<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
HARMON INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(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]
1600 N.E. CORONADO DRIVE
BLUE SPRINGS, MISSOURI 64014
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 2:00 P.M. ON MAY 11, 1999
AT THE COUNTRY CLUB OF BLUE SPRINGS
1600 N. CIRCLE DRIVE
BLUE SPRINGS, MISSOURI
To the Holders of Common Stock of Harmon Industries, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders of Harmon
Industries, Inc. will be held for the following purposes:
1. To elect nine (9) members of the Board of Directors;
2. To approve the selection of KPMG LLP, as Auditors for the forthcoming
fiscal year; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only shareholders of record at the close of business on March 15, 1999, will
be entitled to notice of and to vote at the meeting and any adjournments
thereof. The transfer books of the Company will not be closed.
Shareholders who do not expect to attend the meeting in person are asked to
date, sign and return the proxy using the enclosed envelope which needs no
postage if mailed in the United States. Shareholders may also vote via the
Internet as indicated on the proxy card instructions.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Harmon
Chairman
1600 N.E. Coronado Drive
Blue Springs, Missouri 64014
April 1, 1999
<PAGE>
[LOGO]
1600 N.E. CORONADO DRIVE
BLUE SPRINGS, MISSOURI 64014
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1999
SOLICITATION OF PROXIES
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders of Harmon Industries, Inc. (the "Company") commencing on April 1,
1999. The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company to be used at the Annual Meeting of Shareholders, which will be
held at the Country Club of Blue Springs, 1600 N. Circle Drive, Blue Springs,
Missouri on May 11, 1999 at 2:00 p.m. and at any adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
You may also vote via the Internet as indicated on the proxy card instructions.
Any shareholder who executes and returns the enclosed proxy has the right to
revoke it, in writing, at any time before it is voted at the meeting.
The Company will bear the cost of solicitation of proxies. In addition to
the use of the mail, proxies may be solicited personally or by telephone or
facsimile by the directors or by a few executives or employees of the Company at
a nominal cost, and the Company may reimburse brokers and other persons holding
stock in their names or in the names of their nominees for their expenses in
sending proxy material to principals.
The Board of Directors of the Company has fixed the close of business on
March 15, 1999, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting. As of that date, the Company
had 10,741,964 shares of Common Stock outstanding and entitled to vote at the
meeting.
Each share of Common Stock entitles the shareholders to one vote for each
share held. All voting, unless otherwise specifically indicated, requires
approval by a majority of the shares of stock represented in person or by proxy
at the meeting and voted on the matter in question. Abstentions and broker
non-votes will be treated as present at the meeting for purposes of determining
a quorum but are tabulated as if no vote was cast on the matter indicated.
Directors are elected by a plurality of the votes cast. Shareholders do not have
the right to accumulate votes in the election of directors. Votes withheld in
the election of directors are not tabulated as a vote for or against the person
or persons indicated. The selection of directors is determined in the order of
those nominees receiving the highest number of votes in favor of election until
the number of nominees to be elected in the election have been selected.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock of the
Company owned beneficially as of March 15, 1999 by each person who, as of that
date, to the best knowledge of management, was the beneficial owner of more than
5% of the outstanding shares or who is a named executive officer. Common Stock
is the only class of voting securities.
<TABLE>
<CAPTION>
PERCENT
TITLE NAME AND ADDRESS OF BENEFICIAL OF
OF CLASS BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------ ------------------------------------------------- --------------- -------------
<C> <S> <C> <C>
Common Stock St. Denis J. Villere & Company 1,182,075(3) 11%
210 Baronne Street, Suite 808
New Orleans, LA 70112-1727
Common Stock Mercantile Bancorporation Inc. 777,959(4) 7%
#1 Mercantile Center
St. Louis, MO 63101
Common Stock Charles M. Foudree 59,250(5) 1%
Common Stock Lloyd T. Kaiser 46,072(6) --%
Common Stock William P. Marberg 30,000(7) --%
Common Stock Bjorn E. Olsson 56,250(8) 1%
Common Stock Raymond A. Rosewall 40,500(9) --%
Common Stock Beneficial ownership of all officers and 973,665 9%
directors as a group (21 in group)
</TABLE>
(1) All amounts of shares reflect sole voting and disposition power unless
otherwise indicated. The share amounts reflected in this column include
outstanding shareholdings, as well as unexercised ISOP and LTIP option
shares and unexercised director option shares (see discussion under caption
"Executive Compensation" herein). Shares allocated under the Company's ESOP
are not included since participants have no disposition power and have only
shared voting rights. Shares in the ESOP allocated to Messrs. Foudree,
Kaiser, Marberg, Olsson and Rosewall and all officers and directors as a
group were 8,448; 2,921; -0-; 3,054; 27 and 51,541 shares, respectively.
(2) Rounded to the nearest whole percentage. Percentages are calculated on
11,176,364 shares representing the total of 10,741,964 outstanding shares
(excluding certain shares held in a Rabbi Trust) and 434,400 shares for
unexercised ISOP options and LTIP options.
