<PAGE>
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:
/ / 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 Section240.14a-11(c) or
Section240.14a-12
ALLIED PRODUCTS 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
10 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
Telephone: (312) 454-1020
TO OUR STOCKHOLDERS:
This letter affords me the opportunity to extend a cordial invitation to all our
stockholders to attend the 1999 Annual Meeting on Friday, June 18, 1999. At this
meeting there will be ample time to answer your questions and thoroughly discuss
our Company's affairs.
Enclosed you will find the Notice of our Annual Meeting, together with a Proxy
Statement and a Proxy card, and a copy of our 1998 Annual Report. The Proxy
Statement describes the matters to be considered at the meeting. If you are
unable to attend the meeting in person, please complete and return the enclosed
Proxy so that your shares are represented and voted. We would appreciate your
prompt attention to this matter.
Very truly yours,
RICHARD A. DREXLER
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Chicago, Illinois
April 30, 1999
<PAGE>
[LOGO]
10 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
Telephone: (312) 454-1020
- ------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
ON June 18, 1999
- ---------------------------------
Notice is hereby given that the Annual Meeting of Stockholders of ALLIED
PRODUCTS CORPORATION (herein referred to as "Allied" or the "Company") will be
held on Friday, June 18, 1999 at 9:30 o'clock A.M. (Chicago Time) in the
Shareholders Room, 21st Floor, Bank of America, 231 South LaSalle Street,
Chicago, Illinois 60697, for the following purposes:
1. To elect two directors in accordance with the Company's By-Laws.
2. To act upon any other business as may properly come before the meeting or
any adjournment or adjournments thereof.
Only stockholders of record as shown by the transfer books of Allied at the
close of business on May 7, 1999, are entitled to notice of, and to vote at,
this Annual Meeting.
All stockholders are invited to attend this Annual Meeting in person. Those
stockholders who are unable to attend in person are respectfully urged to
execute and return the enclosed Proxy at their earliest convenience. Since
attendance in person or by proxy of a majority of the outstanding shares is
required at the meeting in order to transact business, promptness in returning
the executed Proxy will be appreciated. Stockholders who execute a Proxy may
nevertheless attend the meeting and vote their shares in person.
By Order of the Board of Directors
ALLIED PRODUCTS CORPORATION
Mark C. Standefer
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
April 30, 1999
<PAGE>
- ---------------------------------
PROXY STATEMENT
- ------------------------------
ANNUAL MEETING OF STOCKHOLDERS
OF ALLIED PRODUCTS CORPORATION
June 18, 1999
SOLICITATION OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of ALLIED PRODUCTS
CORPORATION (herein referred to as "Allied" or the "Company") for use at the
Annual Meeting of Stockholders, to be held on Friday, June 18, 1999, and at any
and all adjournments thereof. Any Proxy given may be revoked with respect to any
matter by notice in writing to the Secretary of Allied at any time prior to its
use, by delivering another later dated proxy or by voting in person at the
Annual Meeting. Pursuant to Delaware General Corporation Law, the presence, in
person or represented by proxy, of a majority of the shares entitled to vote is
required for a quorum. Directors are elected by a plurality of the votes cast at
a meeting at which a quorum is present. "Plurality" means that the individuals
who receive the largest number of votes are elected as directors up to the
maximum number of directors to be chosen at the meeting. Consequently, as long
as a quorum is established any shares not voted (whether by withholding
authority or otherwise) have no impact on the election of directors except to
the extent the failure to vote for an individual results in another individual's
receiving a larger number of votes.
The cost of preparing, assembling and mailing this Proxy Statement and the
material enclosed herewith is being borne by the Company. The Company has
engaged Georgeson & Company Inc. to assist in the solicitation of proxies from
stockholders at an estimated fee of $7,500. Upon request, the Company will
reimburse brokerage houses and other custodians and fiduciaries holding stock of
record for reasonable out-of-pocket expenses incurred in forwarding proxy
solicitation material to the beneficial owners of such stock. Directors,
officers, and certain regular employees of the Company, without additional
compensation, may solicit Proxies personally or by telephone or other means.
This Proxy Statement and the enclosed proxy card were first mailed to the
stockholders on or about May 14, 1999.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on May 7, 1999, as the
record date for the determination of stockholders entitled to notice of this
Annual Meeting, and only stockholders of record on that date will be entitled to
vote thereat.
As of [April 30, 1999, 11,818,609] shares of Common Stock (par value $.01 per
share), were issued and outstanding, each of which shares is entitled to one
vote on the election of directors.
As of March 31, 1999, Allied's SMART and SIP Plans (employee benefit plans
formed pursuant to Section 401(k) of the Internal Revenue Code) holds 418,644
shares of Common Stock representing 3.54% of the outstanding shares of Allied
Common Stock. CTC Illinois Trust Company acts as trustee for the SMART and SIP
Plans. The shares held in the SMART and SIP Plans have been credited to the
individual accounts of the participants in the SMART and SIP Plans and will be
voted in accordance with instructions of such participants. Shares in the SMART
and SIP Plans with respect to which participants
2
<PAGE>
fail to return voting instructions (other than in the PAYSOP accounts) will be
voted on each issue by an advisory committee composed of three members, Lloyd A.
