<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
RAILWORKS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
(RAILWORKS LOGO)
April 29, 1999
Dear Stockholder:
We cordially invite you to attend our 1999 Annual Meeting of Stockholders
on Thursday, May 27, 1999, beginning at 10:00 a.m. local Baltimore time. The
meeting will be held at our offices at 1104 Kenilworth Drive, Suite 301,
Baltimore, Maryland 21204.
The attached Notice of Annual Meeting and Proxy Statement fully describe
the formal business to be transacted at the annual meeting, including (1) the
election of three directors and (2) the ratification of the board of directors'
appointment of Arthur Andersen LLP as our independent accountants for the 1999
fiscal year.
It is important that your shares be represented at the annual meeting.
Whether or not you plan to attend, please complete, sign and date the enclosed
proxy card and return it in the enclosed postage prepaid envelope. If you attend
the annual meeting and vote in person, your proxy card will not be used. The
prompt return of your proxy card will save the expense involved in further
communication.
Your board of directors and I look forward to seeing you at the annual
meeting.
Very truly yours,
JOHN G. LARKIN
Chairman of the Board and Chief
Executive Officer
<PAGE> 3
(RAILWORKS LOGO)
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999
---------------------
TO OUR STOCKHOLDERS:
The 1999 Annual Meeting of Stockholders of RailWorks Corporation will be
held on Thursday, May 27, 1999, beginning at 10:00 a.m. local Baltimore time, at
our offices at 1104 Kenilworth Drive, Suite 301, Baltimore, Maryland 21204. At
the meeting, stockholders will act on the following matters:
(1) Election of three directors to serve a three-year term;
(2) Ratification of the appointment of Arthur Andersen LLP as
RailWorks' independent accountants for fiscal 1999; and
(3) Any other matters that properly come before the annual meeting.
Stockholders of record at the close of business on April 15, 1999 are
entitled to attend and vote at the annual meeting or any postponement or
adjournment.
By order of the board of directors,
JOHN G. LARKIN
Chairman of the Board and Chief
Executive Officer
April 29, 1999
Baltimore, Maryland
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY CARD PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING AND
VOTE IN PERSON, THE PROXY CARD WILL NOT BE USED. IF THE PROXY CARD IS MAILED IN
THE UNITED STATES IN THE ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED. THE PROMPT
RETURN OF YOUR PROXY CARD WILL SAVE US THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
<PAGE> 4
RAILWORKS CORPORATION
1104 KENILWORTH DRIVE
SUITE 301
BALTIMORE, MARYLAND 21204
(410) 512-0500
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement contains information regarding the 1999 Annual Meeting
of Stockholders of RailWorks Corporation ("RailWorks"). The meeting will be held
on Thursday, May 27, 1999, beginning at 10:00 a.m. local Baltimore time, at our
offices at 1004 Kenilworth Drive, Suite 301, Baltimore, Maryland 21204. The
proxy card enclosed with this Proxy Statement is being solicited by the board of
directors. Voting material for the annual meeting, which includes this Proxy
Statement, the enclosed proxy card and our 1998 Annual Report, will be mailed to
our stockholders on or about April 29, 1999.
ABOUT THE MEETING
WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
You are receiving a Proxy Statement and proxy card because you own shares
of common stock in RailWorks. This Proxy Statement describes issues on which we
would like you, as a stockholder, to vote. It also gives you information on
these issues so you can make an informed decision.
When you sign the proxy card, you appoint John G. Larkin and Michael R.
Azarela as your representatives at the meeting. Mr. Larkin and Mr. Azarela will
vote your shares, as you have instructed them on the proxy card, at the meeting.
This way, your shares will be voted whether or not you attend the annual
meeting. Even if you plan to attend the annual meeting, it is a good idea to
complete, sign and return your proxy card in advance of the meeting in case your
plans change.
If an issue comes up for vote at the meeting that is not on the proxy card,
Mr. Larkin and Mr. Azarela will vote your shares, under your proxy, in
accordance with their best judgment.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, stockholders will act on the matters outlined in the
accompanying Notice of Annual Meeting. These matters include the election of
three directors to serve a three-year term on the board of directors and
ratification of the appointment of Arthur Andersen LLP as our independent
accountants. In addition, management will report on the performance of RailWorks
during 1998 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record at the close of business on the record date,
April 15, 1999, are entitled to receive notice of the annual meeting and to vote
the shares of common stock that they held on that date at the annual meeting, or
any postponement or adjournment of the meeting. At the close of business on the
record date, 13,889,880 of common stock were outstanding and are entitled to
vote at the annual meeting.