(3) St. Denis J. Villere & Company has shared voting power and shared
dispositive power over 1,182,075 shares.
(4) Mercantile Bancorporation, Inc., as Trustee for the Company's ESOP, has sole
voting and shared dispositive power over 777,959 shares
(5) 31,250 shares are beneficially owned and held of record by M. Colleen
Foudree as trustee for the M. Colleen Foudree Trust with sole voting and
disposition power. 9,700 shares are held by the Charles M. Foudree Trust
with sole voting and disposition power. 300 shares are held directly by
Charles M. Foudree. The remainder are held by Charles M. Foudree and
represent unexercised option shares.
(6) 30,322 shares are owned by Lloyd T. Kaiser with sole voting and dispositive
power. The remainder represent unexercised option shares.
2
<PAGE>
(7) Does not include 354 shares held by a Rabbi Trust for deferred compensation
for William P. Marberg. 30,000 shares represent unexercised option shares.
(8) 39,750 shares are held by Bjorn E. Olsson with sole voting and dispositive
power. The remainder represent unexercised option shares. Does not include
33,418 shares held by a Rabbi Trust for deferred compensation, 15,424 shares
of which are currently vested.
(9) Raymond A. Rosewall holds no shares directly with sole voting and
dispositive power. 40,500 shares represent unexercised option shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
Based on a review of reports on Forms 3, 4 and 5 and amendments to such
forms filed with the Company, the Company is aware of only two late filings of
such forms by any person required to file such forms in connection with Section
16(a) of the Securities Exchange Act of 1934, as amended. An amended Form 4 was
filed approximately seven months late by an officer and another Form 4 was filed
less than one month late by a director. The Company is unaware of any
transactions in which there was a failure to file by a reporting person under
such Act.
ELECTION OF DIRECTORS
On December 10, 1998, the Board of Directors amended its Bylaws to divide
the directors into three approximately equal classes, having three-year terms
that expire in successive years. The implementation of this classification of
the Board arrangement requires that the classes of directors elected at this
annual meeting of shareholders shall be elected for terms of one, two and three
years, respectively. After this initial implementation, each class of directors
shall be elected for three year terms upon expiration of the initial term for
each class. It is the intention of the persons named in the accompanying form of
proxy to vote for the election of the nominees listed below. If, for any reason,
any of the nominees is unable or declines to serve, the proxies will be voted
for the other persons listed or for substitute nominees nominated by management.
During calendar 1998, the Board of Directors held eight meetings. All of the
directors nominated for re-election herein attended greater than 75% of the
meetings of both the Board and the respective committees for which they were
eligible to serve.
The Director Nomination and Compensation Committee proposes nominees for
Board positions and evaluates director compensation. The Committee consists of
Herbert M. Kohn (Chair), Douglass Wm. List, Bruce M. Flohr and Judith C.
Whittaker. The Committee met two times during 1998. The Committee will consider
proposed director candidates submitted by shareholders. Proposals for the 2000
election must be received in writing on or prior to November 11, 1999.
The Audit Committee of the Board of Directors was composed of Gerald E.
Myers (Chair), Herbert M. Kohn, John A. Sprague and Judith C. Whittaker during
1998. The Audit Committee reviews and monitors financial controls throughout the
Company, supervises the internal audit function and monitors the Company's
relationship with the external auditors. The committee met two times in 1998.
The Compensation Committee was composed of Douglass Wm. List (Chair), Bruce
M. Flohr and Rodney L. Gray during 1998. The Compensation Committee is a
standing committee of the Board of Directors and establishes executive salary
and bonus levels for the executive officers of the Company. During 1998, the
Compensation Committee met four times.
3
<PAGE>
DIRECTOR NOMINEES
<TABLE>
<CAPTION>
SERVED
PRINCIPAL CONTINUOUSLY STOCK
OCCUPATION FOR AS A DIRECTOR PERCENT OF OWNED
NAME OF NOMINEE AGE LAST FIVE YEARS SINCE CLASS(2) BENEFICIALLY(1)
- ------------------------ ----------- -------------------------------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
CLASS I TO BE ELECTED FOR AN INITIAL TERM OF ONE YEAR:
Bruce M. Flohr 60 Since February 1999, Founder and 05/11/93 --% 7,680(3)
Chairman Emeritus of RailTex, Inc.;
prior to that from August 1998 to
February 1999, Chairman; prior to that
Chief Executive Officer and Board
Chairman of RailTex, Inc. from 1977 to
August 1998.
Gerald E. Myers 57 Self-employed management consultant 05/03/88 --% 47,056(4)
through GEM Financial Services, Inc.
since July 1989.
Judith C. Whittaker 60 Since January 1997, Vice President, 05/11/93 --% 7,680(5)
General Counsel/ Secretary of Hallmark
Cards, Incorporated; prior to that
Vice-President-Legal of Hallmark
Cards, Incorporated.
