<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TCC INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
TCC INDUSTRIES, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
AN IMPORTANT MESSAGE
FROM THE CHAIRMAN OF
TCC INDUSTRIES, INC.
<PAGE> 3
PRELIMINARY PROXY STATEMENT
AMENDMENT NO. 1
SUBJECT TO COMPLETION
TCC INDUSTRIES, INC.
Dear Shareholders:
Your Company's 1997 Annual Meeting of Shareholders will be held in Austin,
Texas on Wednesday, May 7, 1997, and we take this opportunity to invite you to
attend. The meeting will begin promptly at 9:00 a.m. in the Boardroom of Texas
Commerce Bank -- Austin, 3rd Floor, Texas Commerce Bank Building, 700 Lavaca
Street, Austin, Texas. Please refer to the enclosed formal notice and proxy
statement.
This year's meeting will be especially important in defining the future
of your investment in TCC Industries, Inc.
In June 1996, the Board of Directors retained an investment banking firm to
advise the Board on various strategic alternatives to increase shareholder
value. In February 1997, the investment banking firm was authorized to evaluate
additional strategic alternatives including the acquisition of, or a merger
with, another company or the sale of all or part of your Company or leveraged
buyout by management or new investors.
This strategy evolved over the last year as the Board monitored
developments at the Company's subsidiaries and in the market. The Board, after
consulting with its advisors, believes that this strategy represents the best
approach to maximize value for all stockholders, and considers the vote on the
directors to be elected at the meeting to be a referendum on the decision to
pursue this strategy. While there can be no assurance that a transaction can be
consummated on terms that are favorable to TCC Industries, the Board of
Directors is determined to use its efforts to actively explore all opportunities
that it believes will result in enhanced shareholder value.
Remember, together the Board of Directors (of which only one member is
employed by the Company) owns a total of 247,624 shares. We all share a common
interest -- to see TCC Industries' stock price go up.
BEWARE
Unfortunately, you may soon be receiving a proxy mailing from two dissident
shareholders, Walter A. DeRoeck and Robert Thomajan, soliciting your vote to
elect their nominees to the Board. We have attempted to accommodate these
people, even offering Mr. DeRoeck a seat on the Board, but they have apparently
decided to wage a proxy contest anyway. Please do not send back any proxy sent
to you by this group, even to vote against them.
WE ARE ASKING YOU TO VOTE FOR MANAGEMENT'S NOMINEES BY SIGNING AND DATING THE
WHITE PROXY CARD TODAY, AND RETURNING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE.
EVEN IF YOU HAVE ALREADY SENT BACK A PROXY CARD TO THIS DISSIDENT GROUP, YOU CAN
STILL SUPPORT MANAGEMENT BY USING THE WHITE PROXY CARD. ONLY YOUR LATEST DATED
CARD COUNTS.
The campaign being waged against your Company by this group is going to be
very costly to your Company -- not only in terms of the money involved defending
the Company from this group, but also in diverting management's focus at this
very important time in implementing the strategic plan initiated by the Board.
- As outlined in the proxy statement, the Board believes that Mr. DeRoeck
and Mr. Thomajan want to gain control of the Board so that they can sell
all the operating units of the Company and redeploy the assets in some
other manner without making any distributions to the shareholders.
- Neither Mr. DeRoeck nor Mr. Thomajan claims to have special expertise in
managing a company such as TCC or either of its businesses.
<PAGE> 4
- It appears that Mr. Thomajan has spent the past several years as a
trusted aide facilitating the business maneuvers of Marc Rich, who fled
the United States to avoid prosecution for among other things, tax
evasion and trading with the Iranian enemy during the trading embargo.
Are Mr. DeRoeck and Mr. Thomajan the kind of candidates your want running
your Company?
Send a message to DeRoeck and Thomajan. Do not return any proxy card you
may receive from them, even to vote against their nominees.
- IF YOU HOLD YOUR SHARES THROUGH A BROKERAGE FIRM, your broker cannot vote
your shares unless he receives your specific instructions. Please sign,
date and return the WHITE PROXY CARD in the envelope provided by your
broker.
- IF YOU ARE SIGNING AS A CUSTODIAN, TRUSTEE, PARTNER, OFFICER, EXECUTOR OR
ATTORNEY, please write in such title next to your signature.
- IF YOU HAVE ALREADY SENT BACK THE DISSIDENT GROUP'S CARD, you can still
change your vote by returning a properly signed WHITE PROXY CARD and
dating it later than the card originally sent. Only your latest dated
card counts.
Your attendance, if possible, and your vote, either by proxy or in person,
will be very much appreciated. Please vote today. It is important that you vote,
no matter how many or how few shares you own.
If you have any question about how to vote your shares, please call our
proxy solicitor, Corporate Investor Communication, Inc., toll free at (800)
242-4410.
Sincerely,
Lawrence W. Schumann
Chairman of the Board
<PAGE> 5
***** IMPORTANT *****
Your vote is important. No matter how many or how few shares of TCC
industries you own, please vote FOR the Board's nominees by signing, dating and
mailing the enclosed WHITE PROXY CARD.
If you have already returned an opposition proxy card, you have every right
to change your vote by signing and returning the enclosed WHITE PROXY CARD. Only
your latest dated, properly executed card will count.
If you own your shares in the name of a brokerage firm, your broker cannot
vote such shares unless he receives your specific instructions. Please sign,
date and return the enclosed WHITE PROXY CARD in the postage-paid envelope that
has been provided.
If you have any questions as to how to vote your shares, please call our
proxy solicitor:
CORPORATE INVESTOR COMMUNICATIONS, INC.
111 COMMERCE DRIVE
CARLSTADT, NJ 07072
TOLL FREE: 1-800-242-4410
CALL COLLECT: 1-201-896-1900
<PAGE> 6
PRELIMINARY PROXY STATEMENT
AMENDMENT NO. 1
SUBJECT TO COMPLETION
TCC INDUSTRIES, INC.
SUITE 1250, 816 CONGRESS AVENUE
AUSTIN, TEXAS 78701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 1997
To the Shareholders of TCC Industries, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders of TCC
Industries, Inc. (the "Company") will be held in the Boardroom of Texas Commerce
Bank -- Austin, 3rd Floor, Texas Commerce Bank Building, 700 Lavaca Street,
Austin, Texas on Wednesday, May 7, 1997, at 9:00 a.m., local time, for the
following purposes:
1. Electing two directors to the Board of Directors;
2. Approving the appointment by the Board of Directors of Coopers &
Lybrand L.L.P. as the firm of independent accountants to audit the accounts
of the Company for the fiscal year ended December 31, 1997;
3. Transacting such other business as may properly come before the
meeting.
Holders of Common Stock of the Company of record at March 12, 1997 are
entitled to notice of and to vote at the meeting or at any adjournment thereof.
We hope that you can attend the meeting in person, but if you cannot do so,
please sign, date and return the enclosed WHITE PROXY CARD as soon as possible
by mail in the enclosed addressed, postage paid envelope.
By Order of the Board of Directors,
/s/ FRANK W. DENIUS
------------------------------------
Frank W. Denius, Secretary
Austin, Texas
March 31, 1997
<PAGE> 7
PRELIMINARY PROXY STATEMENT
AMENDMENT NO. 1
SUBJECT TO COMPLETION
TCC INDUSTRIES, INC.
SUITE 1250
816 CONGRESS AVENUE
AUSTIN, TEXAS 78701
PROXY STATEMENT
INTRODUCTION
The enclosed WHITE PROXY CARD is solicited by and on behalf of the BOARD OF
DIRECTORS of TCC Industries, Inc. ("TCC" or the "Company") to be used at the
Annual Meeting of Shareholders to be held May 7, 1997, at 9:00 a.m. local time,
in the Boardroom of Texas Commerce Bank -- Austin, 3rd Floor, Texas Commerce
Bank Building, 700 Lavaca Street, Austin, Texas and any adjournments thereof.
All shares represented by proxies will be voted at the meeting in accordance
with the instructions thereon or, if no directions are given, the shares
represented by such proxies will be voted FOR the election of the directors
named on the WHITE PROXY CARD and FOR the approval of the appointment of
auditors.
