
and all rights to purchase Shares thereunder shall cease, on the
date ten (10) years from the date on which the Option was granted.
6.6 Performance Goals for Vesting. Vesting of granted
options to Participants shall be determined solely by reference to
the extent the Company attains the goals relating to each of the
Measurement Areas. Subject to the provisions of Section 6.9, the
goals relating to each of the Measurement Areas are as follows:
ROTC: 14%; EPS $4; and Stock Price minimum and target goals, $43 and
$50, respectively. The percentage of the Option that will vest and
shall be exercisable under the Plan relating to each of the
Measurement Areas is 70% -- Stock Price; 15% -- ROTC; and 15% --
EPS. Whether an Option vests and is exercisable under the Plan will
be first determined by reference to the Stock Price goals. If
Company performance fails to attain the minimum Stock Price goal, no
Options shall vest. Accordingly, the percentages of an Option that
may vest under the Plan relating to ROTC and EPS will not vest
unless the minimum Stock Price is attained.
6.7 Vesting of Shares Subject to Option. Except as
otherwise provided in Section 6.8 hereof, each Option granted under
the Plan shall vest and first become exercisable on April 30, 2001
pursuant to the following schedule: (a) if the Stock Price is less
than $43, zero percent (0%) of each Option shall vest and become
exercisable; (b) if the Stock Price is $43, options on 7,031 shares
(70% of 25%) of the total grant shall vest and become exercisable;
(c) if the Stock Price is $50 or higher, options on 26,250 shares
(70% of 100%) of the total grant shall vest and become exercisable;
and (d) if the Stock Price is between $43 and $50, the percentage of
each Option that shall vest and become exercisable shall be
interpolated. In addition, if the ROTC or EPS goal is attained, the
number of Options which would otherwise vest by virtue of the Stock
Price will be increased by an additional 15% of the applicable
vesting amount for each of the two goals achieved.
6.8 Vesting Upon a Change in Control. In the event of
a Change in Control, one hundred percent (100%) of each Option
granted under the Plan shall vest and become fully exercisable,
prorated for the number of completed months between the Effective
Date and the date of the Change in Control.
6.9 Adjustment of Option Price. In the event that the
number of outstanding Shares is changed by any stock dividend, stock
split or combination of Shares, the Option Price, the EPS goal and
the Stock Price minimum and target goals shall be proportionably
adjusted, and in the event of any other change in the capitalization
of the Company, the Committee shall provide for a proportionate
adjustment to such Option Price, the EPS goal and the Stock Price
minimum and target goals.
6.10 Effect of Termination of Directorship. In the
event that a Participant ceases to be a Director on or before April
30, 2001 for any reason, Options held by such Participant or such
Participant's Permitted Transferees will vest and become exercisable
to the extent such Options would have vested and become exercisable
under the terms of the Plan if the Participant had remained a
Director until April 30, 2001, but prorated according to the number
of full months the Director actually served during the period from
the Effective Date to the date of termination.
6.11 Exercise of Options. A person entitled to exercise an
Option may do so by delivery of a written notice to that effect
specifying the number of Shares with respect to which the Option is
being exercised and any other information the Committee may prescribe.
The notice shall be accompanied by payment and the Participant's copy
of any and all Award Agreements. All notices or requests provided for
herein shall be delivered to the Secretary of the Company.
Except as otherwise provided in an Award Agreement, the
Participant may pay the Option Price per Share upon exercise of any
Option (a) in cash, (b) in cash received from a broker-dealer to
whom the Participant has submitted an exercise notice consisting of
a fully endorsed Option (however, in the case of a Participant
subject to Section 16 of the Exchange Act, this payment option shall
only be available to the extent such Participant complies with
Regulation T issued by the Federal Reserve Board), (c) by delivering
Shares having an aggregate Fair Market Value on the date of exercise
equal to the Option Price, (d) by directing the Company to withhold
such number of Shares otherwise issuable upon exercise of such
Option having an aggregate Fair Market Value on the date of exercise
equal to the Option Price, or (e) by any combination of (a), (b),
(c) and (d). In the case of an election pursuant to (a) or (b)
above, cash shall mean cash or a check issued by a federally insured
bank or savings and loan, and made payable to Illinois Central
Corporation. In the case of a Participant who is subject to Section
16 of the Exchange Act and who elects payment pursuant to (d) above,
to the extent required under Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder, the election must be
made in writing either (i) within the ten (10) business days
beginning on the third business day following release of the
Company's quarterly or annual summary of earnings and ending on the
twelfth business day following such day, or (ii) at least six (6)
months prior to the date of exercise of such Option. In lieu of a
separate election governing each exercise of an Option, a
Participant may file a blanket election with the Committee which
shall govern all future exercises of Options until revoked by the
Participant. The Company shall issue, in the name of the
Participant, stock certificates representing the total number of
Shares issuable pursuant to the exercise of an Option as soon as
reasonably practicable after such exercise, provided that any Shares
purchased by a Participant through a broker-dealer pursuant to
clause (b) above shall be delivered to such broker-dealer in
accordance with 12 C.F.R. Sect.220.3(e)(4) or any other applicable
provision of law.
