DEF 14A
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c82191ddef14a.txt
DEFINITIVE PROXY STATEMENT
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
GATX CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[GATX CORPORATION] GATX CORPORATION
500 WEST MONROE STREET
CHICAGO, IL 60661
312-621-6200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To our Shareholders:
The Annual Meeting of the Shareholders of GATX Corporation will be held at
The Northern Trust Company, 50 South LaSalle Street, Sixth Floor Assembly Room,
Chicago, Illinois 60675, on Friday, April 23, 2004, at 9:00 A.M., for the
purposes of:
1. electing directors;
2. approving the appointment of independent auditors for the year 2004;
3. adopting the 2004 Equity Incentive Compensation Plan;
4. adopting the Cash Incentive Compensation Plan; and
5. transacting such other business as may properly come before the
meeting.
Only holders of Common Stock and both series of $2.50 Cumulative
Convertible Preferred Stock of record at the close of business on March 5, 2004
will be entitled to vote at this meeting or any adjournment thereof.
If you do not expect to attend in person, it will be appreciated if you
will promptly vote, sign, date and return the enclosed proxy. Alternatively, you
may vote by telephone or Internet by following the instructions in the enclosed
proxy.
Ronald J. Ciancio
Secretary
March 22, 2004
GATX CORPORATION LOGO GATX CORPORATION
500 WEST MONROE STREET
CHICAGO, IL 60661
312-621-6200
March 22, 2004
PROXY STATEMENT
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GENERAL
The enclosed proxy is solicited by the Board of Directors of GATX
Corporation (the "Company") and may be revoked at any time prior to its exercise
by any shareholder giving such proxy. A proxy may be revoked by written notice
to the Company, by duly executing a subsequent proxy relating to the same shares
or by attending the Annual Meeting and voting in person. All shares represented
by the proxies received and not revoked will be voted at the meeting.
All expenses incurred in connection with the solicitation of this proxy
will be paid by the Company. In addition to solicitation by mail, the Company
has retained Mellon Investor Services to solicit proxies on behalf of the Board
of Directors for a fee not to exceed $6,500, plus reasonable out-of-pocket
expenses and disbursements. Mellon Investor Services may solicit proxies by
mail, facsimile, telegraph or personal call. In addition, officers, directors
and employees of the Company, who will receive no extra compensation for their
services, may solicit proxies by mail, facsimile, telegraph or personal call.
The Annual Report, including the Annual Report on Form 10-K for the year ended
December 31, 2003 as filed with the Securities and Exchange Commission ("SEC"),
was first mailed to all shareholders together with this proxy statement on or
about March 22, 2004.
VOTING SECURITIES
Only holders of Common Stock and both series of $2.50 Cumulative
Convertible Preferred Stock of record at the close of business on March 5, 2004
will be entitled to vote at the meeting or any adjournment thereof. As of that
date, there were 49,258,969 shares of the Common Stock and 21,774 shares of the
$2.50 Cumulative Convertible Preferred Stock of the Company issued and
outstanding. Each share is entitled to one vote. New York law and the Company's
bylaws require the presence in person or by proxy of shares representing a
majority of the votes entitled to be cast at the Annual Meeting in order to
constitute a quorum for the Annual Meeting.
Shareholders voting by proxy have a choice of voting (a) by completing the
proxy card and mailing it in the envelope provided, (b) over the Internet or (c)
by telephone using the toll-free telephone number. The proxy card contains an
explanation of how to use each voting option and sets forth applicable
deadlines.
For shareholders who are participants in the GATX Salaried Employees
Retirement Savings Plan and/or the GATX Hourly Employees Retirement Savings
Plan, the enclosed proxy card also serves as a voting instruction to the Trustee
of the shares held in the GATX Stock Fund as of March 5, 2004. If instructions
are not received over the Internet or by telephone by April 19, 2004, or if the
signed proxy card is not returned and received by the Trustee by April 21, 2004,
the GATX shares in the GATX Stock Fund will be voted by the Trustee in
proportion to the shares for which the Trustee timely receives voting
instructions.
Shares represented at the meeting but as to which votes are withheld from
director nominees or which abstain as to other matters, and shares held by
brokers for their customers and represented at the meeting but as to which the
brokers have received no voting instructions from their customers and thus do
not have discretion to vote on certain matters ("Broker Non-Votes"), will be
counted in determining whether a quorum has been attained.
Assuming that a quorum is present, the election of directors will require a
plurality of the votes cast. Approval of the appointment of auditors and
adoption of the 2004 Equity Incentive Compensation Plan and the Cash Incentive
Compensation Plan will require a majority of the votes cast. Shares
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as to which votes are withheld or which abstain from voting on these matters and
Broker Non-Votes will not be counted and thus will not affect the outcome with
respect to these matters.
ELECTION OF DIRECTORS
Seven directors are to be elected, each for a term of one year, to serve
until the next Annual Meeting of shareholders or until their successors are
elected and qualified. Unless authority to vote on directors has been withheld,
each proxy will be voted for the election of the nominees named below. All of
the nominees have consented to serve as directors if elected. If at the time of
the Annual Meeting any nominee is unable or declines to serve, the proxies may
be voted for any other person who may be nominated by the Board of Directors to
fill the vacancy, or the Board may be reduced accordingly. Mr. John W. Rogers,
Jr., who has served as a director since 1998, has decided not to stand for
reelection. The Company expresses its utmost appreciation to Mr. Rogers for his
dedicated service.
NOMINEES FOR BOARD OF DIRECTORS
Director
Name and Principal Occupation Age Since
----------------------------- --- --------
Rod F. Dammeyer............................................. 63 1999
President, CAC LLC
James M. Denny.............................................. 71 1995
Retired; Former Vice Chairman, Sears, Roebuck and Co.
Richard Fairbanks........................................... 63 1996
Counselor, Center for Strategic & International Studies
Deborah M. Fretz............................................ 55 1993
President and Chief Executive Officer, Sunoco Logistics
Partners, L.P.
Miles L. Marsh.............................................. 56 1995
Former Chairman of the Board and Chief Executive Officer,
Fort James Corporation
Michael E. Murphy........................................... 67 1990
Retired; Former Vice Chairman, Chief Administrative
Officer, Sara Lee Corporation
Ronald H. Zech.............................................. 60 1994
Chairman of the Board, President and Chief Executive
Officer of the Company
ADDITIONAL INFORMATION CONCERNING NOMINEES
Mr. Dammeyer is President of CAC LLC, a private company offering capital
investment and management advisory services. Mr. Dammeyer retired as Managing
Partner of Equity Group Corporate Investments, a diversified management and
investment firm, in June 2000, having served in that position since February
1998. Mr. Dammeyer retired as Vice-Chairman of Anixter International, Inc., a
global distributor of wiring systems and networking products, in December 2000,
having previously served as its Chief Executive Officer from January 1993 to
February 1998 and its President from October 1985 to February 1998. Mr. Dammeyer
is also a director of Stericycle, Inc., Therasense, Inc. and Ventana Medical
Systems, Inc. and a trustee of Van Kampen Investments, Inc.
Mr. Denny retired as Vice Chairman, Sears, Roebuck and Co., a merchandising
company, in August 1995, having served in that position since February 1992. He
also served as a Managing Director of William Blair Capital Partners, LLC, a
general partner of private equity funds affiliated with William Blair & Co.,
from August 1995 until December 2000. Mr. Denny is also a director of
ChoicePoint Inc. and is Chairman of Gilead Sciences, Inc.
Mr. Fairbanks was named Counselor, Center for Strategic & International
Studies, a nonprofit public policy research institution providing analysis on
and assessment of the public policy impact of U.S. domestic, foreign and
economic policy, international finance and national security issues, in
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April 2000, having previously served as its Chief Executive Officer since May
1999 and as its Managing Director for Domestic & International Issues from April
1994 through April 1999. Mr. Fairbanks was formerly a U.S. Ambassador at Large.
Mr. Fairbanks is also a director of SEACOR SMIT, Inc. and SPACEHAB, Inc.
Ms. Fretz was named President and Chief Executive Officer of Sunoco
Logistics Partners, L.P., an owner and operator of refined product and crude oil
pipelines and terminal facilities, in October 2001. Ms. Fretz previously served
as Senior Vice President, Mid-Continent Refining, Marketing & Logistics, of
Sunoco, Inc., an energy company, from December 2000 to October 2001 and Senior
Vice President, Lubricants and Logistics, from January 1997 to December 2000.
Mr. Marsh resigned as Chairman of the Board and Chief Executive Officer of
Fort James Corporation, a producer of consumer and commercial tissue products
and food and consumer packaging, in November 2000, having served in that
position since August 1997. Mr. Marsh is also a director of Whirlpool
Corporation and Morgan Stanley.
Mr. Murphy retired as Vice Chairman, Chief Administrative Officer of Sara
Lee Corporation, a diversified manufacturer of packaged food and consumer
products, in October 1997, having served in that position since July 1993. Mr.
Murphy is also a director of Bassett Furniture Industries, Inc., CNH Global
N.V., Coach, Inc., Northern Funds and Payless ShoeSource, Inc.
Mr. Zech was elected Chairman of the Board in April 1996, having been
previously named Chief Executive Officer of the Company in January 1996 and
President in July 1994. Mr. Zech is also a director of McGrath RentCorp and PMI
Group, Inc. and one of the Company's subsidiaries, GATX Financial Corporation.
BOARD OF DIRECTORS
The Board has three standing committees: an Audit Committee, a Compensation
Committee and a Governance Committee. Each committee is composed of directors
determined by the Board of Directors to be independent in accordance with the
recently revised New York Stock Exchange ("NYSE") listing standards. During
2003, there were ten meetings of the Board of Directors of the Company, the
regular annual meeting and nine special meetings. In addition, the Board's non-
management directors generally meet in executive sessions without management
following each meeting of the Board. The Chairs of the Audit, Compensation and
Governance Committees of the Board each preside as the chair at meetings or
executive sessions of outside directors at which the principal items to be
considered are within the scope of the authority of his or her committee. Where
the matter does not fall within the purview of a specific committee, the
executive session will be chaired by the Chair of the Governance Committee.
Each director attended at least 75% of the meetings of the Board and
committees (on which he or she served) held while the director was a member
during 2003, with the exception of Mr. Fairbanks, who attended 64% of all such
meetings, having missed several meetings while recovering from surgery. The
Company has adopted a policy strongly encouraging all members of the Board to
attend the Annual Meeting of Shareholders. Last year all directors attended the
Annual Meeting of Shareholders.
The Company's Corporate Governance Guidelines, Code of Ethics and Code of
Ethics for Senior Officers and the charters of each of the standing Board
committees are available under Corporate Governance in the Investor Relations
section on the Company's website at www.gatx.com .
BOARD INDEPENDENCE
The Board of Directors has adopted the independence standard for the
directors set forth in Exhibit A to this Proxy Statement. These standards
conform to the recently revised standards
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required by the NYSE for listed companies. The Board of Directors has
affirmatively determined that each of the following nominees is independent
based on the Company's independence standards, and that each such director has
no material relationship with the Company: Ms. Fretz and Messrs. Dammeyer,
Denney, Fairbanks, Marsh and Murphy.
COMMITTEES OF THE BOARD.
The Audit Committee members are Ms. Fretz (Chair) and Messrs. Dammeyer,
Murphy and Rogers. The Board has determined that each current member of the
Audit Committee meets the criteria established by the Securities and Exchange
Commission for an "Audit Committee Financial Expert." The Audit Committee is
composed solely of members who are independent in accordance with the NYSE's
rules for independence of audit committee members. During 2003, there were six
meetings of the Audit Committee. In addition to appointing the Company's
independent auditors, the committee's functions include: (i) assisting the Board
of Directors in its oversight of the integrity of the Company's financial
statements; (ii) maintaining the Company's compliance with legal and regulatory
requirements; (iii) reviewing the independent auditor's qualifications and
independence; (iv) reviewing and evaluating the performance of the Company's
internal audit function and independent auditors; and (v) preparing the report
that SEC rules require be included in the Company's annual proxy statement.
The Compensation Committee members are Messrs. Denny (Chair), Dammeyer,
Marsh and Murphy. During 2003, there were seven meetings of the Compensation
Committee. The committee's functions include: (i) assisting the Board of
Directors in the discharge of its responsibilities with respect to compensation
of the Company's directors, officers and executives, and producing an annual
report on executive compensation for inclusion in the Company's proxy statement
in accordance with applicable rules and regulations; (ii) delivering a report to
the full Board, following each of its meetings, including a description of
actions taken by the committee thereat; (iii) general responsibility for
ensuring the appropriateness of the Company's executive compensation and benefit
programs, and the criteria for awards to be issued under such programs; and (iv)
reporting the results of its annual performance evaluation of its effectiveness
to the Board of Directors, including any recommended amendments to the
committee's charter, and any recommended changes to the policies and procedures
of the committee.
The Governance Committee members are Messrs. Fairbanks (Chair), Denny,
Marsh and Rogers. During 2003, there were three meetings of the Governance
Committee. The committee's functions include: (i) identifying individuals
qualified to become Board members and recommending that the Board of Directors
select a group of director nominees for each annual meeting of the Company's
shareholders; (ii) ensuring that all of the committees of the Board of Directors
shall have the benefit of qualified and experienced independent directors; (iii)
developing and recommending to the Board of Directors a set of effective
corporate governance policies and procedures applicable to the Company; and (iv)
reviewing the performance of all members of the Board in their capacities as
directors, including attendance and contributions to Board deliberations, and
making such recommendations to the Board as may be appropriate.
PROCESS FOR IDENTIFYING AND EVALUATING DIRECTOR NOMINEES
The Board is responsible for recommending nominees for election by the
shareholders. The Board has delegated the process for screening potential
candidates for Board membership to the Governance Committee with input from the
Chairman of the Board and Chief Executive Officer. When the Governance Committee
determines that it is desirable to add to the Board or fill a vacancy on the
Board, the Governance Committee will identify individuals qualified to become
members of the Board and recommend them to the Board. In identifying qualified
individuals, the Governance Committee will seek suggestions from other Board
members, and may also retain a search firm for this purpose. The Governance
Committee will also consider candidates recommended by share-
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holders, who should send any recommendations to the Governance Committee. The
Governance Committee will conduct such inquiry into the candidate's background,
qualifications and independence as it believes is necessary or appropriate under
the circumstances, and would apply the same standards to candidates suggested by
shareholders as it applies to other candidates. Such recommendations should be
submitted to the Governance Committee, c/o Corporate Secretary, 500 West Monroe
Street, Chicago, Illinois 60661. The recommendation should be received not more
than 120 and not less than 90 days prior to the first anniversary date of the
immediately preceding annual meeting and should include the following
information: (i) the name of the individual recommended as a director candidate;
(ii) all information required to be disclosed in the solicitation of proxies for
the election of directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934; (iii) the individual's written consent to being named in
the proxy statement as a nominee and serving as a director if elected; (iv) a
representation that the person making the nomination is a shareholder of the
Company; and (v) a description of any arrangements and understandings between
the shareholder and the nominee.
