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:
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[ ] Confidential, for use of the Commission only (as permitted by Rule 14a-
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[ ] Definitive Additional Materials
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BRENCO, INCORPORATED
(Name of Registrant as Specified In Its Charter)
- ---------------------------------------------------------------------------
Jacob M. Feichtner
Executive Vice President &
Secretary
Brenco, Incorporated
(Name of Person(s) Filing Proxy Statement)
- ---------------------------------------------------------------------------
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BRENCO, INCORPORATED
Midlothian, Virginia
Notice of Annual Meeting of Shareholders
To be held April 18, 1996
To Shareholders of Brenco, Incorporated:
You are hereby notified that the annual meeting of shareholders of
Brenco, Incorporated, a Virginia corporation, will be held at the Crestar
Center, 919 East Main Street, Richmond, Virginia, on Thursday, April 18,
1996, at 3:30 p.m. for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To ratify the appointment of McGladrey & Pullen, LLP as auditors
for 1996; and
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on February 23,
1996, are entitled to notice of and to vote at the meeting.
A proxy statement and proxy are enclosed herewith.
If you are unable to attend the meeting in person, you are urged to
sign, date and return the enclosed proxy promptly in the enclosed addressed
envelope which requires no postage if mailed within the United States. If
you attend the meeting in person, you may withdraw your proxy and vote your
shares.
By Order of the Board of Directors
Jacob M. Feichtner
Executive Vice President &
Secretary
Midlothian, Virginia
March 8, 1996
BRENCO, INCORPORATED
One Park West Circle
Midlothian, Virginia 23113
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies for use at the Annual Meeting (the "Annual Meeting") of
shareholders of Brenco, Incorporated (the "Company") to be held on Thursday,
April 18, 1996, and at any adjournments thereof. The accompanying proxy is
solicited by the Board of Directors of the Company and is revocable by the
shareholder giving it at any time before it is voted. The principal
executive offices of the Company are located at One Park West Circle, Suite
204, Midlothian, Virginia 23113. The approximate mailing date of the proxy
statement is March 8, 1996.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on February 23,
1996, are entitled to receive notice of and to vote at the Annual Meeting.
As of February 23, 1996, the number of shares and class of stock that was
outstanding and will be entitled to vote at the meeting was 10,193,021
shares of Common Stock, par value $1.00 per share ("Common Stock"). Each
share of Common Stock is entitled to one vote on all matters. There are no
cumulative voting rights. With regard to the election of directors, votes
may be cast in favor or withheld. If a quorum is present, the nominees
receiving a plurality of the votes cast at the Annual Meeting will be
elected directors; therefore, votes withheld will have no effect.
Generally, in other matters governed by Virginia corporate law, including
the ratification of auditors, the affirmative vote of a majority of the
shares cast is required for passage. Thus, although abstentions and broker
non-votes (shares held by customers which may not be voted on certain
matters because the broker has not received specific instructions from the
customer) are counted for purposes of determining the presence or absence of
a quorum for the transaction of business, they are generally not counted for
purposes of determining whether a proposal has been approved and therefore
have no effect.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 23, 1996, the number and
percentage of shares of Common Stock held by each person who, to the
knowledge of the Company, is the beneficial owner of 5% or more of the
outstanding shares of Common Stock, each of the Company's directors and
executive officers named in the Summary Compensation Table, and all of the
Company's executive officers and directors as a group:
1
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class
Anne Whitfield Kenny 1,024,870(1) 10.05%
Richmond, Virginia
The Prudential Insurance Company
of America 880,900(7) 8.64
Newark, New Jersey
David L. Babson & Company, Inc. 714,800(7) 7.01
Cambridge, Massachusetts
Thomson Horstmann & Bryant, Inc. 559,300(7) 5.49
Saddle Brook, New Jersey
Dimensional Fund Advisors Inc. 515,100(7) 5.05
Santa Monica, California
Estate of Mildred F. Whitfield 250,000(2) 2.45
Howard J. Bush 40,104(6) *
Midlothian, Virginia
Jacob M. Feichtner 40,231(6) *
Richmond, Virginia
Donald E. Fitzsimmons 8,571(6) *
Richmond, Virginia
Steven M. Johnson 1,600(3) *
Richmond, Virginia
John C. Kenny 7,500(4) *
Richmond, Virginia
J. Craig Rice 155,895(6) 1.53
Midlothian, Virginia
James M. Wells III 200 *
Richmond, Virginia
Needham B. Whitfield 859,573(5)(6) 8.43
Midlothian, Virginia
Frederic W. Yocum, Jr. 2,000 *
Iowa City, Iowa
2
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class
All executive officers 2,188,749 (6) 21.47%
and directors as a group
(12 persons) including
those named above
*Less than 1%
<FN>
(1) Mrs. Kenny is the wife of John C. Kenny, a director, and the sister
of Needham B. Whitfield, a director and officer. Shares shown for Mrs.