<PAGE> 5
HOW MANY VOTES DOES EACH SHARE OF COMMON STOCK ENTITLE ITS HOLDER TO CAST?
Holders of common stock are entitled to one vote per share on each matter
to be voted on at the annual meeting. No cumulative voting rights are authorized
and dissenter's rights of appraisal do not apply to the matters being proposed.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting, and may be accompanied by guests. Registration and
seating will begin at 9:30 a.m. Cameras, recording devices and other electronic
devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you must bring a copy of a brokerage statement
reflecting your stock ownership as of the record date.
HOW MANY VOTES DO YOU NEED TO HOLD THE MEETING?
Our Bylaws provide that the presence in person or by proxy of the holders
of a majority of the shares entitled to vote the annual meeting is required to
hold the meeting and conduct business. This is called a "quorum." Proxy cards
received but marked "ABSTAIN" and "broker non-votes" (discussed below) will be
included in the calculation of the number of shares considered to be present at
the meeting.
HOW DO I VOTE?
You may vote by mail. You do this by signing your proxy card and mailing
it in the enclosed, prepaid and addressed envelope. If you mark your voting
instructions on the proxy card, your shares will be voted as you instruct. If
you return a signed card but do not provide voting instructions, your shares
will be voted for the three named director nominees and for the ratification of
the appointment of Arthur Andersen LLP as our independent accountants.
You may vote in person at the meeting. Written ballots will be passed out
to anyone who wants to vote at the meeting. If you hold your shares in "street
name" (through a broker or other nominee), you must request a legal proxy from
the registered holder of those shares to vote at the meeting.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
RailWorks either a notice of revocation or an executed proxy card with a later
date. The powers of the proxy holders will be suspended if you attend the annual
meeting in person and so request. Attendance at the annual meeting will not by
itself revoke a previously granted proxy.
WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
If your shares are held in street name, your brokerage firm may vote your
shares under certain circumstances. These circumstances include certain
"routine" matters, such as the election of directors. Therefore, if you do not
vote your proxy, your brokerage firm may either vote your shares on routine
matters, or leave your shares unvoted. When a brokerage firm votes its
customers' unvoted shares on routine matters, these shares are counted for
purposes of establishing a quorum to conduct business at the annual meeting.
A brokerage firm cannot vote customers' shares on non-routine matters.
Therefore, if your shares are held in street name and you do not vote your
proxy, your shares will not be voted on non-routine matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether there is a quorum.
2
<PAGE> 6
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote each signed proxy in accordance with
the recommendations of the board of directors. The board's recommendation is set
forth together with the description of each item in this Proxy Statement. In
summary, the board of directors recommends a vote:
- for election of the three nominated directors (see page 4); and
- for ratification of the appointment of Arthur Andersen LLP as RailWorks'
independent accountants (see page 7).
With respect to any other matter that properly comes before the annual
meeting, the proxy holders will vote as recommended by the board of directors
or, if no recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. The affirmative vote of a plurality of the votes
cast at the annual meeting is required for the election of directors.
"Plurality" means that the individuals who receive the largest number of votes
cast are elected as directors. Consequently, shares not voted have no impact on
the election of directors. Unless a properly executed proxy card is marked
"WITHHOLD AUTHORITY," each signed proxy will be voted "FOR" the three nominees
for director.
Ratification of the Appointment of the Auditors. The affirmative vote of
the majority of shares of common stock represented in person or by proxy and
entitled to vote on the item is required for approval. A properly executed proxy
card marked "ABSTAIN" with respect to the ratification of the appointment of the
auditors will not be voted. Accordingly, an abstention will have the effect of a
vote "AGAINST" the proposal.
IS MY VOTE CONFIDENTIAL?
Yes. Only the inspector of elections, MacKenzie Partners, and certain
employees of RailWorks will have access to your card. They will tabulate and
certify the vote. Your vote will remain confidential, unless you ask that your
name be disclosed.
WHERE DO I FIND THE VOTING RESULTS OF THE MEETING?
RailWorks will announce preliminary voting results at the meeting and will
publish the final results in its quarterly report on Form 10-Q for the second
quarter of 1999. The report is filed with the Securities and Exchange
Commission, and you can get a copy by contacting our Corporate Secretary at
(410) 512-0500 or the Securities and Exchange Commission at (800) SEC-0330 for
the location of the nearest public reference room, or through the SEC's EDGAR
system at www.sec.gov.