6.12 Taxes. At the time of the exercise of any Option,
as a condition of the exercise of such Option, the Company may
require the Participant to pay the Company an amount equal to the
amount of the tax the Company or any subsidiary may be required to
withhold to obtain a deduction for federal and state income tax
purposes as a result of the exercise of such Option by the
Participant or to comply with applicable law.
At any time when a Participant is required to pay an
amount required to be withheld under applicable income tax or other
laws in connection with the exercise of an Option, the Participant
may satisfy this obligation in whole or in part by (a) in cash, (b)
directing the Company to withhold such number of Shares otherwise
issuable upon exercise of such Option having an aggregate Fair
Market Value on the date of exercise equal to the amount of tax
required to be withheld, (c) delivering Shares having an aggregate
Fair Market Value equal to the amount required to be withheld, or
(d) by any combination of (a), (b) or (c). In the case of payment
of taxes pursuant to (a) above, cash shall mean cash or a check
issued by a federally insured bank or savings and loan, and made
payable to Illinois Central Corporation. In case of payment of
taxes pursuant to (b) or (c) above, the Participant's election must
be made on or prior to the date of exercise and shall be
irrevocable. The Committee may disapprove any election or delivery
or may suspend or terminate the right to make elections or
deliveries. In the case of a Participant who is subject to Section
16 of the Exchange Act, to the extent required by Section 16 and the
rules and regulations promulgated thereunder, an election to
withhold Shares must be made in writing either (a) six months prior
to the exercise date, (b) during a period beginning on the third
business day following the date of release for publication of the
Company's quarterly or annual summary consolidated statements of
revenue and income and ending on the twelfth business day following
such date or (c) more than six months and one day from the later of
the date of the grant of the Option hereunder to such person or the
date of the most recent transaction by such person which is treated
as a purchase of Shares pursuant to the Exchange Act and the rules
and regulations thereunder, and which is not exempt from Section
16(b) of the Exchange Act. In lieu of a separate election governing
each exercise of an Option, a Participant may file a blanket
election with the Committee which shall govern all future exercises
of Options until revoked by the Participant.
6.13 Transferability of Options. No Option granted
under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than (a) by will or by
the laws of descent and distribution, or (b) to the extent permitted
by Rule 16b-3 and solely for the purposes of estate planning by or
on behalf of the Participant, by transfer to members of such
Participant's family, family partnerships or trusts, provided that
the sole beneficiaries of such trusts consist of the Participant and
members of the Participant's family. Any person or entity to which
an Option has been transferred in accordance with clause (a) or (b)
of the preceding sentence is referred to elsewhere in this Plan as
a "Permitted Transferee." All Options granted to a Participant
under the Plan shall be exercisable during his or her lifetime only
by such Participant or such Participant's Permitted Transferees.
6.14 Postponement of Exercise. The Committee may
postpone any exercise of an Option for such time as the Committee in
its sole discretion may deem necessary in order to permit the
Company (a) to effect, amend or maintain any necessary registration
of the Plan or the Shares issuable upon the exercise of an Option
under the Securities Act or the securities laws of any applicable
jurisdiction, (b) to permit any action to be taken in order to (i)
list such Shares on a stock exchange if Shares are then listed on
such exchange or (ii) comply with restrictions or regulations
incident to the maintenance of a public market for its Shares,
including any rules or regulations of any stock exchange on which
the Shares are listed, or (c) to determine that such Shares and the
Plan are exempt from such registration or that no action of the kind
referred to in (b)(ii) above needs to be taken; and the Company
shall not be obligated by virtue of any terms and conditions of any
Option or any provision of the Plan to recognize the exercise of an
Option or to sell or issue Shares in violation of the Securities Act
or the securities laws of any applicable jurisdiction thereof.