Kenny include (a) 643,800 shares owned directly by Mrs. Kenny; (b) 192,360
shares held in a trust of which Mrs. Kenny is a co-trustee with NationsBank
of Virginia, N.A. and an income beneficiary; (c) 95,625 shares held for the
benefit of Mrs. Kenny's two children in trusts established pursuant to the
will of Mildred F. Whitfield, of which Mrs. Kenny is co-trustee; (d) 92,585
shares held by a charitable foundation of which Mrs. Kenny is an officer;
and (e) 500 shares held as custodian. With respect to all these shares
owned by or held for the benefit of others, Mrs. Kenny disclaims beneficial
ownership. Shares shown for Mrs. Kenny do not include the 250,000 shares
shown for the estate of Mildred F. Whitfield, which shares Mrs. Kenny and
Needham B. Whitfield are also deemed to beneficially own as co-executors of
the estate of Mildred F. Whitfield.
(2) Anne Whitfield Kenny and Needham B. Whitfield are also deemed to
beneficially own the shares shown for the estate of Mildred F. Whitfield.
See notes (1) and (5).
(3) The amount shown includes 700 shares held by Mr. Johnson's wife, as
to which shares Mr. Johnson disclaims beneficial ownership.
(4) Mr. Kenny is the husband of Anne Whitfield Kenny, and brother-in-
law of Needham B. Whitfield, a director and officer. Shares shown for Mr.
Kenny exclude those owned by his wife as set forth above in the table, as to
all of which shares he disclaims beneficial ownership.
(5) Mr. Whitfield is the brother of Anne Whitfield Kenny, and the
brother-in-law of John C. Kenny, a director. The amounts shown include
274,124 shares owned directly by Mr. Whitfield, as well as 21,443 shares of
stock awarded pursuant to the Restricted Stock Plan as to which Mr.
Whitfield has voting and dividend rights, but which are not fully vested.
Shares shown for Mr. Whitfield also include; (a) 192,360 shares held for the
benefit of his children in trusts of which Mr. Whitfield is a co-trustee
with NationsBank of Virginia, N.A. and an income beneficiary; (b) 116,082
shares held in trusts for the benefit of his two minor children, of which
Mr. Whitfield is a co-trustee with his wife; (c) 30,164 shares held in
trusts for his two grown children, of which Mr. Whitfield is a co-trustee
with his children; (d) 97,800 shares held for the benefit of two children of
3
Mr. Whitfield in trusts established pursuant to the will of Mildred F.
Whitfield, of which Mr. Whitfield is co-trustee; (e) 100,000 shares held
by two charitable foundations of which Mr. Whitfield is an officer; and (f)
2,000 shares held in custodianship for the two minor children of a former
partner of Mr. Whitfield, for which Mr. Whitfield acts as custodian. With
respect to all these shares owned by or held for the benefit of others, Mr.
Whitfield disclaims beneficial ownership. Shares shown for Mr. Whitfield do
not include the 250,000 shares shown for the estate of Mildred F. Whitfield,
which shares Mr. Whitfield and Mrs. Kenny are also deemed to beneficially
own as co-executors of the estate of Mildred F. Whitfield.
(6) The beneficial ownership shown for the named executive officers and
for all executive officers and directors as a group includes currently
exercisable options awarded under the Company's Stock Option Plan and/or
shares of restricted stock awarded under the Company's Restricted Stock
Plan, as more fully described under "Executive Compensation".
(7) The beneficial ownership shown for each of the institutional
stockholders is based upon the Schedule 13G filings received by the Company
for such stockholders showing their respective ownership as of December 31,
1995. The Schedule 13Gs certify that the acquisition of the shares reported
thereon was in the ordinary course of business and not in connection with or
as a participant in any transaction having the purpose or effect of changing
or influencing the control of the Company.
ELECTION OF DIRECTORS
Unless otherwise instructed, shares of Common Stock represented by
proxies will be voted for the election of the nominees listed below, all of
whom are members of the present Board of Directors. Directors elected at
the Annual Meeting will hold office until the next Annual Meeting of
shareholders or until their respective successors are duly elected and
qualified.
In the event that any nominee becomes unavailable for election for any
reason, an event which management does not anticipate, shares of Common
Stock represented by proxies will be voted for any substitute nominee
designated by the Board of Directors.