3
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of shares of common
stock as of April 1, 1999 by: (1) RailWorks' Chief Executive Officer and all
other executive officers who were serving as executive officers at December 31,
1998 (the "Named Executive Officers"); (2) each director; and (3) all directors
and executive officers as a group. Unless otherwise provided, all persons listed
have sole voting and investment power with respect to their shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
------------------------
PERCENT(1)
OF
OUTSTANDING
NUMBER SHARES
--------- -----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
John G. Larkin(2)........................................... 828,309 6.0%
Michael R. Azarela.......................................... 551,747 4.0
John Kennedy................................................ 404,021 2.9
Peter Alan Pasch(3)......................................... 421,012 3.1
Scott D. Brace.............................................. 200,093 1.5
Steve C. Goggin............................................. 292,456 2.1
Lambertus L. Tameling....................................... 72,587 *
Ronald W. Drucker........................................... 3,000 *
R.C. Matney................................................. 2,000 *
All executive officers and directors as a group (10
persons).................................................. 2,755,225 20.0
OTHER 5% STOCKHOLDER:
BT Alex. Brown Incorporated(4).............................. 2,009,061 13.2
</TABLE>
- ---------------
* Less than one percent.
(1) As of April 1, 1999, there were 13,796,038 shares of common stock
outstanding.
(2) Mr. Larkin's address is c/o RailWorks Corporation, 1104 Kenilworth Drive,
Suite 301, Baltimore, Maryland 21204.
(3) Includes 20,000 shares issuable upon exercise of outstanding options to
purchase common stock granted to Mr. Pasch on February 25, 1999.
(4) Represents 639,061 shares of common stock and 13,700 shares of Series A
convertible preferred stock. Each share of Series A convertible preferred
stock is convertible at any time into 100 shares of common stock, subject to
certain exceptions. Conversion is prohibited if, after the conversion, BT
Alex. Brown Incorporated would own 5% or more of RailWorks' common stock. BT
Alex. Brown Incorporated's address is 130 Liberty Street, New York, New York
10006.
ELECTION OF DIRECTORS (ITEM 1)
There are currently nine members of the board of directors. Two of the
directors, Messrs. Drucker and Matney, are non-employee, independent directors.
Directors serve staggered three-year terms that expire in successive years.
WHO ARE THE NOMINEES THIS YEAR?
The nominees are Messrs. Kennedy, Pasch and Drucker. Their current terms
expire at the 1999 annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" MESSRS.
KENNEDY, PASCH AND DRUCKER AS DIRECTORS UNTIL THE 2002 ANNUAL MEETING OF
STOCKHOLDERS OR UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
4
<PAGE> 8
WHAT IF A NOMINEE IS UNWILLING TO SERVE?
Each of the nominees has consented to serve a three-year term. If any of
them should become unavailable to serve as a director, the board may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the board. In no event will proxies be voted
for the election of more than three nominees to the board of directors.
WHAT IS THE BACKGROUND OF THIS YEAR'S NOMINEES?
John Kennedy has served as Vice President and a director of RailWorks since
its inception in March 1998, and Chief Operating Officer -- Track Contractors
since January 1999. From March 1998 to January 1999, he was Chief Operating
Officer of RailWorks. Mr. Kennedy has served as President of Kennedy Railroad
Builders, Inc. ("Kennedy"), a company that has been acquired by RailWorks, from
June 1965 to February 1998, as President of Railcorp, Inc. from April 1986 to
February 1998 and as Principal of Alpha-Keystone Engineering, Inc. from January
1996 to February 1998. From 1980 to 1988, Mr. Kennedy served as an Elected
Member of the Pennsylvania House of Representatives.
Peter Alan Pasch has served as a director of RailWorks since its initial
public offering (the "IPO") in August 1998 and as Vice President and Chief
Operating Officer -- Transit Operations since January 1999. From August 1998 to
January 1999, Mr. Pasch served as Chief Executive Officer of Comstock Holdings,
Inc. ("Comstock"), a company that has been acquired by RailWorks, and from April
1997 to August 1998 he served as President and Chief Operating Officer of
Comstock. From October 1995 to April 1997, Mr. Pasch served as Executive Vice
President of Comstock in charge of operations outside the New York Metropolitan
area. Mr. Pasch served as Executive Vice President of Comstock from October 1987
to September 1995. Mr. Pasch joined Comstock in 1973 after receiving his Master
of Engineering Degree from Rensselaer Polytechnic Institute. Mr. Pasch is a
Registered Professional Engineer in 45 states, a Master Electrician in 18 states
and is a member of the International Brotherhood of Electrical Workers.
Ronald W. Drucker has been a director of RailWorks since June 1998. Mr.