Article 7
Amendment or Termination of the Plan
7.1 Termination or Amendment. The Board or Committee
may terminate, suspend, or amend the Plan, in whole or in part, from
time to time, without the approval of the stockholders of the
Company to the extent allowed by law; provided, however, that (a) no
Plan amendment shall be effective until approved by the stockholders
of the Company insofar as stockholder approval thereof is required
in order to the Plan to continue to satisfy the requirements of Rule
16b-3 under the Exchange Act, and (b) the provisions of the Plan
relating to the number of Options or Shares subject to Options
granted under the Plan, the timing of the grant of Options under
Plan or the Option Price may not be amended more than once every six
(6) months, except to comply with changes in the Code and the
Employee Retirement Income Security Act, or the rules and
regulations under each.
The Committee may correct any defect or supply an
omission or reconcile any inconsistency in the Plan or in any Option
granted hereunder in the manner and to the extent it shall deem
desirable, in its sole discretion, to effectuate the Plan.
7.2 Options Previously Granted. Unless required by
law, no termination, amendment, or modification of the Plan shall in
any material manner adversely affect the rights of any holder of an
Option previously granted under the Plan, without the written
consent of the Participant holding such Option.
Article 8
Miscellaneous
8.1 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also shall
include the feminine; the plural shall include the singular and the
singular shall include the plural.
8.2 Severability. In the event any provision of the
Plan shall be held illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining provisions
of the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provisions had not been included. This Plan is
intended to comply with all applicable requirements of Rule 16b-3 or
its successors under the 1934 Act, insofar as Participants subject
to Section 16 of the 1934 Act are concerned. To the extent any
provision of the Plan does not so comply, the provision shall, to
the extent permitted by law and deemed advisable by the Committee,
be deemed null and void with respect to such Participants.
8.3 Beneficiary Designation. Each Participant under
the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in the event of his or
her death (and/or who may exercise the Participant's vested Options
following his or her death). Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed
by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during his or her
lifetime. In the absence of any such designation or in the event
that all designated beneficiaries have predeceased the Participant,
benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate (and, subject to the terms and provisions
of the Plan, any unexercised vested Options may be exercised by the
administrator or executor of the Participant's estate).
8.4 No Right of Nomination. Nothing in the Plan shall
be deemed to create any obligation on the part of the Board to
nominate any Director for reelection by the Company's stockholders.
8.5 Successors. All obligations of the Company under
the Plan with respect to Options granted hereunder shall be binding
on any successor to the Company, whether as a result of a Change in
Control or otherwise.
8.6 Governing Law. To the extent not preempted by Federal
law, the Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Illinois.
8.7 Rights as Stockholders. A Participant or a Permitted
Transferee shall have no rights as a stockholder with respect to any
Shares covered by an Option or receivable upon the exercise of an
Option until the Participant or Permitted Transferee shall become the
holder of record of such Shares, and no adjustments shall be made for
dividends in cash or other property or other distributions or rights
in respect to such Shares for which the record date is prior to the date
on which the Participant shall have in fact become the holder of record
of the Shares acquired pursuant to the Option.
APPENDIX II
ILLINOIS CENTRAL RAILROAD COMPANY
INCENTIVE 2000 PLAN
Article 1
Establishment, Purpose and Duration
1.1 Establishment of Plan. Illinois Central Railroad Company
(the "Company") hereby establishes an incentive compensation plan to be
known as the Illinois Central Railroad Company Incentive 2000 Plan (the
"Plan") for certain management employees of Illinois Central Railroad
Company and its Affiliated Companies (as defined in Section 2.1). The
Plan permits the payment of cash awards, subject to the terms and
provisions set forth herein.
1.2 Purpose of Plan. The purpose of the Plan is to focus
sharply the attention of management on the goals of the Illinois Central
Corporation Plan2000 and to provide incentive compensation based upon
attainment of those goals. This incentive will promote creation of
stockholder value, reward high performance and assist in the further
development and retention of high performing management team.