The following table sets forth with respect to each nominee for
director, his age, principal occupation during the past five years, other
positions he holds with the Company, if any, other directorships of public
companies he holds, if any, and the year in which he first became a director
of the Company:
Principal Occupation During
Name and Position the Last Five Years and Director
with the Company Age Other Directorships Since
Jacob M. Feichtner 58 Executive Vice President and 1985
Executive Vice President Secretary of the Company.
and Director
4
Principal Occupation During
Name and Position the Last Five Years and Director
with the Company Age Other Directorships Since
Steven M. Johnson 45 Vice President - Corporate 1990
Director Development of Tredegar Industries,
Inc., a diversified manufacturing
company headquartered in Richmond,
Virginia.
John C. Kenny (1) 73 Counsel in the law firm of 1966
Director Christian, Barton, Epps, Brent
and Chappell, Richmond,
Virginia.
J. Craig Rice 48 President and Chief Operating 1985
President, Chief Officer of the Company.
Operating Officer
and Director
James M. Wells III (2) 49 President and Director of Crestar 1990
Director Financial Corporation and Crestar
Bank, a banking and financial
services institution headquartered
in Richmond, Virginia.
Needham B. Whitfield (3) 59 Chief Executive Officer of the 1973
Chief Executive Officer Company.
and Chairman of the
Board of Directors
Frederic W. Yocum, Jr. 53 President and Director, Chief 1990
Director Executive Officer and Chief
Operating Officer of Iowa Interstate
Railroad. President, Pittsburgh
and Lake Erie Acquisition Corporation,
affiliated with Railroad Development
Corporation headquartered in Pittsburgh,
Pennsylvania April, 1990 - August, 1991.
<FN>
(1) The firm of Christian, Barton, Epps, Brent and Chappell was
retained by the Company to perform legal services during the past year and
is expected to perform legal services for the Company during the current
year. Mr. Kenny's family relationship to certain principal shareholders and
directors is explained under "Security Ownership of Certain Beneficial
Owners and Management".
(2) The Company maintains a customary banking relationship with Crestar
Bank, including a revolving credit facility.
(3) Mr. Whitfield's family relationship to certain principal
shareholders and directors is explained under "Security Ownership of Certain
Beneficial Owners and Management".
5
COMMITTEES AND MEETINGS
The Board of Directors held 12 meetings during the year ended December
31, 1995. During the year, each director attended at least 75 percent of
the aggregate number of meetings of the Board of Directors and respective
Committees thereof on which he served, held during the period in which he
served as such. The Company's outside directors receive a monthly fee of
$500 and a $500 meeting attendance fee for Board, Audit and Compensation
Committee meetings plus traveling expenses.
There is no Nominating Committee. Nominations are made by the entire
Board at a regular meeting of the Board, and although the Board currently
does not have a formal procedure for considering nominations made by
shareholders, it will accept suggestions.
The Audit Committee of the Board currently consists of Messrs. Johnson
and Yocum. The Committee met with the Company's independent auditors twice
during the year at which times the audit of the Company's financial
statements was discussed.
The Compensation Committee of the Board currently consists of Messrs.
Johnson, Whitfield and Yocum. The Committee met two times during the year
and took action by unanimous written consent on three occasions. The
Compensation Committee establishes the cash compensation (salary and cash
bonuses) of the officers of the Company and such key employees of the
Company as may be recommended by the Chief Executive Officer; reviews
management recommendations on stock incentive awards to officers and
employees of the Company; exercises the full authority of the Board under
employee benefit and other similar plans of the Company (other than stock
incentive plans); and reviews management succession planning. Outside
director committee members review and evaluate the performance of the Chief
Executive Officer and establish his compensation, other than stock option
and restricted stock awards which are established and approved for all
officers and key employees by all non-employee members of the Board of
Directors.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table lists all compensation paid or accrued by the
Company for services in all capacities to the Company's chief executive
officer and the Company's four most highly compensated executive officers
other than the chief executive officer whose total annual salary and bonus
for the year ended December 31, 1995 exceeded $100,000. Figures are given
for compensation paid or accrued by the Company during the three years ended
December 31, 1995:
6
Summary Compensation Table
Long-Term Compensation
Annual Compensation Restricted All
Stock Securities Other
Name and Salary Bonus Awards Underlying Compen-
Principal Position Year ($) ($) ($)(1) Options(#) sation(2)
Needham B. Whitfield FY95 $176,808 $53,820 $72,001 13,000 $12,569
Chief Executive Offi- FY94 170,016 72,200 67,974 13,000 10,869
cer and Chairman of FY93 140,016 39,400 38,094 10,800 9,013
the Board of
Directors.
J. Craig Rice FY95 208,008 60,548 72,001 13,000 12,763
President and FY94 200,016 81,225 67,974 13,000 11,556
Chief Operating FY93 180,000 59,100 39,750 10,800 12,442
Officer.
Jacob M. Feichtner FY95 131,040 29,601 13,205 5,000 7,804
Executive Vice FY94 126,000 37,620 12,463 5,000 7,549
President and FY93 121,608 31,520 11,594 4,800 7,463
Secretary.