The Board of Directors upon recommendation of the Governance Committee has
determined that all candidates that it proposes for election to the Board of
Directors should possess and have demonstrated the following minimum criteria:
(i) the highest level of personal and professional ethics, integrity and values;
(ii) an inquisitive and objective perspective; (iii) broad experience at the
policy-making level in business, finance, accounting, government or education;
(iv) expertise and experience that is useful to the Company and complementary to
the background and experience of other Board members, so that an optimal balance
and diversity of Board members may be achieved and maintained; (v) broad
business and social perspective, and mature judgment; (vi) commitment to serve
on the Board for an extended period of time to ensure continuity and to develop
knowledge about the Company's business; (vii) demonstrated ability to
communicate freely with management and the other directors, as well as the
ability and disposition to meaningfully participate in a collegial decision
making process; (viii) willingness to devote the required time and effort to
carry out the duties and responsibilities of a Board member; and (ix)
independence from any particular constituency, and the ability to represent the
best interests of all shareholders and to appraise objectively the performance
of management.
COMMUNICATION WITH THE BOARD
Interested parties, including shareholders, may communicate directly with
the directors of the Company though the office of the Corporate Secretary as
follows: (i) by mail addressed to the Board or one or more directors, c/o
Corporate Secretary, 500 West Monroe Street, Chicago, Illinois 60661; (ii)
electronically by sending an e-mail to contactboard@gatx.com; or (iii)
anonymously by telephone by calling 888-749-1947. Communications (other than
those deemed in the reasonable judgment of the Corporate Secretary to be
inappropriate, such as employee complaints or matters that are patently
frivolous) received by the Company addressed to the Board or one or more
directors shall be promptly forwarded by the Corporate Secretary to the Board
member or members to whom it was addressed or, if not so specifically addressed,
then, depending on the subject matter of the particular communication, to the
chair of the appropriate Board committee or to the non-management directors as a
group. Any communication not readily identifiable for a particular director or
Board committee shall be forwarded to the Chair of the Governance Committee.
COMPENSATION OF DIRECTORS
Each non-employee director receives an annual retainer of $40,000 and an
annual grant of phantom Common Stock valued at $37,000. In addition, each
non-employee director receives a meeting fee of $2,000 for each meeting attended
of the Board or a committee of the Board of which the director is a member. The
Chair of each committee receives $3,000 for each meeting attended.
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The annual retainer is paid quarterly in arrears. Half of each quarterly
installment is paid in cash and half in units of phantom Common Stock which are
credited to each director's account in an amount determined by dividing the
amount of such payment by the average of the high and low prices of the
Company's Common Stock on the last trading day of the month in which the
quarterly installment is paid. The annual grant of phantom units is also
credited to each director's account in quarterly installments in arrears. Each
director's phantom Common Stock account is credited with additional units of
phantom Common Stock representing dividends declared on the Company's Common
Stock based on the average of the high and low prices of the Company's Common
Stock on the date such dividend is paid. At the expiration of each director's
service on the Board, settlement of the units of phantom Common Stock will be
made as soon as is reasonably practical in shares of Common Stock equal in
number to the number of units of phantom Common Stock then credited to his or
her account. Any fractional units will be paid in cash.
Under the Deferred Fee Plan, non-employee directors may defer receipt of
the cash portion of their annual retainer, meeting fees, or both, in the form of
either cash or units of phantom Common Stock. If the deferral is in cash, the
deferred amount accrues interest at a rate equal to the 20-year U.S. government
bond rate. If the deferral is in units of phantom Common Stock, the units are
credited to an account for each participating director along with dividends and
settled, following expiration of the director's service on the Board, in the
same manner as that portion of the annual retainer that is paid in units of
phantom Common Stock described above. Three directors participated in the
Deferred Fee Plan in 2003.
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COMPENSATION OF EXECUTIVE OFFICERS
The Company's executive officers participate in various incentive
compensation programs more fully described below under the caption "Compensation
Committee Report on Executive Compensation." The table below sets forth the
annual and long-term compensation paid or deferred by the Company to or for the
account of the Chief Executive Officer and each of the other four most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------- -------------------------------------
Awards Payouts
--------------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Principal Position Year ($) ($)(1) ($) ($) (#) of shares ($) ($)(2)
------------------ ---- ------- --------- ------------ ---------- -------------- ------- ------------
Ronald H. Zech 2003 775,000 550,064 5,377 0 0 0 31,046
Chairman, President & 2002 758,333 1,751,938 6,004 550,073 150,000 71,076 26,372
Chief Executive Officer 2001 725,000 0 5,990 0 116,515 59,594 51,666
Ronald J. Ciancio 2003 260,000 234,975 6,360 0 0 0 6,226
Vice President, General 2002 243,333 191,821 6,360 63,470 17,500 0 5,688
Counsel & Secretary 2001 238,333 78,430 6,360 88,375 10,691 0 5,257
Brian A. Kenney 2003 350,000 137,541 6,360 0 0 0 6,000
Senior Vice President 2002 341,951 371,907 6,360 137,518 40,000 11,352 5,500
Chief Financial Officer 2001 321,667 116,438 6,360 176,750 26,590 6,115 5,100
Gail L. Duddy 2003 245,000 234,635 6,360 0 0 0 6,000
Vice President 2002 230,417 189,065 6,360 63,470 17,500 6,342 5,500
Human Resources 2001 218,333 71,848 6,360 88,375 13,281 4,584 5,100
William J. Hasek 2003 196,000 124,198 4,440 0 0 0 5,880
Vice President 2002 182,667 134,878 4,440 21,157 10,000 0 4,955
Treasurer 2001 172,500 36,745 4,440 0 8,225 0 5,100
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(1) Amounts reflect bonus payments earned for the years set forth opposite the
specified payments. Messrs. Zech and Kenney voluntarily declined bonuses
under the Management Incentive Plan ("MIP") for calendar year 2003
performance. The amounts shown for Messrs. Zech and Kenney consist of
two-thirds of the value of the cash awards granted in 2002 under the
Executive Incentive Plan ("EIP") which vested on December 31, 2003. For Ms.
Duddy and Messrs. Ciancio and Hasek, the amounts shown consist of the sum of
bonuses paid under the MIP for calendar 2003 performance and two-thirds of
the value of the cash awards granted in 2002 under the EIP which vested on
December 31, 2003. The amounts in the column captioned "Bonus" consist of
the following components:
Bonus
---------------------------------------
MIP Award EIP Awards
For 2003 Vested in 2003 Total
--------- -------------- --------
Mr. Zech......................... $ 0 $550,064 $550,064
Mr. Ciancio...................... $171,510 $ 63,465 $234,975
Mr. Kenney....................... $ 0 $137,541 $137,541
Ms. Duddy........................ $171,170 $ 63,465 $234,635
Mr. Hasek........................ $103,076 $ 21,122 $124,198
(2) For 2003, includes contributions made to the Company's Salaried Employees
Retirement Savings Plan (the "Savings Plan") in the amount of $6,000 for Ms.
Duddy and Messrs. Zech, Ciancio and Kenney and $5,880 for Mr. Hasek, and
above-market interest amounts earned, but not currently payable, on
compensation previously deferred under the Company's 1984, 1985 and 1987
Executive Deferred Income Plans for Messrs. Zech and Ciancio of $25,046 and
$226, respectively.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
No options were granted to any of the named executive officers in 2003. The
table below sets forth certain information concerning the exercise of stock
options during 2003 by each of the named executive officers, the number of
unexercised options and the 2003 year-end value of such unexercised options
computed on the basis of the difference between the exercise price of the option
and the closing price of the Company's Common Stock at year-end ($27.98).
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options/SARs at Fiscal the-Money Options/SARs
Shares Year-End (#) at Fiscal Year-End ($)
Acquired on Value --------------------------- ---------------------------
Name Exercise Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------- ----------- ------------- ----------- -------------
Ronald H. Zech............. 0 0 718,177 25,000 880,670 0
Ronald J. Ciancio.......... 0 0 58,291 2,500 78,833 0
Brian A. Kenney............ 0 0 117,618 6,250 132,545 0
Gail L. Duddy.............. 3,000 6,469 74,339 2,500 98,640 0
William J. Hasek........... 0 0 32,968 1,500 34,365 0
---------------
(1) Amount represents the aggregate pre-tax dollar value realized upon the
exercise of stock options as measured by the difference between the market
value of the Company's Common Stock and the exercise price of the option on
the date of exercise.
EMPLOYEE RETIREMENT PLANS
The Company's Non-Contributory Pension Plan for Salaried Employees (the
"Pension Plan") covers salaried employees of the Company and its domestic
subsidiaries. Subject to certain limitations imposed by law, pensions are based
on years of service and average monthly compensation during: (i) the five
consecutive calendar years of highest compensation during the last 15 calendar
years preceding retirement or the date on which the employee terminates
employment or (ii) the 60 consecutive calendar months preceding retirement or
the date on which the employee terminates employment, whichever is greater.
Illustrated below are estimated annual benefits payable upon retirement to
salaried employees, including executive officers, assuming normal retirement at
age 65. Benefits shown below are calculated on a straight life annuity basis,
but the normal form of payment is a qualified joint and survivor pension.
Benefits under the Pension Plan are not subject to any deduction for Social
Security or other offset amounts.
Estimated Annual Pension Benefits
Average Annual ------------------------------------------------------------------------------------
Compensation for 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
Applicable Period ($) Service ($) Service ($) Service ($) Service ($) Service ($) Service ($)
--------------------- ----------- ----------- ----------- ----------- ----------- -----------
200,000 15,000 29,988 44,988 59,988 74,976 89,976
400,000 31,500 62,988 94,488 125,988 157,476 188,976
600,000 48,000 95,988 143,988 191,988 239,976 287,976
800,000 64,500 128,988 193,488 257,988 322,476 386,976
1,000,000 81,000 161,988 242,988 323,988 404,976 485,976
1,200,000 97,500 194,988 292,488 389,988 487,476 584,976
1,400,000 114,000 227,988 341,988 455,988 569,976 683,976
1,600,000 130,500 260,988 391,488 521,988 652,476 782,976
Compensation covered by the Pension Plan is salary and bonus paid under the
MIP as shown in the Summary Compensation Table. Annual benefits in excess of
certain limits imposed by the Employee Retirement Income Security Act of 1974 or
the Internal Revenue Code on payments from the Pension Plan will be paid by the
Company under its Excess Benefit Plan and Supplemental Retirement Plan and are
included in the above table.
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The executive officers named in the Summary Compensation Table have the
following number of years of credited service: Mr. Zech, 26 years; Mr. Ciancio,
23 years; Mr. Kenney, 8 years; Ms. Duddy, 11 years; Mr. Hasek, 18 years.
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into agreements with Messrs. Zech, Kenney, Ciancio
and Hasek and Ms. Duddy which provide for certain benefits upon termination of
employment following a "change of control" of the Company. Each agreement
provides that the Company shall continue the executive in its employ for a
period of three years following a change of control (the "Employment Period"),
and that during such period the executive's employment may be terminated only
for "cause." If, during his or her Employment Period, the executive's employment
is terminated by the Company other than for "cause," death or disability or by
the executive for "good reason," the executive will be entitled to receive in a
lump sum the aggregate of the following amounts: (i) the sum of (a) unpaid
salary through the date of termination, (b) the highest bonus earned by the
executive for the last two years prior to the date on which a change of control
occurs, prorated from the beginning of the fiscal year through the date of
termination, and (c) previously deferred compensation and vacation pay not
previously paid ("Accrued Obligations"); (ii) an amount equal to the product of
three times the executive's annual base salary and target bonus that would have
been payable under the MIP or any comparable plan which has a similar target
bonus for the year in which termination occurs, in lieu of any payments under
the Company's severance pay policies; (iii) the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined benefit
retirement plan and any excess or supplemental plan in which the executive
participates (together the "SERP") which the executive would have received if
his or her employment had continued for three years after the date of
termination assuming continuation of the same annual base salary plus a target
bonus for the most recent fiscal year, over (b) the actuarial equivalent of the
executive's actual benefit under the qualified retirement plan and SERP as of
the date of termination; and (iv) should the executive so elect, an amount equal
to the present value of his or her benefits under the SERP as of the termination
date. In addition, for a period of three years following the date of
termination, the executive will be entitled to: (i) continued participation in
and receipt of all benefits under welfare plans, practices, policies and
programs provided by the Company (including medical, prescription, dental,
disability, employee life, group life); (ii) outplacement services at a maximum
cost of 10% of annual base salary; and (iii) any other amounts or benefits for
or to which the executive is eligible or entitled under any other plan, program,
policy or practice of the company ("Other Benefits"). If the executive's
employment is terminated by reason of death or disability during the Employment
Period, the agreement shall terminate without further obligation to the
executive other than the payment of Accrued Obligations and Other Benefits.
Under the terms of Mr. Hasek's agreement, the number of years of employment
following a change in control, the multiple of his base salary and target bonus,
and the number of years for which he will be entitled to other specified
benefits is two. If any payment made under the agreements creates an obligation
to pay excise tax in accordance with Internal Revenue Code Section 4999, an
additional amount (the "Gross Up Amount") equal to the excise tax and any
related income taxes and other costs shall be paid to the executive. "Cause"
means a willful and continued failure of the executive to perform following
written demand for substantial performance or the willful engaging in illegal or
gross misconduct which is materially and demonstrably injurious to the Company.
"Change of control" means: (i) the acquisition by any individual, entity or
group ("Person") of 20% or more of either (a) the then outstanding shares of
Common Stock of the Company or (b) the combined voting power of the then
outstanding voting securities of the Company, with certain exceptions; (ii) a
change in the majority of the Board of Directors of the Company not recommended
for election by a majority of the incumbent directors; (iii) consummation of a
reorganization, merger, consolidation or sale of substantially all of the assets
of the Company ("Business Combination"), unless following such Business
Combination (a) shareholders holding more than 65% of the outstanding Common
Stock and combined voting
9
power of the voting securities prior to such Business Combination also own more
than 65% of the outstanding Common Stock and combined voting power of the voting
securities issued as a result thereof, (b) no Person owns 20% or more of the
then outstanding shares of Common Stock or combined voting power of the then
outstanding voting securities except to the extent such ownership existed prior
thereto, and (c) at least a majority of the members of the Board of Directors of
the entity resulting from the Business Combination were members of the Board of
Directors at the time the transaction was approved; (iv) approval by the
shareholders of a complete liquidation or dissolution of the Company; or (v)
consummation of a Business Combination involving a subsidiary of the Company
which was the primary employer of an executive immediately prior thereto, unless
immediately thereafter, the Company owns 50% or more such subsidiary. "Good
Reason" means: (i) the assignment of duties inconsistent with, or any action
which diminishes, the executive's position, authority, duties or
responsibilities; (ii) failure to compensate or requiring the executive to
relocate, in either case, as provided in the agreement; (iii) any unauthorized
termination of the agreement; or (iv) any failure to require a successor to the
Company to assume and perform the agreement. The amount that would be payable
under each of the foregoing agreements in the event of termination of employment
following a change of control (excluding the Gross-Up Amount, if any, payable
thereunder, which is not determinable at this time, and the present value of
benefits under the SERP as of the date of termination) on the date hereof, is as
follows: Mr. Zech ($6,208,303); Mr. Kenney ($2,255,906); Mr. Ciancio
($1,903,879); Ms. Duddy ($1,550,887); Mr. Hasek ($838,838).