The Board of Directors does not know of any other business to be brought
before the meeting, but it is intended that as to any such other matters, votes
may be cast pursuant to the proxies in accordance with the judgment of the
person or persons acting thereunder. Any shareholder giving a proxy may revoke
it at any time before it is voted by attending the Annual Meeting and voting
their shares in person, by giving written notice to Frank W. Denius, Secretary
of the Company, at Suite 1250, 816 Congress Avenue, Austin, Texas 78701, stating
that the proxy has been revoked, or by delivery of a proxy bearing a later date.
However, if shares are held of record by a broker, bank or other nominee and the
beneficial owner desires to attend and vote at the meeting, such beneficial
owner must obtain from such broker, bank or other nominee, a proxy issued in
such beneficial owner's name.
The Board of Directors has unanimously authorized the Company's investment
banking firm, Rauscher Pierce Refsnes, Inc. ("Rauscher Pierce"), to evaluate
strategic alternatives designed to increase shareholder value, including having
the firm assist with a material acquisition of, or a merger with, another
company or the sale of all or part of the Company or a leveraged buyout by
management or new investors. The Board believes this approach to maximizing
shareholder value to be in the best interests of the shareholders and believes
that the vote on directors to be elected at the 1997 Annual Meeting is a
referendum on its decision to pursue this strategy. There can be no assurance
that one or more transactions can be consummated on terms that are acceptable to
the Board, but the Board is determined to use its efforts to explore these
opportunities. The Board of Directors has been advised that your proxy may also
be solicited by two shareholders of the Company in favor of their election as
directors. The Board believes they will be asking you to elect them without
having an agenda or a plan to maximize shareholder value. See "Election Contest
below".
YOUR BOARD SEEKS YOUR VOTE FOR ITS NOMINEES NAMED ON THE ENCLOSED WHITE
PROXY CARD. DO NOT SIGN ANY PROXY CARD SENT TO YOU BY WALTER A. DEROECK OR
ROBERT THOMAJAN. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PREVIOUSLY
SIGNED PROXY BY DELIVERING A LATER-DATED WHITE PROXY CARD IN THE ENCLOSED
ENVELOPE. IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER
NOMINEE, ONLY YOUR BANK OR BROKER CAN VOTE YOUR SHARES AND ONLY UPON YOUR
SPECIFIC INSTRUCTIONS. PLEASE CONTACT THE PERSON RESPONSIBLE AND INSTRUCT THEM
TO VOTE THE WHITE PROXY CARD AS SOON AS POSSIBLE. IF YOU HAVE ANY QUESTIONS, OR
NEED ASSISTANCE VOTING YOUR SHARES, PLEASE CONTACT OUR PROXY SOLICITOR,
CORPORATE INVESTOR COMMUNICATIONS AT (800) 242-4410.
This proxy statement is first being mailed to the shareholders of the
Company on or about March , 1997. It is contemplated that solicitation of
proxies will be by use of the mails, and that directors, officers and regular
employees of the Company may solicit proxies in person, or by telephone or
telegraph or facsimile
<PAGE> 8
transmission. Such directors, officers and employees will not receive additional
remuneration, other than out-of-pocket expenses, with respect to solicitation of
proxies. Brokerage houses, nominees, fiduciaries and other custodians will be
requested to forward solicitation material to the beneficial owners of shares to
request authority for execution of the proxies and will be reimbursed for their
expenses. The Company has also engaged Corporate Investor Communications, Inc.
("CIC"), at an anticipated cost of approximately $25,000 plus expenses, to
assist in the solicitation of proxies. The Company has agreed to indemnify CIC
against certain liabilities and expenses. The Company will pay all costs of this
solicitation of proxies from its shareholders and estimates that its total cost
to date has been $ , and that its total cost of the solicitation will
be approximately $ , although a precise estimate cannot be made at this
time. The foregoing costs exclude the amount normally expended for a
solicitation for an election of directors in the absence of a contest, and
salaries of regular employees and officers who may solicit proxies. The Company
estimates that approximately 15 employees of CIC will be involved in the
solicitation of proxies on behalf of the Company.
The close of business on March 12, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting. As of such date, there were 2,762,115 shares of Company common stock,
$1.00 par value ("Common Stock"), issued and outstanding and entitled to vote at
the meeting, exclusive of 79,486 treasury shares.
VOTING OF SHARES
The presence in person or by proxy of a majority of the outstanding shares
of the Company's Common Stock will constitute a quorum at the meeting. If a
quorum is not present, the meeting may be adjourned and reconvened from time to
time without further notice until a quorum is obtained, if the time and place of
the reconvened meeting are announced at the meeting. Each outstanding share of
Company Common Stock is entitled to one vote on each matter properly presented
at the meeting and a majority vote of the shares present in person or by proxy
at the meeting will be required to approve each matter other than the election
of directors. Shares of Common Stock held by the Company or any subsidiary of
the Company will not be considered present or entitled to vote. Directors are
elected by a plurality of the votes cast by the shares entitled to vote at a
meeting at which a quorum is present. A plurality means that the nominees with
the greatest number of votes are elected as directors up to the maximum number
of directors to be chosen at the meeting. There is no cumulative voting in the
election of directors. All other matters submitted at the meeting will be
determined by affirmative vote of a majority of the shares present and entitled
to vote. Shares represented by proxies which withhold authority with respect to
the election of one or more nominees for election as director and proxies which
are marked "abstain" on other proposals, will not be counted in determining
whether a plurality or majority vote was obtained in such matters. If no
directions are given and the signed card is returned, the attorneys-in-fact
appointed in the proxy will vote the shares "FOR" the election of both listed
nominees, and "FOR" the other proposal listed on the WHITE PROXY CARD, and at
their discretion on any other matter that may properly come before the meeting.
In instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned proxies to the brokers
("broker non-votes"), such as in the case of this year's contested election of
directors, those shares will not be included in the vote totals and, therefore,
will be counted as present for purposes of determining whether a quorum exists,
but will have no effect on the outcome of the vote.
2
<PAGE> 9
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information believed by the Company
to be accurate as of March 12, 1997 (except as noted below) concerning any
person or group (as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934), known to the Company to be the beneficial owner of more
than 5% of the outstanding Company Common Stock:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) OF CLASS
------------------------------------ ---------- -----------
<S> <C> <C>
Cede & Co.(1)............................................... [1,820,005] 65.9%
Box 20
Bowling Green Station
New York, New York 10004
Walter A. DeRoeck and Robert Thomajan(2).................... [236,400] 8.6%
Suite B125, 1301 Capital of Texas Hwy. South
Austin, Texas 78746
Tweedy, Browne Company L.P.(3).............................. [188,185] 6.8%
52 Vanderbilt Avenue
New York, NY 10017
Lawrence W. Schumann(4)..................................... [160,000] 5.8%
816 Congress Avenue, Suite 1250
Austin, Texas 78701
Dimensional Fund Advisors Inc.(5)........................... [159,100] 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
- ---------------
(1) The Company is informed that Depository Trust Company (55 Water Street, New
York, New York) holds shares of stock of record in the name of Cede & Co.
and that the beneficial ownership of such shares is held by various
broker-dealers and banks throughout the United States, or their customers.
No information as to such beneficial ownership has been made available to
the Company.
(2) On February 7, 1997, Mr. DeRoeck filed Amendment No. 2 to Schedule 13D
wherein he reported that he had formed a group with Mr. Thomajan, who held
52,500 shares of Company Common Stock as of the filing. Mr. DeRoeck and Mr.
Thomajan each disclaims beneficial ownership of the shares held by the
other. The address shown in the table is Mr. DeRoeck's business address.
(3) Based upon the Schedule 13D filed by Tweedy, Browne Company L.P., a
registered broker-dealer ("TBC"), with respect to its ownership of such
shares, all of such shares are held in accounts of various customers of TBC,
with respect to which accounts TBC has investment discretion, and with
respect to some of which it has obtained sole or shared voting power. TBC
disclaims that it is the beneficial owner of such shares.
(4) Mr. Schumann holds beneficial ownership of 42,000 shares individually, and
has options to acquire 40,000 shares of Common Stock of the Company, of
which 18,000 are exercisable within 60 days of March 12, 1997. Mr. Schumann
is the general partner of the Schumann/Muth Family L.P., which holds
beneficial ownership of 100,000 shares.