Howard J. Bush FY95 124,800 25,415 12,004 6,250 7,304
Vice President of FY94 120,000 34,200 11,325 6,000 6,946
Marketing and FY93 115,008 29,550 9,938 4,800 6,633
Sales.
Donald E. Fitzsimmons FY95 118,728 22,018 9,000 4,000 6,354
Vice President of FY94 110,481 39,220 8,496 3,600 5,682
Railroad Sales. FY93 -- -- -- -- --
<FN>
(1) At December 31, 1995, the number of shares and year end value of
the aggregate restricted stock holdings (i.e., still subject to a period of
restriction) for the persons named in the Summary Compensation Table were:
20,104 shares with an aggregate fair market value of $206,066 for Needham B.
Whitfield; 20,353 shares with an aggregate fair market value of $208,618 for
J. Craig Rice; 4,549 shares with an aggregate fair market value of $46,627
for Jacob M. Feichtner; 3,976 shares with an aggregate fair market value of
$40,754 for Howard J. Bush; and 1,794 shares with an aggregate fair market
value of $18,388 for Donald E. Fitzsimmons. During the year ended December
31, 1995, the following number of shares of Restricted Stock, the value of
which is reported in the above table, were awarded under the Restricted
Stock Plan, for the persons named in the Summary Compensation Table: 6,472
shares for Needham B. Whitfield; 6,472 shares for J. Craig Rice; 1,187
shares for Jacob M. Feichtner; 1,079 shares for Howard J. Bush; and 809
7
shares for Donald E. Fitzsimmons. The periods of restriction for all
Restricted Stock awards, including the above, made to date under the Plan
are (a) 2 years for 1/3 of the total shares covered by the award, (b) 3
years for the next 1/3 of such shares and (c) 4 years for the remaining 1/3
of such shares. The recipient has the right to vote such shares and to
receive dividends on them during the period of restriction.
(2) The amounts reported as "All Other Compensation" in this column
reflect (a) the amount of Brenco's contributions to its Supplemental Pension
Plan on behalf of the named executives and (b) the amount of dividends paid
on the restricted stock awards as follows:
(a) The amount of Brenco's contributions to its Supplemental Pension
Plan on behalf of the named executive officers for 1995, 1994 and 1993 are:
Mr. Whitfield - $7,500, $7,500 and $7,000; Mr. Rice - $7,500, $7,500 and
$9,000; Mr. Feichtner - $6,552, $6,300 and $6,080; Mr. Bush - $6,240, $6,000
and $5,750; and Mr. Fitzsimmons - $5,936 for 1995 and $5,524 for 1994.
(b) The amount of dividends paid on the restricted stock awards to the
named executive officers for 1995, 1994 and 1993 are: Mr. Whitfield -
$5,069, $3,369 and $2,013; Mr. Rice - $5,263, $4,056 and $3,442; Mr.
Feichtner - $1,252, $1,249 and $1,383; Mr. Bush - $1,064, $946 and $883; and
Mr. Fitzsimmons - $418 for 1995 and $158 for 1994.
Stock Options
The following table reflects grants of stock options made during the
year ended December 31, 1995 to each of the named executive officers:
Option Grants in Last Fiscal Year Potential
Realizable
Individual Grants (1) Value at
_____________________________________________________________ Assumed Annual
Rates of
Stock Price
Percent Appreciation
of Total For Option
Number of Options Term (2)
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted(#) Year ($/Sh) Date 5% 10%
Needham B. Whitfield 13,000 12.60% $11 5/8 10/27/05 $95,042 $240,854
J. Craig Rice 13,000 12.60 11 5/8 10/27/05 95,042 240,854
Jacob M. Feichtner 5,000 4.84 11 5/8 10/27/05 36,555 92,636
Howard J. Bush 6,250 6.06 11 5/8 10/27/05 45,693 115,795
Donald E. Fitzsimmons 4,000 3.88 11 5/8 10/27/05 29,244 74,109
<FN>
(1) All grants were made under the Company's 1988 Stock Option Plan as
amended by the shareholders on April 15, 1993 and vest in one year from the
grant date.
8
(2) The dollar amounts under these columns are the result of
calculations at assumed rates of stock price appreciation set by the
Securities and Exchange Commission. The dollar amounts shown are not
intended to forecast possible future appreciation, if any, of the price of
the Common Stock.
The following table sets forth information regarding the exercise of
stock options during the year ended December 31, 1995, by each of the named
executive officers:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
___________________________________________________
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Value Fiscal Year-End(#) Fiscal Year-End($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
Needham B. Whitfield 0 $ 0 25,600/15,700 $ 20,813/$ -0-
J. Craig Rice 15,000 123,750 84,100/15,700 276,375/ -0-
Jacob M. Feichtner 10,000 80,000 25,100/ 6,200 76,313/ -0-
Howard J. Bush 1,875 9,375 25,100/ 7,450 71,688/ -0-
Donald E. Fitzsimmons 625 3,047 5,400/ 4,600 -0-/ -0-
Retirement Benefits
The Company maintains a defined benefit Executive Retirement Incentive
Plan for select executives and a defined benefit Retirement Plan for all
employees, including executives.