Drexler, S.S. Sherman and Richard A. Drexler, in the same proportion as all
other outstanding shares are voted. All PAYSOP account shares (approximately
16,028 shares) with respect to which participants fail to return voting
instructions will not be voted. Those shares held in the SMART and SIP Plans
which have not been credited to participants' accounts will be voted by the
advisory committee in its discretion.
BENEFICIAL OWNERS
Mr. S.S. Sherman and Messrs. Lloyd A. Drexler and Richard A. Drexler combined,
directors of the Company, beneficially own more than 5% of Allied Common Stock.
See the table set forth under the caption "Election of Directors - Principal
Stockholders and Management Ownership" and the notes thereto for information
concerning their ownership.
The Company was notified on April 9, 1999 that The Prudential Insurance Company
of America whose address is 751 Broad Street, Newark, New Jersey 07102,
beneficially owned 770,334 shares of Common Stock representing approximately
6.52% of the outstanding shares of Allied Common Stock. It has sole voting power
over only 426,720 shares.
The Company was notified on February 5, 1999 that Neuberger & Berman L.P., whose
address is 605 Third Avenue, New York, New York 10158-3698, beneficially owned
706,876 shares of Common Stock representing approximately 6.01% of the
outstanding shares of Allied Common Stock. It has sole voting power over only
482,476 shares.
The Company was notified on February 12, 1999 that Dimensional Fund Advisors,
whose address is 1299 Ocean Avenue, Santa Monica, California 90401, beneficially
owned 785,317 shares of Common Stock representing approximately 6.64% of the
outstanding shares of Allied Common Stock. It has sole voting power over these
785,317 shares.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The directors are classified into three groups, with each group being as nearly
equal in number as possible. One class of directors generally is elected at each
year's Annual Meeting for a three-year term and to continue in office until
their successors are elected and qualified. In 1993, the Board of Directors
adopted a policy which provides that Directors who are not employees of the
Company and who turn 70 after the date of the adoption of the policy shall be
asked to tender their resignation from the Board at the first Annual Meeting of
the shareholders of the Company after they reach 70. Such Directors are not
eligible to stand for election to the Board thereafter. Mr. Puth and Mr. Fischer
both recently attained the age of 70.
The Board of Directors presently consists of eight members. In light of the
above stated Board policy, Mr. Puth and Mr. Fischer will tender their
resignation at or prior to the Annual Meeting. The Board of Directors, in
accordance with the Bylaws, has reduced the size of the Board to six members
effective upon the resignation of Mr. Puth and Mr. Fischer. Mr. S.S. Sherman and
Mr. Stanley J. Goldring, both of whom are presently directors of the Company,
are being nominated for election to Class C with a three-year term expiring in
2002. Mr. Sherman's term expires at this year's meeting and Mr. Goldring, whose
term was to expire in 2001, is being moved to Class C in order to balance out
the number of directors in each class.
THE FOLLOWING SETS FORTH CERTAIN BIOGRAPHICAL INFORMATION, PRESENT OCCUPATION
AND BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS FOR EACH OF THE NOMINEES AS WELL
AS THE TERM OF OFFICE FOR WHICH EACH IS BEING NOMINATED:
CLASS C DIRECTORS (TERM EXPIRES IN 2002)
S.S. SHERMAN, age 81, was the Co-Chairman of the Board from 1992 until 1993. He
was Chairman of the Board from 1973 until 1992 and has been a member of the
Board of Directors since 1963.
STANLEY J. GOLDRING, age 53, is Senior Managing Director of Punk Ziegel &
Company, an investment advisory company. From December 1996 until 1998, Mr.
Goldring was Senior Managing Director of J.W. Charles, Inc., an investment
banking company. Prior to December 1996, Mr. Goldring was Senior Managing
Director of Ladenburg, Thalman & Company, Inc. an investment banking company,
for thirteen years. Ladenburg, Thalman & Company, Inc., J.W. Charles, Inc., and
now, Punk Ziegel & Company have served as an investment manager for certain
funds held by the Trustee for certain of the Company's defined benefit pension
plans and accordingly received a management fee from the trustee. Mr. Goldring
has been involved in various aspects of analytical research, money management
and investment banking over the course of his 25-year career on Wall Street. He
has been a member of the Board of Directors since August 1993.
Both of the above individuals are currently directors of the Company. Any
director may resign or may be removed as provided in the By-Laws. It is intended
that proxies received in response to this solicitation will be voted in favor of
the nominees unless otherwise specified in the proxy.
If for any reason any of such nominees should be unable to serve (a situation
which is not presently contemplated), it is intended that the proxies will be
voted for such other person or persons as the Board of Directors shall
designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE TWO NOMINEES
FOR DIRECTOR.
4
<PAGE>
THE FOLLOWING SETS FORTH CERTAIN BIOGRAPHICAL INFORMATION, PRESENT OCCUPATION
AND BUSINESS EXPERIENCE FOR THE PAST FIVE YEARS FOR EACH OF THE OTHER MEMBERS OF
THE BOARD OF DIRECTORS:
CLASS A DIRECTORS (TERM EXPIRES IN 2000)
RICHARD A. DREXLER, age 51, has been Chairman of the Board since 1993, President
since 1982 and Chief Executive Officer since 1986. He has been a member of the
Board of Directors since 1982. Mr. Drexler is a director of ABC/NACO, a public
company engaged in the manufacture of products for the railroad industry.