Drucker has been an independent consultant on transportation and technology
issues since May 1992. From September 1966 to April 1992, Mr. Drucker served in
various capacities for CSX Corporation and certain of its subsidiaries,
including Chief Engineer, Senior Vice President for Transportation and President
and Chief Executive Officer of CSX Rail Transport. Additionally, from December
1989 to October 1997, he was the Chairman of the Board of Encompass, a global
logistics information partnership. Mr. Drucker also serves on the board of
directors of SunTrust Bank, North Florida, N.A., Landstar System, Inc.,
Jacksonville University, the National Defense Transportation Association and the
New World Symphony Orchestra.
WHO ARE THE DIRECTORS CONTINUING IN OFFICE?
Term Expiring 2000:
Michael R. Azarela has served as the Executive Vice President, Chief
Financial Officer and a director of RailWorks since May 1998. Mr. Azarela was
Chief Executive Officer of Comstock from February 1998 to August 1998 and Senior
Vice President and Chief Financial Officer of Comstock Group, Inc. ("CGI") and
Spie Enertrans S.A. ("Spie") from May 1994 to February 1998, Chairman of the
Board of Comstock Holdings, Inc. since November 1996 and Vice President and
Treasurer of L.K. Comstock & Co., Inc. ("L.K. Comstock") from September 1992 to
April 1994 and in various other positions at Comstock since June 1983. Mr.
Azarela is a certified public accountant and has a Master of Business
Administration from Iona College.
Steve C. Goggin has served as a director of RailWorks since the IPO and as
President of Merit Railroad Contractors, Inc. ("Merit"), a company that has been
acquired by RailWorks, since October 1986. Mr. Goggin is a past President of the
National Railroad Construction and Maintenance Association, Inc. (the "NRCMA").
5
<PAGE> 9
Lambertus L. Tameling has served as a director of RailWorks since the IPO,
as President of U.S. Trackworks, Inc. ("U.S. Trackworks"), a company that has
been acquired by RailWorks, since April 1986 and as President of Northern Rail
Service and Supply Co. since February 1992. Mr. Tameling is a past President of
the NRCMA.
Term Expiring 2001:
John G. Larkin has been the Chairman of the Board and Chief Executive
Officer and a director of RailWorks since its inception in March 1998. For the
past 21 years, Mr. Larkin has worked in the transportation industry. From
December 1994 to February 1998, Mr. Larkin was a managing director of BT Alex.
Brown Incorporated, where he focused on the transportation industry. Prior
thereto, he served in various capacities at BT Alex. Brown Incorporated since
1987, including as an equity research analyst, focused exclusively on the
transportation industry. From 1986 to 1987, Mr. Larkin was Assistant Vice
President of CSX Transportation, Inc., where he was responsible for strategic
planning and analysis. From 1985 to 1986, Mr. Larkin was Director of Strategic
Planning of Seaboard System Railroad, Inc. From January 1979 through July of
1982, Mr. Larkin served as an engineering project coordinator for Day &
Zimmermann, Inc., an engineering and construction management firm. During this
period, Mr. Larkin was focused exclusively on railroad and rail transit design
and valuation projects. Mr. Larkin has a Master of Business Administration from
Harvard University and a Master of Science in Civil Engineering from the
University of Texas.
Scott D. Brace has served as a director of RailWorks and President of
Railroad Service, Inc. ("Railroad Service"), a company that has been acquired by
RailWorks, since the IPO. Mr. Brace has served as Vice President of Railroad
Service since May 1989 and as President of Minnesota Railroad Service, Inc.
since May 1989. Mr. Brace is President-elect of the NRCMA.
R.C. Matney has been a director of RailWorks since June 1998. Mr. Matney
has been President, Chairman of the Board and Chief Executive Officer of Mark
VII Transportation Company, Inc., since he founded the company in August 1987.
From March 1985 to December 1988, he served as President of American President
Distribution Services, Inc. Prior thereto, Mr. Matney was the President of the
Surface Transportation Group of Brae Corporation from October 1980 to March
1985. Mr. Matney is a former member of the Intermodal Freight Committee of the
National Transportation Research Board.
HOW ARE DIRECTORS COMPENSATED?
Cash Compensation. Directors who are not currently receiving compensation
as officers, employees or consultants of RailWorks are entitled to receive fees
of $2,000 per board meeting attended and $1,000 per committee meeting attended,
plus reimbursement of expenses for each meeting of the board of directors and
each committee meeting that they attend in person. Directors who are also
employees of RailWorks are not separately compensated for their service as
directors.