(5) Dimensional Fund Advisors Inc., a registered investment advisor
("Dimensional"), has advised the Company that Dimensional is deemed to have
beneficial ownership of 159,100 shares of Common Stock as of December 31,
1996, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, for all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
3
<PAGE> 10
Information as of March 12, 1997 relating to the beneficial ownership of
Company Common Stock by each member of the Company's Board of Directors and
nominees therefor, executive officers, and by all directors and officers of the
Company as a group, is set forth under the caption "ELECTION OF DIRECTORS."
ELECTION OF DIRECTORS
Prior to March 1997, the Bylaws of the Company provided for a Board of
Directors consisting of six members serving staggered terms. Pursuant to these
provisions, two of the Company's six directors have been elected to three-year
terms at each of the last three annual meetings of shareholders. BY UNANIMOUS
CONSENT OF THE COMPANY'S DIRECTORS, THE BYLAWS WERE RECENTLY AMENDED TO
ELIMINATE STAGGERED TERMS. Notwithstanding the amendment of the Bylaws, the
terms of office of directors currently serving were not changed. Accordingly,
the terms of only two directors expire at the 1997 Shareholders Meeting. Of the
four remaining positions, the terms of office of two will expire in 1998 and the
terms of office of the other two positions will expire in 1999. In the event of
a vacancy among the directors whose terms expire in 1999, such vacancy may be
filled by the remaining directors for the remainder of such director's term,
even if more than one year. The two Directors elected at the 1997 Shareholders
Meeting will each serve a one-year term in accordance with the Bylaws as
amended. The terms of four directors (the two elected at the 1997 Shareholders
Meeting and the two whose three-year terms expire in 1998) will be up for
election at the 1998 Shareholders Meeting. All six directors will be up for
election at the 1999 Shareholders Meeting.
The Board determined to amend the Bylaws after two events coincided with
preparations for the 1997 Shareholders Meeting. In conjunction with the
nomination of himself and Robert Thomajan, Walter A. DeRoeck notified the
Company that he intended to solicit proxies in favor of a proposal to eliminate
the staggered terms of the Board of Directors. In addition, at a Board meeting
held in February 1997, the Board authorized its investment banking firm,
Rauscher Pierce Refsnes, Inc., to provide investment banking advice and
assistance evaluating strategic alternatives designed to enhance shareholder
value, including a material acquisition of, or a merger with, another company,
or the possible sale of either or both of its principal businesses or the
Company as a whole. In light of the Board's determination to expand the scope of
Rauscher Pierce's engagement, it decided that the effort associated with a proxy
contest concerning the benefits and disadvantages of staggered terms for board
members was counterproductive, even though the Board believes that staggered
terms of office are beneficial to the Company and its shareholders. While it is
assumed that a board of directors elected without staggered terms would be as
likely to seek to maximize shareholder value as one with staggered terms,
staggered terms serve to prevent an abrupt change in control which could
interfere with the Company's long-term objectives and they serve as leverage for
an incumbent board to defend against attempted takeovers that may not be fair
to, or in the best interests of, all shareholders. It was determined that the
Company's resources would be more productively employed focusing on the
strategic alternatives being pursued by the Board and returning the Company to
profitability in an effort to maximize shareholder value. The two independent
directors nominated for re-election to the Board of Directors, neither of whom
has ever been an executive officer or employee of the Company, have expressed
their full support for the Company's business plan as outlined above.
The Company's Board of Directors has nominated Ed R. L. Wroe, Jr. and
William E. Callahan for election to the Board of Directors at the 1997
Shareholders Meeting. THE PERSONS APPOINTED AS PROXIES IN THE ENCLOSED WHITE
PROXY CARD INTEND TO VOTE SUCH PROXY IN THE MANNER DIRECTED, BUT IF NO DIRECTION
IS INDICATED, THE SHARES REPRESENTED BY SUCH PROXIES WILL BE VOTED FOR THE
ELECTION OF ED R. L. WROE, JR. AND WILLIAM E. CALLAHAN TO TERMS OF OFFICE
EXPIRING IN 1998. The two nominees for directors receiving the most votes cast
in person or by proxy at the meeting shall be elected. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" BOTH OF THE ABOVE-NAMED
NOMINEES FOR ELECTION AS DIRECTORS.
Mr. Wroe and Mr. Callahan have been independent members of the Company's
Board since 1960 and 1980, respectively. See the table below regarding directors
and executive officers of the Company. The Board of Directors has no reason to
believe that its nominees will be unable to serve. However, in the event a
nominee is unable to accept election or if any unforeseen contingency should
arise, it is intended that proxies
4
<PAGE> 11
will be voted for the remaining nominee, and for such other person as may be
designated by the Board of Directors, unless otherwise directed by a proxy.
ELECTION CONTEST
At the 1997 Annual Meeting, it is contemplated that shareholders will be
asked to choose between either the directors nominated for reelection by the
Board of Directors, both of whom support the announced strategy of using
Rauscher Pierce to assist the Board in evaluating and pursuing strategic
alternatives for enhancing shareholder value, or Walter A. DeRoeck and Robert
Thomajan who have announced in a Schedule 13D filed with the SEC that, if
elected, they would "seek to identify, and then urge the Board of Directors to
explore, a variety of plans and proposals that, if adopted, would be designed to
increase TCC's sales, earnings and return on investment, all with the view to
increasing shareholder value." Through formal and informal communications with
Mr. DeRoeck (other than SEC filings and indirect communications, the Board has
had no communications with Mr. Thomajan), the Board of Directors has been unable
to ascertain that Mr. DeRoeck and Mr. Thomajan have any more specific intentions
for the future of the Company, except that Mr. DeRoeck has indicated that he
feels Mr. Schumann should be removed as Chief Executive Officer of the Company.
The Board of Directors of the Company disagrees with this view. The Board
believes that Mr. Schumann's removal as Chief Executive Officer of the Company
would NOT be in the best interests of the Company and could prejudice the
Company's pursuit of strategic alternatives as described elsewhere in this Proxy
Statement. In particular, the Board believes that Mr. Schumann's experience with
the Company makes him most qualified to work with Rauscher Pierce to implement
the strategy adopted by the Board and to negotiate a major transaction without
unduly disrupting operations at the Company's subsidiaries. In addition, his
removal at this time might be incorrectly interpreted as an indication that the
Board believes the Company is financially unhealthy, when in fact the Board
believes the Company to be well positioned financially.
The Board believes there is a significant risk that Mr. DeRoeck and Mr.
Thomajan are engaged in an attempt to gain control of the Company, without
making an offer to buy out the shareholders, to further their own personal
objectives which may be inconsistent with maximizing value for all shareholders.
In particular, in light of Mr. Thomajan's associations (see below) and Mr.
DeRoeck's apparent disregard for the potential negative impact Mr. Thomajan's
election could have on the Company, the Board of Directors is concerned that if
this dissident group obtains control of the Board of Directors, they will seek
to redeploy assets of the Company into new businesses or opportunities which may
not benefit the majority of shareholders (see discussion below regarding
Rauscher Pierce's consideration of a strategy of investing in a new business)
and which most shareholders may prefer not to finance.
The Board does not consider its concerns to be idle speculation. In May
1996, Mr. DeRoeck made a presentation to the Board in which he asked the Board
to pursue "strategic options available to TCC, including the sale of its
operating units and the redeployment of its proceeds to maximize the value to
shareholders." Mr. DeRoeck and Mr. Thomajan insist on pursuing this costly proxy
contest even though the Board announced its decision to expand the scope of
Rauscher Pierce's engagement to pursue strategic options and made a compromise
offer to Mr. DeRoeck for one seat on the Board (rather than the two seats he
seeks for himself and Mr. Thomajan) in an attempt to spare most of the expense
of this solicitation. In comparing the Company's strategic plan and Mr.
DeRoeck's May 1996 request, it appears that the principal difference is the
emphasis on redeployment of the proceeds from a sale of the subsidiaries.
Without knowing how Mr. DeRoeck might "redeploy" the Company's assets, it is
impossible to predict that this would or would not ultimately benefit the
shareholders. However, the Board of Directors is concerned that the shareholders
would not be given the choice between receiving a distribution from the Company
and investing in the completely new businesses which Mr. DeRoeck or Mr. Thomajan
might desire to pursue with a public company as a vehicle. In light of all the
circumstances, the Board believes that Mr. DeRoeck and Mr. Thomajan seek
election to the Board to sell the operating units AND redeploy the proceeds in
some other manner (as yet unspecified), and that their objectives would not
likely accommodate a distribution to the shareholders.