The Company's Executive Retirement Incentive Plan (the "Executive
Plan") was adopted effective January 1, 1995 and provides a monthly
retirement benefit for life to executives selected for participation by the
Compensation Committee of the Company's Board of Directors equal to the
excess of (i) 3% of the executive's remuneration multiplied by his years of
service (up to a maximum of 20 years), over (ii) the value of benefits
payable to the executive by the Company's Retirement Plan and the
executive's Social Security benefit. The executive officers named in the
Summary Compensation Table are among the executives who have been selected
for participation in the Executive Plan. In order to receive a benefit
under the Executive Plan, the executive must have at least five years of
vesting service and must retire after attaining age 55 but no later than the
first day of the calendar quarter coinciding with or next following his
attaining age 62. The Executive Plan provides for benefit payment options
and spousal and beneficiary rights and payments in the event of the
executive's death. No benefits are payable under the Executive Plan to any
executive who terminates employment before attaining age 55 or who does not
retire during the available retirement window period. In addition, benefits
in the Executive Retirement Incentive Plan are forfeited if a retired
executive competes with the Company.
9
The following table shows the estimated retirement benefits payable
under both the Company's Executive Plan and its Retirement Plan, together
with Social Security benefits (that is the gross amount before offset by the
Retirement Plan benefit and the Social Security benefit), to executives in
the listed remuneration and years of service classifications, with the
assumption of straight life payments:
Pension Plan Table - Executive Plan and Retirement Plan *
Years of Service
___________________________________________________________________
Amount of Annual Retirement Benefit (before Social Security Offset)
___________________________________________________________________
Remuneration(1) 15 20 25 30 35
$100,000 $ 45,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
125,000 56,250 75,000 75,000 75,000 75,000
150,000 67,500 90,000 90,000 90,000 90,000
175,000 78,750 105,000 105,000 105,000 105,000
200,000 90,000 120,000 120,000 120,000 120,000
225,000 101,250 135,000 135,000 135,000 135,000
250,000 112,500 150,000 150,000 150,000 150,000
300,000 135,000 180,000 180,000 180,000 180,000
400,000 180,000 240,000 240,000 240,000 240,000
<FN>
* All benefits computed without regard to compensation limits of
Internal Revenue Code Section 401(a)(17) or benefit limitations of Code
Section 415 which do not apply to the Executive Plan, but which do apply to
the Retirement Plan.
(1) "Remuneration" for the Executive Plan is the average of five-year
salary plus 100% of the year-end cash incentive awards as such amounts are
shown under the respective salary and bonus columns in the Summary
Compensation Table.
The Company's Retirement Plan covers substantially all employees of the
Company and currently provides a monthly retirement benefit for life equal
to 1% of remuneration for each year of service plus .5% of remuneration for
each year of service in excess of Social Security covered compensation for
each year of service (up to a maximum of 35 years). The Retirement Plan
limits the annual pension payable to the maximum limitation specified in
Code Section 415 which was $120,000 for 1995.
The following table shows the estimated retirement benefits payable
solely under the Company's Retirement Plan (which is the minimum retirement
amount payable from the Company, regardless of whether an executive is
entitled to benefits under the Company's Executive Plan) to executives in
the listed remuneration and years of service classifications, with the
assumptions of 1995 retirement and straight life payments. The table is
based on the current benefit formula:
10
Pension Plan Table - Retirement Plan Only **
Years of Service
______________________________________________________
Amount of Annual Retirement Benefit
______________________________________________________
Remuneration(1) 15 20 25 30 35
$100,000 $20,250 $ 27,000 $ 33,750 $ 40,500 $ 47,250
125,000 25,875 34,500 43,125 51,750 60,375
150,000 31,500 42,000 52,500 63,000 73,500
175,000 37,125 49,500 61,875 74,250 86,625
200,000 42,750 57,000 71,250 85,500 99,750
225,000 48,375 64,500 80,625 96,750 112,875
250,000 54,000 72,000 90,000 108,000 126,000
300,000 65,250 87,000 108,750 130,500 152,250
400,000 87,750 117,000 146,250 175,500 204,750
<FN>
** All benefits computed without regard to compensation limits of Code
Section 401(a)(17) or benefit limitations of Code Section 415 which do apply
to the Retirement Plan.
(1) "Remuneration" for the Retirement Plan is the average of five-year
salary plus 75% of the year-end cash incentive awards as such amounts are
shown under the respective salary and bonus columns in the Summary
Compensation Table.