Options. Each non-employee director was granted options to purchase 10,000
shares of common stock upon consummation of the IPO on August 4, 1998. These
options are exercisable at $12.00 per share in 25% increments on August 4 of
each of 1999, 2000, 2001 and 2002, and expire on August 4, 2008.
HOW OFTEN DID THE BOARD MEET DURING 1998?
The board of directors met four times during 1998. Each director attended
more than 75% of the total number of meetings of the board of directors and
committees on which he served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The board of directors has standing compensation and audit committees.
Compensation Committee. The compensation committee consists of Messrs.
Drucker and Matney, RailWorks' two independent directors. The compensation
committee establishes salaries, incentives and other forms of compensation for
senior officers of RailWorks, administers RailWorks' incentive
6
<PAGE> 10
compensation and benefit plans and recommends policies relating to such plans.
This committee met one time in 1998.
Audit Committee. The audit committee consists of Messrs. Drucker and
Matney. This Committee reviews RailWorks' accounting practices, internal
accounting controls and financial results and oversees the engagement of
RailWorks' independent auditors. The audit committee met one time in 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. Drucker nor Mr. Matney, the members of the compensation
committee, has engaged in related party transactions with RailWorks.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS (ITEM 2)
RailWorks has appointed Arthur Andersen LLP as RailWorks' independent
accountants for the fiscal year ending December 31, 1999. Arthur Andersen LLP
has served as RailWorks' independent accountants since its inception in 1998.
Representatives of Arthur Andersen LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as they
may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS RAILWORKS' INDEPENDENT ACCOUNTANTS
FOR FISCAL 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of certain transactions and relationships
between RailWorks and certain officers, directors and principal stockholders of
RailWorks. On August 4, 1998, RailWorks acquired in separate concurrent
transactions 14 groups of companies (the "Founding Companies") engaged
principally in the rail system services and products business and RailWorks
consummated its IPO. Set forth below also is certain information regarding
transactions and relationships prior to the IPO between certain of the Founding
Companies and their respective officers, directors and principal stockholders.
GENERAL
Prior to the IPO, certain of the Founding Companies engaged in transactions
with companies that are under common ownership, which transactions are described
below. Since the IPO, transactions between RailWorks and its officers, directors
or principal stockholders must be approved by a majority of the disinterested
members of the board of directors.
ACQUISITION OF CERTAIN FOUNDING COMPANIES
On August 4, 1998, concurrently with the consummation of the IPO, RailWorks
acquired all of the outstanding stock of the Founding Companies. Certain of the
directors and executive officers of RailWorks were owners of certain of the
Founding Companies. These companies, and the consideration their owners received
in the acquisitions, are set forth below:
<TABLE>
<CAPTION>
CONSIDERATION
-----------------------------
SHARES OF
CASH COMMON STOCK
------------- ------------
<S> <C> <C>
FOUNDING COMPANY
Comstock Holdings, Inc.................................. $13.1 million 2,959,291
Kennedy Railroad Builders, Inc.......................... 2.8 million 386,795
Merit Railroad Contractors, Inc......................... 2.0 million 292,456
Railroad Service, Inc................................... 3.5 million 454,680
U.S. Trackworks, Inc.................................... 1.3 million 305,609
</TABLE>
7
<PAGE> 11
Michael R. Azarela, former Chief Executive Officer of Comstock, is
Executive Vice President, Chief Financial Officer and a director of RailWorks.
Upon completion of the IPO, Peter Alan Pasch, then President and Chief Operating
Officer of Comstock became a director of RailWorks. John Kennedy, then President
of Kennedy, is the Vice President and Chief Operating Officer -- Track
Contractors and a director of RailWorks. Upon completion of the IPO, Steve C.
Goggin, President of Merit, Scott D. Brace, President of Railroad Service, and
Lambertus L. Tameling, President of U.S. Trackworks, became directors of
RailWorks. Each of Messrs. Azarela, Pasch, Kennedy, Goggin, Brace and Tameling
entered into a two-year employment agreement with RailWorks in connection with
the acquisition of the Founding Companies.
COMSTOCK
Effective January 1, 1997, Comstock acquired all of the outstanding stock
of L.K. Comstock from Spie for $5.0 million plus a contingent payment of up to
$5.0 million based on 1997, 1998 and 1999 pre-tax income (the "Comstock
Acquisition"). In May 1998, Comstock agreed to pay Spie $1.6 million in lieu of
such contingent payment, which amount was paid by RailWorks on September 8,
1998.