CLASS II TO BE ELECTED FOR AN INITIAL TERM OF TWO YEARS:
Robert E. Harmon 59 Chairman of the Board of the Company 10/02/61 3% 374,568(6)
since February 1975. Chief Executive
Officer of the Company from November
1969 to December 1994. President of
the Company from November 1969 to July
1990.
Herbert M. Kohn 60 Since June 1991, a partner in the law 09/01/85 --% 37,330(7)
firm of Bryan Cave LLP.
Douglass Wm. List 43 Since January 1988, President, List & 05/08/90 --% 7,280(8)
Company, Inc., a management consulting
firm based in Baltimore, Maryland.
Since December 1992, also President of
Railway Engineering Associates, Inc.,
having been Vice-President and General
Manager of that company since May
1988. Since January 1997, President of
Moorgate, Inc., an investment advisory
company.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SERVED
PRINCIPAL CONTINUOUSLY STOCK
OCCUPATION FOR AS A DIRECTOR PERCENT OF OWNED
NAME OF NOMINEE AGE LAST FIVE YEARS SINCE CLASS(2) BENEFICIALLY(1)
- ------------------------ ----------- -------------------------------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
CLASS III TO BE ELECTED FOR AN INITIAL TERM OF THREE YEARS:
Rodney L. Gray 46 Since November 1998, Vice-Chairman of 05/11/93 --% 13,680(9)
Azurix, an affiliate of Enron Corp.;
prior to that from 1997 to 1998,
Executive Vice President, Finance of
Enron International, Inc.; from 1994
to November 1997, Chairman and Chief
Executive Officer of Enron Global
Power & Pipelines, LLC; prior to that,
Senior Vice-President-Finance and
Treasurer of Enron Corp. from October
1992 to 1994.
Bjorn E. Olsson 53 President and Chief Executive Officer 05/06/86 1% 56,250(10)
of the Company since January 1995;
President and Chief Operating Officer
of the Company from August 1990 to
December 1994.
John A. Sprague 46 Managing General Partner of a private 05/12/98 --% 1,680(11)
equity investment firm, Jupiter
Partners, LP since 1994; from June
1993 to February 1994, a private
investor.
</TABLE>
(1) All amounts of shares reflect sole voting and disposition power unless
otherwise indicated. The share amounts reflected in this column include
outstanding shareholdings, as well as unexercised ISOP and LTIP option
shares and unexercised director option shares (see discussion under caption
"Executive Compensation" herein). Shares allocated under the Company's ESOP
are not included since participants have no disposition power and shared
voting rights. Shares in the ESOP allocated to Messrs. Foudree and Olsson
were 8,448 and 3,054 shares, respectively.
(2) Percentages shown are rounded to the nearest whole percentage. Percentages
are calculated on 11,176,364 shares representing the total of 10,741,964
outstanding shares (excluding certain shares held in a Rabbi Trust) and
434,400 shares for unexercised ISOP and LTIP options.
(3) 6,180 shares are beneficially owned and held of record by Bruce M. Flohr.
The remainder represent unexercised LTIP director options.
(4) Includes 42,294 shares which are held in a living trust, 262 shares are held
in an IRA and the remainder represent unexercised LTIP director options.
(5) 3,180 shares are held directly by Judith C. Whittaker. The remainder
represent unexercised LTIP director options.
(6) 13,160 shares are held by Robert E. Harmon directly. 353,908 shares are held
of record by Robert E. Harmon, as Trustee for the Robert E. Harmon Trust,
with sole voting and dispositive powers.
5
<PAGE>
The remainder are held by Robert E. Harmon and represent unexercised
director options. Does not include 12,380 shares owned by his wife for which
Robert E. Harmon disclaims beneficial ownership.
(7) 13,180 shares are held directly by Herbert M. Kohn. 19,650 shares are held
through an IRA and the remainder represent unexercised LTIP director
options.
(8) 180 shares are held directly by Douglass Wm. List. 2,300 shares are held
through an IRA. 300 shares in the aggregate are held on behalf of the
daughters of Douglass William List. The remainder represent unexercised LTIP
director options. Does not include 300 shares held by Moorgate Foundation
Fund, L.L.C., for which Mr. List disclaims beneficial ownership. Mr. List
and members of his immediate family own approximately 28% of Moorgate
Foundation Fund, L.L.C. Moorgate, Inc., an investment advisory company,
provides investment advisory services to Moorgate Foundation Fund, L.L.C.,
and Mr. List is President of Moorgate, Inc.
(9) 9,180 shares are held of record by Rodney L. Gray. The remainder represent
unexercised LTIP director options.
(10) 39,750 shares are held by Bjorn E. Olsson with sole voting and dispositive
power. The remainder represent unexercised option shares. Does not include
33,418 shares held by a Rabbi Trust for deferred compensation, 15,424 shares
of which are currently vested.
(11) 180 shares are held of record by John A. Sprague. The remainder represent
unexercised LTIP director options.
Mr. Flohr serves as a director of RailTex, Inc., a publicly-held company.