Ms. Duddy and Messrs. Zech, Kenney, Ciancio and Hasek also participate in
the Company's 1995 Long Term Incentive Compensation Plan ("LTICP" or "1995
Plan") under which the Company's executive officers and certain key employees
may receive stock options, Stock Appreciation Rights ("SARs"), restricted stock
rights, restricted Common Stock, Performance Awards or Individual Performance
Units ("IPUs"). The LTICP provides that upon a "change of control" as described
above; (i) all outstanding stock options and SARs held by executive officers
become immediately exercisable; (ii) optionees will have the right for a period
of thirty days to have the Company purchase or to exercise for cash (a)
non-qualified stock options or any tandem SARs at a per share price (the
"Acceleration Price") equal to the excess over the option price of the highest
of (1) the highest reported price of the Company's Common Stock in the prior
sixty days, (2) the highest price included in any report on Schedule 13D paid
within the prior sixty days, (3) the highest tender offer price paid and (4) the
fixed formula per share price in any merger, consolidation or sale of all or
substantially all of the Company's assets, and (b) incentive stock options or
any tandem SARs at a per share price equal to the difference between the then
fair market value of the Common Stock and the option price, provided, however,
that during such thirty day period the Company may purchase any such incentive
stock option or SAR at the Acceleration Price; (iii) all restricted stock rights
which have been outstanding will be immediately exchanged for Common Stock and
all restricted Common Stock held by the Company for participants will be
distributed free of any further restrictions, together with all accumulated
interest, dividends and dividend equivalents, and all earned Performance Awards;
and (iv) all IPUs shall be immediately redeemed on the same basis as if the
performance goals had been achieved and, for purposes of calculating the
redemption value, the fair market value of the Company's Common Stock will be
equal to the average price of the Common Stock during the five business days
immediately preceding such event. In addition, agreements with participants
provide that upon the occurrence of a "change of control" restricted stock
rights on shares of phantom restricted Common Stock shall immediately be
exchanged for a number of shares of Common Stock equal to the number of
restricted stock rights on shares of phantom restricted stock so exchanged, and
all such shares of Common Stock and dividend equivalents shall then be
immediately distributed to participants free of all restrictions in exchange for
phantom stock rights or phantom restricted stock.
As of October 11, 2002, the Company entered into a three year Employment
Agreement with Mr. Zech. Under the terms of the agreement, he receives an annual
base salary of $775,000 (subject to review in accordance with the Company's
normal practices) and is eligible to participate
10
in bonus programs and benefit plans generally available to the senior management
of the Company, and he received a contract bonus. If Mr. Zech's employment with
the Company is terminated during the three year term, either by the Company for
Cause or by Mr. Zech without Good Reason (as those terms are defined in the
change of control agreement between the Company and Mr. Zech described above) or
without the approval of the Board, then he will forfeit payment of his non-
qualified pension benefits until the forfeited amount equals a prorated portion
of $500,000 based on the proportion of the three year term during which he
remained employed by the Company. If Mr. Zech's employment is terminated by the
Company other than for Cause or if he resigns for Good Reason, then, in addition
to any amount which he is entitled to receive pursuant to any plan, policy,
practice, contract or agreement of the Company, Mr. Zech shall be entitled to an
amount equal to twice his annual base salary and target bonus under the bonus
program in which he then participates plus a prorated bonus for the year in
which the termination occurs, less any amounts received as severance. Upon the
occurrence of a "change of control" (as defined in the change of control
agreement), Mr. Zech's Employment Agreement shall terminate and his benefits
shall be determined under the change of control agreement. Following the
termination of his employment, Mr. Zech may not compete in a business in which
the Company is engaged until the earlier of two years following the date of
termination, or April 11, 2006.
The Company adopted Executive Deferred Income Plans effective September 1,
1984 (the "1984 EDIP"), July 1, 1985 (the "1985 EDIP") and December 1, 1987 (the
"1987 EDIP") (collectively the "EDIPs") which permitted Mr. Zech and Mr. Ciancio
to defer receipt of up to 20% of their annual base salaries from compensation
earned during the year following the effective date of the EDIP pursuant to
participation agreements entered into between the Company and each participant.
The participation agreements were amended to provide for a determination by the
Compensation Committee, within ten days following a "change of control" as
described above, as to whether agreements will (a) continue to provide for the
payment of benefits thereunder in installments as described in the agreement or
(b) terminate and provide a single lump sum payment to participants.
Participants are no longer making deferrals for EDIPs.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICY AND OBJECTIVES
The Company's policy is to provide a competitive and balanced total
compensation program that is structured to attract, retain and motivate highly
qualified management personnel and to appropriately align management interests
with those of the Company's shareholders. This policy has been developed under
the supervision of the Compensation Committee of the Board of Directors which
periodically reviews the policy and oversees its implementation. The Committee
has retained a respected independent consultant to assist in this process.
The principal components of the total compensation program for executive
officers of the Company are base salary, annual incentive awards, and long-term
incentive awards. The Compensation Committee annually reviews and approves
executive salary levels and the design of the annual and long-term incentive
programs, and regularly evaluates the Company's total compensation program to
ensure that it adequately reflects the manner and level of compensation deemed
appropriate for the executive officers of the Company. In early 2002, the
Compensation Committee modified the compensation program applicable to executive
officers in view of the unprecedented challenges and uncertainty facing the
Company following the events of September 11. Total compensation opportunities
remained the same, but the relative weight placed on annual versus long-term
incentives and the form of the long-term incentive awards were modified to
reduce the level of risk in the pay package, retain key executives and ensure
continuity during a turbulent time. The changes made were temporary, and
reflected in a new program called the Executive Incentive Plan (the "EIP"),
which was effective for calendar years 2002 and 2003. The terms of the EIP and
its operation in 2003 are further explained in this report.
11
Competitive compensation levels are determined based on analyses of annual
and long-term compensation data reported in nationally recognized surveys of
companies of comparable size in a diversified group of industries. The companies
in the compensation surveys are hereinafter referred to as the "Comparative
Group." It is believed that the Comparative Group represents a valid cross-
section of executive talent for which the Company competes. Moreover, comparison
to companies that might be considered more direct competitors in the businesses
in which the Company and its subsidiaries engage is not feasible since most of
these companies are either privately-held or subsidiaries of larger
organizations, and therefore information on compensation levels is not publicly
available. The Compensation Committee believes that the Company's most direct
competitors for executive talent are not necessarily those companies that are
included in the S&P 500 Index or the MidCap 400 Index (as referred to in the
section entitled "Performance Graph"); thus, the Comparative Group may include
companies not included in those indices. The level of compensation on each
component of the compensation program described in the preceding paragraph is
targeted at the middle range of compensation paid by companies in the
Comparative Group. In any given year, the compensation level for any executive
officer of the Company may be more or less than the corresponding compensation
level paid by companies in the Comparative Group, based upon Company and
individual performance.
BASE SALARIES
The base salaries of the Company's executive officers are targeted at the
median base salary levels of executives of the Comparative Group, giving
consideration to the comparability of responsibilities and experience. Salaries
for executive officers of the Company and other senior level employees are
typically reviewed by the Compensation Committee every 18 months. In each case,
salary adjustments are based on an assessment of the individual performance and
contribution of each employee over the review period and an analysis of the
salary practices of the Comparative Group for positions of similar
responsibilities. No specific weights are assigned to these factors. The base
salary of each named executive officers did not change during 2003. The salaries
paid to Mr. Zech and to the named executive officers as a group in 2003 were
consistent with the median base salaries paid by companies in the Comparative
Group to executives with similar experience and responsibilities.
ANNUAL INCENTIVE COMPENSATION
During 2003, annual incentive awards for key managers and executive
officers of the Company were provided pursuant to the MIP or the EIP. The MIP
was designed to reinforce the Company's pay for performance policy by providing
annual cash payments to executives based upon the achievement of Company,
subsidiary and individual performance goals. Target net income objectives for
the Company and each of its subsidiaries, and a schedule specifying the
percentage of target incentive awards payable for actual performance, were
established by the Compensation Committee. The maximum incentive award was 200%
of the target incentive award (subject to the Chief Executive's discretionary
authority to increase or decrease any participant's award, other than his own,
by 25%).
The parameters and operation of the EIP were similar, but with a larger
portion of target awards based on the achievement of individual performance
objectives. The EIP was intended to temporarily rebalance the short and
long-term orientation of the compensation program given the immediate challenges
that existed after September 11, but to do so without increasing the overall
level of total compensation. Focus was shifted toward the short-term by
increasing target annual incentive awards. In all cases, increases in the size
of annual incentive awards were offset by corresponding decreases in the size of
long-term incentive awards. Additionally, because the high level of uncertainty
in the environment made establishing financial targets extremely difficult,
greater than normal emphasis was temporarily placed on individual performance
under the EIP. At the beginning of 2003, Messrs. Zech and Kenney voluntarily
decided to forego payment of any earned annual
12
incentive for 2003. Target awards for other named executive officers ranged from
45% to 65% of base salary and were based on various combinations of consolidated
or subsidiary net income and individual performance objectives.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation opportunities are provided under the LTICP
to attract and retain qualified executive personnel, encourage ownership of the
Company's stock by key executives, and promote a close identity of interests
between the Company's management and its shareholders. Long-term incentive
awards have generally been made in the form of stock option and IPU grants to
the Chief Executive Officer and selected members of senior management, and in
the form of stock option grants to other key managers. As part of the revised
program in effect for executive officers, long-term incentive compensation
opportunities consisted of: (1) a stock option award under the LTICP and (2) a
combination phantom restricted stock ("PRS") and cash award made pursuant to the
EIP and in lieu of IPUs. A single grant of options and combination PRS and cash,
contingent upon continuing employment, was made in 2002 to each participant in
the revised program. The PRS and cash award vested one-third on December 31,
2002 and two-thirds on December 31, 2003. The stock option award vested in full
on December 31, 2003. The value of the PRS portion of the award was based on the
average daily closing price of the Company's Common stock during the month in
which it vested, and included dividend equivalents. Because the awards made in
2002 were intended to be two-year grants, no other long-term incentive awards
were made to participants in the EIP, including Mr. Zech, during 2003.
For approximately 180 other key employees, long-term incentive awards were
granted in July 2003 in the form of stock options. Stock options are granted as
an incentive to encourage positive performance and to align the interest of the
Company's employees with its shareholders. Options are granted at a price equal
to the average of the high and low prices of the Company's Common Stock on the
NYSE on the date of grant, will have value only if the Company's stock price
increases, and vest 50% on the first, 25% on the second, and 25% on the third
anniversaries of the grant.
The size of long-term incentive awards is based on qualitative factors
considered appropriate by the Compensation Committee, including the scope of the
participant's responsibilities, the participant's performance, the size of
previous grants and competitive practices. For executive officers, the long-term
incentive award consisting of PRS, cash and stock options (annualized over 2002
and 2003) provided a total long-term compensation opportunity below the median
long-term incentive opportunity provided by the companies in the Comparative
Group. When combined with the increased annual bonus opportunity under the EIP
and with median salary levels, target total pay was on par with median total pay
in the Comparative Group. For key employees other than executive officers,
option grants were at or below median long-term incentive grants in the
Comparative Group.
As noted above, under the design of the EIP, Mr. Zech received no stock
options in 2003. In 2002, he received a PRS award of 26,000 shares and a cash
award equal to the fair market value of the PRS on the grant date. Two-thirds of
the combined PRS and cash award vested on December 31, 2003. The PRS portion of
the award was reported in the Summary Compensation Table in full last year. The
cash portion of the award that vested on December 31, 2003, valued at $550,064
is reported in the bonus column of the Summary Compensation Table this year.
In prior years, certain executive officers were granted IPUs. IPUs are
subject to redemption in cash, Common Stock or both at the discretion of the
Compensation Committee if the Company's performance over a three-year period
(the "Performance Period") reaches target levels established by the Compensation
Committee. No IPU awards were made in 2003. Performance for the 2001-2003 IPU
Plan was measured in terms of the Company's total shareholder return (TSR)
relative to the TSR of companies in the MidCap 400 and on a combination of
economic earnings and capital employed growth. No payments were earned under the
2001-2003 IPU Plan.
13
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility by the
Company of compensation in excess of one million dollars paid to the CEO or any
of the named executive officers during any taxable year. Compensation that meets
the requirements of performance-based compensation is excluded from this
limitation. Appropriate steps have been taken to qualify certain awards made
under the Company's LTICP as performance-based. In addition, if it is determined
that any compensation payable in excess of one million dollars is not
performance-based, the Compensation Committee may require, as it has in the
past, that such excess be deferred until it becomes deductible. Further, the
proposals submitted elsewhere in this proxy statement are intended to qualify
awards made under the Company's annual incentive plans as performance-based.
While the tax impact of compensation arrangements is an important factor to be
considered, such impact will be evaluated in light of the Company's overall
compensation philosophy and objectives. The Compensation Committee believes
there may be circumstances in which its ability to exercise discretion outweighs
the advantages of qualifying compensation under Section 162(m), and may, from
time to time, provide compensation that is not fully deductible if it determines
that doing so is in the best interests of the Company.
This report is submitted by the Compensation Committee of the Board of
Directors of GATX Corporation.
James M. Denny (Chairman)
Rod F. Dammeyer
Miles L. Marsh
Michael E. Murphy
14
PERFORMANCE GRAPH
The following performance graph sets forth a comparison of the yearly
percentage change in the cumulative total shareholder return on the Company's
Common Stock (on a dividend reinvested basis utilizing the closing price on
December 31, 1998 as the base) with the cumulative total shareholder return of
the companies within the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"), the Standard & Poor's MidCap 400 Index ("MidCap 400") and the Russell
1000 Financial Services Index ("Russell 1000"). The performance graph assumes
$100.00 was invested in GATX Common Stock and each of the indices on December
31, 1998, and that all dividends were reinvested.