In connection with the Comstock Acquisition, Comstock, L.K. Comstock, Spie
and CGI entered into an Indemnity and Cooperation Agreement pursuant to which
L.K. Comstock issued a contingent promissory note to Spie in the amount of
approximately $14.9 million (the "Contingent Note") collateralized by any
proceeds derived from three projects (the "Spie Projects") for which Comstock
had not been fully paid. Each of these projects is the subject of a lawsuit in
which L.K. Comstock seeks payment of a portion of the contract price. In each
proceeding, the defendant has filed a counterclaim against L.K. Comstock for
breach of contract. Spie is obligated to indemnify L.K. Comstock for all losses
and expenses incurred with respect to these lawsuits. The Contingent Note is
payable only from amounts collected by L.K. Comstock with respect to the Spie
Projects prior to April 3, 2007, at which time the Contingent Note will be
canceled. As such, Spie and any successor or creditor may not look to any other
assets of L.K. Comstock or RailWorks to satisfy the Contingent Note.
RELATED PARTY LEASES
During 1998, companies controlled by Mr. Goggin and his spouse leased
certain property and equipment to one of the operating companies. Property lease
payments made by such operating company totaled approximately $81,000 in 1998.
Equipment lease payments made by such operating company totaled approximately
$250,000 in 1998.
LOANS TO OFFICERS
Pursuant to terms of employment agreements, RailWorks made loans to certain
of its executive officers to cover income taxes due with respect to grants of
restricted common stock. These loans, which are due in full on August 4, 2003,
were in the following principal amounts: John G. Larkin -- $609,000; Michael R.
Azarela -- $126,000; and John Kennedy -- $95,000.
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
RailWorks has employment agreements with each of Messrs. Larkin, Azarela
and Kennedy. The agreements expire on December 31, 2001 (the "Expiration Date")
and will continue on a year-to-year basis, unless terminated by either party.
Each agreement is terminable by RailWorks with or without cause or upon the
employee's death or inability to perform his duties on account of a disability
for a period of six months during any consecutive 12-month period or by the
employee. The agreements provide for annual base salaries of $275,000, $200,000
and $100,000 for Messrs. Larkin, Azarela and Kennedy, respectively, and provide
that these executive officers will receive 5%, 2% and 1.5% respectively, of
RailWorks' first bonus pool (the "First Bonus Pool") and 33.3%, 13.3% and 10.0%,
respectively, of RailWorks' second
8
<PAGE> 12
bonus pool (the "Second Bonus Pool"). The First Bonus Pool consists of 10% of
RailWorks' pre-tax profits, and the Second Bonus Pool consists of 15% of the
amount by which RailWorks' net income exceeds certain benchmarks. In addition,
the agreements provided for the grant of shares of restricted stock, as
described under the heading "Executive Compensation Summary Table" below. The
agreements provide further that the employee may request a loan from RailWorks
in the amount of the income taxes due on stock granted to the employee under his
employment agreement. These loans are collateralized only by the stock granted
and the employee otherwise has no personal obligation to repay the loan. The
term of these loans is five years, requiring annual interest payments; however,
the term is accelerated following termination of employment. Each agreement also
contains noncompetition, nonsolicitation and confidential information
provisions.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth the total compensation earned by the Named
Executive Officers for services rendered in all capacities to RailWorks during
the year ended December 31, 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
-------------------- RESTRICTED ALL OTHER
NAME POSITION SALARY BONUS STOCK AWARDS COMPENSATION
- ---- -------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John G. Larkin........ Chairman of the Board $236,842 -- 678,299 --
and Chief Executive
Officer
Michael R. Azarela.... Executive Vice 83,333(2) $23,000 150,735 $85,001(1)
President, Chief
Financial Officer
John Kennedy.......... Vice President, Chief 41,667(2) -- 150,735 --
Operating Officer --
Track Contractors
Peter Alan Pasch...... Vice President, Chief 83,333(2) 23,000 -- 21,200(3)
Operating Officer --
Transit
</TABLE>
- ---------------
(1) Represents $39,801 in moving expenses that were paid by RailWorks, $2,000 in
automobile allowance, $1,000 in life insurance premiums, $34,000 in FICA and
$8,200 in 401(k) contributions.
(2) Does not reflect compensation earned for services rendered by the Named
Executive Officers to their respective Founding Companies prior to the IPO.
(3) Represents $3,000 in automobile allowance, $2,000 in life insurance
premiums, $8,000 in FICA and $8,200 in 401(k) contributions.
Stock Options. As of December 31, 1998, none of the Named Executive
Officers had been granted any options to purchase common stock.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors has furnished the
following report on executive compensation for fiscal 1998.