MITCHELL I. QUAIN, age 47, has been a member of the Board of Directors since
February, 1995. Mr. Quain has been executive vice president of Ing Baring Furman
Selz, LLC, an investment banking firm from 1997 to the present. Prior to that,
and since 1988, he was a managing director of Schroder Wertheim & Company, an
investment banking firm. Schroder Wertheim & Company served as an independent
buying agent during 1996 and 1997 with respect to the Company's share repurchase
program and accordingly received commissions from the Company. He is also a
director of Strategic Distribution, Inc., an industrial distributor, Mechanical
Dynamics, Inc., an engineering oriented software company and Titan
International, a manufacturer of off-highway components.
CLASS B DIRECTORS (TERM EXPIRES IN 2001)
LLOYD A. DREXLER, age 81, was the Co-Chairman of the Board from 1992 until 1993
and he has been a member of the Board of Directors since 1963. Previously, he
was Chairman of the Executive Committee from 1986 until 1992. Mr. Drexler is the
father of Mr. Richard A. Drexler.
JOHN E. JONES, age 64, has been a member of the Board of Directors since 1974.
Mr. Jones is the retired Chairman of the Board, President and Chief Executive
Officer of CBI Industries, Inc., which was engaged in contracting services and
the manufacture of industrial gases. He served in that function from 1989
through January 1996. Mr. Jones is a director of NICOR Inc., a gas utility
company, Amsted Industries Incorporated, a railroad supply company, Valmont
Industries, Inc., an irrigation and industrial products company, The Interlake
Corporation, which is in the powdered metal and material handling business, and
BWAY Corp., which is in the container business.
5
<PAGE>
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of March 31, 1999, regarding the
beneficial ownership of capital stock of the Company by each director of the
Company, the Company's Chief Executive Officer, each of the Company's executive
officers named in the Summary Compensation Table on Page 10 and the directors
and executive officers of the Company as a group. Except as otherwise indicated,
the shareholders listed in the table have sole voting and investing powers with
respect to the capital stock owned by them.
<TABLE>
<CAPTION>
PERCENT
NAME OF BENEFICIAL OWNER OR GROUP CLASS AMOUNT OF CLASS
- ------------------------------------------------------- ----------- ---------------- -----------
<S> <C> <C> <C>
Lloyd A. Drexler....................................... Common 502,827(1) 4.05
Richard A. Drexler..................................... Common 525,432(2) 4.23
William D. Fischer..................................... Common 36,500(3) *
Robert J. Fleck........................................ Common 56,525(4) *
Stanley J. Goldring.................................... Common 28,500(3) *
John E. Jones.......................................... Common 73,438(3) *
Bobby Middlebrooks..................................... Common 35,036(5) *
Richard W. Metzger..................................... Common 46,500(6) *
John W. Puth........................................... Common 46,500(3) *
Mitchell I. Quain...................................... Common 39,750(7) *
S.S. Sherman........................................... Common 805,172(8) 6.29
Mark C. Standefer...................................... Common 20,911(9) *
All Executive officers and directors as a group (12
persons)............................................. Common 2,134,857(10) 17.18
</TABLE>
- ------------------------
* Less than 1% of class.
(1) Includes 161,567 shares in his own name of which 135,898 shares of
restricted stock; 251,260 shares owned by a partnership of which Mr. Lloyd
Drexler is a partner and 63,000 shares owned by Mr. Drexler's wife and by a
family trust of which Mr. Drexler's wife is the trustee. Also includes
27,000 shares which Mr. Drexler has the right to acquire by exercise of
stock options within sixty days of the date of this proxy statement.
(2) Includes 160,537 shares in his own name of which 56,713 shares of restricted
stock; 145,000 shares owned by a family corporation, of which Mr. Drexler is
President; 53,830 shares credited to Mr. Drexler's account in the Company's
401(k) Plan; 30,000 held in joint tenancy with his spouse and 136,065 shares
which Mr. Drexler has the right to acquire by exercise of stock options
within sixty days of the date of this proxy statement.
(3) Includes 27,000 shares which each of Messrs. Fischer, Goldring, Jones and
Puth has the right to acquire by exercise of stock options within sixty days
of the date of this proxy statement.
(4) Consists of 1,062 shares of restricted stock; 16,963 shares credited to Mr.
Fleck's account in the Company's 401(k) Plan and 38,500 shares which Mr.
Fleck has the right to acquire by exercise of stock options within sixty
days of the date of this proxy statement.
6
<PAGE>
(5) Consists of 3,100 shares of restricted stock; 26,000 shares which Mr.
Middlebrooks has the right to acquire by exercise of stock options within
sixty days of the date of this proxy statement; and 5,936 shares credited to
Mr. Middlebrooks' account in the Company's 401(k) Plan.
(6) Consists of 1,704 shares credited to Mr. Metzger's account in the company's
401(K) plan and 21,000 shares which Mr. Metzger has the right to acquire by
exercise of stock options within 60 days of the date of this proxy.
(7) Includes 26,250 shares which Mr. Quain has the right to acquire by exercise
of stock options within sixty days of the date of this proxy statement.
(8) Includes 208,048 shares in his own name of which shares 93,244 are
restricted stock; 570,124 shares owned by a family corporation of which Mr.
Sherman, his wife and children are stockholders and a foundation controlled
by Mr. Sherman's spouse; and 27,000 shares which Mr. Sherman has the right
to acquire by exercise of stock options within sixty days of the date of
this proxy statement.
(9) Consists of 165 shares of restricted stock; 6,496 shares credited to Mr.