Mr. List is a director of Mark VII, Inc., a publicly-held company. Mr. Kohn is a
director of American Pad & Paper Company, a publicly-held company. Mr. Sprague
is a director of Heartland Wireless Cable, Inc., a publicly-held company. None
of the other director nominees serves as a director of any other company with a
class of stock registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or subject to the requirements of Section 15(d) of that Act or any
company registered under the Investment Company Act of 1940.
CERTAIN TRANSACTIONS.
Mr. Kohn is currently a partner of the Bryan Cave, L.L.P. law firm, which
the Company retains as legal counsel for certain matters. Mr. Flohr is currently
Founder and Chairman Emeritus of RailTex, Inc., a customer of the Company. The
purchases of RailTex, Inc. from the Company were $1,219,000 in 1998, $462,000 in
1997 and $586,000 in 1996.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION.
The following table provides certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries (determined as
of the end of the last fiscal year), to or on behalf of the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company or its subsidiaries (together hereafter referred to as
the "named executive officers") for the fiscal years ended December 31, 1998,
1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
---------------------------------------
OTHER ANNUAL
FISCAL SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($)(3) ($)
- ----------------------------------- ------ ------- ------- ------------
<S> <C> <C> <C> <C>
Bjorn E. Olsson 1998 351,425 216,490 --
President & CEO 1997 305,848 192,309 --
1996 298,274 218,791 --
Charles M. Foudree Executive 1998 184,180 99,919 --
V.P.--Finance 1997 180,445 110,498 --
and Secretary 1996 176,568 109,895 --
William P. Marberg Executive V.P. 1998(6) 156,534 103,644 --
- - 1997 -0- -0- --
System Sales & Support 1996 -0- -0- --
Lloyd T. Kaiser 1998 160,178 87,268 --
Executive V.P. - 1997 151,131 98,842 --
Domestic Sales & Service 1996 156,717 103,441 --
Raymond A. Rosewall 1998 148,204 73,592 --
Executive V.P. - 1997 137,163 85,186 --
Manufacturing 1996 172,651 81,145 --
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
AWARDS
------------------------ PAYOUTS
RESTRICTED -------
STOCK OPTIONS (# LTIP ALL OTHER
AWARD(S) OF SHS.) PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION ($) (4) ($) ($)(5)
- ----------------------------------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C>
Bjorn E. Olsson -- 5,250 -- 167,922
President & CEO -- 5,250 -- 162,418
-- 5,250 -- 47,028
Charles M. Foudree Executive -- 5,250 -- 22,131
V.P.--Finance -- 5,250 -- 51,307
and Secretary -- 5,250 -- 75,304
William P. Marberg Executive V.P. -- 30,000 -- 2,675
- - -- -0- -- -0-
System Sales & Support -- -0- -- -0-
Lloyd T. Kaiser -- 5,250 -- 20,962
Executive V.P. - -- 5,250 -- 10,909
Domestic Sales & Service -- 5,250 20,693
Raymond A. Rosewall -- 5,250 -- 9,102
Executive V.P. - -- 5,250 -- 5,454
Manufacturing -- 30,000 36,049
</TABLE>
(1) Includes no perquisites (i.e. auto allowance, club dues or aircraft use)
because in all instances these total less than $50,000 or 10% of the total
of annual salary and bonus reported for each named executive officer.
(2) Salary includes amounts deferred under the Company's 401(k) and the SERP at
the election of the named executive officer.
(3) Bonus consists of cash. (See discussion under the heading "Employment
Contracts" below.)
(4) Includes grants of non-qualified options in the amount of 5,250 shares in
1998 and in 1997 under the Company's 1996 Long-Term Incentive Plan to all
except William P. Marberg who received a grant of non-qualified options for
30,000 shares in 1998. The options granted in 1996 were pursuant to the
Company's 1990 Incentive Stock Option Plan.
(5) Includes allocation of contributions to the Company's Deferred Compensation
Plan, to the Company's Defined Contribution Plans and to the Company's
non-discriminatory Employee Stock Ownership Plan (ESOP). The amounts
included in this column representing allocation of the contribution made in
1998 to the Company's ESOP for Messrs. Olsson, Foudree, Kaiser, Marberg and
Rosewall were $9,102; $9,102; $7,709; $-0-; and $9,102, respectively. The
remainder shown for each in the column represents allocation of
contributions for such named executive officers under the Company's Deferred
Compensation Plan. During 1997, a total of 24,150 shares were deposited in a
Rabbi Trust for deferred compensation allocated to Mr. Olsson, 8,740 shares
of which were vested. $124,011 of the amount included in this column for Mr.
Olsson in 1997
7
<PAGE>
represents the value of these vested shares. During 1998, a total of 9,268
shares were deposited in a Rabbi Trust for deferred compensation allocated
to Mr. Olsson, 1,854 shares of which were vested. $129,120 of the amount
included in this column for Mr. Olsson in 1998 represents the value of the
vested shares. During 1998, a total of 354 shares were deposited in a Rabbi
Trust for a defined contribution plan allocated to Mr. Marberg, 71 shares of
which were vested. $2,675 shown in this column for Mr. Marberg in 1998
represents the value of the vested shares. (See discussion under the heading
"Pension Plan" below.)