Although Mr. DeRoeck seeks the removal of Mr. Schumann, he has suggested no
successor, and neither Mr. DeRoeck nor Mr. Thomajan claims to have special
expertise in managing a company such as TCC or
5
<PAGE> 12
either of its businesses. In fact, it appears that Mr. Thomajan has spent the
past several years facilitating the business maneuvers of Marc Rich who fled the
United States to avoid prosecution for racketeering, fraud, tax evasion and
trading with the Iranian enemy in violation of the trading embargo, according to
Forbes magazine in its October 18, 1993 issue. Forbes described Mr. Thomajan as
one of only a handful of trusted aides who help keep Marc Rich in the background
in business transactions. The article states that "In 1991 Thomajan moved to Zug
[Switzerland] and became one of [Marc] Rich's top partners. He has since moved
to Austin, Texas, although he still apparently owns a house in Meggen near
Hackel and the new Rich/Rossi villa. He's been a great help to Rich." When asked
by an Austin American Statesman reporter in 1993 if he is still working for Marc
Rich, Mr. Thomajan was quoted as saying, "I'm not giving any information at
all." Austin-American Statesman, October 17, 1993. THE BOARD OF DIRECTORS IS
VERY CONCERNED THAT MR. THOMAJAN'S ASSOCIATION WITH MARC RICH COULD REFLECT
NEGATIVELY ON THE COMPANY AND ITS BUSINESSES IF MR. THOMAJAN WERE ELECTED.
Of the six directors currently serving on the Board, five (including the
two nominees for re-election to the Board) are independent from management.
Outside directors are paid $833 per month and $1,000 per meeting, plus expenses,
for each meeting attended (but not those held on the same day as another
meeting). No fees are paid for telephone conference meetings. Five of the six
directors have served on the Board for at least twelve years, and the sixth has
been a director since August 1995 (longer than Mr. DeRoeck and Mr. Thomajan have
been shareholders). In February 1997, the Board of Directors, including the
directors nominated for re-election, unanimously voted to expand Rauscher
Pierce's engagement to encompass evaluating and assisting the Company with a
strategy designed to maximize value for all shareholders including having
Rauscher Pierce assist with such alternatives as a material acquisition of, or a
merger with, another company or the sale of all or part of TCC, or a leveraged
buyout by management or new investors. Your Board of Directors is committed to
implementing this strategy while aggressively directing the Company's resources,
and in particular management, to return the Company to profitability. The Board
believes that its experienced nominees are the most qualified to direct the
implementation of the strategy.
This strategy has evolved over the last year as the result of developments
(in particular, results of operations) at the Meyer Group and Allen-Lewis and in
the market for the Company's stock. The financial results are discussed in
detail in the accompanying Annual Report. Management has been seeking
opportunities for the Meyer Group to acquire a complementary business or product
line which would allow it to penetrate new geographic or industry markets, or
allow it to achieve better utilization of its facilities by shifting
manufacturing from the acquired company to TCC's facilities. Management began
discussions with Rauscher Pierce in early 1996, and in June 1996, Rauscher
Pierce was authorized by the Board to evaluate the Company's strategies for
enhancing shareholder value, including the strategy of seeking acquisition
opportunities for the Meyer Group, as discussed above, and the possibility of
positioning one of the Company's businesses for sale. Rauscher Pierce concluded
that the strategies were sound and recommended against pursuing businesses in
new, unfamiliar industries. Management identified and had preliminary
correspondence with several possible acquisition targets. Only a few were
thought worthy of further attention, and discussions with only one large target
progressed to the point that management sought assistance from Rauscher Pierce.
These negotiations were terminated in January 1997 by the other side after
rejection of a letter of intent from the Company. A letter of intent was
delivered to a smaller acquisition target, and the time period for acceptance
was not extended at the request of the target after further consideration by the
Company. Discussions with other target companies were terminated before offers
were made either because the targets were considered unsatisfactory by
management after further evaluation or because the target was not interested in
pursuing discussions. The Board views the strategy adopted in February 1997 as
an expansion of the assignments previously delegated to management and Rauscher
Pierce.
In order to facilitate continuity among key management personnel during the
pursuit of the Board's strategy and the potential proxy contest, the Board
ordered a review of the employment agreements with the named executive officers,
Lawrence W. Schumann and Larry T. Marek (who became President of Allen-Lewis
effective August 1996). In light of the review, the Board determined that no
additional sums should be provided for in the agreements, but that the
provisions allowing full severance payment after voluntary termination following
an event of insolvency and one-half severance payment following a change in
control
6
<PAGE> 13
should be reversed such that a one-half severance payment would be payable after
voluntary termination following an event of insolvency and full severance would
be payable following a change in control. These amendments were made effective
January 1997. See "Compensation of Executive Officers," below.
The Board considers the vote for directors to be a referendum on its
strategy. There can be no assurance that one or more transactions can be
consummated on favorable terms any time in the near future, if at all, but the
Board is determined to use its efforts to explore these opportunities. PLEASE DO
NOT RETURN A PROXY CARD TO MR. DEROECK AND MR. THOMAJAN, EVEN TO VOTE AGAINST
THEM. THE ONLY WAY TO SUPPORT THE BOARD'S NOMINEES IS TO RETURN A WHITE PROXY
CARD MARKED "FOR" THE BOARD'S NOMINEES.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Securities and Exchange Commission rules, the Company has
reviewed reports of ownership of equity securities of the Company, reports of
changes in ownership and written representations submitted to it with respect to
transactions in the Company's equity securities during the fiscal year ended
December 31, 1996 and is unaware of any failure on the part of its officers and
directors to timely report a transaction in Company Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table contains information relating to the directors and
executive officers and the nominees for director of the Company.
<TABLE>
<CAPTION>
SHARES
PRESENT YEAR BENEFICIALLY APPROXIMATE
NAME; POSITION WITH THE COMPANY; PRINCIPAL TERM FIRST OWNED AS OF PERCENT OF CLASS
OCCUPATION; AND OTHER DIRECTORSHIPS(1) AGE EXPIRES ELECTED MARCH 12, 1997 (IF MORE THAN .1%)
- ------------------------------------------ --- ------- ------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
W. Grogan Lord............................ 82 1998 1958 8,000(10) 0.3%
Director and Senior Chairman of the
Board of the Company; Senior Chairman of
the Board of First Texas Bancorp, Inc.;
Director, Frozen Food Express
Industries, Inc., a refrigerated
trucking company(2)
Frank W. Denius........................... 72 1998 1993 2,924(11) 0.1%
Director and Secretary of the Company;
Attorney/Sole Practitioner; Director,
Southern Union Co., a gas utility
company(2)(3)(4)(5)
Lawrence W. Schumann...................... 42 1999 1985 160,000(12) 5.8%
Director, Chairman of the Board,
President and Chief Executive Officer of
the Company(6)
Ed R. L. Wroe, Jr......................... 72 1997 1960 1,800(13) 0.1%
Director; Insurance Liquidation
Consultant(2)(3)(4)(7)
William E. Callahan....................... 79 1997 1980 77,800(14) 2.8%
Director; Chairman, Kona-Cal, Inc., a
publishing company(2)(3)(4)
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
SHARES
PRESENT YEAR BENEFICIALLY APPROXIMATE
NAME; POSITION WITH THE COMPANY; PRINCIPAL TERM FIRST OWNED AS OF PERCENT OF CLASS
OCCUPATION; AND OTHER DIRECTORSHIPS(1) AGE EXPIRES ELECTED MARCH 12, 1997 (IF MORE THAN .1%)
- ------------------------------------------ --- ------- ------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
J. Patrick Kaine.......................... 71 1999 1995 8,800(15) 0.3%
Director; President, JPK Management Co.,
a property management firm; Director,
AGCO Corporation, a manufacturer and
distributor of agricultural equipment
and attendant service parts(2)(3)(4)(8)
Larry T. Marek............................ 41 N/A N/A 39,000(16) 1.4%
Executive Vice President, Treasurer and
Secretary of the Company(9)
All Executive Officers and Directors as a
Group (7 persons)....................... N/A N/A N/A 298,324(17) 10.6%
</TABLE>
- ---------------
(1) Except as noted in footnotes (5) through (9) below, the positions described
have been held for over five years. Only directorships of issuers with a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 or subject to the requirements of Section 15(d) of
that Act or directorships of issuers registered as investment companies
under the Investment Company Act of 1940 are listed in the above table.