[PERFORMANCE GRAPH]
GATX S&P 500 MIDCAP 400 RUSSELL 1000
---- ------- ---------- ------------
1998 100.00 100.00 100.00 100.00
1999 92.01 120.89 114.54 103.28
2000 139.25 109.97 134.51 130.00
2001 94.25 96.94 133.66 111.81
2002 69.85 75.64 114.37 94.89
2003 89.56 97.09 154.80 123.36
APPROVAL OF APPOINTMENT OF AUDITORS
The Audit Committee has appointed the firm of Ernst & Young LLP ("Ernst &
Young") to audit the Company's 2004 financial statements. Ernst & Young also
served in this capacity in 2003. The Board recommends to shareholders that they
approve such appointment. If the shareholders do not approve the appointment,
the Audit Committee will take this into account in making future appointments.
The Board of Directors recommends a vote for this proposal.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting. They will have the opportunity to make a statement if they so desire,
and will be available to respond to appropriate questions by shareholders.
AUDIT FEES
The aggregate fees for professional services rendered by Ernst & Young in
connection with (i) the audit of the annual financial statements set forth in
the Company's (and a subsidiary's) Annual Reports on Form 10-K and (ii) the
review of the interim financial statements in the Company's (and a subsidiary's)
Quarterly Reports on Form 10-Q, and related audit services provided to other
subsidiaries of the Company were approximately $2,025,133 for 2002 and
$2,040,075 for 2003.
15
AUDIT RELATED FEES
The aggregate fees for assurance and related services that were related to
the performance of the audit or review of the Company's financial statements
were $85,300 for 2002 and $93,575 for 2003. The nature of the services performed
for these fees included, among other things, employee benefit plan audits, due
diligence related to an acquisition, support in the preparation of SEC
registration statements, comfort letters and consents and consultations
concerning financial accounting and reporting matters not classified as part of
the audit.
TAX FEES
The aggregate fees billed for professional services rendered for federal
state and international tax compliance, advice, and planning and expatriate tax
services were $344,438 for 2002 and $191,500 for 2003.
ALL OTHER FEES
There were no other professional services rendered by Ernst & Young in 2002
or 2003.
PRE-APPROVAL POLICY
It is the policy of the Audit Committee to pre-approve all audit and
non-audit services provided to the Company by the independent auditor prior to
the engagement of the auditor. The Audit Committee reviews the annual audit plan
submitted by the independent auditor and considers for pre-approval annually all
audit services. Each quarter, the Company and the independent auditor jointly
provide the Audit Committee a description of the audit-related, tax and other
non-audit services which have been provided in the then current fiscal quarter
pursuant to the authority previously granted, and an estimate of such services
expected to be provided in the immediately following quarter for pre-approval,
together with a joint statement as to whether, in their view, the request is
consistent with the SEC's rules on auditor independence. Any proposed changes to
the estimate of services reviewed as part of the annual audit plan is discussed
with the Audit Committee at that time. The Audit Committee may delegate
pre-approval authority to one or more of its members. The member or members to
whom such authority is delegated must report any pre-approval decisions to the
Audit Committee at its next scheduled meeting.
AUDIT COMMITTEE REPORT
The responsibilities of the GATX Corporation Audit Committee are set forth
in its amended and restated Charter, as approved by the Board of Directors on
October 2, 2003 (the "Audit Committee Charter"). Such responsibilities include
providing oversight of the Company's financial accounting and reporting process
through periodic meetings with the Company's management, independent auditors
and internal auditors to review accounting, auditing, internal controls and
financial reporting matters as set forth in the Audit Committee Charter. A
current copy of the Audit Committee Charter is available under Corporate
Governance in the Investor Relations section on the Company's website at
www.gatx.com. and is also attached hereto as Exhibit B.
The Audit Committee has the ultimate authority to select the Company's
independent auditors, evaluate their performance, approve all audit and
non-audit work and approve all fees associated therewith. The management of the
Company is responsible for the preparation and integrity of the financial
reporting information and related systems of internal control. In the discharge
of its functions, the Audit Committee relies on the Company's management,
including senior financial management, the Company's internal audit staff and
the Company's independent auditors.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
prepared in accordance with generally accepted accounting principles; that is
the responsibility of the Company's management
16
and its independent auditors. In making its recommendation to the Board of
Directors, the Audit Committee has relied on management to prepare the financial
statements with integrity and objectivity and in conformance with generally
accepted accounting principles and the report of the Company's independent
auditors with respect to such financial statements.
The Audit Committee consists of the following members of the Company's
Board of Directors: Deborah M. Fretz (Chair), Rod F. Dammeyer, Michael E. Murphy
and John W. Rogers Jr., each of whom is an "independent director" under the NYSE
Listing Standards applicable to Audit Committee members. The Board of Directors
of the Company has determined that each member of the Audit Committee is
financially literate, and meets the Securities and Exchange Commission's
criteria of an audit committee financial expert.
The Audit Committee has reviewed and discussed with management the
Company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
The Audit Committee has discussed with Ernst & Young, the Company's
independent auditors, the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU sec. 380), as modified or
supplemented.
The Audit Committee has received the written disclosures and letter from
its independent accountants required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as modified or
supplemented, and has discussed with Ernst & Young its independence.
Based on the review and discussions noted above, the Audit Committee has
recommended to the Board of Directors of the Company that the audited financial
statements be included in GATX's Annual Report on Form 10-K for the year ended
December 31, 2003 for filing with the Securities and Exchange Commission.
Deborah M. Fretz (Chair)
Rod F. Dammeyer
Michael E. Murphy
John W. Rogers, Jr.
17
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the security
ownership of each class of equity securities of the Company owned by each of the
directors and named executive officers and by directors and executive officers
as a group as of March 5, 2004:
Shares of Common Stock
Beneficially Owned
Name of Beneficial Owner as of March 5, 2004 (1)(2)
------------------------ --------------------------
Ronald J. Ciancio........................................... 66,425
Rod F. Dammeyer............................................. 10,178
James M. Denny.............................................. 20,170
Gail L. Duddy............................................... 90,752
Richard Fairbanks........................................... 36,870
Deborah M. Fretz............................................ 15,834
William J. Hasek............................................ 35,191
Brian A. Kenney............................................. 137,214
Miles L. Marsh.............................................. 17,361
Michael E. Murphy........................................... 21,935
John W. Rogers, Jr.......................................... 17,831
Ronald H. Zech.............................................. 786,080
Directors and Executive Officers as a group................. 1,708,441
---------------
(1) Includes units of phantom Common Stock credited to the accounts of
individuals and payable in shares of Common Stock following retirement from
the Board as follows: Mr. Dammeyer (6,178); Mr. Denny (12,536); Mr.
Fairbanks (14,870); Ms. Fretz (10,131); Mr. Marsh (10,131); Mr. Murphy
(12,935); Mr. Rogers (10,331) and directors as a group (77,112); and shares
which may be obtained by exercise of previously granted options within 60
days of March 5, 2004 by Mr. Ciancio (58,291); Mr. Dammeyer (4,000); Mr.
Denny (5,000); Ms. Duddy (74,339); Mr. Fairbanks (5,000); Ms. Fretz (5,000);
Mr. Kenney (117,618); Mr. Marsh (5,000); Mr. Murphy (5,000); Mr. Hasek
(32,968); Mr. Rogers (5,000); Mr. Zech (718,177) and directors and executive
officers as a group (1,429,750).
(2) Each person has sole investment and voting power (or shares such powers with
his or her spouse), except with respect to units of phantom Common Stock,
phantom restricted stock and option grants. With the exception of Mr. Zech,
who beneficially owned approximately 1.58% of the Company's outstanding
shares of Common Stock, none of the directors and executive officers owned
1% of the Company's outstanding shares of Common Stock. Directors and
executive officers as a group beneficially owned approximately 3.47% of the
Company's outstanding shares of Common Stock. No director or executive
officer owns any Preferred Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the SEC and
the NYSE reports of ownership and changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms filed. Based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, the Company believes that, during the 2003 fiscal year,
with the exception of Mr. Warren E. Buffett who, as a beneficial owner of more
than 10% of the Company's stock, filed a late report for eleven transactions,
all filing requirements applicable to its officers, directors and greater than
10% beneficial owners were satisfied.
18
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following are the only persons known to the Company to beneficially own
more than 5% of the Company's Common Stock:
Percent of
Shares Common
Name and Address of Beneficial Owner Beneficially Owned Stock
------------------------------------ ------------------ ----------
Capital Research & Management Company(1).................... 6,146,500 12.48
Capital Income Builder, Inc.
333 South Hope Street
Los Angeles, CA 90071
State Farm Mutual Automobile Insurance Company(2)........... 5,900,170 11.98
One State Farm Plaza
Bloomington, IL 61710
---------------
(1) According to a Schedule 13G dated February 10, 2004, jointly filed by
Capital Research & Management Company ("CRMC"), a registered investment
advisor, and Capital Income Builder, Inc. ("CIB"), a registered investment
company advised by CRMC, CRMC has sole dispositive power as to these shares
of Common Stock owned by accounts under its discretionary investment
management and CIB has sole voting power as to 3,050,000 of these shares
(6.19% of the outstanding Common Stock).
(2) According to a Schedule 13G dated January 21, 2004, State Farm Mutual
Automobile Insurance Company ("State Farm") and certain of its affiliated
entities, each of which owned shares of Common Stock with sole voting and
dispositive power, may be deemed to constitute a "group" under the
regulations of the SEC with regard to the beneficial ownership of these
shares of Common Stock. State Farm and each of the entities disclaim that
they are part of a group.
APPROVAL OF GATX CORPORATION
2004 EQUITY INCENTIVE COMPENSATION PLAN
There will be presented to the shareholders a proposal to approve a new
incentive plan entitled the GATX Corporation 2004 Equity Incentive Compensation
Plan (the "Equity Plan") for non-employee directors, officers and key employees
of the Company and its subsidiaries. On March 3, 2004, the Board of Directors
adopted the Equity Plan subject to shareholder approval. The Equity Plan will
succeed the 1995 Long Term Incentive Compensation Plan (the "1995 Plan") and
will not be put into effect unless approved by the affirmative vote of the
holders of a majority of votes cast on the proposal at the Annual Meeting,
provided that the total votes cast represent over 50 percent of all votes
entitled to be cast on the proposal.
The Board of Directors recommends a vote for this proposal.
DESCRIPTION OF THE PLAN
The following summary of the material terms of the Equity Plan is qualified
in its entirety by reference to the full text of the Equity Plan which is
attached as Exhibit C.
The Equity Plan will provide for awards ("Awards") of Non-Qualified Stock
Options ("Options"), Stock Appreciation Rights ("SARs"), and Full Value Awards.
If the Equity Plan is approved, grants and awards will no longer be made under
the 1995 Plan.
The aggregate number of shares of Common Stock that may be issued pursuant
to all Awards under the Equity Plan may not exceed 3,000,000 shares together
with any shares of Common Stock that are available under the 1995 Plan or the
1985 Long Term Incentive Compensation Plan (the "1985 Plan") (collectively the
"Prior Plans"), and shares covered by awards outstanding under the
19
Prior Plans on the date the Equity Plan is adopted but which are not
subsequently issued or are forfeited pursuant to those awards. No shares remain
available for grant under the 1985 Plan, which was terminated upon the approval
of the 1995 Plan except as to prior awards remaining outstanding thereunder. As
of March 5, 2004, 507,155 shares were available for grant under the 1995 Plan,
and an additional 3,791,756 shares were reserved for issuance pursuant to awards
outstanding under the Prior Plans and would become available for issuance under
the Equity Plan if those awards lapse. The Common Stock delivered under the
Equity Plan may be authorized and unissued stock or treasury shares or, at the
discretion of the Compensation Committee, may be purchased on the open market or
in private transactions. Any shares subject to a grant or award which terminates
by expiration, cancellation or otherwise without delivery of such shares or
which result in the forfeiture of the shares shall again be available for future
grants under the Equity Plan. Appropriate adjustment shall be made with respect
to the number and kind of shares awarded or subject to being awarded and to the
terms of any outstanding award in the event of a merger, consolidation,
reorganization, recapitalization, stock split, stock dividend, spin-off or other
change in the corporate structure or capitalization affecting the Common Stock.
The Closing price of the Company's Common Stock as reported for NYSE composite
transactions on March 5, 2004 was $23.69.
Subject to the approval of shareholders, the Equity Plan will be effective
as of January 1, 2004. The Board of Directors may terminate and amend the Equity
Plan except that (i) no amendment or termination may adversely affect the rights
of any beneficiary or participant without their consent and (ii) the number of
shares available for issuance under the Equity Plan may not increase nor may
options be repriced without shareholder approval.
AWARDS
Non-Qualified Stock Options and Stock Appreciation Rights. The grant of an
Option entitles the Participant to purchase shares of the Company's Common Stock
at an Exercise Price established by the Committee. Any Option granted shall be a
non-qualified option that is not intended to be an "incentive stock option" as
that term is described in section 422(b) of the Internal Revenue Code. A SAR
entitles the Participant to receive, in cash or Common Stock, value equal to (or
otherwise based on) the excess of: (a) the Fair Market Value of a specified
number of shares of Common Stock at the time of exercise; over (b) an Exercise
Price established by the Committee. The "Exercise Price" of each Option and SAR
shall be established by the Compensation Committee or shall be determined by a
method established by the Compensation Committee at the time the Option or SAR
is granted. The Exercise Price shall not be less than 100% of the fair market
value of a share of Stock on the date of grant, although the Compensation
Committee, in its discretion, may establish an Exercise Price of an Option or
SAR that varies based on the stock price of a comparator group of companies or
such other index as is selected by the Compensation Committee (resulting in an
Exercise Price that may at times be less than the fair market value of a share
of Stock on the date of grant), but a variable price shall not be used if the
Compensation Committee intends that the Options or SARs be Performance-Based
Compensation, and the use of such variable pricing would preclude such
treatment.
Except as described below, the full Exercise Price for shares of Stock
purchased upon the exercise of any Option shall be paid at the time of such
exercise in cash, by promissory note, or by tendering, by either actual delivery
of shares or by attestation, shares of Stock acceptable to the Compensation
Committee, and valued at fair market value as of the day of exercise, or in any
combination thereof, as determined by the Compensation Committee. The
Compensation Committee may permit a participant to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from
such exercise.
Except as otherwise provided by the Compensation Committee, if an Option is
in tandem with an SAR, the exercise price of both the Option and SAR shall be
the same, and the exercise of the
20
Option or SAR with respect to a share of Stock shall cancel the corresponding
tandem SAR or Option right with respect to such share. If an SAR is in tandem
with an Option but is granted after the grant of the Option, or if an Option is
in tandem with an SAR but is granted after the grant of the SAR, the later
granted tandem Award shall have the same exercise price as the earlier granted
Award, and the exercise price for the later granted Award may be less than the
fair market value of the shares at the time of such grant.
Full Value Awards. A Full Value Award is a grant of one or more shares of
Common Stock or a right to receive one or more shares of Common Stock in the
future. The grant of Full Value Awards may also be subject to such other
conditions, restrictions and contingencies, as determined by the Compensation
Committee. Awards may be denominated in Common Stock, but could be settled in
shares of Common Stock, cash, or a combination, as determined by the
Compensation Committee. The Compensation Committee may designate a Full Value
Award granted to a participant as "performance-based compensation" as that term
is used in section 162(m) of the Internal Revenue Code. Any such Award so
designated shall be conditioned on the achievement of a level of the Company's
Total Gross Income Less Total Ownership Costs (as defined in the Equity Plan)
established by the Compensation Committee in accordance with the requirements of
section 162(m) of the Internal Revenue Code.