(6) Mr. Marberg's employment with the Company commenced in April, 1998.
Accordingly, base salary for 1998 was prorated.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
During 1998, all of the named executive officers received a grant of stock
options under the Company's 1996 Long-Term Incentive Plan. The Company has no
outstanding Stock Appreciation Rights (SARs). The following table contains
information concerning the grant of stock options under the Company's 1996
Long-Term Incentive Plan to the named executive officers (see discussion below
under "Compensation Committee Report--1996 Long-Term Incentive Plan"):
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(3)
GRANTED (1) EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME (# OF SHARES) FISCAL YEAR ($/SH) DATE(2) 5% ($) 10% ($)
- ----------------------------------- ------------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bjorn E. Olsson 5,250 3.45 20.88 3/19/03 44,983 105,919
through
3/19/07
Charles M. Foudree 5,250 3.45 20.88 3/19/03 44,983 105,919
through
3/19/07
William P. Marberg 30,000 19.72 20.50 4/20/03 252,428 594,376
through
4/20/07
Lloyd T. Kaiser 5,250 3.45 20.88 3/19/03 44,983 105,919
through
3/19/07
Raymond A. Rosewall 5,250 3.45 20.88 3/19/03 44,983 105,919
through
3/19/07
</TABLE>
(1) Each of Messrs. Olsson, Foudree, Kaiser and Rosewall received 5,250 shares
pursuant to a non-qualified stock option grant from the Company's 1996
Long-Term Incentive Plan (LTIP) in 1998. Mr. Marberg received 30,000 shares
pursuant to a non-qualified option grant from the Company's LTIP during
1998. A total of 152,100 shares in the form of non-qualified options were
granted to employees of the Company during 1998. For a description of the
terms of the options see "Compensation Committee Report-Incentive Stock
Option Plan" below.
8
<PAGE>
(2) The exercise price for non-qualified LTIP equals the fair market value of
the underlying shares on the date of grant. The grants are 20% vested at the
date of grant and an additional 20% vests on each anniversary of the date of
grant until fully vested. Non-qualified LTIP options expire on the later of
five years from the date of grant or the date the options first become
exercisable. The following tables illustrate the effect of vesting,
expiration dates and assumed appreciation calculated at specified rates for
5,250 share and 30,000 share options granted on March 19, 1998 and April 20,
1998, respectively, with vesting as shown:
<TABLE>
<CAPTION>
IMPLIED PER SHARE
POTENTIAL
FUTURE APPRECIATION @ REALIZABLE
STOCK PRICE @ VALUE @
EXERCISE DATE SHARES TERM OF OPTION ------------------------ ------------------------ ----------
PRICE DATE VESTED EXPIRES VESTED IN YEARS 5% 10% 5% 10% 5%
- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.875 3/19/98 3/19/03 1,050 5 $ 26.64 $ 33.62 $ 5.77 $ 12.74 $ 6,055.75
3/19/99 3/19/04 1,050 6 $ 27.97 $ 36.98 $ 7.10 $ 16.11 $ 7,454.47
3/19/00 3/19/05 1,050 7 $ 29.37 $ 40.68 $ 8.50 $ 19.80 $ 8,923.13
3/19/01 3/19/06 1,050 8 $ 30.84 $ 44.75 $ 9.97 $ 23.87 $10,465.23
3/19/02 3/19/07 1,050 9 $ 32.38 $ 49.22 $ 11.51 $ 28.35 $12,084.43
----------
$44,983.00
<CAPTION>
EXERCISE
PRICE 10%
- ----------- -----------
<S> <C>
$20.875 $ 13,381.62
$ 16,911.65
$ 20,794.69
$ 25,066.04
$ 29,764.52
-----------
$105,918.51
</TABLE>
<TABLE>
<CAPTION>
IMPLIED PER SHARE
POTENTIAL
FUTURE APPRECIATION @ REALIZABLE
STOCK PRICE @ VALUE @
EXERCISE DATE SHARES TERM OF OPTION ------------------------ ------------------------ -----------
PRICE DATE VESTED EXPIRES VESTED IN YEARS 5% 10% 5% 10% 5%
- ----------- ----------- ----------- ----------- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.500 4/20/98 4/20/03 6,000 5 $ 26.16 $ 33.02 $ 5.66 $ 12.52 $ 33,982.63
4/20/99 4/20/04 6,000 6 $ 27.47 $ 36.32 $ 6.97 $ 15.82 $ 41,831.76
4/20/00 4/20/05 6,000 7 $ 28.85 $ 39.95 $ 8.35 $ 19.45 $ 50,073.35
4/20/01 4/20/06 6,000 8 $ 30.29 $ 43.94 $ 9.79 $ 23.44 $ 58,727.02
4/20/02 4/20/07 6,000 9 $ 31.80 $ 48.34 $ 11.30 $ 27.84 $ 67,813.37
-----------
$252,428.14
<CAPTION>
EXERCISE
PRICE 10%
- ----------- -----------
<S> <C>
$20.500 $ 75,092.73
$ 94,902.00
$116,692.20
$140,661.42
$167,027.57
-----------
$594,375.93
</TABLE>
(3) These amounts represent only the fully vested amounts over the full vesting
period (see footnote 2 above) and certain assumed rates of appreciation
only. The assumed rates may have no correlation to current or future actual
market conditions.