Following are credited years of service for the Executive Plan and the
Retirement Plan for the executive officers named in the Summary Compensation
Table on page 7 as of December 31, 1995: Needham B. Whitfield - 10; J.
Craig Rice - 22; Jacob M. Feichtner - 15; Howard J. Bush - 6; and Donald E.
Fitzsimmons - 10.
Compensation of Directors
The Company's outside directors receive a monthly fee of $500 and a
$500 meeting attendance fee for Board, Compensation and Audit Committee
meetings plus traveling expenses. Mr. Yocum was paid $5,500 in connection
with certain special assignments for the Board during 1995. Directors who
are also employees of the Company receive no additional compensation for
serving as directors.
Employment Agreements
On July 26, 1983 the Board of Directors authorized agreements with
certain key employees of the Company, including Messrs. Rice, Feichtner and
Lawrence, to provide such employees with severance pay equal to one year's
salary in the event their employment is terminated or their duties are
11
materially altered as a result of a change in control of the Company. For
purposes of this arrangement, "change in control" means a change in the
composition of a majority of the Board of Directors of the Company as a
result of a successful tender or exchange offer for the Company's Common
Stock, the transfer of ownership of 28% or more of the Company's voting
stock to any person or group of associated or affiliated persons acting
together, the merger or consolidation of the Company with another concern,
or the sale of all or substantially all of the Company's assets.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is comprised of
Steven M. Johnson, Needham B. Whitfield and Frederic W. Yocum, Jr. Needham
B. Whitfield, as Chief Executive Officer of the Company, is the only member
of the Committee who is an employee of the Company. None of the Company's
executive officers has served on the Board of Directors of any company of
which a Compensation Committee member is an employee.
Compensation Committee Report on Executive Compensation
Officer and Key Employee Compensation. The Compensation Committee
believes it essential to provide a compensation program that both ensures
the continued motivation and retention of the management team and rewards
managers as the shareholders benefit.
The Company's compensation program for officers and key employees
consists of three major elements: base salary, a discretionary annual cash
incentive award, and periodic grants of stock options and restricted stock.
By providing a significant portion of executive compensation in an annual
incentive payment that varies with earnings and in stock option and
restricted stock awards that vary in value with the market value of the
Company's Common Stock, the Committee believes it has closely aligned
management's compensation over time with the shareholders' interests.
Establishing Competitive Pay Levels and Practices. The Compensation
Committee employs compensation consultants who provide data, comparables,
and objective and independent guidance on compensation practices for
officers and key employees of companies of similar size and nature. The
last formal study was completed by the compensation consultants in the fall
of 1993. The Committee believes it appropriate to align Company compensation
practices with the 50th percentile of the consultants' survey population,
with the exception that the compensation of the Company's two senior
executive officers should be lower in salary and cash incentives and more
heavily weighted toward longer term stock awards.
Base Salary. Salaries paid to officers and key employees (other than
the Chief Executive Officer) are established annually by the Committee in
conjunction with the Chief Executive Officer's review of each executive's
contributions, experience, and other attributes.
12
Annual Cash Incentive. Each year, the Chief Executive Officer
recommends to the Committee cash incentive targets for each of the other
officers and key employees. The amount of the cash incentive award for each
individual is dependent upon the Company's achieving its target for income
from operations for the year, and will vary with that measure, with the
exception that no cash incentive awards will be made if a pre-established
threshold of operating income is not met, and in no event may the actual
award exceed two times the original target. Once targeted amounts have been
established, the Chief Executive Officer will set specific incentive goals
for each officer and key employee, and at year end, based upon the Chief
Executive's Officer's evaluation of the individual's performance, the
Committee will determine to award part or all of the individual's available
award.
Stock Incentives. The Committee has determined that stock option and
restricted stock awards are the best mechanisms to reward officers and key
employees for long-term performance, in a manner that is directly linked to
the interests of the shareholders. The individual receives his vested
interest in the awards over a number of years, and the ultimate value of the
awards varies directly with the market value of the Company's shares.
Awards of stock options and restricted stock are suggested by the Chief
Executive Officer and considered by the Compensation Committee as part of
the annual compensation plan for each officer and key employee. Based on
these considerations, the Compensation Committee makes its recommendations
to all the non-employee members of the Board of Directors, and then all non-
employee members of the Board of Directors establish and approve all stock
option and restricted stock grants. Until 1994, options had typically been
granted with a five-year period of exercise and a three-year vesting
schedule. Options granted after July 1994, including the options granted
October 27, 1995 were granted with a ten-year period of exercise and are
exercisable one year after date of grant. Restricted stock awards typically
vest over a four-year time frame. In determining the size of each grant or
award, the Committee does not take into consideration the current option or
restricted stock holdings of the recipient.