Standefer's account in the Company's 401(k) Plan and 14,250 shares which Mr.
Standefer has the right to acquire by exercise of stock options within sixty
days of the date of this proxy statement.
(10) Includes 424,065 shares which the group has the right to acquire by
exercise of stock options within sixty days of the date of this proxy
statement; 84,929 shares credited to the accounts of members of the group in
the Company's 401(k) Plan; and 290,182 shares of restricted stock.
MANAGEMENT COMPENSATION
REPORT OF STOCK OPTION AND COMPENSATION COMMITTEE
The Stock Option and Compensation Committee of the Board of Directors was
comprised during fiscal 1998 of Stanley J. Goldring, Chairman, John E. Jones and
John W. Puth, all outside directors of the Company. The Committee oversees the
administration of the Company's employee benefit plans and establishes policies
relating to compensation of employees. A subcommittee of the Stock Option and
Compensation Committee, comprised during fiscal 1998 of John E. Jones and John
W. Puth oversees the administration of certain of the Company's stock-based
compensation plans. All decisions by the Stock Option and Compensation Committee
relating to the compensation of the Company's executive officers are reviewed by
the full Board.
COMPENSATION POLICY
The objectives of the Company's executive compensation program are to:
- Support the achievement of desired Company performance.
- Provide compensation that will attract and retain superior talent and
reward performance.
- Align the executive officers' interests with the success of the Company.
Compensation of the Company's executive officers for 1998 was comprised
primarily of salary, annual cash bonus awards, long-term awards under the
Company's Incentive Stock Plan and various benefits, including medical and life
insurance, generally available to employees of the Company.
7
<PAGE>
In determining the compensation for the executive officers, the Stock Option and
Compensation Committee took into consideration a number of factors. As described
below, the Stock Option and Compensation Committee uses its discretion to set
executive compensation at levels warranted in its judgment by external, internal
or an individual's circumstances. In each year since 1996, a recognized
consulting firm in the field of executive compensation has analyzed and
categorized the duties of each of the executive officers and has also compiled
salary and incentive compensation information on similar officers at a number of
companies in general and manufacturing industries with revenues ranging from
$200 million to $500 million (the "Survey Group") selected by the compensation
consultant. The Stock Option and Compensation Committee reviewed such
information for the Survey Group and established targeted total compensation
(salary, annual bonus and long-term incentive awards) at the 50th percentile of
the Survey Group.
The Internal Revenue Code generally prohibits the Company from deducting
executive compensation in excess of $1,000,000 per year. Qualifying "performance
based" compensation is not subject to this deduction limitation if certain
requirements are satisfied. It is the Committee's general intent to preserve the
deductibility of executive compensation to the extent reasonably practicable and
to the extent consistent with its other compensation objectives. All
compensation paid by the Company with respect to 1998 was deductible.
SALARY
The base salaries of the Company's executive officers for 1998 were determined
in October 1997, with an effective date of January 1, 1998, and (other than for
the Chief Executive Officer) were designed to be competitive with the Survey
Group at approximately the 50th percentile of the base salary range for
executives in similar positions with companies in the Survey Group. Actual base
salaries were determined based on individual performance and experience.
BONUSES
In October 1997, the Committee established target bonuses relating to 1998
performance for each of the Company's executive officers. The target bonuses
were expressed as a percentage of base salary and ranged from 30% to 74% of base
salary. Target bonuses (other than for the Chief Executive Officer) were
established so that the total compensation would be competitive with the 50th
percentile of total cash compensation paid to comparable executives in the
Survey Group.
Payment of the bonuses was dependent upon Company and individual performance
during 1998. In particular, in determining the final bonus payment amounts, the
Committee considered the Company's financial and operating results during 1998,
the strategic acquisitions of Great Bend and Universal Turf, and certain other
corporate and individual initiatives. As a result, the Committee determined that
Mr. Middlebrooks, with direct operating responsibility for the Bush Hog division
would receive 100% of his target bonus, Messrs. Fleck and Standefer, as
executives at corporate headquarters, would receive 33 1/3% of their target
bonus, and executives at Verson would receive no bonus payments. These bonuses
were paid in cash in April 1999.
8
<PAGE>
LONG-TERM INCENTIVES
The Subcommittee of the Committee administers the Incentive Stock Plan, which
provides for the grant of any or all of the following types of awards: stock
options, stock appreciation rights, restricted stock and performance units. For
1998, the subcommittee chose to award stock options to executive officers.
Stock options were granted to executive officers during the third quarter of
1998 at an exercise price equal to the fair market value at the date of the
grant. The options have a 10-year term and vest over 2 years, with one-half of
the options becoming exercisable at the end of the first year and the remainder
vesting at the end of the second year. Since options were granted with an
exercise price equal to the market value of the Company's common stock at the
time of grant, they provide no value unless the Company's stock price increases
after the options are granted. These awards are thus tied to stock price
appreciation in excess of the stock's value at time of grant, rewarding
executives as if they shared in the ownership of the Company. The number of
shares subject to options for each executive officer is set forth in the Summary
Compensation Table on page 10.