OPTION EXERCISES AND HOLDINGS.
The following table provides, for the named executive officers, information
concerning the exercise of stock options during the last fiscal year and
unexercised options held as of the end of the last fiscal year for any of the
Company's 1990 Incentive Stock Option Plan ("ISOP") and its 1996 Long-Term
Incentive Plan ("LTIP"):
9
<PAGE>
AGGREGATED OPTION EXERCISE IN LAST PERIOD AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE (IN $) OF
NUMBER OF UNEXERCISED
NUMBER OF SHARES UNEXERCISED IN-THE-MONEY
TYPES OF ACQUIRED ON VALUE (IN $) OPTIONS/SHARES AT OPTIONS AT
NAME OPTION EXERCISE REALIZED(1) 12/31/98 12/31/98(2)(3)
- ------------------------------ ---------- ------------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Bjorn E. Olsson ISOP 1,500 10,375 6,000 81,500
LTIP -- -- 10,500 68,687
Charles M. Foudree ISOP -- -- 7,500 102,094
LTIP -- -- 10,500 68,687
Lloyd T. Kaiser ISOP -- -- 5,250 71,203
LTIP -- -- 10,500 68,687
William P. Marberg LTIP -- -- 30,000 76,875
Raymond A. Rosewall ISOP -- -- 30,000 421,875
LTIP -- -- 10,500 68,687
</TABLE>
(1) Market price at exercise less exercise price times the number of options
exercised.
(2) There are no SARs.
(3) Market price at 12/31/98 ($23.0625) less exercise price.
LONG-TERM INCENTIVE PLANS.
Under the 1996 Long-Term Incentive Plan (the "LTIP"), the Compensation
Committee may establish vesting criteria for the grant of options or other
permitted awards under the LTIP. The Compensation Committee currently
anticipates that the primary awards vehicle under the plan will consist of
non-qualified options, with vesting over a four-year period from the date of
grant so that 20% of the grant vests at grant and the remaining amount will vest
on the anniversary of the grant for the next four years. During 1998, the
shareholders approved an increase in the annual recharge rate of the LTIP from
1.15% to 1.25% of outstanding shares of the Company on each January 1. At the
1.15% rate, the recharge for the LTIP in early 1998 was 80,020 shares (pre-split
or 120,030 post-split). At the 1.25% rate, the recharge for the LTIP in early
1999 was 133,280 shares. In addition, the LTIP provides that up to 120,000
additional shares may be purchased on the open market for use under the LTIP.
The expiration date of the LTIP is May 31, 2003. There are no performance-based
criteria relating to the award or vesting under the contemplated plan in
connection with the non-qualified options. The exercise prices of such
non-qualified options equals the Closing price for the Company's stock on the
date of grant. Under the LTIP, the Compensation Committee currently anticipates
that grants to executive officers will be in the amount of 5,250 option shares
per year so that 1,050 option shares will be vested as of the date of grant and
an additional 1,050 option shares will vest over each of the following four
years from the date of grant. In addition, the Compensation Committee
anticipates granting non-qualified options to certain key employees of the
Company, which grants will be in the amount of 750 option shares, with 150
option shares vested upon grant and 150 option shares vesting in each of the
following four years following the date of grant. Finally, grants of
non-qualified options under the LTIP are anticipated to certain Assistant Vice
Presidents at 1,500 non-qualified option shares to each with similar vesting
percentage provisions to those options granted to executive officers.
Under the LTIP, on the last business day of May, commencing May 31, 1996 (or
if later, on the date on which the person is first elected or begins to serve as
a non-employee director, other than by reason of termination of employment) and,
thereafter on the date of each annual meeting of shareholders of the Company,
each person who is a non-employee director after such meeting of stockholders
shall be
10
<PAGE>
granted a non-qualified option for 1,500 option shares of the Common Stock of
the Company. The option amount shall be prorated if such non-employee director
is first elected or begins to serve as a non-employee director on a date other
than the date of an annual meeting of stockholders. The exercise prices of such
non-qualified options equal the Closing price for the Company's stock on the
date of grant. Options granted to non-employee directors pursuant to the LTIP
will immediately vest and will have a term of seven years for exercise.