ADMINISTRATION
The Equity Plan will be administered by the Compensation Committee of the
Board of Directors. The Compensation Committee will select from time to time key
employees of the Company and its subsidiaries and non-employee directors of the
Board to receive awards (which could include the executive officers named and
included in the Summary Compensation Table) and the amounts, type and terms of
such awards, and is authorized to interpret the Equity Plan, to establish rules
and regulations thereunder, and to make all other determination necessary or
advisable for administration of the Equity Plan. The Compensation Committee may
allocate all or any portion of its responsibilities or powers to any one or more
of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it.
Approximately 225 current employees have received awards under the 1995
Plan. Estimates of benefits which would have been paid under the Equity Plan in
the past or will be payable in the future if the Equity Plan is approved cannot
be made since such benefits will depend upon, among other things, future
implementation of the Equity Plan, performance achieved against goals to be
established and the future market value of the Company's Common Stock, except as
disclosed in the section entitled "New Plan Benefits -- Equity Plan."
LIMITS ON AWARDS
No more than 500,000 shares may be covered by Options and SARs granted to
any single participant in any calendar year, and no more than 300,000 shares may
be covered by Full Value Awards that are intended to be performance-based
compensation granted to any participant in any calendar year. An Award may
provide the participant with the right to receive dividend or dividend
equivalent payments with respect to the Stock which is the subject of the Award,
subject to such conditions or restrictions as the Compensation Committee may
determine.
VESTING AND EXERCISE PERIOD
An Award may be exercisable in accord with such terms and conditions as may
be established by the Compensation Committee. In no event, however, shall an
Option or SAR expire later than ten years after the date of its grant.
21
CHANGE IN CONTROL
The effect of the occurrence of a Change in Control on an Award shall be
determined by the Compensation Committee, in its discretion, except as otherwise
provided in the Equity Plan or the Award Agreement reflecting the applicable
Award. The term "Change in Control" has the same meaning as under the agreements
described in the section entitled "Employment and Change of Control Agreements."
The Board of Directors does not consider the change of control provisions
of the Equity Plan to have any significant deterrent effect on a potential
change in control of the Company; however, if a change in control occurs, such
provisions may result in an acceleration of the dates on which the Company will
incur certain costs and participants will receive certain benefits under the
Equity Plan and in this respect may be considered to have an anti-takeover
effect.
FEDERAL INCOME TAX EFFECTS
Under present Federal income tax laws, awards granted under the Plan will
have the following tax consequences:
Non-Qualified Stock Options. The grant of an Option will not result in
taxable income to the participant. Except as described below, the participant
will realize ordinary income at the time of exercise in an amount equal to the
excess of the fair market value of the shares acquired over the exercise price
for those shares, and the Company will be entitled to a corresponding deduction.
Gains or losses realized by the participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of exercise.
The exercise of an Option through the delivery of previously acquired stock
will generally be treated as a non-taxable, like-kind exchange as to the number
of shares surrendered and the identical number of shares received under the
option. That number of shares will take the same basis and, for capital gains
purposes, the same holding period as the shares that are given up. The value of
the shares received upon such an exchange that are in excess of the number given
up will be includible as ordinary income to the participant at the time of the
exercise. The excess shares will have a new holding period for capital gain
purposes and a basis equal to the value of such shares determined at the time of
exercise.
Stock Appreciation Rights. The grant of an SAR will not result in taxable
income to the participant. Upon exercise of an SAR, the amount of cash or the
fair market value of shares received will be taxable to the participant as
ordinary income, and a corresponding deduction will be allowed to the Company.
Gains or losses realized by the participant upon disposition of such shares will
be treated as capital gains and losses, with the basis in such shares equal to
the fair market value of the shares at the time of exercise.
Full Value Awards. A participant who has been granted a full value award
will not realize taxable income at the time of grant, and the Company will not
be entitled to a deduction at that time, if the grant is subject to a risk of
forfeiture or other restrictions that will lapse upon the achievement of one or
more goals relating to completion of service by the participant, or achievement
of other objectives, assuming that the restrictions constitute a "substantial
risk of forfeiture" for Federal income tax purposes. Upon the vesting of shares
subject to an award, the holder will realize ordinary income in an amount equal
to the then fair market value of those shares, and the Company will be entitled
to a corresponding deduction. Gains or losses realized by the participant upon
disposition of such shares will be treated as capital gains and losses, with the
basis in such shares equal to the fair market value of the shares at the time of
vesting. Dividends paid to the holder during the restriction period will also be
compensation income to the participant and deductible as such by the Company.
22
Change of Control. Any acceleration of the vesting or payment of awards
under the Plan in the event of a change of control in the Company may cause part
or all of the consideration involved to be treated as an "excess parachute
payment" under the Internal Revenue Code, which may subject the participant to a
20% excise tax and which may not be deductible by the Company.
Tax Advice. The preceding discussion is based on Federal tax laws and
regulations presently in effect, which are subject to change, and the discussion
does not purport to be a complete description of the Federal income tax aspects
of the Plan. A participant may also be subject to state and local taxes in
connection with the grant of awards under the Plan. The Company suggests that
participants consult with their individual tax advisors to determine the
applicability of the tax rules to the awards granted to them in their personal
circumstances.
NEW PLAN BENEFITS -- EQUITY PLAN
The Compensation Committee has awarded performance-based restricted stock
units under the Equity Plan, contingent upon the achievement of 2004 performance
goals and subject to shareholder approval of the Equity Plan. The maximum number
of units that may be earned by a participant if each performance goal is
exceeded by 150% is as follows:
Maximum Dollar Maximum
Name and Principal Position Value ($) Number of Units
--------------------------- -------------- ---------------
Ronald H. Zech.............................................. $1,350,000 57,990
Chairman, President & Chief Executive Officer
Ronald J. Ciancio........................................... $ 187,500 8,055
Vice President, General Counsel & Secretary
Brian A. Kenney............................................. $ 300,000 12,885
Senior Vice President & Chief Financial Officer
Gail L. Duddy............................................... $ 187,500 8,055
Vice President Human Resources
William J. Hasek............................................ $ 90,000 3,870
Vice President Treasurer
Executive Group............................................. $3,007,500 129,210
Non-Executive Director Group................................ $ 0 0
Non-Executive Officer Employee Group........................ $1,132,500 48,630
The maximum dollar value shown for these units is based on the average
closing price of GATX Common Stock on the four Fridays prior to the March 2004
Compensation Committee Meeting. The actual number of which earned, if any, will
be determined based on the achievement of performance goals for 2004 and will be
paid in the form of restricted stock which will vest on December 31, 2006.
EQUITY COMPENSATION PLAN INFORMATION
This table provides information regarding the equity securities authorized
for issuance under our equity compensation plans as of December 31, 2003.
23
Number of securities
Number of remaining available
securities to be Weighted- for future issuance
issued upon average under equity
exercise of exercise price of compensation plans
outstanding outstanding (excluding
options, warrants options, warrants securities reflected
and rights and rights in column (a))
Plan Category (a) (b) (c)
------------- ----------------- ----------------- --------------------
Equity compensation plans approved by
shareholders.................................. 3,853,154(1) $30.18 2,965,019(2)
Equity compensation plans not approved by
shareholders (3).............................. 102,423 0.00 0
---------------
(1) This number includes stock options granted under plans as follows: the 1995
Plan (3,710,862); the 1985 Plan (94,700); the Employee Stock Purchase Plan
("ESPP") (47,592). Stock options awarded to employees for the purchase of
shares of Common Stock were granted at the fair market value of the shares
on the date of grant, generally have a 10 year exercise period and become
exercisable one-half on the anniversary of grant, one quarter on the second
anniversary and one quarter on the third anniversary. Awards of restricted
stock granted under the 1995 Plan were established by the Compensation
Committee at the time of issuance. This number includes units of phantom
stock which are not included in the weighted average price calculation in
column (b).
(2) There were 493,349 shares available for grant under the 1995 Plan and
2,471,670 shares available under the ESPP. At the time the ESPP was
approved, it provided that the plan would provide for awards for 247,167
shares per year. There were 10 years remaining in the plan.
(3) The following plans were not approved by the shareholders of the Company:
the Deferred Compensation Plan, the Directors' Deferred Stock Plan and the
Directors' Deferred Fee Plan. A brief description of the material features
of each plan is set forth below. In addition, the Compensation Committee
approved a single grant of 5,658 restricted shares to an individual in
January 2001 outside of the 1995 Plan. The terms of this grant conform to
the terms of restricted stock grants under the 1995 Plan except that the
restrictions lapse in equal installments over a three year period commencing
one year following the grant rather than at the end of the third year. When
restrictions lapse, shares are issued from treasury shares.
The Deferred Compensation Plan. The Compensation Committee of the Board of
Directors approved the Deferred Compensation Plan on January 28, 1999. This plan
permitted one executive of a subsidiary of the Company to elect to defer payment
of an incentive bonus award for up to 7 years following the year the incentive
was earned. Deferred amounts were credited to an account in units of phantom
Common Stock with a value equal to the average of the daily high and low closing
prices on the NYSE of GATX Common Sock in the January following the end of the
performance period. No additional deferrals will be made under this plan.
Additional shares in the form of dividend equivalents paid on Common Stock are
credited to the account during the deferral period. As of December 31, 2003,
11,219 units of phantom Common Stock were held in the account. Deferred amounts
will be paid at the end of the deferral period in shares of GATX Common Stock
from treasury shares.
The Directors' Deferred Stock Plan. The Board of Directors approved the
Directors' Deferred Stock Plan on July 26, 1996. The plan requires that 50% of
the annual retainer of non-employee directors be deferred into shares of phantom
Common Stock quarterly. The plan also includes units credited to replace the
Directors' Retirement Plan which was eliminated at the time the Deferred Stock
Plan was adopted. As of December 31, 2003, there were 59,152 deferred phantom
shares in the plan. There is no definitive number of shares reserved for
issuance under the plan. Deferred share payments will be made from the Equity
Plan if that plan is approved by shareholders.
24
The Directors' Deferred Fee Plan. The Board of Directors approved the
Directors' Deferred Fee Plan effective as of July 1, 1998. The plan allows a
director to elect to defer all or any part of the cash portion of his or her
annual retainer and meeting fees into a phantom stock account. The number of
units credited to a participating director's phantom stock account is equal to
the deferred amount divided by the average high and low price for the Company's
shares on the NYSE on the last trading days of July, October, January and April.
Each participant's account is credited with additional units of phantom Common
Stock representing dividends declared on the Company's Common Stock based on the
price of the Common Stock at the date such dividend is paid. A participant can
elect to receive payment in shares of Common Stock equal to the number of units
of phantom Common Stock credited to the account in a lump sum or annual
installments following termination of service on the Board or the participant's
71(st) birthday. As of December 31, 2003, 30,166 shares of phantom Common Stock
had been credited to participant's accounts under the plan.
APPROVAL OF THE GATX CORPORATION CASH INCENTIVE PLAN
On March 3, 2004, the Company's Board of Directors adopted the GATX
Corporation Cash Incentive Plan (the "Cash Plan") subject to shareholder
approval at the 2004 Annual Meeting of Shareholders. Subject to such approval,
the Cash Plan will be effective as of January 1, 2004; provided, however, that
to the extent that Cash Incentive Awards are granted prior to approval by
shareholders, the Cash Incentive Awards shall be contingent on shareholder
approval.
DESCRIPTION OF THE CASH PLAN
The following summary of the material terms of the Cash Plan is qualified
in its entirety by reference to the full text of the Cash Plan, a copy of which
is attached as an Exhibit D.
AWARDS
Cash Incentive Awards may be granted under the Cash Plan to any key
employee of the Company or a subsidiary selected by the Compensation Committee.
Each Cash Incentive Award that is intended to be performance-based compensation
(as defined in Section 162(m) of the Internal Revenue Code) shall be determined
in accordance with the following: (i) the award for any performance period shall
equal three quarters of one percent of the Company's Total Gross Income Less
Total Ownership Costs as reported in the Company's consolidated statement of
income (or if such amounts are not reported in the Company statement of income,
the line items in the Company's state of income determined by the Compensation
Committee to correspond thereto) for the performance period; (ii) prior to
payment the Compensation Committee may reduce the amount of any award in its
discretion; and (iii) no payment for any award that is intended to be
performance-based compensation shall be made until identified performance
objectives have been achieved. For 2003, three quarters of one percent of the
Company's Total Gross Income Less Total Ownership Costs was $4,693,000. Cash
Incentive Awards that are not intended to be performance-based compensation may
be made in any amount and conditioned on any criteria the Compensation Committee
determines. All awards made under the Cash Plan are discretionary. Distribution
of a Cash Incentive Award shall be made at such time as determined by the
Compensation Committee. Cash Incentive Awards may be subject to such terms and
conditions, not inconsistent with the Cash Plan, as the Compensation Committee,
in its sole discretion, prescribes. All distributions are subject to withholding
of applicable taxes. The Board may, at any time, amend or terminate the Cash
Plan, except that no such termination may, without consent of the affected
participant, adversely affect the rights of such participant.
25
CASH PLAN AWARDS
The Compensation Committee has selected Messrs. Zech, Ciancio, Kenney and
Hasek and Ms. Duddy and six other executive officers for Cash Incentive Awards
under the Cash Plan for 2004. All Cash Incentive Awards are intended to qualify
as performance-based compensation under Section 162(m) of the Internal Revenue
Code, are contingent on achievement of identified performance objectives and are
subject to shareholder approval of the Cash Plan. The maximum Cash Incentive
Award granted to any plan participant may be calculated as set forth in the
prior paragraph, subject to reduction at the discretion of the Compensation
Committee based on such factors as the committee deems appropriate. The actual
amount payable to each of the foregoing is currently not determinable, as it
will depend upon performance relative to the performance criteria and any change
in base salary during the performance period. The Compensation Committee is
expected to limit the size of Cash Incentive Awards to amounts generally
comparable to those that would have been earned under the MIP.
ADMINISTRATION
The Cash Plan will be administered by the Compensation Committee. Except as
specifically provided by law to the contrary, the Compensation Committee may
delegate any of its responsibilities as it may determine. Subject to the terms
of the Cash Plan, the Compensation Committee shall designate from among the
employees of the Company and its subsidiaries those persons who will be granted
Cash Incentive Awards.
FEDERAL INCOME TAX EFFECTS
A participant will realize taxable income at the time the Cash Incentive
Award is distributed, and the Company will be entitled to a corresponding
deduction.