CEO COMPENSATION
The 1998 compensation for Mr. Drexler consisted of the same components as the
compensation for other executive officers. Mr. Drexler's 1998 salary was
increased from $455,000 to $485,000, effective January 1, 1998, in order to keep
his base salary competitive with the Survey Group at approximately the 75th
percentile of the base salary range for executives in similar positions with
companies in the Survey Group. Mr. Drexler's 1998 targeted bonus was set at 65%
of his base salary, which the Committee believed to be an appropriate level
based on his performance and his prior experience. As a result of 1998
performance as described above, he received a payout of $113,750, representing
36% of his targeted bonus. The payment of his bonus was made in restricted
stock. The Committee felt that payment in restricted stock, rather than cash,
was an appropriate means to further tie his compensation to the performance of
the Company, particularly in light of the Company's disappointing stock
performance. The award of stock options made to Mr. Drexler was based on his
performance, leadership skills and positive reputation within the community and
industry.
Stanley J. Goldring, Chairman
John W. Puth
John E. Jones
9
<PAGE>
SUMMARY COMPENSATION TABLE
The table below sets forth certain information regarding compensation earned
during each of the Company's last three fiscal years by the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers, based on salary and bonus earned during fiscal 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- ----------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS COMPENSATION
NAMES AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (A) SAR'S # (B) ($)(C)
- ------------------------------------ --------- --------- --------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Drexler 1998 485,004 113,750* 52,500 4,800
Chairman, President 1997 455,004 315,250 30,000 9,096
and CEO 1996 400,008 395,750 1,378 60,000 8,409
Bobby Middlebrooks 1998 240,496 120,000 22,500 1,800
Senior Vice President 1997 220,149 110,000 10,000
1996 210,000 105,000 5,000
Robert J. Fleck 1998 155,004 18,100 15,000 5,430
Vice President--Accounting and 1997 143,160 50,050 5,000 8,076
Chief Accounting & 1996 137,000 41,100 3,000 7,465
Administrative Officer
Richard W. Metzger ** 1998 156,143 15,000 5,884
Vice President 1997 135,070 100,000 10,000 3,115
Mark C. Standefer Vice President, 1998 140,000 16,950 15,000 4,193
General Counsel and Secretary***
</TABLE>
- ------------------------
* Paid in restricted stock
** Not an executive officer during 1996
*** Not an executive officer during 1997 or 1996
(A) While each named executive officer received certain perquisites and other
benefits in each of the years shown, the value of these amounts are not
shown, in accordance with the regulations of the Securities and Exchange
Commission, since such benefit did not exceed in aggregate the lesser of
$50,000 or 10% of an individual's salary and bonus in such year. The amounts
shown represent the Medicare Hospital Insurance taxes paid by the Company on
behalf of each executive on the value of the increase in the executive's
vested accrued benefit in the Executive Retirement Plan (see "Retirement
Plans" elsewhere in this document).
(B) No stock appreciation rights were granted to the named executive officers in
any of the three years. See "Option Grants during 1998 Fiscal Year" for
description of options granted.
(C) Amounts shown consist of Company contributions to defined contribution
plans.
10
<PAGE>
OPTION GRANTS DURING 1998 FISCAL YEAR
The following table provides information relating to options granted to the
named executive officers during fiscal 1998.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS APPRECIATION
------------------------------------------------------ AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES STOCK PRICE
UNDERLYING % OF TOTAL APPRECIATION FOR
OPTIONS OPTIONS EXERCISE OPTION TERM (2)
GRANTED GRANTED IN PRICE EXPIRATION --------------------
NAME (#)(1) FISCAL YR. ($/SH) DATE 5% ($) 10% ($)
- --------------------------------- ------------ --------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Drexler 52,500 14 7.9375 10/21/08 262,074 664,140
Bobby Middlebrooks 22,500 6 7.9375 10/21/08 112,317 284,631
Robert J. Fleck 15,000 4 7.9375 10/21/08 74,878 189,754
Richard W. Metzger 15,000 4 7.9375 10/21/08 74,878 189,754
Mark C. Standefer 15,000 4 7.9375 10/21/08 74,878 189,754
</TABLE>
- ------------------------
(1) All options are non-qualified and have exercise prices equal to the fair
market value of Allied Common Stock on the date of grant. Each option is
exercisable as to 50% of the shares on the first anniversary of the date of
grant and as to the remaining 50% of the shares on the second anniversary
date and thereafter.
(2) The amounts shown in these columns are calculated based upon assumed annual
appreciation rates of 5% and 10%, as set by the Securities and Exchange
Commission, and are not intended to be forecasts of future appreciation of
Allied Common Stock.
11
<PAGE>
OPTION EXERCISES DURING 1998 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The Company does not have any outstanding stock appreciation rights. The
following table provides information relating to the exercise of options during
1998 and the value of options held by the named executive officers at the end of
1998:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE END OF 1998 (#) END OF 1998 ($)(1)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------- ---------------- -------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Richard A. Drexler 11,475 118,020.38 136,065/67,500
Bobby Middlebrooks 26,000/27,500
Robert J. Fleck 38,500/17,500 39,472.50/0
Richard W. Metzger 56,375/20,000 14,392.50/0
Mark C. Standefer 14,250/17,500
</TABLE>
- ------------------------
(1) The closing price for the Company's Common Stock as reported by the New York
Stock Exchange on 12/31/98 was $6.3125 per share. Value is calculated on the
basis of the difference between the option exercise price and $6.3125
multiplied by the number of shares of Common Stock underlying the option.