(2) Member, Audit Committee
(3) Member, Compensation Committee
(4) Member, Stock Option Committee
(5) Mr. Denius was appointed by the Board to fill a vacancy created when a
director resigned from the Board in May of 1993. He previously served on
the Board of Directors of the Company and was its Secretary from 1958 until
1985. From 1988 until February of 1990 he was Chairman of the Board and
Chief Executive Officer of Southern Union Co. As an attorney, Mr. Denius
has maintained an office since 1976 and continues to work as a sole
practitioner. He has served as the Secretary of the Company since August
1996.
(6) Mr. Schumann has been employed by the Company since December 1979. He has
served as President since May 1988 and Chairman of the Board and Chief
Executive Officer since September 1992.
(7) From February 1987 to January 1989, Mr. Wroe served as an independent
financial consultant. From January 1989 until December 1991, Mr. Wroe
served as Deputy Commissioner III, Associate to the Conservator, Texas
State Board of Insurance. Since December 1991, Mr. Wroe has acted as a
self-employed insurance liquidation consultant.
(8) Mr. Kaine was elected to the Board of Directors on August 2, 1995 to fill a
vacancy created by an increase in the number of directors from five to six
directors.
(9) Mr. Marek has been employed by the Company or its subsidiaries since
November 1980. Mr. Marek was elected Treasurer in April 1984, Secretary in
May 1988 and Executive Vice President in February 1991. He served as a
director from 1988 until March 16, 1993. He relinquished his offices with
the Company effective August 1996 in connection with assuming the position
of president of the Company's wholly owned subsidiary Allen-Lewis
Manufacturing Company.
(10) Mr. Lord has vested options to acquire 8,000 shares pursuant to an option
granted him in February 1991.
(11) Of such 2,924 shares Mr. Denius holds 124 shares and the remaining 2,800
shares represent shares he is presently entitled to purchase under the
vesting provisions of options granted to him for the purchase of 6,000
shares pursuant to the Company's 1995 Non-Employee Directors Stock Option
Plan (the "NEDSOP").
8
<PAGE> 15
(12) Of such 160,000 shares, Mr. Schumann holds beneficial ownership of 142,000
shares and has options to acquire 40,000 shares pursuant to options granted
him in 1993 and 1995 by the Company under the Company's 1985 Incentive
Stock Option Plan. Such options have vested with respect to 18,000 shares.
Mr. Schumann disclaims beneficial ownership of 1,000 of such shares owned
by his wife.
(13) In addition to the 500 shares held, Mr. Wroe has vested options to acquire
1,300 shares pursuant to the vesting provisions of options granted him for
the purchase of 4,500 shares under the NEDSOP.
(14) Of such 77,800 shares, Mr. Callahan holds 73,000 shares and has vested
options to acquire 4,800 shares pursuant to the vesting provisions of
options granted him under the NEDSOP to purchase 8,000 shares.
(15) In addition to the 8,000 shares held, Mr. Kaine holds an option to acquire
4,000 shares (800 of such options have vested), under the NEDSOP.
(16) Of such 39,000 shares, Mr. Marek holds 25,000 shares and has options to
acquire 30,000 shares pursuant to options granted him in 1993 and 1995 by
the Company under the Company's 1985 Incentive Stock Option Plan. Such
options have vested with respect to 14,000 shares.
(17) Of such 298,324 shares, the group referenced holds and has sole voting and
investment power over 247,624 shares and has vested options to acquire
49,700 shares.
The Board of Directors held eight meetings during the fiscal year ended
December 31, 1996. All but one of the incumbent directors attended 100% of the
meetings held during their tenure in 1996. The remaining director attended all
but one of the meetings. The Company's Board of Directors has standing
committees for consideration of matters relating to audit, compensation and
stock options. The Company has no nominating committee. The Audit Committee
functions primarily to review questions, if any, raised by the independent
accountants who audit the accounts of the Company and to suggest to the Board,
as well as to help implement, any changes required in internal accounting
controls. The members of the Audit Committee are William E. Callahan, W. Grogan
Lord, Frank W. Denius, Ed R. L. Wroe, Jr. and J. Patrick Kaine. The Audit
Committee met once during the fiscal year ended December 31, 1996.
The Compensation Committee functions primarily to review and recommend
compensation arrangements for directors, officers and employees of the Company.
The members of the Compensation Committee are William E. Callahan, Frank W.
Denius, Ed R. L. Wroe, Jr. and J. Patrick Kaine. The Compensation Committee met
once during the fiscal year ended December 31, 1996. The Stock Option Committee
administers the Company's 1985 Incentive Stock Option Plan and makes decisions
regarding the issuance of options for the Company's Common Stock pursuant to
such plan. The members of the Stock Option Committee are William E. Callahan,
Frank W. Denius, Ed R. L. Wroe, Jr. and J. Patrick Kaine. The Stock Option
Committee did not meet during the fiscal year ended December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frank W. Denius, a director who serves on the Compensation Committee, was
Secretary of the Company and certain of its subsidiaries for the period from
1958 to 1985 and was elected Secretary of the Company in August 1996. Other than
fees paid to outside directors generally, Mr. Denius received no remuneration
for this service as Secretary of the Company during the period of his service.
9
<PAGE> 16
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF EXECUTIVE OFFICERS
Information in the following table sets forth total compensation paid or
accrued for services rendered by the Chief Executive Officer and the Executive
Vice President, who were the only executive officers of the Company during the
fiscal year ended December 31, 1996 whose salary and bonus from the Company and
its subsidiaries exceeded $100,000 for such fiscal year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(1)
(# OF SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION OPTIONS) COMPENSATION
----------------- ---- -------- ----- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence W. Schumann 1996 $183,604 -- -- -- --
Chairman of the Board, 1995 $182,296 -- -- 15,000 --
President and Chief 1994 $180,000 -- -- -- --
Executive Officer
Larry T. Marek 1996 $121,870 -- -- -- --
Executive Vice President, 1995 $120,296 -- -- 10,000 --
Treasurer and Secretary(2) 1994 $118,000 -- -- -- --
</TABLE>
- ---------------
(1) During 1994 and 1996, the Company did not pay or award any long-term
compensation within the meaning of that term (restricted stock awards,
options and long-term incentive payouts) to any of the named executive
officers.
(2) Mr. Marek relinquished these positions in August 1996 in conjunction with
assuming the position of president of the company's wholly-owned subsidiary,
Allen-Lewis Manufacturing Company. Accordingly, amounts reflected as paid
during 1996 include amounts paid by Allen-Lewis after August 1996.
In March 1993, the Company entered into agreements with its two executive
officers, Lawrence W. Schumann and Larry T. Marek, pursuant to which they are
entitled to certain benefits if their employment is terminated by the Company or
if the executive voluntarily terminates his employment. The agreements, which
were amended in January 1997, now provide that if the executive voluntarily
terminates his employment with the Company following a change in control of the
Company, the Company ceases to do business or certain changes in the executive's
circumstances (such as a material change in duties), then he will be entitled to
receive an amount equal to one month's base salary for each full year of
employment with the Company; bonuses accrued but unpaid during the twelve-month
period preceding termination; and any other compensation owed by the Company as
of the date of termination, all payable within 15 days after such termination.
The executive will also be entitled to the sums described above in the event the
officer's employment is terminated by the Company for any reason other than for
"cause" (such as fraud or dishonesty, excessive absenteeism other than for major
illness and inattention to duties after prior warning by the Company). In the
event of termination by the Company (other than for "cause") or voluntary
termination by the executive, he will also be entitled to one year's benefits
(such as life and health insurance and car allowance). If the executive's
employment is voluntarily terminated following insolvency of the Company, all
payments and benefits are reduced by one-half. As of March 12, 1997, the
aggregate amount that would be payable to the executive officers as a group
under these agreements was $427,000 (excluding benefits and except that such
amount would be reduced by one-half in the event of voluntary termination
following insolvency).