RailWorks began operating as a holding company in August 1998. The initial
compensation structure for RailWorks' executive officers was primarily
determined by the board of directors and is set forth in employment agreements
with each executive officer. The employment agreements generally provide for an
annual base salary and annual performance-based and discretionary bonus awards.
See "-- Employment Agreements" above. Pursuant to the employment agreements, in
1998 Messrs. Larkin, Azarela and Kennedy were awarded an aggregate of 979,769
restricted shares of common stock upon consummation of
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<PAGE> 13
RailWorks' initial public offering. See "-- Executive Compensation Summary
Table" above. In determining compensation levels, the board considered, among
other things, competitive market conditions, projected company earnings and the
executive officers' salaries prior to consummation of the acquisition by
RailWorks of the founding companies by which executive officers were employed.
Annual salary increases will be considered by the compensation committee upon
the recommendation of the Chief Executive Officer. RailWorks' overall goal is to
remain competitive with the marketplace on a total compensation basis, including
base salary and annual and long-term incentives.
RailWorks uses long-term incentive compensation to compensate for
achievement of performance measures which extend beyond one year, while at the
same time aligning management's interests with the interests of stockholders.
The compensation committee believes that stock-based awards are most appropriate
for long-term incentive compensation. In 1998, RailWorks adopted the 1998
Incentive Stock Plan (the "Incentive Plan"). Individual awards under the
Incentive Plan may take the form of one or more of (1) stock options, (2) stock
appreciation rights, (3) restricted or deferred stock, (4) dividend equivalents,
(5) bonus awards in lieu of company obligations to pay cash compensation and (6)
other awards the value of which is based in whole or in part upon the value of
RailWorks' common stock. The compensation committee administers the Incentive
Plan and generally selects the individuals who receive rewards based on the
recommendation of the Chief Executive Officer.
In 1998, John G. Larkin, RailWorks' Chairman of the Board and Chief
Executive Officer, earned $236,842 in base salary (based on a salary rate of
$275,000 per year) and was granted 678,299 restricted shares of common stock.
The compensation committee believes Mr. Larkin has been responsible for much of
RailWorks' initial success. Mr. Larkin has assembled an outstanding management
group and has furnished leadership in all areas of RailWorks' business.
THE COMPENSATION COMMITTEE
Ronald W. Drucker
R.C. Matney
The Compensation Committee Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934 (together, the "Acts"), except to
the extent RailWorks specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
10
<PAGE> 14
PERFORMANCE GRAPH
The following stock price performance graph compares RailWorks' stock price
performance to the Russell 2000 Index and RailWorks' two peer group indices. The
stock price performance graph assumes an investment of $100 in RailWorks, the
Russell 2000 Index and in the two peer group indices on July 30, 1998 (the date
that the common stock was first publicly traded) and measures the return thereon
at various points based on closing prices on the dates indicated, assuming
reinvestment of dividends. RailWorks' peer groups consist of: (1) certain
companies that provide services and products to rail systems -- Harmon
Industries, Inc. (HRMN), ABC - NACO, Inc. (ABCR), Greenbrier Companies, Inc.
(GBX), Johnstown America Industries Inc. (JAII) and Motive Power Industries,
Inc. (MPO); and (2) consolidating companies in the contracting
industry -- Integrated Electrical Services, Inc. (IES), Group Maintenance
America Corp. (MAK), Emcore Group, Inc. (EMCG) and Quanta Services, Inc. (PWR).
CHART
<TABLE>
<CAPTION>
Rail Services Contractor
Measurement Period Russell 2000 and Products Consolidator
(Fiscal Year Covered) RailWorks Index Peer Group Peer Group
<S> <C> <C> <C> <C>
7/30/98 100 100 100 100
8/31/98 100 78.68 76.13 80.12
9/30/98 68.48 84.65 87.23 81.53
10/30/98 57.61 88.05 93.04 85.52
11/30/98 70.65 92.61 97.60 97.31
12/31/98 71.74 98.24 96.66 104.32
</TABLE>
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under either of the Acts, except to the extent RailWorks specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
OTHER MATTERS
As of the date of this Proxy Statement, RailWorks knows of no business that
will be presented for consideration at the annual meeting other than the items
referred to above. If any other matter is properly bought before the meeting for
action by stockholders, proxies in the enclosed form returned to RailWorks will
be voted in accordance with the recommendation, in accordance with the judgment
of the proxy holder.