RETIREMENT PLANS
Mr. Bobby Middlebrooks is a participant in the Bush Hog Division Salaried
Pension Plan, a defined benefit plan. As such, upon retirement he will be
entitled to the following monthly benefit: One percent of his final monthly
salary multiplied by the number of years of service to the Company. Assuming Mr.
Middlebrooks' retirement at age 65 (he is now 63 years old) at his current
salary, Mr. Middlebrooks would be entitled to a pension of $6,900 per month.
Assuming Mr. Middlebrooks' salary is increased by 5% per year until retirement,
he would be entitled to a pension of $6,900 per month. Current Federal law
prohibits paying benefits under the Bush Hog Division Salaried Pension Plan
based on compensation in excess of $160,000 per year and annual benefits in
excess of $130,000 per year. Therefore, the Company also has granted to Mr.
Middlebrooks a non-qualified retirement benefit which is not subject to these
limits. This additional benefit will provide Mr. Middlebrooks with payments
equal to the difference between (i) the sum Mr. Middlebrooks will receive
subject to the maximum compensation and benefits limitations under Internal
Revenue Code provisions and (ii) the sum he would have been able to receive
under the Bush Hog Division Salaried Pension Plan without such limitations.
Assuming Mr. Middlebrooks retires at age 65, his non-qualified retirement
benefit would be $4,400 per month.
Effective January 1, 1994, the Company entered into an agreement with Mr.
Richard Drexler to provide retirement benefits pursuant to an Executive
Retirement Plan adopted by the Board of Directors. Under such Plan, Mr. Drexler
is eligible, upon reaching Normal Retirement Date (which is defined as the
earlier of age sixty-five or completion of twenty-five years of service), to
receive a retirement benefit equal to three times his final average annual
compensation (which is defined as the average of the participant's compensation
during the thirty-six months prior to the participant's separation from
service). Such benefits shall be paid in 120 equal monthly installments
commencing on the month following the date of termination of service with the
Company or, upon prior election by Mr. Drexler, in a lump sum amount
12
<PAGE>
discounted to present value. If Mr. Drexler dies during such period, the unpaid
remaining monthly installments will be paid to his named beneficiary or to his
estate. Based on the average compensation received during the past three years,
Mr. Drexler would receive $2,468,609 (payable over ten years) on his Normal
Retirement Date. Benefits payable under the Executive Retirement Plan are
reduced by the sum of (a) payments made by the Company to Mr. Drexler's Target
Benefit Plan account and (b) Supplemental Payments made by the Company to Mr.
Drexler's Smart Plan (401(k)) account, both of which are described below.
TARGET BENEFIT PLAN
Effective January 1, 1995 the Company implemented a defined benefit plan called
"The Target Benefit Plan". The purpose of the plan was to provide retirement
benefits for certain employees, (i.e., those employees who are not a part of an
established pension plan) taking into consideration the employee's age, years of
service and compensation. The plan, which was funded solely by the Company, set
forth a "Target" benefit amount to be paid to the employee upon reaching age 65.
The target benefit was one-half of one percent of the employees' final average
salary (the average of taxable earnings over the last five years of service with
the Company) multiplied by all years of service with the Company. The amount
contributed by the Company was actuarially derived. Effective October 1, 1998
the Company terminated the Target Benefit Plan and all sums in the Participants'
accounts were frozen and placed in their Smart Plan (401(K)) account. See below
for a description of the Smart Plan. The target benefit amount frozen for the
named officers (other than Bobby Middlebrooks who is a participant in a pension
plan and therefore is not eligible to participate in the Target Benefit Plan) is
as follows: Richard Drexler $30,561; Robert Fleck $24,265; Richard Metzger
$10,511; Mark Standefer $11,611. The actual benefits paid to Mr. Drexler under
the Target Benefit Plan (which have been placed in his 401(K) account) and paid
during the first ten years of retirement will reduce amounts payable to Mr.
Drexler under the Executive Retirement Plan described above.
SMART PLAN-401(k)
The Company has had a 401(K) plan for many years. Effective October 1, 1998 the
Plan was amended to add a Company matching and a Company supplemental
contribution feature. For the first six percent of a Participant's earnings, the
Company contributes 50 cents for each dollar contributed by the Participant to
the Plan: At the end of each year, the Company may make a supplemental
contribution to each Participant's account of up to three percent of his or her
earnings for that year. A Participant need not make any contributions to be
eligible for the supplemental contribution. The supplemental contribution made
in 1998 to the named officers (other than Mr. Bobby Middlebrooks who is a
participant in a pension plan and therefore is not eligible for supplemental
contributions) is as follows: Richard Drexler $4,800; Robert Fleck $4,633;
Richard Metzger $4,684; Mark Standefer $4,193. The total supplemental benefit
payments made by the Company to Mr. Drexler's account plus the frozen target
benefit contributions described above will reduce the amounts payable under the
Executive Retirement Plan described above.
13
<PAGE>
TERMINATION AGREEMENTS
Agreements between the Company and the named executive officers provide that, if
within one year following a specified change in ownership or control of the
Company there shall be an involuntary termination of such executive's
employment, or if there shall be certain patterns of activity during such period
by the Company causing such executive to resign, then, subject to prevailing tax
laws and regulations, the executive shall be entitled to payments equal
approximately to three years' compensation.