Officers named in the Summary Compensation Table received stock option
and restricted stock awards during 1995 as set forth therein.
Chief Executive Officer Compensation. The compensation of Mr.
Whitfield, the Chief Executive Officer, is determined by the outside
director members of the Compensation Committee in a manner consistent with
the determination of compensation for other officers of the Company. Mr.
Whitfield's salary is based on competitive pay levels of Chief Executive
Officers of similar sized companies as determined by the compensation
consultants, with the exception that Mr. Whitfield's compensation is based
in part upon the assumption that he will devote 75% of his working time to
the affairs of the Company. In 1995, he devoted substantially all of his
working time to the Company. Mr. Whitfield's salary was $176,800 for 1995,
which is lower than the median for pay comparables for similar sized
companies. For 1996 Mr. Whitfield's salary was increased 4.5%, which was in
line with salary increases for other senior officers of the Company.
13
Mr. Whitfield's cash incentive award for 1995 was $53,820, which
approximated his original target for the year, as the result of the
Company's exceeding its target for operating income by 15% and the
Committee's assessment of Mr. Whitfield's individual performance.
In 1995, Mr. Whitfield received stock options representing 13,000
shares of the Company's Common Stock and a restricted stock award for 6,472
shares of such stock, as part of his total compensation plan, following the
guidelines outlined above for all officers and key employees. Details of
these awards to Mr. Whitfield are provided under the caption Summary
Compensation Table.
Section 162(m) Considerations. The Committee has not given significant
consideration to the deductibility of executive compensation under Section
162(m) of the Internal Revenue Code which was enacted in 1993. Under this
provision, beginning in 1994 a publicly held corporation is not permitted to
deduct compensation in excess of one million dollars per year paid to the
chief executive officer or any one of the other named executive officers
except to the extent the compensation was paid under compensation plans
meeting certain tax code requirements. The Committee has noted that the
Company does not currently face the loss of this deduction for compensation.
The Committee nevertheless has determined that, in reviewing the design of
and administering the executive compensation program, the Committee will
continue in the future to seek to preserve the Company tax deductions for
executive compensation unless this goal conflicts with the primary
objectives of the Company's compensation's program.
Submitted by,
Steven M. Johnson
Frederic W. Yocum, Jr.
Needham B. Whitfield
14
Performance Graph
Securities and Exchange Commission regulations require the Company to
include in its proxy statement the following Performance Graph. The graph
is intended to assist shareholders in assessing corporate performance by
providing a five year comparison of cumulative total returns (on a dividends
reinvested basis) for the Company's Common Stock with the S&P 500, a broad
market index, and the Timken Company, a peer issuer, a domestic manufacturer
of roller bearings with its stock traded on the New York Stock Exchange.
There is no published index available which compares the Company to its
competition.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BRENCO, INCORPORATED, TIMKEN COMPANY AND S&P 500
Measurement Period BRENCO, TIMKEN
(Fiscal Year Covered) INCORPORATED COMPANY S&P 500
*Measurement Pt-12/31/90 $100.00 $100.00 $100.00
FYE 12/31/91 121.14 113.35 126.31
FYE 12/31/92 119.01 127.48 131.95
FYE 12/31/93 228.97 162.82 141.25
FYE 12/31/94 222.17 171.70 139.08
FYE 12/31/95 192.00 187.36 189.52
<FN>
* Assumes $100 invested on 12/31/90 in Brenco, Timken and S&P 500
(HARD COPY SENT TO SEC UNDER COVER OF FORM SE ON 3/6/96)
Compliance with Section 16 of the Securities Exchange Act of 1934
Based on a review of reports of beneficial ownership of the Company's
Common Stock and written representations furnished to the Company, the
Company believes that its officers and directors filed on a timely basis the
reports required to be filed under Section 16(a) of the Securities Exchange
Act of 1934 during 1995, except for the filing of a Form 4 reporting the
sale of 2,333 shares on May 8, 1995 by Mr. Feichtner, and a Form 4 reporting
the sale of 3,750 shares on May 11, 1995 by Mr. Fitzsimmons which two
transactions were inadvertently not reported in a timely manner by the above
officers of the Company.
15
Ratification of Auditors
The Audit Committee of the Board of Directors has selected McGladrey &
Pullen, LLP to audit the financial statements of the Company and its
Subsidiaries for the year ending December 31, 1996. McGladrey & Pullen, LLP
has been serving as auditor of the financial statements of the Company since
1952. The Board of Directors recommends that the shareholders ratify the
appointment of McGladrey & Pullen, LLP. The affirmative vote of a majority
of the votes cast is required for ratification of the appointment of
auditors.
It is anticipated that representatives of McGladrey & Pullen, LLP will
be present at the meeting to respond to appropriate questions and will have
an opportunity, if they desire, to make a statement.