On May 29, 1998, each of the non-employee directors received a grant of
1,500 non-qualified options, with an exercise price of $23.88 per share. On
March 19, 1998, non-qualified options for 68,250 option shares (5,250 to each
officer) were issued to 13 key employees under the LTIP. Additionally, on March
19, 1998, non-qualified options for 45,000 option shares (750 to each key
employee) were granted to 60 key employees of the Company, and on that same
date, 6,000 option shares (1,500 to each Assistant Vice President) were issued
to four Assistant Vice Presidents. The exercise price of the officer and key
employee options was $20.88 per share, and the other terms of such options were
as set forth above.
PENSION PLANS.
The Company has no defined benefit pension plans. The Company has a
non-qualified, unfunded deferred compensation plan and trust for certain
officers and key employees, providing for payments upon retirement, death or
disability. Under the plan, the employees receive retirement payments equal to a
portion of the average of the three highest consecutive years' compensation.
Upon retirement, these payments are to be made for the remainder of the
employee's life with a minimum payment of ten years' benefits to either the
employee or his beneficiary. The plan provides for reduced benefits upon early
retirement, disability or termination of employment. The amount of the deferred
compensation expense for all covered employees for 1998 was approximately
$286,484 and amounts allocated to the named executive officers are included in
the "All Other Compensation" column of the Summary Compensation Table.
Participation in the Deferred Compensation Plan and Trust has been frozen and no
additional participants are permitted.
On October 7, 1997, the Compensation Committee of the Board of Directors
approved the establishment of one or more defined contribution plans for
executive management of the Company who were not covered under the prior
deferred compensation plan of the Company. The defined contribution plans have a
variable contribution level up to 12% of base salary for new members of senior
management. Contribution levels above 12% require Compensation Committee
approval. Contributions are made in cash and stock to a rabbi trust with vesting
over a rolling period based on 20% at the time of contribution and 20% on each
of the anniversary dates of the contribution until fully vested. Finally, the
defined contribution plan includes life insurance coverage at eight times
current salary up to a cap of $1,400,000. During 1998, the only members of
senior management participating in a defined contribution plan were William L.
Bush and William P. Marberg. Effective December 31, 1998, Williams L. Bush
terminated his employment with the Company.
The Company also has an Employee Stock Ownership Plan and Trust ("ESOP").
Employees, including officers of the Company who satisfy the ESOP's eligibility
criteria with respect to hours and years of service are eligible to participate.
Allocations are based on the ratio that an eligible individual's salary (subject
to current regulatory caps) represents to the total salaries of all eligible
persons. Standards for vesting are based upon years of service with the Company
in accordance with current regulatory guidelines. Under the ESOP, the Company is
not required to make any contributions, other than matching employee 401K
contributions up to 4% of eligible compensation. However, the Company's current
intention is to contribute approximately 15% of the Company's pre-tax earnings
to the ESOP. The 15% contribution would include the funds required to fulfill a
portion of the Company's obligation to match a portion of the employee's 401K
contribution. The contribution to the ESOP for the years ended December 31,
1996, 1997 and 1998 totaled $3,815,000, $3,874,000 and $4,809,000,
11
<PAGE>
respectively, which amounts were paid in cash. The amount of compensation
included in the "All Other Compensation" column of the Summary Compensation
Table includes the amounts of respective annual contributions allocated for the
named executive officers as of March 31 of the preceding year.
CANCELLATION AND REGRANT OF OPTIONS.
During 1998, the Company did not cancel, regrant or reprice any outstanding
stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
Mr. Rodney L. Gray, Mr. Douglass Wm. List (Chair) and Mr. Bruce M. Flohr
served on the Compensation Committee of the Company during the past fiscal year.
None of the members of the Compensation Committee are officers or employees of
the Company. The Compensation Committee of the Company establishes executive
salary and bonus levels for the executive officers of the Company.
The Company does not believe that any interlocks exist between members of
the Compensation Committee and any third party represented on the Board of
Directors or providing significant services to the Company.
EMPLOYMENT CONTRACTS.
Messrs. Olsson, Foudree, Kaiser, Marberg and Rosewall had employment
contracts with the Company as of December 31, 1998 which provides for the
payment to such officers of annual base salaries of $400,000, $186,349,
$166,349, $201,400 and $140,662, respectively. As of December 31, 1997, the base
salaries for Messrs. Olsson, Foudree, Kaiser and Rosewall were $325,000,
$182,481, $156,933 and $140,662, respectively. The employment contracts have a
rolling 12-month term, except that Mr. Olsson's contract has a rolling 24-month
term. For the year ended December 31, 1998, these officers' contracts included
an annual cash bonus. Cash bonuses paid to Messrs. Olsson, Foudree, Kaiser,
Marberg and Rosewall for calendar year 1998 under the cash bonus plan were
$216,490, $99,919, $87,268, $103,644 and $73,592, respectively. (See description
below under "Compensation Committee Report on Bonuses".)
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND COMPOSITION OF THE COMMITTEE.
The Compensation Committee is responsible for (i) establishing compensation
programs for executive officers of the Company and its subsidiaries designed to
attract, motivate and retain key executives responsible for the success of
Company as a whole; (ii) administering and maintaining such programs in a manner
that will benefit the long-term interests of the Company and its shareholders;
and (iii) determining the compensation of the Company's executive officers and
certain key employees. The Committee serves pursuant to a charter adopted by the
Board of Directors. The Committee is composed entirely of directors who have
never served as officers or employees of the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES.