Mr. Metzger, who was Vice President of the Company and President of the Verson
division, resigned effective January 1, 1999. At the time of his resignation,
the Company and Mr. Metzger entered into a Resignation and Release Agreement,
pursuant to which Mr. Metzger agreed to waive and release any potential claims
against the Company. In return, the Company agreed to pay Mr. Metzger continued
salary and medical benefits through December 31, 1999 and approximately $17,000
in lieu of stock options exercisable as of the date of his resignation. The
Company also agreed to extend through January 8, 2000 the term of certain stock
options granted in 1994 and 1995 that otherwise would have expired three months
following his resignation.
14
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the Common
Stock of the Company for the last five fiscal years with the cumulative total
return on the S&P 500 Index and the S&P Machinery-Diversified Index over the
same period (assuming the investment of $100 in the Company's Common Stock, the
S&P 500 Index and the S&P Machinery-Diversified Index at the end of 1994, and
reinvestment of all dividends).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF 5 YEAR TOTAL RETURN AMONG ALLIED PRODUCTS
CORPORATION, S&P 500 INDEX & S&P MACHINERY DIVERSIFIED INDEX
<S> <C> <C>
Allied Products S&P 500
1993 $100.00 $100.00
1994 115.00 101.32
1995 192.71 139.40
1996 240.66 171.40
1997 293.16 228.59
1998 78.37 293.91
<CAPTION>
COMPARISON OF 5 YEAR TOTAL RETURN AMONG ALLIED PRODUCTS
CORPORATION, S&P 500 INDEX & S&P MACHINERY DIVERSIFIED INDEX
<S> <C>
S&P Machinery - Diversified
1993 $100.00
1994 97.34
1995 120.13
1996 149.73
1997 198.06
1998 164.84
</TABLE>
FUNCTIONING OF THE BOARD AND COMMITTEES
Allied's Board of Directors has an Executive Committee, an Audit Committee, a
Stock Option and Compensation Committee and a Nominating Committee. In 1998,
each non-employee director received the sum of $20,000 for his services as a
director and the chairman of each committee (if a non-employee of the Company)
received the additional sum of $3,000. Each non-employee director of the Company
also received $750.00 for each meeting of the Board which he attended and,
except for the Executive Committee, for each committee meeting which he
attended.
Members of the Executive Committee are Messrs. R. Drexler (Chairman), L. Drexler
and Sherman. During 1998, the Committee met on five occasions to exercise the
powers of the Board of Directors in the management of the business and affairs
of the Company.
15
<PAGE>
Members of the Audit Committee are Messrs. Jones (Chairman), Fischer, Goldring,
Puth and Quain. During 1998, the Committee met on two occasions to review and
make recommendations to the full Board with respect to the scope and results of
the annual audit, and the selection of independent public accountants.
Members of the Stock Option and Compensation Committee are Messrs. Goldring
(Chairman), Jones and Puth. During 1998, the Committee met on one occasion to
review and make recommendations to the full Board with respect to officers'
salaries, options and corporate incentive compensation plans.
Members of the Nominating Committee are Messrs. Fischer (Chairman), Goldring,
Jones, Quain, Puth, R. Drexler, L. Drexler and Sherman. The Committee met on one
occasion in 1998. The Nominating Committee will consider recommendations for
nominees for election to the Board submitted by shareholders. These nominations
should be submitted to the Secretary of the Company for review by the Committee.
Such nominations for the 2000 Annual Meeting should be submitted no later than
December 1, 1999.
Allied's Board of Directors met on five occasions during 1998. All of the
current directors attended at least 75% of the meetings of the Board and the
respective committees to which they belong.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
During 1998, upon the recommendation of Allied's Audit Committee and approval by
its Board of Directors, Allied engaged Coopers Lybrand, LLP (now known as
PricewaterhouseCoopers LLP) as its independent public accountants to perform the
following audit services: examination of Allied's annual consolidated financial
statements, assistance and consultation in connection with various accounting
matters and other non-audit professional services.
The appointment of auditors is approved annually by the Board of Directors. The
decision of the Board of Directors is based on the recommendations of the Audit
Committee. In making its recommendations, the Audit Committee reviews both the
audit scope and estimated audit fees for the coming year. At its October 21,
1998 meeting, the Audit Committee reviewed and approved the services described
above as well as the services to be performed in 1999 and concluded that they do
not impair the independence of the accountants.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will be given an opportunity to make any comments they wish, and will
be available to respond to any questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10% of a registered class of
the Company's securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission.
Based solely on its review of such reports received by it and written
representations from its officers and directors, the Company believes that
during fiscal year 1998 all filing requirements applicable to its officers and
directors were complied with.
16
<PAGE>
STOCKHOLDER PROPOSAL
In order for a stockholder proposal to be included in the Proxy Statement and
form of proxy relating to Allied's 2000 Annual Stockholders' meeting it must be
received by the Secretary of Allied on or before January 15, 2000.
Proposals received by that date, deemed to be proper for consideration at the
Annual Meeting and otherwise conforming to the rules of the Securities and
Exchange Commission, will be included in the 2000 proxy statement.