1.3 Effective Date and Duration of the Plan. The Plan has been
adopted and authorized by the Board of Directors for submission to the
stockholders of IC. If the Plan is approved by the affirmative vote of
a majority of the shares of the voting stock of IC entitled to be voted
by the holders of stock represented at a duly held stockholders' meeting,
it shall be deemed to be effective as of the date of approval by the
stockholders of IC. The Plan shall remain in effect, subject to the right
of the Board of Directors to terminate the Plan at anytime pursuant to
Article 6 hereof, until all Awards (as defined in Section 2.2), if any,
have been paid in accordance with this Plan.
Article 2
Definitions
Wherever used herein the following terms shall have the meanings
hereinafter set forth:
2.1 Affiliated Company. "Affiliated Company" shall mean a
business entity, or predecessor of such entity, if any, which is a member
of a controlled group of corporations which includes the Company.
2.2 Award. "Award" shall mean the cash remuneration payable to
an Eligible Employee pursuant to the Plan.
2.3 Beneficial Owner. "Beneficial Owner" shall have the
meaning given such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
2.4 Board or Board of Directors. "Board" or "Board of Directors"
shall mean the Board of Directors of Illinois Central Corporation.
2.5 Change in Control. A "Change in Control" of IC shall be
deemed to have occurred if:
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (except that a person shall be deemed to be
the "beneficial owner" of all shares that any such person has
the right to acquire pursuant to any agreement or arrangement or
upon exercise of conversion rights, warrants, options or
otherwise, without regard to the sixty day period referred to in
such Rule), directly or indirectly, of securities representing
25% or more of the combined voting power of IC's then outstanding
securities; provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from IC, (ii) any acquisition by
IC or (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by IC; or
(b) at any time during any period of two consecutive years
(not including any period prior to January 1, 1996) individuals
who at the beginning of such period constituted 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 date whose election, or
nomination for election by the IC's stockholders, 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 either an actual or
threatened election contest (as such terms are used in Rule 14a-
11 or Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the Board.
2.6 Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
2.7 Committee. "Committee" shall mean the Compensation
Committee of the Board of Directors of IC. The Committee shall be
comprised of two or more members of the Board of Directors. All members
of the Committee shall satisfy the "outside" director requirements of
Section 162(m).
2.8 Common Stock. "Common Stock" shall mean shares of common
stock of IC, par value $.001 per share.
2.9 Company. "Company" shall mean Illinois Central Railroad
Company, a Delaware corporation, or any successor corporation or other
entity resulting from a merger or consolidation into or with the Company
or a transfer or sale of substantially all of the assets of the Company.
2.10 Disability. "Disability" shall mean "disabled" within the
meaning of the Illinois Central Railroad Company Supplemental Executive
Retirement Plan.
2.11 Effective Date. "Effective Date" shall have the meaning
set forth in Section 1.3 hereof.
2.12 Eligible Employee. "Eligible Employee" shall mean any
employee of the Company in Salary Grades A, B, C, D, E, F, G, 1, 2 and 3.
2.13 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time, or any successor act
thereto.
2.14 IC. "IC" shall mean Illinois Central Corporation, a
Delaware corporation, or any successor corporation or other entity
resulting from a merger or consolidation into or with IC or a transfer or
sale of substantially all of the assets of IC.
2.15 Incentive Period. "Incentive Period" shall mean the period
commencing on the Effective Date and ending on April 30, 2001.
2.16 Measurement Area. "Measurement Areas" shall mean the areas
of IC's performance that are measured for purposes of determining whether
Awards may be earned and paid under the Plan, as follows:
(a) IC's return on total capital, for the year ended
December 31, 2000, calculated as follows: (i) IC's net income
after giving effect to both Awards earned under the Plan and the
financial impact, if any, of the options granted under the
Illinois Central Corporation Directors Incentive 2000 Option
Plan but before giving effect to special or extraordinary items
or changes in accounting rules, plus after-tax interest expense;
divided by (ii) the average of IC's total assets less non-
interest bearing current liabilities at the beginning and end of
such year ("ROTC");
(b) IC's primary earnings per share for the year ended
December 31, 2000, as reported in IC's audited financial
statements, after giving effect to both Awards earned under the
Plan and the financial impact, if any, of the options granted
under the Illinois Central Corporation Directors Incentive 2000
Option Plan but before giving effect to special or extraordinary
items or changes in accounting rules ("EPS"); and
(c) The highest consecutive average twenty-day closing
price of the Common Stock for the sixteen-month period ending
April 30, 2001, determined concurrently with or after the period
when such closing price has been not less than $43 for twenty
consecutive days, as such closing prices are reported on the
consolidated tape of the New York Stock Exchange ("Stock Price").