The 1993 Tax Act imposed a $1,000,000 limitation on any claimed federal
income tax deductions for compensation paid to each of the named executive
officers for tax years beginning after 1993. For purposes of this limitation,
all the amounts paid to the named executive officers are taken into account for
the taxable year in which such compensation would be deductible, except that the
spread between the exercise price and the fair market value of incentive stock
options is not included unless the executive makes a disqualifying disposition
of the stock received on exercise. A "disqualifying disposition" is a sale of
the stock issued upon exercise which occurs prior to the expiration of one year
from the exercise date or two years from the date of grant. It is contemplated
that stock options to be granted to the named executive officers in the future
will be
10
<PAGE> 17
incentive stock options, and therefore, the spread will not be deductible by the
Company upon exercise in the absence of a disqualifying disposition. So long as
any options granted to the named executive officers are incentive stock options,
the Company does not anticipate that executive compensation will exceed the
$1,000,000 limitation imposed for federal income tax purposes. Nevertheless, the
Company intends to take necessary precautions to insure that its executive
compensation will be fully deductible under this new provision.
STOCK OPTION EXERCISES AND HOLDINGS
The following table shows information regarding stock options exercised and
unexercised options held as of the end of fiscal year 1996 by the named
executive officers (no stock options were granted during such fiscal year to any
of the named executive officers).
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
OPTIONS OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996(1)
NAME EXERCISED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------- ---------------------------- -------------------------
<S> <C> <C> <C>
Lawrence W. Schumann............ 0 48,000/22,000 $0/0
Larry T. Marek.................. 0 29,000/16,000 $0/0
</TABLE>
- ---------------
(1) Based on closing price of $1.625 on December 31, 1996.
ANNUAL INCENTIVE PLAN
The Company has an Annual Incentive Plan ("AIP") which provides for annual
incentive payments to key employees of the Company and its subsidiaries. Each
year the President of the Company determines which key employees will be
participants in the AIP, subject to approval by the Compensation Committee of
the Board of Directors, which administers the AIP.
Awards under the AIP are based upon the actual performance of the Company
and its subsidiaries in a fiscal year, as measured by gross revenues and pretax
income excluding all extraordinary items and the amount recorded during the plan
year in the incentive compensation accrual account (at the subsidiary level,
interest income and inter-company management fees are also excluded), in
relation to budgeted performance. Each participant is assigned a number of
incentive units having an initial value of $100 per unit at the beginning of the
fiscal year. A performance factor is determined by expressing actual gross
revenues and pretax income for the Company as a whole, or for the subsidiary
that employs the participant, as percentages of targeted gross revenues and
pretax income and averaging the resulting percentages. The amount of the gross
revenue percentage used in calculating the performance factor cannot exceed the
amount of the pretax income percentage. In addition, if actual pretax income is
less than 70% of targeted pretax income, no incentive compensation is earned.
Both the number of incentive units and the initial value per unit are multiplied
by the performance factor. The base level incentive is determined by multiplying
the adjusted number of incentive units by the adjusted value per unit. An
additional amount equal to 20% of the aggregate base level incentive earned in
any year may be allocated on a discretionary basis among AIP participants. Any
individual award may be reduced by up to 20% of the calculated base level
incentive. These adjustments are recommended by the President of the Company or
of the subsidiary that employs the participant, and approved by the Compensation
Committee. Aggregate incentive compensation paid by the Company or any
subsidiary under the AIP cannot exceed 50% of the pretax income of the Company
or that subsidiary.
In determining the number of incentive units assigned to executive
officers, the Compensation Committee first determines the appropriate amount of
incentive compensation for each officer by considering a number of factors,
including each executive's level of responsibility, performance, level of
expertise and the amount of incentive compensation paid to executive officers of
comparable businesses, based on surveys conducted by an independent compensation
consultant from time to time. After determining the appropriate level of
incentive compensation, the Compensation Committee sets the number of incentive
units assigned to a given officer so that the officer will earn the incentive
compensation, as determined by the Committee, if the targets are achieved.
Awards under the AIP are paid within 45 days after completion of audited
financial statements for the fiscal year with respect to which the awards
relate.
11
<PAGE> 18
No amounts were earned under the AIP for fiscal years 1994, 1995 or 1996 by
the executive officers of the Company named in the table appearing above under
"Compensation of Executive Officers," because target levels for those years were
not attained.
COMPENSATION OF DIRECTORS
During 1996, all directors, except Mr. Schumann, were paid $1,000 for every
Board and Committee meeting, regular or special (not held on the same day as
another meeting for which the directors were paid), that they attended. No fees
are paid for Board or Committee meetings held by telephone conference call. All
directors, other than Mr. Schumann, were paid $833 per month as a retainer. In
addition, directors are reimbursed for out-of-pocket expenses incurred to attend
meetings. It is contemplated that this policy will continue during 1997.
CONSULTING AND NONCOMPETITION AGREEMENTS WITH DIRECTORS
The Company has entered into a Consulting and Noncompetition Agreement with
each of the current directors of the Company. Each Agreement provides that upon
the resignation or removal from the Board, the former director will be
available, from time to time, to provide consulting services to the Company for
a period ending on the earlier of the expiration of three years or the death of
the former director. The former director cannot be required to provide services
in excess of five hours per month. In consideration of the consulting services
to be provided, the Company has agreed to pay each such former director an
annual consulting fee equal to one-third of the annual retainer paid by the
Company to members of the Board as of the date of such former director's
resignation or removal, multiplied by the number of calendar months (not to
exceed 36 months) during which he has served as a member of the Board, divided
by twelve, to be paid in quarterly installments. Each Agreement contains an
agreement by the director to maintain the confidentiality of the methods by
which the business of the Company and its subsidiaries are conducted and of the
proprietary or confidential information of the Company and its subsidiaries.
Each Agreement further provides that during the consulting term the former
director will not directly or indirectly own, manage, operate, control, be
employed by, advise or be connected in any manner with any person or entity
which directly or indirectly is competitive with the businesses of the Company
or its subsidiaries. In addition, each Agreement provides that during the
consulting term, the former director will not directly or indirectly hire or
solicit the employment of any employee of the Company or one of its subsidiaries
or induce any such employee to leave or decline employment with the Company or
any such subsidiary. It is the present intention of the Board of Directors of
the Company to require any other person who becomes a member of the Board in the
future, to enter into an agreement substantially similar to the Consulting and
Noncompetition Agreements described above. If the directors nominated for
re-election to the Board are not re-elected, the benefits and obligations
associated with their Agreements will commence effective as of the day of the
Annual Meeting.
1985 INCENTIVE STOCK OPTION PLAN
The Company's 1985 Incentive Stock Option Plan (the "ISO Plan") expired in
July 1995. Options granted under the ISO Plan are exercisable at a price not
lower than 100% of the fair market value of the stock on the date of the grant.
All outstanding options have the same vesting schedule pursuant to which they
become exercisable in five equal installments commencing one year after the date
of grant. The aggregate fair market value, measured as of the date of grant, of
stock covered by options granted under the ISO Plan to any employee may not
exceed $100,000 in the year in which such options first become exercisable.
Options for the purchase of 36,500 shares were terminated or expired during
1996.
1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company's 1995 Non-Employee Directors Stock Option Plan ("NEDSOP")
provides that non-employee directors are entitled to receive one option to
purchase 4,000 shares of Company Common Stock upon becoming a director. Each
such director also receives an option to purchase 2,000 shares on the second
anniversary of their becoming a director and an additional option to purchase
2,000 shares on the fourth anniversary of their becoming a director. Currently,
all directors, other than Frank W. Denius and J. Patrick Kaine, have received
all the options they are entitled to under the NEDSOP.