OTHER MATTERS
Annual Report to Shareholders
The 1995 Annual Report of the Company, which includes audited financial
statements for the year ended December 31, 1995, has been mailed to
shareholders of record.
10-K Report
A copy of the Company's 10-K Annual Report for 1995 to the Securities
and Exchange Commission will be available free of charge at the end of
March, 1996. You may obtain a copy by written request to:
Secretary
BRENCO, INCORPORATED
One Park West Circle
Suite 204
Midlothian, Virginia 23113
Shareholders' Proposals
Shareholders who intend to present proposals at the Company's Annual
Meeting of shareholders to be held on April 17, 1997, must submit their
proposals to the Secretary of the Company on or before November 8, 1996.
The Company's Bylaws prescribe the procedures a shareholder must follow
to make nominations for director candidates. Notice of shareholder
nominations must be submitted in writing to the Secretary of the Company at
the Company's principal place of business at least 90 days prior to the
anniversary date of the previous year's annual meeting (or not later than 10
days after the record date in the case of a special meeting). The notice
must contain all information specified in Article II, Section 12 of the
Bylaws. Any shareholder desiring a copy of the Company's Bylaws will be
furnished one without charge upon written request to the Secretary.
16
General
The cost of soliciting proxies will be borne by the Company. In
addition to the use of mails, proxies may be solicited by personal
interview, telephone and telegraph, and by directors, officers and regular
employees of the Company, without special compensation therefor. The
Company expects to reimburse banks, brokers and other persons for their
reasonable out-of-pocket expenses in handling proxy material for beneficial
owners of the Company's Common Stock.
Unless contrary instructions are indicated on the proxy, all shares of
Common Stock represented by valid proxies received pursuant to this
solicitation (and not revoked before they were voted) will be voted for the
election of the nominees for directors named herein and for the ratification
of the selection of McGladrey & Pullen, LLP as independent auditors for the
year ending December 31, 1996. If a shareholder specifies a different
choice on the proxy, his or her shares of Common Stock will be voted in
accordance with the specification so made.
The Board of Directors knows of no business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote
of the shareholders arise, the persons designated as proxies will vote the
shares of Common Stock represented by the proxies in accordance with their
judgment on such matters.
By Order of the Board of Directors
Jacob M. Feichtner
Executive Vice President &
Secretary
Midlothian, Virginia
March 8, 1996
17
TEXT OF PROXY CARD
FRONT SIDE
PROXY
BRENCO, INCORPORATED
ONE PARK WEST CIRCLE
MIDLOTHIAN, VIRGINIA 23113
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John C. Kenny, Steven M. Johnson and
Jacob M. Feichtner, jointly and severally, as Proxies, each with full power
to act alone and with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Brenco, Incorporated held of record by the
undersigned on February 23, 1996 at the Annual Meeting of Shareholders to be
held on April 18, 1996 or any adjournment thereof.
[X] Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted for Proposals 1 and 2. If, at or before the time
of the meeting, any of the nominees listed above has become unavailable
for any reason, the proxies have the discretion to vote for a
substitute nominee or nominees. This proxy may be revoked anytime
prior to its exercise.
1. ELECTION OF DIRECTORS: [ ] FOR [ ] WITHHELD
Nominees: J. Feichtner, S. Johnson, J. Kenny, J. Rice, J. Wells,
N. Whitfield, F. Yocum
To withhold authority to vote for any individual nominee, write that
nominee's name on the line provided below:
- ----------------------------------------------------------------------------
2. Ratify the appointment of McGladrey & Pullen, LLP as auditors for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon other
business as may properly come before the meeting.
(Please sign reverse side and return promptly.)
18
BACK SIDE
(Continued from other side)
Date: _____________________, 1996
_________________________________
Signature
_________________________________
Signature
Please sign exactly as name appears
above. When shares are held by
joint tenants, both should 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.
STATEMENT OF DIFFERENCES BETWEEN ELECTRONIC SUBMISSION OF PROXY AND ACTUAL
CARD DISTRIBUTED TO SHAREHOLDERS:
DIFFERENCES
PAGES 18 AND 19 OF THE DOCUMENT ARE THE COMPLETE TEXT OF THE WORDING OF THE
PROXY CARD. HOWEVER, THE SIZE OF THE TYPE AND THE CARD ARE NOT
REPRESENTATIVE OF THE ACTUAL CARD SENT TO SHAREHOLDERS.
DESCRIPTION
THE ACTUAL PROXY CARD SENT TO SHAREHOLDERS IS A 3 1/2 INCH BY 8 1/2 INCH
WHITE CARD WITH PRINTING ON BOTH SIDES AS INDICATED. BOXES ARE PROVIDED FOR
INDICATING DECISIONS.
19