2.17 Retirement. "Retirement" shall mean either Normal
Retirement or Early Retirement within the meaning of the Illinois Central
Railroad Company Supplemental Executive Retirement Plan.
2.18 Plan. "Plan" shall mean the Illinois Central Railroad
Company Incentive 2000 Plan, as set forth herein and as hereinafter
amended from time to time.
2.19 Section 162(m). "Section 162(m)" shall mean the provisions
of Code Section 162(m) and the regulations implementing such provisions
issued by the Internal Revenue Service.
Article 3
Administration of the Plan
3.1 Appointment of the Committee. The Plan shall be administered
by the Committee, subject to the restrictions set forth herein.
3.2 Authority of the Committee. The Committee shall have all
power, discretion and authority necessary to interpret and administer the
Plan in a manner which is consistent with the Plan's provisions. The
Committee shall determine all questions arising in the administration,
interpretation, and application of the Plan, including but not limited to,
questions of eligibility and the status and rights of Eligible Employees.
The Committee may, subject to the provisions of the Plan, establish such
rules and regulations as it deems necessary or advisable for the proper
administration of the Plan, and may make determinations and may take such
other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each determination and decision made by the
Committee shall presumptively be final, conclusive and binding for all
purposes and upon all persons.
3.3 Committee Certification. The Committee shall certify in
writing, prior to payment of any Award hereunder to an Eligible Employee,
the extent to which the goals for each of the Stock Price, ROTC and EPS
Measurement Areas were satisfied.
Article 4
Eligibility
4.1 Eligibility. Persons eligible to participate in Plan are
Eligible Employees as of the Effective Date and persons who become
Eligible Employees after the Effective Date but before January 1, 2000.
Article 5
Awards Under the Plan
5.1 Performance Goals for Awards. Awards earned by and paid to
Eligible Employees shall be determined solely by reference to the extent
IC attains the goals relating to each of the Measurement Areas. Subject
to the provisions of Section 5.7, the goals relating to each of the
Measurement Areas are as follows: ROTC: 14%; EPS $4; and Stock Price
minimum, target and maximum goals, $43, $50 and $60, respectively. The
percentage of an Award that may be earned and shall be paid under the Plan
relating to each of the Measurement Areas is 70% -- Stock Price; 15% --
ROTC; and 15% -- EPS. Whether an Award is earned and paid under the Plan
will be first determined by reference to the Stock Price goals. If
IC s Performance fails to attain the minimum Stock Price goal, no Award
shall be earned or paid to Eligible Employees. Accordingly, the
percentages of an Award that may be earned under the Plan relating to ROTC
and EPS may not be earned unless the minimum Stock Price is attained.
5.2 Calculation of Awards. ROTC, EPS and Stock Price shall be
certified by the Committee. If the Stock Price is less than $43 (as
adjusted from time to time in accordance with Section 5.7 hereof), no
Awards will be made under the Plan. If the Stock Price is equal to or
greater than the minimum goal (as may be adjusted), Awards earned and paid
under the Plan shall be calculated as follows:
(a) If only the Stock Price minimum, target or maximum
goal is attained, Eligible Employees shall be entitled to
receive 70% of the minimum target or maximum Award set forth in
the following table, respectively, for their employment Salary
Grade, determined in accordance with Section 5.6. If the Stock
Price is between the Stock Price minimum, target and maximum
goals, the amount of an Award shall be interpolated between the
minimum and target or target and maximum Awards, as the case may be.
Salary
Grade Threshold Award Target Award Maximum Award
A $750,000 $3,000,000 $6,000,000
B $500,000 $2,000,000 $4,000,000
C $437,500 $1,750,000 $3,500,000
D $250,000 $1,000,000 $2,000,000
E $187,500 $ 750,000 $1,500,000
F $125,000 $ 500,000 $1,000,000
G $ 62,500 $ 250,000 $ 500,000
1 $ 43,750 $ 175,000 $ 350,000
2 $ 37,500 $ 150,000 $ 300,000
3 $ 31,250 $ 125,000 $ 250,000
(b) If the ROTC goal is attained, an additional 15% of
the applicable Award (based upon attainment of the Stock Price
goal) as set forth in the table above or interpolated, shall be
earned and paid.
(c) If the EPS goal is attained, an additional 15% of
the applicable Award (based upon attainment of the Stock Price
goal) as set forth in the table above or interpolated, shall be
earned and paid.