A shareholder who intends to submit a shareholder proposal for consideration at
the Annual Meeting, but does not want it included in the proxy statement, must
follow the procedures established by the By-laws. These procedures require that
the shareholder notify the Company in writing of the proposal. The notice must
be received by the Corporate Secretary at least 30 days, but not more than 60
days, prior to the meeting and must contain the following information:
- a brief description of the business desired to be brought before the
Annual meeting and the reasons for conducting such business at the Annual
Meeting
- the name and address of the shareholder submitting the proposal, and any
other shareholders known to support it
- the number of shares of Common stock which are beneficially owned by the
shareholder
- any material financial interest the shareholder may have in the business
being proposed
GENERAL
Allied has no knowledge of any matters, other than those set forth in this Proxy
Statement or referred to in the accompanying Notice of Annual Meeting of
Stockholders, which will be presented at the Annual Meeting, but if any other
matters are properly presented to the meeting for action, the persons named in
the accompanying proxy will vote them in accordance with their best judgment.
By Order of the Board of Directors
ALLIED PRODUCTS CORPORATION
MARK C. STANDEFER
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
April 30, 1999
17
<PAGE>
PROXY PROXY
ALLIED PRODUCTS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS--
FOR ANNUAL MEETING OF STOCKHOLDERS JUNE 18, 1999
The undersigned hereby appoints S. S. Sherman, Lloyd A. Drexler and Richard
A. Drexler, and each of them, Proxies, with the powers the undersigned would
possess if personally present, to vote all shares of the undersigned in Allied
Products Corporation at the annual meeting of the stockholders to be held on
June 18, 1999, at 9:30 A.M., Chicago Time, and at any adjournment thereof, for
the purpose of acting upon the proposals referred to herein in accordance with
the designations below, and of acting in their discretion upon such other
matters as may properly come before the meeting.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / FOR all nominees listed below (except / / WITHHOLD AUTHORITY
as marked to the contrary below) to vote for all nominees listed below
</TABLE>
<TABLE>
<S> <C> <C>
SAUL SHERMAN STANLEY J. GOLDRING
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through that nominee's name.
(Continued and to be signed on other side)
<PAGE>
IF YOU SIGN AND RETURN THIS PROXY, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE HEREON. IF NOT OTHERWISE SPECIFIED,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
DATED: ____________________, 1998
___________________________(L.S.)
___________________________(L.S.)
IMPORTANT: Please sign exactly as
your name or names appear on the
stock certificate or
certificates, and when shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustees or
guardian, give your full title as
such. If the signatory is a
corporation or partnership sign
the full corporate or partnership
name by duly authorized officer
or partner.
NOTE: Please date, sign and mail
this proxy in the enclosed
envelope. No postage is required
for mailing in the United States.
<PAGE>
FORM OF DIRECTION CARD
ALLIED PRODUCTS CORPORATION
SMART PLAN
DIRECTIONS FOR VOTING SHARES OF ALLIED PRODUCTS CORPORATION ("ALLIED") HELD IN
TRUST FOR THE EMPLOYEE
The undersigned hereby authorizes the Advisory Committee for the
above-captioned plan (the "Plan") to direct the Trustee for the Plan to vote at
the Annual Meeting of Stockholders of Allied on June 18, 1999 or at any
adjournments thereof, all shares of Allied Stock credited to the account of the
undersigned under the Trust for such Plan at the close of business on December
31, 1998, as directed below on the following matters, and, in their discretion,
on any other matters that may come before the meeting:
1. ELECTION OF / / FOR all nominees listed / / WITHHOLD AUTHORITY
DIRECTORS: below to vote for all nominees
listed below
SAUL S. SHERMAN STANLEY J. GOLDRING
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THAT NOMINEE'S NAME.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
IF YOU SIGN AND RETURN THIS DIRECTION, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE HEREON. SMART SHARES FOR WHICH NO
INSTRUCTIONS ARE RECEIVED WILL BE VOTED IN THE SAME PROPORTION AS NON-SMART
SHARES ARE VOTED.
Dated: .................. , 1998
........................ (L.S.)
Signature
NOTE: PLEASE DATE, SIGN AND MAIL
THIS DIRECTION IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED
FOR MAILING IN THE UNITED STATES.
<PAGE>
FORM OF DIRECTION CARD
ALLIED PRODUCTS CORPORATION
ALLIED PRODUCTS CORPORATION
SAVINGS INCENTIVE PLAN (SIP)
DIRECTIONS FOR VOTING SHARES OF ALLIED PRODUCTS CORPORATION ("ALLIED")
HELD IN TRUST FOR THE EMPLOYEE
The undersigned hereby authorizes the Advisory Committee for the
above-captioned plan ("SIP") to direct the Trustee for the Plan to vote at the
Annual Meeting of Stockholders of Allied on June 18, 1999 or at any adjournments
thereof, all shares of Allied Stock credited to the account of the undersigned
under the Trust for such Plan at the close of business on December 31, 1998, as
directed below on the following matters, and, in their discretion, on any other
matters that may come before the meeting:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / FOR all nominees listed below / / WITHHOLD AUTHORITY
to vote for all nominees listed below
</TABLE>
<TABLE>
<S> <C>
SAUL S. SHERMAN STANLEY J. GOLDRING
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through that nominee's name.
(Continued and to be signed on other side)
<PAGE>
(Continued from other side)
IF YOU SIGN AND RETURN THIS DIRECTION, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE HEREON. SIP SHARES FOR WHICH NO
INSTRUCTIONS ARE RECEIVED WILL BE VOTED IN THE SAME PROPORTION AS NON-SIP SHARES
ARE VOTED.
DATED: ____________________, 1998
___________________________(L.S.)
NOTE: Please date, sign and mail
this direction in the enclosed
envelope. No postage is required
for mailing in the United States.