11
<PAGE> 15
ADDITIONAL INFORMATION
Stockholder Proposals. Any stockholder proposals intended to be presented
at the 2000 annual meeting of stockholders and eligible for inclusion in the
Proxy Statement and form of proxy to be distributed by the board of directors in
connection with such meeting must be submitted to RailWorks in writing on or
before December 31, 1999. Any stockholder proposals intended to be presented
from the floor at RailWorks' 2000 annual meeting of stockholders must be
submitted to RailWorks in writing on or before March 16, 2000 or the persons
appointed as proxies may exercise their discretionary voting authority with
respect to the stockholder proposal.
Annual Report on Form 10-K. RAILWORKS WILL PROVIDE WITHOUT CHARGE A COPY
OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS), UPON THE WRITTEN
REQUEST OF ANY STOCKHOLDER AS OF RECORD AS OF APRIL 15, 1999. Copies of exhibits
to the Annual Report on Form 10-K will be furnished (upon payment of RailWorks's
reasonable expenses in furnishing such exhibits) upon request to:
RailWorks Corporation
1104 Kenilworth Drive
Suite 301
Baltimore, Maryland 21204
Attention: Corporate Secretary
Proxy Solicitation Costs. The proxies being solicited hereby are being
solicited by RailWorks. The cost of soliciting proxies in the enclosed form will
be borne by RailWorks. RailWorks has retained MacKenzie Partners, 156 Fifth
Avenue, PH 3, New York, New York 10010, to aid in the solicitation. For these
services, RailWorks will pay MacKenzie Partners a fee of $2,500 and reimburse it
for certain out-of-pocket disbursements and expenses. Officers and regular
employees of RailWorks may, but without compensation other than their regular
compensation, solicit proxies by further mailing or personal conversations, or
by telephone, telex, facsimile or electronic means. RailWorks will, upon
request, reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of stock.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires executive officers and directors of
RailWorks and persons who beneficially own more than ten percent of RailWorks'
common stock to file with the Securities and Exchange Commission certain
reports, and to furnish copies thereof to RailWorks, with respect to each such
person's beneficial ownership of RailWorks' equity securities. Based solely upon
a review of the copies of such reports furnished to RailWorks and certain
representations of such persons, RailWorks believes that all filings were
timely.
By order of the board of directors,
JOHN G. LARKIN
Chairman of the Board and
Chief Executive Officer
April 29, 1999
12
<PAGE> 16
RAILWORKS CORPORATION
PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 27, 1999
The undersigned hereby appoints JOHN G. LARKIN and MICHAEL R. AZARELA, and
each of them, Proxies, with full power of substitution and resubstitution, for
and in the name of the undersigned, to vote all shares of stock of RailWorks
Corporation ("RailWorks"), which the undersigned would be entitled to vote if
personally present at the 1999 Annual Meeting of Stockholders to be held on
Thursday, May 27, 1999, beginning at 10:00 a.m. local Baltimore time, at
RailWorks' offices at 1104 Kenilworth Drive, Suite 301, Baltimore, Maryland
21204 and at any adjournment thereof, upon the matters described in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement,
receipt of which is hereby acknowledged, and upon any other business that may
properly come before the meeting or any adjournment thereof. Said Proxies are
directed to vote on the matters described in the Notice of Annual Meeting and
Proxy Statement as follows, and otherwise in their discretion upon such other
business as may properly come before the annual meeting or any adjournment
thereof.
Proposal No. 1. To elect three directors to serve three-year terms, as follows:
John Kennedy
Peter Alan Pasch
Ronald W. Drucker
<TABLE>
<S> <C>
[ ] FOR ALL NOMINEES
(except as marked to the contrary)
<CAPTION>
<S> <C>
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
Proposal No. 2. To ratify the action of the board of directors appointing Arthur
Anderson LLP as RailWorks' independent auditors for the year
ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the annual meeting.
(PLEASE SIGN ON REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" ALL PROPOSALS. IF ANY OTHER MATTERS ARE PROPERLY PRESENTED AT THE ANNUAL
MEETING FOR ACTION TO BE TAKEN THEREUNDER, THIS PROXY WILL BE VOTED ON SUCH
MATTERS BY THE PERSONS NAMED AS PROXIES HEREIN IN ACCORDANCE WITH THEIR BEST
JUDGMENT.
Dated:
-------------------------, 1999
-------------------------------------
(Signature)
-------------------------------------
(Signature)
(Name(s))
---------------------------
Please sign exactly as your name or
names appear hereon. Where more than
one owner is shown above, each should
sign. When signing in a fiduciary or
representative capacity, please give
full title. If this Proxy is
submitted by a corporation, limited
liability company or partnership, it
should be executed in the full entity
name by a duly authorized officer,
member or partner, as the case may
be.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU ATTEND
THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