12
<PAGE> 19
A non-employee director may not receive any other or further option under
the NEDSOP, regardless of whether such director shall exercise any portion of
the option or options awarded him thereunder, except that if an option granted
expires unexercised prior to August 2, 2005 and had an exercise price higher
than the fair market value of the Company Common Stock on the date of
expiration, the optionee will automatically receive a new option for the same
number of shares as were covered by the expired option but at an exercise price
equal to the fair market value for such stock on the date of expiration of the
old option. Although administered by a Committee appointed by the Board, all
options awarded to a director under the NEDSOP are granted automatically and
without the exercise of discretion on the part of any person. A maximum of
75,000 shares may be covered by options granted pursuant to the NEDSOP. The
NEDSOP will expire on August 2, 2005. The NEDSOP may be amended by the Board of
Directors at any time, except that no such amendment may be made without the
approval of the holders of a majority of the outstanding shares of Company
Common Stock if it materially increases the benefits accruing to optionees,
materially increases the number of shares which may be issued thereunder, or
materially modifies the requirements as to eligibility for participation in the
NEDSOP. In addition, provisions relating to the amount and price of shares to be
issued under the NEDSOP may not be amended more than once every six months,
other than to comply with changes to the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.
The options are exercisable at a price not lower than 100% of the fair
market value of the Company's shares on the date of the grant. The options are
exercisable during a period of not more than ten years from the date of grant.
The options vest and become exercisable in five equal annual installments, with
the first installment vesting one year after the date of grant.
Since W. Grogan Lord did not qualify to receive options under the NEDSOP,
in 1991 the Company granted him a fully vested option to acquire 8,000 shares of
Company Common Stock at $1.25 per share, which was 100% of the fair market value
on the date of the grant. Such option was ratified by the shareholders of the
Company at the 1994 Annual Meeting of Shareholders.
REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION COMMITTEE ON ANNUAL
COMPENSATION
The Compensation Committee of the Board of the Directors (the "Committee")
is made up of four outside directors. The Committee is responsible for
recommending to the full Board of Directors the compensation for the executive
officers, and providing assistance to the Chief Executive Officer for
determining the annual compensation of other officers, and overseeing the award
of annual incentive payments to key employees of the Company pursuant to the AIP
(discussed above). Their recommendations concerning the executive officers have
always been adopted by the Board of Directors.
Over the past three years the Company has had no more than two executive
officers at any one time. Compensation for these officers has been based upon
the following criteria: level of responsibility at the Company; individual
performance as perceived by the Committee; level of experience; the amount of
compensation paid to executive officers of comparable businesses; consideration
of the fact that the executive officers are not presently covered by a
retirement plan; the amount of time and effort required by that position (both
generally and for the fiscal year); contributions (or the lack thereof) to the
profitability of the Company; assessment of risks associated with losing the
benefit of their services; and, number of years of service with the Company.
"Comparable businesses," as the term is used herein, means companies with sales
levels similar to that of the Company and in industries similar to those served
by the Company as determined by an independent compensation consultant. The
consultant does not divulge the names of the comparable businesses to the
members of the Committee or the Company. As the Committee considers the factors
discussed above collectively, it does not specifically assign any relative
weight to the individual factors in making its determination.
The Committee is advised from time to time by an independent compensation
consultant with respect to executive officer compensation, although the
consultant did not render any advice to the Committee during 1996. The
components of compensation for the executive officers consist of base salary,
bonus (incentive compensation) and stock options (long-term incentive
compensation). With respect to each of these
13
<PAGE> 20
components, the policy of the Compensation and Stock Option Committees is to
compensate the executive officers within the median range of compensation for
executive officers of comparable businesses as determined by the consultant.
Within that range, variations from year to year are based upon the Committee's
assessment of the criteria for compensation described above. The advice of the
consultant includes an analysis of executive salaries, bonuses (incentive
compensation) and stock options (long-term incentive compensation) in comparable
business. Each time the market analysis has been conducted (including most
recently in January 1993), the compensation for the Company's named executive
officers (Messrs. Schumann and Marek) have approximated or were below the
average market level of compensation.
Mr. Schumann was appointed to serve as Chairman of the Board and Chief
Executive Officer in 1992. At this time, Mr. Schumann and Mr. Marek assumed
additional duties and responsibilities in order to facilitate an overall goal of
reducing overhead by reducing staffing levels, which was accomplished. Mr.
Schumann's salary for 1993 was set by the committee based on their analysis of
Mr. Schumann's performance during 1992 compared with (i) their expectations, and
(ii) the average salaries paid, and the average salary increase provided, to
chief executive officers of comparable businesses as reported by the independent
compensation consultant. The Committee increased Mr. Schumann's base salary 7.8%
for 1994 as a result of their assessment of (i) the improvement in the results
of operations of the company during 1993 as compared to prior periods; and (ii)
Schumann's contribution to the improved results. In addition, the Committee
considered overall increases in compensation granted to chief executive officers
of public companies. The Committee did not specifically assign any relative
weight to the foregoing factors in making its determination with regard to Mr.
Schumann's salary. The results of operations for 1994 were below the Company's
expectations due to the declines in revenue at both of the Company's operating
segments. As a result, the Company implemented measures to control and reduce
costs, including a salary freeze for the Company's executive officers in 1995.
The Committee did, however, authorize an increase in the base salary of
executives, including Mr. Schumann, effective for 1995, to compensate them for a
change in the Company's policy regarding the payment of group health insurance
premiums for the dependents of the executives. The 1995 increase in salary that
was granted was equal to the actual cost of the insurance premiums that are now
paid directly by the executives under a cafeteria plan. Due to results of
operations during 1995, there were no increases during 1996, except for the
slight increase associated with the rising cost of the insurance premiums.
The following compares Mr. Schumann's compensation for fiscal years 1994,
1995 and 1996 with the Company's performance for the same periods:
<TABLE>
<CAPTION>
COMPANY'S
SCHUMANN'S ANNUAL RESULTS OF
YEAR COMPENSATION SALARY OPERATIONS(1)
- ---- ------------------- -------------
<S> <C> <C>
1994......................................... $180,000 $ (77,000)
1995......................................... $182,296 $ (90,000)
1996......................................... $183,604 $(1,536,000)
</TABLE>
- ---------------
(1) Parentheses indicate a loss.
During 1996, no additional options were granted to the named executive
officers.
The Compensation Committee and the Stock Option Committee intend to
continue to evaluate the performance of the Company in light of management's
efforts and to recommend to the Board of Directors appropriate adjustments in
compensation as the situation warrants.
Submitted by:
William E. Callahan,
Chairman of the Compensation Committee
Frank W. Denius
Chairman of the Stock Option Committee
Ed R.L. Wroe, Jr.
J. Patrick Kaine
14
<PAGE> 21
FIVE-YEAR CUMULATIVE TOTAL RETURN CHART
The graph below compares total shareholder returns for the Company over the
last five years to the Standard & Poor's 500 Stock Index and the Diversified
Companies listed in "The Value Line Investment Survey" assuming a $100
investment made on December 31, 1991. This index has been selected because there
is no readily ascertainable survey of businesses in the Company's combined
industries or market capitalization. Management believes this survey constitutes
the most comparable index of companies for which information is readily
attainable. Each of the three measures of cumulative total return assumes
reinvestment of dividends. The stock performance shown on the graph below is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Diversified
Measurement Period TCC Indus- Compa-
(Fiscal Year Covered) tries, Inc. S&P 500 nies(1)
<S> <C> <C> <C>
1991 100.000 100.000 100.000
1992 133.26 104.95 130.96
1993 293.18 112.36 179.78
1994 279.85 110.63 161.19
1995 213.22 148.37 194.02
1996 173.24 178.43 235.05
</TABLE>
- ---------------
(1) Consists of the 44 out of 48 companies listed in the Value Line diversified
company index dated 2/7/97 that trade on U.S. stock exchanges.
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company voted to appoint Coopers & Lybrand
L.L.P., independent accountants, to audit the accounts of the Company for the
fiscal year ended December 31, 1997. Coopers & Lybrand, L.L.P., also served as
auditors for the Company for each of the preceding three fiscal years ended
December 31. If the shareholders of the Company do not approve such appointment,
the Board of Directors will not appoint the firm as auditors for the fiscal year
ended December 31, 1997. A representative of Coopers & Lybrand L.L.P. is
expected to attend the Annual Meeting and will have the opportunity to make a
statement if so desired. Such representative is expected to be available to
respond to appropriate questions. Neither Coopers & Lybrand nor any of its
associates has any relationship with the Company except in their capacity as
such auditor.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the Company's 1998 annual
meeting of shareholders pursuant to Rule 14a-8 promulgated by the Securities and
Exchange Commission must be received by the Company at its executive offices,
816 Congress Avenue, Suite 1250, Austin, Texas 78701, attention of the
Secretary, on or before November 23, 1997.