In no event shall total Awards under this Plan exceed $30 million at
Target or $60 million at Maximum Awards. In the event that total Awards
under this Plan exceed such Target or Maximum Awards, actual Awards shall
be prorated among Eligible Employees.
5.3 Payment of Awards. Awards will be paid to Eligible
Employees within 90 days following the earliest to occur of a Change in
Control or the end of the Incentive Period. Except as otherwise provided
in Sections 5.4 and 5.5, Awards will be paid only to Eligible Employees
who are employed by the Company or an Affiliated Company on the last day
of the Incentive Period.
5.4 Calculation of Awards in the Event of Death, Disability or
Retirement. Awards will be paid to an Eligible Employee whose termination
of employment occurs on account of death, Disability or Retirement, in an
amount equal to the amount that such Eligible Employee would have received
under the terms of the Plan if he had remained employed until the last day
of the Incentive Period, but prorated according to the number of full
months the Eligible Employee actually worked during the Incentive Period.
Such Award will be paid at the same time and in the same manner as other
Awards.
5.5 Calculation of Awards in the Event of a Change in Control.
In the event of a Change in Control, Awards will be payable to Eligible
Employees who are employed by the Company or an Affiliated Company on the
date of the Change in Control at the greater of Target Award or actual
Award earned, determined by performance during the prior 12 months,
prorated for the number of completed months in the Incentive Period prior
to the Change in Control. Awards will be paid to Eligible Employees
within 90 days following a Change in Control.
5.6 Change in Salary Grade; New Hires. An employee who first
becomes a Eligible Employee after the Effective Date, shall be entitled
to an Award equal to the amount of Award he or she would have received
under the terms of the Plan, but pro rated according to the number of full
months in which such employee actually was an Eligible Employee during the
Incentive Period. The Award of an Eligible Employee whose Salary Grade
changes during the Incentive Period shall be calculated according to the
number of months worked in each Salary Grade.
5.7 Adjustment of Performance Goals. In the event that the
number of outstanding shares of Common Stock is changed by any stock
dividend, stock split or combination of the shares of Common Stock, the
EPS goal and the Stock Price minimum, target and maximum goals shall be
proportionately adjusted, and in the event of any other change in the
capitalization of IC, the Committee shall provide for a proportionate
adjustment to such EPS and Stock Price goals.
Article 6
Amendment or Termination of the Plan
6.1 Amendment or Termination. The Board or Committee may
terminate, suspend, or amend the Plan, in whole or in part, from time to
time, without the approval of the stockholders ofIC to the extent allowed
by law; provided, however, that no Plan amendment shall be effective until
approved by the stockholders of IC insofar as stockholder approval thereof
is required in order for the Plan to continue to satisfy the requirements
of Section 162(m).
The Committee may correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Award granted hereunder
in the manner and to the extent it shall deem desirable, in its sole
discretion, to effectuate the Plan.
Article 7
Miscellaneous
7.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the
plural.
7.2 No Right of Employment. Establishment of the Plan shall
not be construed to give any Eligible Employee the right to be retained
in the service of the Company for any particular period or to limit the
Company's right to discharge an employee for any reason at any time.
7.3 Spendthrift Provision. No interest of any person or entity
in, or right to receive a distribution under, the Plan shall be subject
in any manner to sale, transfer, assignment, pledge, attachment,
garnishment, or other alienation or encumbrance of any kind; nor may such
interest or right to receive a distribution be taken, either voluntarily
or involuntarily for the satisfaction of the debts of, or other
obligations or claims against, such person or entity, including claims for
alimony, support, separate maintenance and claims in bankruptcy
proceedings.
7.4 Withholding. The Company may withhold from any Award paid
an amount necessary to pay any taxes or other deductions required by law
to be withheld.
7.5 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, such illegality or invalidity
shall not effect the remaining provisions of the Plan, and the Plan shall
be construed and enforced as if such illegal or invalid provision had not
been included. This Plan is intended to comply with all applicable
requirements of Section 162(m) insofar as participants covered by such
section are concerned. To the extent any provision of the Plan does not
so comply, the provisions shall, to the extent permitted by law and deemed
advisable by the Committee, be deemed null and void with respect to such
participants.
7.6 Governing Law. To the extent not preempted by Federal law,
the Plan and all agreements hereunder shall be construed in accordance