SHAREHOLDER PROPOSALS OR NOMINATIONS FOR 2005 ANNUAL MEETING
Any shareholder proposal intended for inclusion in the Company's proxy
material in connection with the Company's 2005 Annual Meeting must be received
by the Company no later than November 22, 2004, and otherwise comply with the
requirements of the SEC. Any shareholder who intends to nominate any person for
election as a director or present a proposal at the Company's 2005 Annual
Meeting without inclusion in the Company's proxy material must send to the
Company a notice of such nomination or proposal so that it is received no
earlier than October 23, 2004 and no later than November 22, 2004, and must
otherwise comply with the requirements of the Company's bylaws.
26
OTHER INFORMATION
On August 14, 2003, the Company purchased liability policies that provide
protection for the Company's directors and officers for those instances in which
they may not be indemnified by the Company. The policies will also provide
reimbursement to the Company for any indemnification payments made by the
Company on behalf of its directors and/or officers. These policies replace three
policies that expired on August 14, 2003. Premiums were paid to five insurers to
provide the coverage as follows: Ace Bermuda Insurance Ltd. ($360,500); Ace
American Insurance Company ($185,400); National Union Fire Insurance Company of
PA ($412,000); Federal Insurance Company ($500,000); Zurich American Insurance
Company ($329,000).
The Board of Directors does not know of any matters to be presented at the
meeting other than those mentioned above. If any other matters do come before
the meeting, the holders of the proxy will exercise their discretion in voting
thereon.
By order of the Board of Directors
Ronald J. Ciancio
Secretary
27
EXHIBIT A
GATX CORPORATION
DIRECTOR INDEPENDENCE STANDARD
To be considered "independent", a director of the Company must meet the
following categorical standards:
- A director, who is an employee of the Company, or whose immediate family
member is an executive officer of the Company, will not be considered
independent until three years after such employment relationship has
terminated.
- A director who receives, or whose immediate family member receives, more
than $100,000 per year in direct compensation, other than director and
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent on continued
service), will not be considered independent until three years after the
end of the last fiscal year in which he or she received more than
$100,000 in such compensation.
- A director who is affiliated with or employed by, or whose immediate
family member is affiliated with or employed in a professional capacity
by, a present or former internal or external auditor of the Company will
not be considered independent until three years after the end of the
affiliation, employment or auditing relationship.
- A director who is employed, or whose immediate family member is employed,
as an executive officer of another company where any of the Company's
present executives serve on that company's compensation committee (or the
equivalent) will not be considered independent until three years after
the end of such service or the employment relationship.
- A director who is an executive officer or an employee, or whose immediate
family member is an executive officer, of a company that makes payments
to, or receives payments from, the Company for property or services in an
amount which, in any single fiscal year, exceeds the greater of $1
million, or 2% of such other company's consolidated gross revenues, will
not be considered independent until three years after falling below such
threshold.
- A director who is a partner of a firm providing tax, accounting, legal or
other consulting services to GATX where the fees from such services by
that firm exceeds $250,000 shall not be considered independent until
three years after falling below such threshold.
In addition, the Board will review all relevant facts and circumstances as
to any other relationship which may exist between the Company and any director.
A-1
EXHIBIT B
AUDIT COMMITTEE
CHARTER
1. Purpose of the Committee: The Audit Committee shall assist the Board of
Directors in its oversight of the integrity of the Company's financial
statements, the Company's compliance with legal and regulatory requirements,
the Independent Auditor's qualifications and independence, and the
performance of the Company's internal audit function and Independent Auditors
and procedures. The Audit Committee shall prepare the report that the SEC
rules require be included in the Company's annual proxy statement.
2. Committee Membership: The membership of the Audit Committee shall consist of
at least three members of the Board of Directors who shall serve at the
pleasure of the Board of Directors. The Audit Committee members and the
Committee Chair shall be designated by the full Board of Directors upon the
recommendation of the Corporate Governance Committee.
3. Meetings and Procedures: The Committee shall meet as often as it deems
appropriate, but no less frequently than four (4) times per year. The Audit
Committee shall fix its own rules of procedure, which shall be consistent
with the bylaws of the Company and this Charter. The chair of the Committee,
or a majority of the members of the Committee, may call a special meeting.
The presence of not less than one-third of the number of members of the
Committee or two members, whichever shall be greater shall constitute a
quorum. The Committee may ask members of management or the Company's outside
counsel or Independent Auditors to attend its meetings and provide pertinent
information as necessary. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditors in separate
executive session as may be required. Following each of its meetings, the
Committee shall deliver a report on the meeting to the Board of Directors,
including a description of all actions taken by the Committee.
4. Member Qualifications: The members of the Audit Committee shall meet the
independence and experience requirements of the New York Stock Exchange,
Section 10A(m)(3) of the Securities and Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations of the Securities and Exchange
Commission (the "Commission").
5. Authority, Duties and Responsibilities: The duties and responsibilities of
the Committee shall include the following:
Retention of Auditors
a. To retain and terminate (subject to ratification by the shareholders
of the Company) the Company's independent auditors. The Audit
Committee shall be directly responsible for the compensation and
oversight of the work of the independent auditor (including the
resolution of any disagreements between management and the
independent auditor regarding financial reporting).
b. The independent auditor shall report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and
permitted non-audit services (including the fees and terms thereof)
to be performed for the company by its independent auditor, subject
to the de minimis exception for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act which are approved by the
Audit Committee prior to the completion of the audit.
B-1
Financial Statement and Disclosure Matters
c. To review and discuss with management and the independent auditor the
annual audited financial statements, including the disclosures made
in management's discussion and analysis, and recommend to the Board
whether the audited financial statements should be included in the
Company's Annual Report on Form 10-K.
d. To review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its
Quarterly Report on Form 10-Q, including the results of the
independent auditor's review of the quarterly financial statements.
e. To discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any
analyses prepared by either in connection therewith. Prior to
finalizing and filing the Annual Report on Form 10-K, the Audit
Committee should review the selection, application and disclosure of
critical accounting policies and the criteria used by management in
its selection of the accounting principles and methods. Among the
items the Audit Committee may want to review with the independent
auditor are: any accounting adjustments that were noted or proposed
but were passed (as immaterial or otherwise), any communication with
the firm's national office respecting auditing or accounting issues
presented by the engagement, and any material communications from the
independent auditor, including any "management" or "internal control"
letter issued, or proposed to be issued, by the audit firm to the
Company.
f. To discuss with management and the independent auditor all
alternative GAAP treatments for policies and practices relating to
material items that have been discussed by the independent auditor
with management, including the ramifications of the use of such
alternative treatments and the treatment preferred by the independent
auditor.
g. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company.
h. Discuss with management the Company's earnings press releases (paying
particular attention to any use of "pro forma" or "adjusted" non-GAAP
information), as well as earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally (consisting of
the types of information to be disclosed and the types of
presentation to be made).
i. To discuss with the independent auditor matters required to be
discussed by the Statement on Auditing Standards No. 61 relating to
the conduct of the audit, including any difficulties encountered in
the course of the audit work, any restrictions on the scope of
activities or access to requested information, and any significant
disagreements with management.
j. No less frequently than quarterly, to receive and review the reports
of the Company's Chief Executive Officer and Chief Financial Officer
regarding any significant deficiencies in the design or operation of
internal controls that could adversely affect the Company's ability
to record, process or report financial data and any material weakness
in internal controls, and any fraud (irrespective of how material)
involving an employee who has a significant role in the Company's
internal controls. The Audit Committee should discuss with management
and the independent auditor major issues as to the adequacy of
internal controls and any measures taken in response thereto.
k. To review with management the Company's major financial risk
exposures with particular attention as to how such matters are
reflected in the Company's financial statements and
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related reporting. The Audit Committee shall discuss with management
the steps management has taken to monitor and control such exposure.
Oversight of the Independent Auditor
l. The Audit Committee shall meet regularly with the independent auditor
independently of management to review any audit problems or
difficulties the auditor encountered in the course of the audit work,
including any restrictions on the scope of the auditor's activities
or on access to requested information, and any significant
disagreements with management and management's response thereto.
m. Not less than annually, to obtain and review a report by the
independent auditor describing: the firm's internal quality control
procedures, any material issues raised by the most recent internal
quality control review or peer review of the firm, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five (5) years respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and (to assess the auditor's independence) all relationships
between the independent auditor and the Company.
n. To receive and review reports from the Company's independent auditors
regarding the auditor's independence, and all relationships between
the independent auditor and the Company. The Committee shall discuss
such reports with the auditors and shall consider whether the
provision of approved non-audit services is compatible with
maintaining the auditor's independence.
o. To periodically evaluate the quality of the audit services provided
by the independent auditor, including an evaluation and review of the
lead partner of the independent auditor. The Audit Committee shall
present its conclusions in this regard to the full Board of
Directors.
p. To ensure rotation of the lead, concurring and "audit partners" as
required by the Commission's rules.
q. To receive and review the independent auditor's report on the
assessment made by management as to the effectiveness of the
Company's internal control structure and procedures for financial
reporting.
r. Recommend to the Board policies for the Company's hiring in a
financial oversight role, employees or former employees of the
independent auditor who participated in any capacity in the audit of
the Company.
Internal Audit / Conduct
s. To meet periodically with the Director of Internal Audit
independently of management. The Audit Committee shall review the
organizational structure and qualifications of the members of the
internal audit department. The review should also include discussion
of the responsibilities, budget and staffing of the Company's
internal auditors and any significant changes thereto. The Audit
Committee shall review the internal audit plan for the year, and any
material changes to such plan, with management and the Director of
Internal Audit, any significant findings and management's responses
thereto. The Audit Committee shall review any difficulties
encountered by the internal auditors in the course of their audits,
including any restrictions on the scope of their work or access to
required information.
t. To establish procedures under guidance issued by the Commission for
(i) the receipt and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing
matters, and (ii) the confidential, anonymous submission by
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employees of the Company of concerns regarding questionable
accounting or auditing matters.
u. To investigate any matter brought to the attention of the Committee
within the scope of its duties and responsibilities, and in that
regard, shall have the authority to obtain advice and assistance from
outside legal, accounting and other advisors where considered
appropriate.
Performance Evaluation
v. To conduct an annual performance evaluation of its own effectiveness,
and in this regard the Committee shall report the results of its
evaluation to the Board of Directors, including any recommended
amendments to this Charter, and any recommended changes to the
policies and procedures of the Committee.
6. Delegation of Authority: The Audit Committee may form and delegate
authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant pre-approvals of audit
and permitted non-audit services, provided that decisions of such
subcommittee to grant pre-approvals shall be presented to the full
Audit Committee.
7. Management Responsibility: While the Audit Committee has the
responsibilities and authority set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and
accurate and are in accordance with Generally Accepted Accounting
Principles. These are the responsibilities of management and the
Company's independent auditor.
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EXHIBIT C
GATX CORPORATION
2004 EQUITY INCENTIVE COMPENSATION PLAN
SECTION 1
GENERAL
1.1. Purpose. The purpose of the GATX Corporation 2004 Equity Incentive
Compensation Plan (the "Plan") is to promote the long term financial interest of
GATX Corporation (the "Company") by (i) attracting and retaining key employees
and non-employee directors possessing outstanding ability; (ii) further
motivating such individuals by means of growth-related incentives to achieve
long-range goals; (iii) providing incentive compensation opportunities, in the
form of Non-Qualified Options, Stock Appreciation Rights, and Full Value Awards
(each as described below) which are competitive with those of other major
corporations; and (iv) furthering the identity of interests of Participants with
those of the Company's stockholders through opportunities for increased stock
ownership.
1.2. Participation. The Committee shall determine and designate, from
time to time, from among the key employees of the Company or a Subsidiary and
non-employee directors of the Board, those persons who will be granted one or
more Awards under the Plan, and thereby become "Participants" in the Plan.
1.3. Definitions. Capitalized terms in the Plan shall be defined as set
forth in the Plan (including the definition provisions of Section 8).
SECTION 2
OPTIONS AND SARS
2.1. Definitions.
(a) The grant of an "Option" entitles the Participant to purchase
shares of Stock at an Exercise Price established by the Committee. Any
Option granted under this Section 2 shall be a non-qualified option (an
"NQO"). An "NQO" is an Option that is not intended to be an "incentive
stock option" as that term is described in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection
2.5), value equal to (or otherwise based on) the excess of: (a) the Fair
Market Value of a specified number of shares of Stock at the time of
exercise; over (b) an Exercise Price established by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted. The Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant (or, if greater, the par
value of a share of Stock); provided, however, that the Committee, in its
discretion, may establish an Exercise Price of an Option or SAR granted under
this Section 2 that varies based on the stock price of a comparator group of
companies or such other index as is selected by the Committee (resulting in an
Exercise Price that may at times be less than the Fair Market Value of a share
of Stock on the date of grant); and further provided that such variable price
shall not be used if the Committee intends that the Options or SARs be
Performance-Based Compensation, and the use of such variable pricing would
preclude such treatment.
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2.3. Exercise. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee. In no event, however, shall an Option or SAR expire later than
ten years after the date of its grant.
2.4. Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise.
(b) Subject to applicable law, the Exercise Price shall be paid in
cash, by promissory note, or by tendering, by either actual delivery of
shares or by attestation, shares of Stock acceptable to the Committee, and
valued at Fair Market Value as of the day of exercise, or in any
combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably authorizing a
third party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise.
2.5. Settlement of Award. Settlement of Options and SARs is subject to
subsection 4.6.
2.6. No Repricing. Except for either adjustments pursuant to paragraph
4.2(f), or reductions of the Exercise Price approved by the Company's
stockholders, the Exercise Price for any outstanding Option may not be decreased
nor may an outstanding Option granted under the Plan be surrendered to the
Company as consideration for the grant of a replacement Option with a lower
exercise price.
2.7. Grants of Options and SARs. An Option may but need not be in tandem
with an SAR, and an SAR may but need not be in tandem with an Option. Except as
otherwise provided by the Committee, if an Option is in tandem with an SAR, the
exercise price of both the Option and SAR shall be the same, and the exercise of
the Option or SAR with respect to a share of Stock shall cancel the
corresponding tandem SAR or Option right with respect to such share. If an SAR
is in tandem with an Option but is granted after the grant of the Option, or if
an Option is in tandem with an SAR but is granted after the grant of the SAR,
the later granted tandem Award shall have the same exercise price as the earlier
granted Award, but the exercise price for the later granted Award may be less
than the Fair Market Value of the Stock at the time of such grant.
SECTION 3
FULL VALUE AWARDS
3.1. Full Value Awards. A "Full Value" Award is a grant of one or more
shares of Stock or a right to receive one or more shares of Stock in the future,
with such grant subject to one or more of the following, as determined by the
Committee:
(a) The grant shall be made in consideration of a Participant's
previously performed services or surrender of other compensation that may
be due.
(b) The grant shall be contingent on the achievement of performance
objectives during a specified period.