15
<PAGE> 22
The Bylaws of the Company establish procedures for bringing business before
any annual meeting of shareholders of the Company and for shareholder
nominations for elections of directors of the Company. In order to properly
submit any business to an annual meeting of shareholders, a shareholder must
give timely notice in writing to the Secretary of the Company. To be considered
timely, a shareholder's notice must be delivered either in person or by United
States certified mail, postage prepaid, and received at the principal executive
offices of the Company (a) not less than one hundred twenty (120) days nor more
than one hundred fifty (150) days before the first anniversary date of the
Company's proxy statement in connection with the last annual meeting of
shareholders (no later than November 23, 1997 and no earlier than October 24,
1997, in the case of the 1998 annual meeting of shareholders), or (b) if no
annual meeting has been called after the expiration of more than thirty (30)
days from the date for such meeting contemplated at the time of the previous
year's proxy statement, not less than a reasonable time, as determined by the
Board of Directors, prior to the date of the applicable annual meeting. A
shareholder may nominate a person or persons for election to the Board of
Directors by giving written notice to the secretary of the Company in accordance
with the procedures set forth above. In addition to the timeliness requirements
set forth above for notice to the Company by a shareholder of business to be
submitted at an annual meeting of shareholders, with respect to any special
meeting of shareholders called for the election of directors, written notice
must be delivered in the manner specified above and not later than the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. A shareholder's notice to submit business to an
annual meeting of shareholders shall set forth (i) the name and address of the
shareholder, (ii) the class and number of shares of stock beneficially owned by
such shareholder, (iii) the name in which such shares are registered on the
stock transfer books of the Company, (iv) a representation that the shareholder
intends to appear at the meeting in person or by proxy to submit the business
specified in such notice, (v) any material interest of the shareholder in the
business to be submitted, and (vi) a brief description of the business desired
to be submitted to the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the shareholder
making such proposal shall promptly provide any other information reasonably
requested by the Company. In addition to the information required above to be
given by a shareholder who intends to submit business to a meeting of
shareholders, if the business to be submitted is the nomination of a person or
persons for election to the Board of Directors then such shareholder's notice
must also set forth, as to each person whom the shareholder proposes to nominate
for election as a director, (a) the name, age, business address and, if known,
residence address of such person, (b) the principal occupation or employment of
such person, (c) the class and number of shares of stock of the Company which
are beneficially owned by such person, (d) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors or is otherwise required by the rules and regulations of
the Securities and Exchange Commission promulgated under the Securities Exchange
Act of 1934, as amended, (e) the written consent of such person to be named in
the proxy statement as a nominee to serve as a director if elected, and (f) a
description of all arrangements or understandings between such shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
shareholder.
FINANCIAL STATEMENTS AND FORM 10-K
The Consolidated Financial Statements of the Company and its subsidiaries,
which include audited consolidated balance sheets as of December 31, 1996 and
1995 and audited consolidated statements of operations, shareholders' equity and
cash flows for the years ended December 31, 1996, 1995 and 1994, are included in
the Company's Annual Report to the Securities and Exchange Commission on Form
10-K. The Company will furnish without charge to each person who was a
beneficial owner of its securities on March 12, 1997, the record date for the
Company's Annual Meeting of Shareholders, and who wishes to receive a copy of
the Company's Form 10-K, upon the written request of any such person, a copy of
such Form 10-K for the fiscal year ended December 31, 1996, as filed with the
Securities and Exchange Commission. Requests for copies of such report should be
directed to Frank W. Denius, Secretary, TCC Industries, Inc., 816 Congress
Avenue, Suite 1250, Austin, Texas 78701.
March 31, 1997.
16
<PAGE> 23
APPENDIX 1
SUPPLEMENTAL PARTICIPANT INFORMATION
Set forth below is (i) the name and business address of each of the
participants and their associates (except for the Company) in the solicitation
made pursuant to this Proxy Statement, and (ii) the dates, types and amounts of
each participant's purchases and sales of the Company's Common Stock within the
past two years.
<TABLE>
<CAPTION>
DATE OF PURCHASE (P) NUMBER OF
NAME & BUSINESS ADDRESS TRANSACTION OR SALE (S) SHARES
----------------------- ----------- ------------ ---------
<S> <C> <C> <C>
Lawrence W. Schumann N/A
TCC Industries, Inc.
816 Congress Avenue, Suite 1250
Austin, Texas 78701
Director, Chairman of the Board, President and Chief
Executive Officer of the Company
W. Grogan Lord N/A
First Texas Bancorp
P. O. Box 649 (Zip: 78627)
900 Austin Avenue
Georgetown, Texas 78626
Director and Senior Chairman of the Board of the Company;
Senior Chairman of First Texas Bancorp
Frank W. Denius N/A
700 Lavaca, Suite 700
Austin, Texas 78701-3102
Director of the Company; Attorney/Sole Practitioner
Ed R.L. Wroe, Jr. 3/6/96 P 500
1303 Wilshire Blvd.
Austin, Texas 78722
Director of the Company; Insurance Liquidation Consultant
William Callahan N/A
Kona-Cal, Inc.
707 Lake Cook Road, Suite 300
Deerfield, Il 60015
Director of the Company; Chairman, Kona-Cal, Inc., A
Publishing Company
J. Patrick Kaine 3/8/96 P 4,500
#5 Hedgebrook Cove
Austin, Texas 78718
Director of the Company; President, JPK Management Co., a
Real Estate Management Company
</TABLE>
Except as set forth in the Proxy Statement or this Appendix, to the best of
the Company's knowledge, none of the participants or, in the case of clause (i)
only, any of their associates (a) owns of record or has direct or indirect
beneficial ownership of any securities issued by the Company or any of its
subsidiaries; (b) has purchased or sold any securities issued by the Company
within the past two years; (c) has incurred any outstanding indebtedness to
acquire or hold securities issued by the Company; or (d) has been a party to any
contract, arrangement or understanding with respect to the securities of the
Company during the past year.
17
<PAGE> 24
Except as set forth in the Proxy Statement or this Appendix, to the best of
the Company's knowledge, (a) none of the participants or any of their associates
has any arrangement or understanding with respect to any future employment or
any future transactions with the Company or any of its affiliates, and (b) none
of the participants, executive officers of the Company, any person known to the
Company to own beneficially or of record more than 5% of the any class of
Company voting securities, or any of their associates has entered into any
transaction or series of similar transactions with the Company or any of its
subsidiaries since the beginning of the Company's last fiscal year in which such
person had or will have a direct or indirect material interest, and no such
transactions are currently proposed.
18
<PAGE> 25
PROXY
TCC INDUSTRIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Lawrence W. Schumann and Frank W.
Denius or either of them, as Proxies, each with full power of substitution, to
represent and to vote, as designated herein, all shares of Common Stock of TCC
Industries, Inc. (the "Company") held of record by the undersigned on March 12,
1997, at the Annual Meeting of Shareholders to be held on May 7, 1997 and any
adjournment thereof.
(change of address)
-----------------------------
-----------------------------
-----------------------------
-----------------------------
(if your address has changed,
please provide new address
and mark the box on the
reverse side of this card)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXIES WILL VOTE "FOR" THE
LISTED NOMINEES AND "FOR" PROPOSAL 2. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
-----------
SEE REVERSE
SIDE
-----------
[X] Please mark your votes as in this example.
SHARES IN YOUR NAME
FOR WITHHELD
1. Election of [ ] [ ] Nominees: William E. Callahan
Directors Ed R. L. Wroe
For, except vote withheld from the following nominee:
- --------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal approving the [ ] [ ] [ ]
appointment of Coopers &
Lybrand L.L.P. as auditors for
the year ended December 31, 1997.
[ ] Change of address provided
SIGNATURE(S) DATE
------------------------------------------- ----------------
SIGNATURE(S) DATE
------------------------------------------- ----------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE VOTING YOUR SHARES, PLEASE
CALL OUR PROXY SOLICITOR, CORPORATE INVESTOR COMMUNICATIONS, INC., TOLL-FREE AT
(800) 242-4410.