(c) The grant shall be subject to a risk of forfeiture or other
restrictions that will lapse upon the achievement of one or more goals
relating to completion of service by the Participant, or achievement of
performance or other objectives.
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The grant of Full Value Awards may also be subject to such other
conditions, restrictions and contingencies, as determined by the Committee.
3.2. Performance-Based Compensation. The Committee may designate a Full
Value Award granted to a Participant as "performance-based compensation" as that
term is used in section 162(m) of the Code. Any such Award so designated shall
be conditioned on the achievement of a level of the Company's Total Gross Income
Less Total Ownership Costs (as defined in Section 8) established by the
Committee in accordance with the requirements of section 162(m) of the Code.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company's 2004 annual meeting of its stockholders, the Plan shall
be effective as of January 1, 2004 (the "Effective Date"); provided, however,
that Awards may be granted contingent on approval of the Plan by the
stockholders of the Company at such annual meeting. The Plan shall be unlimited
in duration and, in the event of Plan termination, shall remain in effect as
long as any Awards under it are outstanding; provided, however, that no Awards
may be granted under the Plan after the ten-year anniversary of the Effective
Date.
4.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Awards may be made under
the Plan shall be shares currently authorized but unissued or currently
held or, to the extent permitted by applicable law, acquired by the Company
as treasury shares, including shares purchased in the open market or in
private transactions.
(b) Subject to the following provisions of this subsection 4.2, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to the sum of paragraphs
(i) and (ii) below:
(i) 3,000,000 shares of Stock;
(ii) Any shares of Stock available for additional awards under the
1995 Long Term Incentive Compensation Plan or the 1985 Long Term
Incentive Compensation Plan of the Company (the "Prior Plans") as of the
date on which shareholders approve the Plan; and any shares of Stock
that are represented by awards granted under the Prior Plans which are
forfeited, expire or are canceled without delivery of shares of Stock or
which result in the forfeiture of the shares of Stock back to the
Company after the date on which shareholders approve the Plan and which
would not have been counted against the reserve against such Prior
Plans.
(c) To the extent provided by the Committee, any Award may be settled
in cash rather than Stock.
(d) Only shares of Stock, if any, actually delivered to the
Participant or beneficiary on an unrestricted basis with respect to an
Award shall be treated as delivered for purposes of the determination under
paragraph (b) above, regardless of whether the Award is denominated in
Stock or cash. Consistent with the foregoing:
(i) To the extent any shares of Stock covered by an Award are not
delivered to a Participant or beneficiary because the Award is forfeited
or canceled, or the shares of Stock are not delivered on an unrestricted
basis (including, without limitation, by reason of the Award being
settled in cash or used to satisfy the applicable tax withholding
obligation), such shares shall not be deemed to have been delivered for
purposes of the determination under paragraph (b) above.
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(ii) If the exercise price of any Option or the tax withholding
obligation with respect to any Award is satisfied by tendering shares of
Stock to the Company (by either actual delivery or by attestation), only
the number of shares of Stock issued net of the shares of Stock tendered
shall be deemed delivered for purposes of determining the number of
shares of Stock available for delivery under the Plan.
(e) Subject to paragraph 4.2(f), the following additional maximums are
imposed under the Plan.
(i) The maximum number of shares that may be covered by Awards
granted to any one Participant during any one-calendar-year period
pursuant to Section 2 (relating to Options and SARs) shall be 500,000
shares. If an Option is granted in tandem with an SAR, such that the
exercise of the Option or SAR with respect to a share of Stock cancels
the tandem SAR or Option right, respectively, with respect to such
share, the tandem Option and SAR rights with respect to each share of
Stock shall be counted as covering but one share of Stock for purposes
of applying the limitations of this paragraph (i).
(ii) For Full Value Awards that are intended to be
"performance-based compensation" (as that term is used for purposes of
Code section 162(m)), no more than 300,000 shares of Stock may be
delivered pursuant to such Awards granted to any one Participant during
any one-calendar-year period; provided that Awards described in this
paragraph (ii), that are intended to be performance-based compensation,
shall be subject to the following:
(A) If the Awards are denominated in Stock but an equivalent
amount of cash is delivered in lieu of delivery of shares of Stock,
the foregoing limit shall be applied based on the methodology used by
the Committee to convert the number of shares of Stock into cash.
(B) If delivery of Stock or cash is deferred until after shares
of Stock have been earned, any adjustment in the amount delivered to
reflect actual or deemed investment experience after the date the
shares are earned shall be disregarded.
(f) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
Committee may adjust Awards to preserve the benefits or potential benefits
of the Awards. Action by the Committee may include: (i) adjustment of the
number and kind of shares which may be delivered under the Plan; (ii)
adjustment of the number and kind of shares subject to outstanding Awards;
(iii) adjustment of the Exercise Price of outstanding Options and SARs; and
(iv) any other adjustments that the Committee determines to be equitable
(which may include, without limitation, (I) replacement of Awards with
other Awards which the Committee determines have comparable value and which
are based on stock of a company resulting from the transaction, or (II)
cancellation of the Award in return for cash payment of the current value
of the Award, determined as though the Award is fully vested at the time of
payment, provided that in the case of an Option, the amount of such payment
may be the excess of value of the Stock subject to the Option at the time
of the transaction over the exercise price).
4.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no obligation to deliver any shares of Stock or make any other
distribution of benefits under the Plan unless such delivery or
distribution complies with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange on which the shares of
the Company are registered.
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(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may
be effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
4.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. Except as otherwise provided by the
Committee, such withholding obligations may be satisfied (i) through cash
payment by the Participant; (ii) through the surrender of shares of Stock which
the Participant already owns (provided, however, that to the extent shares
described in this clause (ii) are used to satisfy more than the minimum
statutory withholding obligation, as described below, then, except as otherwise
provided by the Committee, payments made with shares of Stock in accordance with
this clause (ii) above shall be limited to shares held by the Participant for
not less than six months prior to the payment date); or (iii) through the
surrender of shares of Stock to which the Participant is otherwise entitled
under the Plan; provided, however, that such shares under this clause (iii) may
be used to satisfy not more than the Company's minimum statutory withholding
obligation (based on minimum statutory withholding rates for Federal and state
tax purposes, including payroll taxes, that are applicable to such supplemental
taxable income).
4.5. Grant and Use of Awards and Dividends. The grant and use of Awards,
and a Participant's right to receive dividend or dividend equivalent payments
shall be subject to the following:
(a) In the discretion of the Committee, a Participant may be granted
any Award permitted under the provisions of the Plan, and more than one
Award may be granted to a Participant. Awards may be granted as
alternatives to or replacement of awards granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or a portion
of which is acquired by the Company or a Subsidiary).
(b) The Committee may use available shares of Stock as the form of
payment for compensation, grants or rights earned or due under any other
compensation plans or arrangements of the Company or a Subsidiary,
including the plans and arrangements of the Company or a Subsidiary assumed
in business combinations. Notwithstanding the provisions of subsection 2.2,
Options and SARs granted under the Plan in replacement for awards under
plans and arrangements of the Company or a Subsidiary assumed in business
combinations may provide for exercise prices that are less than the Fair
Market Value of the Stock at the time of the replacement grants, if the
Committee determines that such exercise price is appropriate to preserve
the economic benefit of the award.
(c) An Award (including without limitation an Option or SAR Award) may
provide the Participant with the right to receive dividend payments or
dividend equivalent payments with respect to Stock subject to the Award
(both before and after the Stock subject to the Award is earned, vested, or
acquired), which payments may be either made currently or credited to an
account for the Participant, and may be settled in cash or Stock, as
determined by the Committee, subject to such conditions, restrictions and
contingencies as the Committee shall establish, including the reinvestment
of such credited amounts in Stock equivalents.
4.6. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, grant of replacement Awards, or combination thereof
as the Committee shall determine. Satisfaction of any such obligations under an
Award, which is sometimes referred to as "settlement" of the Award, may be
subject to such conditions, restrictions and contingencies as the Committee
shall determine. Subject to such rules and procedures as it may establish, the
Committee may permit or require the deferral of any Award payment, which may
include payment or crediting of interest or dividend equivalents, and converting
such credits into deferred Stock equivalents.
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4.7. Transferability. Except as otherwise provided by the Committee,
Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.8. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.9. Agreement With Company. An Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in a written agreement (the "Award
Agreement") with terms determined by the Committee. A copy of such agreement
shall be provided to the Participant, and the Committee may, but need not
require that the Participant sign such agreement.
4.10. Action by Company. Any action required or permitted to be taken by
the Company shall be by resolution of the Board, or by action of one or more
members of the Board (including a committee of the Board) who are duly
authorized to act for the Board, or (except to the extent prohibited by
applicable law or applicable rules of any stock exchange on which shares of the
Company are registered) by a duly authorized officer of the Company.
4.11. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.12. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company or any Subsidiary whatsoever, including,
without limitation, any specific funds, assets, or other property which the
Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only a
contractual right to the Stock or amounts, if any, payable under the Plan,
unsecured by any assets of the Company or any Subsidiary, and nothing
contained in the Plan shall constitute a guarantee that the assets of the
Company or any Subsidiary shall be sufficient to pay any benefits to any
person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee the
right to be retained in the employ of the Company or any Subsidiary or the
right to continue to provide services to the Company or any Subsidiary, nor
any right or claim to any benefit under the Plan, unless such right or
claim has specifically accrued under the terms of the Plan. Except as
otherwise provided in the Plan, no Award under the Plan shall confer upon
the holder thereof any rights as a stockholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of such
rights.
4.13. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
CHANGE IN CONTROL
The effect of the occurrence of a Change in Control on an Award shall be
determined by the Committee, in its discretion, except as otherwise provided in
the Plan or the Award Agreement reflecting the applicable Award. The term
"Change in Control" shall mean the occurrence of a change in the beneficial
ownership of the Company's voting stock or a change in the composition of
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the Company's Board of Directors if such change is described in any of
paragraphs (a), (b), (c), (d) or (e) below:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any acquisition
by the Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 5.
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board.
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 65% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination.
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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(e) Consummation of a Business Combination involving any subsidiary of
the Company (a "Company Unit") unless immediately after such Business
Combination, the Company owns at least 50% of the voting stock of such
Company Unit. However, the circumstances described in this paragraph (e)
shall constitute a Change in Control with respect to Awards of an
individual only if the individual's primary employer immediately prior to
such Business Combination is such Company Unit.
The terms used in this Section 5 and not defined elsewhere in the Plan
shall have the same meaning as such terms have in the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted thereunder.
SECTION 6
COMMITTEE
6.1. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in the Compensation Committee of
the Board (the "Committee") in accordance with this Section 6, Section 303A.05
of the NYSE Listed Company Manual and section 162(m) of the Code. The Committee
shall consist solely of three or more members of the Board who are not employees
of the Company or any Subsidiary. If the Committee does not exist, or for any
other reason determined by the Board, the Board may take any action under the
Plan that would otherwise be the responsibility of the Committee.
6.2. Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the key employees of the
Company or a Subsidiary, and non-employee directors of the Board, those
persons who shall receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the number of shares covered
by the Awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards, and (subject to the
restrictions imposed by Section 7) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of
the Awards in jurisdictions outside the United States, the Committee will
have the authority and discretion to modify those restrictions as the
Committee determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions outside of the United
States.
(c) The Committee will have the authority and discretion to interpret
the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, and to make all other determinations
that may be necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding on all persons.
6.3. Delegation by Committee. The Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members and
may delegate all or any part of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be revoked by the
Committee at any time.
6.4. Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants and
other persons
C-8
entitled to benefits under the Plan must furnish the Committee such evidence,
data or information as the Committee considers desirable to carry out the terms
of the Plan.
SECTION 7
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that (i)
no amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; (ii) the provisions of subsection 2.6
(relating to Option repricing) may not be amended, unless any such amendment is
approved by the Company's stockholders; and (iii) adjustments pursuant to
paragraph 4.2(f) shall not be subject to the foregoing limitations of this
Section 7.
SECTION 8
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Award. The term "Award" means any award or benefit granted under
the Plan, including, without limitation, the grant of Options, SARs and
Full Value Awards.
(b) Board. The term "Board" means the Board of Directors of the
Company.
(c) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any successor provision of the Code.
(d) Fair Market Value. For purposes of the Plan, the term "Fair
Market Value" of a share of Stock as of any date, shall mean the average of
the highest and lowest prices at which a share of Stock is traded on the
date as of which the determination is being made as quoted on the New York
Stock Exchange Composite Transactions or other principal market quotation
selected by the Committee or, if the Stock is not traded on that date, the
average of the highest and lowest prices on the next preceding day on which
such Stock was traded.
(e) Subsidiary. The term "Subsidiary" means any company during any
period in which it is a "subsidiary corporation" (as that term is defined
in Code section 424(f)) with respect to the Company, and any other business
venture designated by the Committee in which the Company (or any entity
that is a successor to the Company) has a significant interest, as
determined in the discretion of the Committee.
(f) Stock. The term "Stock" means shares of common stock of the
Company.
(g) Total Gross Income Less Total Ownership Costs. The term "Total
Gross Income Less Total Ownership Costs" means the Company's "Total Gross
Income" less "Total Ownership Costs" as reported in the Company's
consolidated statement of income (or if such amounts are not reported in
the Company's statement of income, the line items in the Company's
statement of income determined by the Committee to correspond thereto).
C-9
EXHIBIT D
GATX CORPORATION
CASH INCENTIVE COMPENSATION PLAN
SECTION 1
GENERAL
1.1. Purpose. The purpose of the GATX Corporation Cash Incentive
Compensation Plan (the "Plan") is to promote the long term financial interest of
GATX Corporation (the "Company") by (i) attracting and retaining executive
personnel possessing outstanding ability; (ii) further motivating such
individuals by means of cash incentives to achieve long-range goals; and (iii)
providing cash incentive compensation opportunities which are competitive with
those of other major corporations.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Employees, those persons who will be granted one or more Cash Incentive
Awards under the Plan, and thereby become "Participants" in the Plan.
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Cash Incentive Awards made under the
Plan, shall be subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8).
SECTION 2
CASH INCENTIVE AWARD
2.1. Designation. The Committee, from time to time in its discretion,
shall designate from among the Eligible Employees those individuals who will
have an opportunity to receive Cash Incentive Awards under the Plan for any
Performance Period, together with the amounts to be distributed in accordance
with Section 3. Except as otherwise provided by the Committee, Cash Incentive
Awards are intended to be Performance-Based Compensation. Any Cash Incentive
Awards intended to be Performance-Based Compensation shall comply with the
requirements of this Section 2 to the extent such compliance is determined by
the Committee to be required for the Cash Incentive Awards to be treated as
Performance-Based Compensation. To the extent that the provisions of this
Section 2 reflect the requirements applicable to Performance-Based Compensation,
such provisions shall not apply to the portion of any Cash Incentive Award that
is not intended to be Performance-Based Compensation.
2.2. Determination of Cash Incentive Awards. Each Cash Incentive Award
that is intended to be Performance-Based Compensation shall be determined in
accordance with the following:
(a) The Cash Incentive Award for each Participant for any Performance
Period shall equal 0.75% of the Company's Total Gross Income Less Total
Ownership Costs (as defined in Section 8) for the Performance Period.
(b) At any time prior to the payment of a Cash Incentive Award, the
Committee may, in its discretion, reduce the amount of such award based on
such factors as the Committee determines appropriate.
(c) No payment shall be made of any Cash Incentive Award that is
intended to be Performance-Based Compensation until achievement of the
applicable performance objectives set forth in paragraph (a) above has been
certified by the Committee.
D-1
Any Cash Incentive Awards that are not intended to be Performance-Based
Compensation may be conditioned on any performance goals, factors, or criteria
as the Committee shall determine.
SECTION 3
DISTRIBUTIONS
Subject to subsection 2.2, a Participant's Cash Incentive Award shall be
distributed to the Participant in cash at such time and in such form as is
determined by the Committee.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the stockholders of the
Company at the Company's 2004 annual meeting of its stockholders, the Plan shall
be effective as of January 1, 2004 (the "Effective Date"); provided, however,
that to the extent that Cash Incentive Awards are granted under the Plan prior
to its approval by stockholders, the Cash Incentive Awards shall be contingent
on approval of the Plan by the stockholders of the Company at such annual
meeting.
4.2. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any benefits under the Plan on satisfaction of the applicable
withholding obligations.
4.3. Transferability. Except as otherwise provided by the Committee, Cash
Incentive Awards under the Plan are not transferable except as designated by the
Participant by will or by the laws of descent and distribution.
4.4. Heirs and Successors. The Plan shall be binding upon, and inure to
the benefit of, the Company and its successors and assigns, and upon any person
acquiring, whether by merger, consolidation, purchase of assets or otherwise,
all or substantially all of the Company's assets and business. If any benefits
deliverable to a Participant under the Plan have not been delivered at the time
of the Participant's death, such benefits shall be delivered to the Designated
Beneficiary in accordance with the provisions of the Plan. The "Designated
Beneficiary" shall be the beneficiary or beneficiaries designated by a
Participant in a writing filed with the Committee in such form and at such time
as the Committee shall require. If a deceased Participant fails to designate a
beneficiary, or if the Designated Beneficiary does not survive the Participant,
any benefits distributable to the Participant shall be distributed to the legal
representative of the estate of the Participant. If a deceased Participant
designates a beneficiary and the Designated Beneficiary survives the Participant
but dies before the complete distribution of benefits to the Designated
Beneficiary under the Plan, then any benefits distributable to the Designated
Beneficiary shall be distributed to the legal representative of the estate of
the Designated Beneficiary.
4.5. Agreement With Company. A Cash Incentive Award under the Plan may be
subject to such terms and conditions, not inconsistent with the Plan, as the
Committee shall, in its sole discretion, prescribe. The terms and conditions of
any Cash Incentive Award to any Participant may be reflected in such form of
written document as is determined by the Committee. A copy of such document
shall be provided to the Participant, and the Committee may, but need not
require that the Participant sign a copy of such document. Such document is
referred to in the Plan as an "Award Agreement" regardless of whether any
Participant signature is required.
4.6. Action by Company or Subsidiary. Any action required or permitted to
be taken by the Company or any Subsidiary shall be by resolution of its board of
directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.
D-2
4.7. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.8. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company or any Subsidiary whatsoever, including,
without limitation, any specific funds, assets, or other property which the
Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only a
contractual right to the amounts, if any, payable under the Plan, unsecured
by any assets of the Company or any Subsidiary, and nothing contained in
the Plan shall constitute a guarantee that the assets of the Company or any
Subsidiary shall be sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee or
other individual the right to be retained in the employ of the Company or
any Subsidiary or the right to continue to provide services to the Company
or any Subsidiary, nor any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of the
Plan.
4.9. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
SOURCE OF BENEFIT DISTRIBUTIONS
An Employer shall be liable for distribution of benefits under the Plan
with respect to any Participant to the extent that such benefits are
attributable to services rendered by the Participant to that Employer. Any
disputes relating to liability of Employers for benefit distributions shall be
resolved by the Committee.
SECTION 6
COMMITTEE
6.1. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in the Compensation Committee of
the Board (the "Committee") in accordance with this Section 6, Section 303A.05
of the NYSE Listed Company Manual and section 162(m) of the Code. The Committee
shall consist solely of three members of the Board who are not employees of the
Company or any Subsidiary. If the Committee does not exist, or for any other
reason determined by the Board, the Board may take any action under the Plan
that would otherwise be the responsibility of the Committee.
6.2. Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Employees those
persons who shall be eligible to participate in the Plan.
(b) The Committee will have the authority and discretion to interpret
the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any decision
made by it under the Plan is final and binding on all persons.
D-3
6.3. Delegation by Committee. Except to the extent prohibited by
applicable law, the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it. Any such allocation or delegation may be revoked by the
Committee at any time.
6.4. Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment,
termination of employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
SECTION 7
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Cash Incentive Award granted under the Plan prior to the
date such amendment is adopted by the Board.
SECTION 8
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Board. The term "Board" means the Board of Directors of the
Company.
(b) Cash Incentive Award. The term "Cash Incentive Award" means an
award determined in accordance with Section 2 and distributable in
accordance with Section 3.
(c) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any successor provision of the Code.
(d) Eligible Employee. The term "Eligible Employee" means any key
employee of the Company or a Subsidiary.
(e) Employer. The term "Employer" means the Company and each of the
Subsidiaries whose employees the Committee includes in the Plan as
Participants.
(f) Participant. The term "Participant" means an individual who has
been designated by the Committee as eligible to participate in the Plan.
(g) Performance-Based Compensation. The term "Performance-Based
Compensation" shall have the meaning ascribed to it in section 162(m) of
the Code and the regulations thereunder.
(h) Performance Period. The term "Performance Period" shall mean the
Company's fiscal year, or such other period as may be established by the
Committee from time to time as the Performance Period.
(i) Subsidiary. The term "Subsidiary" means any company during any
period in which it is a "subsidiary corporation" (as that term is defined
in Code section 424(f)) with respect to the Company, and any other business
venture designated by the Committee in which the
D-4
Company (or any entity that is a successor to the Company) has a
significant interest, as determined in the discretion of the Committee.
(j) Total Gross Income Less Total Ownership Costs. The term "Total
Gross Income Less Total Ownership Costs" means the Company's "Total Gross
Income" less "Total Ownership Costs" as reported in the Company's
consolidated statement of income (or if such amounts are not reported in
the Company's statement of income, the line items in the Company's
statement of income determined by the Committee to correspond thereto).
D-5
PROXY
GATX CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2004
THIS PROXY IS SOLICITED ON BEHALF OF GATX CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Ronald H. Zech, Ronald J.
Ciancio and Brian A. Kenney, and each of them, the undersigned's true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of GATX CORPORATION to be held
at The Northern Trust Company, 50 South LaSalle Street, Sixth Floor Assembly
Room, Chicago, Illinois 60675 on Friday, April 23, 2004, at 9:00 A.M., and at
any adjournment thereof, on all matters coming before said meeting.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
(Continued and to be signed on other side)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOU CAN NOW ACCESS YOUR GATX CORPORATION ACCOUNT ONLINE.
Access your GATX Corporation shareholder account online via Investor
ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for GATX Corporation, now makes it
easy and convenient to get current information on your shareholder account.
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4. Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
ITEM 1 - ELECTION OF DIRECTORS FOR ALL EXCEPT
AS NOTED WITHHELD
BELOW FOR ALL
Nominees: 01 Rod F. Dammeyer, 02 James M. Denny, [ ] [ ]
03 Richard Fairbanks, 04 Deborah M. Fretz,
05 Miles L. Marsh, 06 Michael E. Murphy, and 07 Ronald H. Zech
WITHHELD FOR: (Write that nominee's name in the space provided below).
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2 - APPROVAL OF AUDITORS [ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon other matters as may properly
come before the meeting.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE GATX CORPORATION NOTICE OF
MEETING AND PROXY STATEMENT
FOR AGAINST ABSTAIN
ITEM 3 - APPROVAL OF 2004 EQUITY
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
FOR AGAINST ABSTAIN
ITEM 4 - APPROVAL OF CASH INCENTIVE
COMPENSATION PLAN [ ] [ ] [ ]
CONSENTING TO RECEIVE ALL FUTURE ANNUAL MEETING MATERIALS AND SHAREHOLDER
COMMUNICATIONS ELECTRONICALLY IS SIMPLE AND FAST! Enroll today at
www.melloninvestor.com/ISD for secure online access to your proxy materials,
statements, tax documents and other important shareholder correspondence.
SIGNATURE SIGNATURE DATE
---------------------------------- ---------------------------------- -----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ -------------------------------- ---------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/gmt 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
------------------------------------ -------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT WWW.GATX.COM
HTTP://WWW.GATX.COM
PROXY
GATX CORPORATION
SALARIED EMPLOYEES RETIREMENT SAVINGS PLAN
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2004
THIS PROXY IS SOLICITED ON BEHALF OF GATX CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Ronald H. Zech, Ronald J.
Ciancio and Brian A. Kenney, and each of them, the undersigned's true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of GATX CORPORATION to be held
at The Northern Trust Company, 50 South LaSalle Street, Sixth Floor Assembly
Room, Chicago, Illinois 60675 on Friday, April 23, 2004, at 9:00 A.M., and at
any adjournment thereof, on all matters coming before said meeting.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
(Continued and to be signed on other side)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4. Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
ITEM 1 - ELECTION OF DIRECTORS FOR ALL EXCEPT
AS NOTED WITHHELD
BELOW FOR ALL
Nominees: 01 Rod F. Dammeyer, 02 James M. Denny, [ ] [ ]
03 Richard Fairbanks, 04 Deborah M. Fretz,
05 Miles L. Marsh, 06 Michael E. Murphy, and 07 Ronald H. Zech
WITHHELD FOR: (Write that nominee's name in the space provided below).
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2 - APPROVAL OF AUDITORS [ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon other matters as may properly
come before the meeting.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE GATX CORPORATION NOTICE OF
MEETING AND PROXY STATEMENT
FOR AGAINST ABSTAIN
ITEM 3 - APPROVAL OF 2004 EQUITY
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
FOR AGAINST ABSTAIN
ITEM 4 - APPROVAL OF CASH INCENTIVE
COMPENSATION PLAN [ ] [ ] [ ]
SIGNATURE SIGNATURE DATE
---------------------------------- ---------------------------------- -----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME ON
APRIL 19, 2004. VOTES CAST AFTER THAT TIME WILL NOT BE COUNTED.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ -------------------------------- ---------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/gmt 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
------------------------------------ -------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT WWW.GATX.COM
HTTP://WWW.GATX.COM
PROXY
GATX CORPORATION
HOURLY EMPLOYEES RETIREMENT SAVINGS PLAN
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2004
THIS PROXY IS SOLICITED ON BEHALF OF GATX CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Ronald H. Zech, Ronald J.
Ciancio and Brian A. Kenney, and each of them, the undersigned's true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of GATX CORPORATION to be held
at The Northern Trust Company, 50 South LaSalle Street, Sixth Floor Assembly
Room, Chicago, Illinois 60675 on Friday, April 23, 2004, at 9:00 A.M., and at
any adjournment thereof, on all matters coming before said meeting.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 and 4.
(Continued and to be signed on other side)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4. Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
ITEM 1 - ELECTION OF DIRECTORS FOR ALL EXCEPT
AS NOTED WITHHELD
BELOW FOR ALL
Nominees: 01 Rod F. Dammeyer, 02 James M. Denny, [ ] [ ]
03 Richard Fairbanks, 04 Deborah M. Fretz,
05 Miles L. Marsh, 06 Michael E. Murphy, and 07 Ronald H. Zech
WITHHELD FOR: (Write that nominee's name in the space provided below).
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2 - APPROVAL OF AUDITORS [ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon other matters as
may properly come before the meeting.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE GATX CORPORATION NOTICE OF
MEETING AND PROXY STATEMENT
FOR AGAINST ABSTAIN
ITEM 3 - APPROVAL OF 2004 EQUITY
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
FOR AGAINST ABSTAIN
ITEM 4 - APPROVAL OF CASH INCENTIVE
COMPENSATION PLAN [ ] [ ] [ ]
SIGNATURE SIGNATURE DATE
---------------------------------- ---------------------------------- -----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME ON
APRIL 19, 2004. VOTES CAST AFTER THAT TIME WILL NOT BE COUNTED.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ -------------------------------- ---------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/gmt 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
------------------------------------ -------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU DO NOT
NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT WWW.GATX.COM
HTTP://WWW.GATX.COM
PROXY
GATX CORPORATION
ESPP
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 2004
THIS PROXY IS SOLICITED ON BEHALF OF GATX CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Ronald H. Zech, Ronald J.
Ciancio and Brian A. Kenney, and each of them, the undersigned's true and lawful
agents and proxies with full power of substitution in each, to represent the
undersigned at the Annual Meeting of Shareholders of GATX CORPORATION to be held
at The Northern Trust Company, 50 South LaSalle Street, Sixth Floor Assembly
Room, Chicago, Illinois 60675 on Friday, April 23, 2004, at 9:00 A.M., and at
any adjournment thereof, on all matters coming before said meeting.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY
ITEM. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
(Continued and to be signed on other side)
------------------------------------------------------------------------
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
------------------------------------------------------------------------
------------------------------------------------------------------------
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4. Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
ITEM 1 - ELECTION OF DIRECTORS FOR ALL EXCEPT
AS NOTED WITHHELD
BELOW FOR ALL
Nominees: 01 Rod F. Dammeyer, 02 James M. Denny, [ ] [ ]
03 Richard Fairbanks, 04 Deborah M. Fretz,
05 Miles L. Marsh, 06 Michael E. Murphy, and 07 Ronald H. Zech
WITHHELD FOR: (Write that nominee's name in the space provided below).
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2 - APPROVAL OF AUDITORS [ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon other matters as may properly
come before the meeting.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE GATX CORPORATION NOTICE OF
MEETING AND PROXY STATEMENT
FOR AGAINST ABSTAIN
ITEM 3 - APPROVAL OF 2004 EQUITY
INCENTIVE COMPENSATION PLAN [ ] [ ] [ ]
FOR AGAINST ABSTAIN
ITEM 4 - APPROVAL OF CASH INCENTIVE
COMPENSATION PLAN [ ] [ ] [ ]
SIGNATURE SIGNATURE DATE
---------------------------------- ---------------------------------- -----------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------ -------------------------------- ---------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/gmt 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. OR Use any touch-tone telephone to OR your proxy card
Have your proxy card in hand when vote your proxy. Have your proxy and
you access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
------------------------------------ -------------------------------- ---------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT WWW.GATX.COM
HTTP://WWW.GATX.COM