The Committee believes that the Company's executive officer compensation
should be determined according to a competitive framework and based on overall
financial results, individual contributions and teamwork that together help
build value for the Company's shareholders. Within this overall philosophy the
Committee addresses a number of specific objectives, including (i) a total
compensation program that takes into account compensation practices and
financial performance as compared to similar companies, (ii) annual bonus
programs that take into account the Company's overall performance relative to
corporate objectives established in advance by the Committee which help create
value for the Company's shareholders, and (iii) alignment of the financial
interests of executive officers to those of shareholders by providing equity
based compensation through option grants and through mandatory minimum
shareholding requirements.
The Committee believes that the top management of the Company must operate
as a team and that the cause and effect relationship between the efforts of any
one individual and corporate performance is difficult to discern. Hence, in
general, the compensation of the executive team tends to track as a group with
the performance of the Company. The Committee does, however, make exceptional
decisions where exceptional circumstances exist. Furthermore, the Committee does
establish individual performance objectives and measures individual performance
against these objectives in an effort to ensure that all members of the top
management team are fulfilling the expectations set for them.
COMPENSATION COMPONENTS AND PROCESS.
There are three major components of the Company's executive officer
compensation: (i) base salary; (ii) annual bonuses and (iii) equity incentives
through ISOP and LTIP option grants and minimum shareholding requirements.
During 1998, the Committee utilized option grants under the Company's 1996
Long-Term Incentive Plan ("LTIP"). The LTIP operates to cover the executive
officer group, as well as a broader key employee group. Non-employee directors
also receive an automatic annual option grant of 1,500 shares each year. (See
discussion above under Executive Compensation--Long-Term Incentive Plan).
The process utilized by the Committee in determining executive officer
compensation levels for all of these components is based on the Committee's
objective judgment and takes into account both qualitative and quantitative
factors. No predetermined weights are assigned to such factors with respect to
any compensation component. Recommendations for base salaries and awards for
each individual executive officer are established after evaluation of individual
performance factors (equally weighted) including the following: knowledge of job
responsibilities, relationships with others, working capacity, initiative,
character, leadership, adaptability, teamwork, administrative ability and
individual goal attainment. The evaluation by the Committee includes the degree
to which each individual has met individual performance objectives. These
performance objectives are believed to relate directly to the Company's
performance and are therefore related to shareholder value. Among the
13
<PAGE>
factors considered by the Committee are the recommendation of the Chief
Executive Officer with respect to compensation of the Company's other key
executive officers. However, the Committee makes the final compensation
decisions concerning such officers.
Comparative information on executive salaries and bonuses from the Company's
peer group (as set forth below under the section herein dealing with the
"Performance Graph") is utilized by the Committee in its executive salary and
bonus reviews. In addition, the Committee reviews at least two other surveys of
industry trade groups with similarities to the Company's operations. The trade
group survey data sources are standard general indices constructed and provided
by outside vendors. The surveys consist of many more data points than the
limited number of companies in the peer performance stock group. In making
compensation decisions, the Committee also from time to time receives
assessments and advice regarding the compensation practices of the Company and
others from independent compensation consultants. During 1998, the Compensation
Committee analyzed the base salary and the total compensation (base salary plus
annual incentives) of the Company's executives as compared to survey data and to
comparative companies in the rail supply industry, the electronic equipment
manufacturing industry and the greater Kansas City area.
In order to meet the objectives set out above, the Committee has designed
the executive compensation program to be consistent with the Company's overall
pay philosophy. Base salaries, the fixed regular periodic component of pay, are
conservatively established at levels comparable to base salaries for similar
positions at companies with similar levels of sales and overall financial
performance. Annual cash bonus and equity awards, which are directly linked to
the short-term and long-term financial performance of the Company as a whole,
are designed to provide better than competitive pay only for better than
competitive financial performance.
BASE SALARY.
On August 17, 1998, the Committee conducted a review of the performance and
compensation of the Company's executive officer group, including Bjorn E. Olsson
and the other named executive officers. This review included an analysis of key
accomplishments of each officer, an evaluation of achievement of individual
goals and objectives, and an assessment of their contributions to the Company's
performance. Based on this review and its assessment of competitive compensation
practices, the Committee recommended an increase in base salaries in a range
generally from 4% to 6% for certain executive officers and key employees
(including some of the named executive officers) effective September 1, 1998.
BONUSES.
The Company's Incentive Bonus Plan for its Executive Officer Group includes
ROCE (Return on Capital Employed) and earnings growth as a critical indicator of
financial performance of the Company. The objective of this cash bonus plan is
to provide an additional incentive to each officer of the Company so as to
advance the interests of the Company and its stockholders and create a more
direct tie between annual performance and increased shareholder values. The
Committee believes that the bonus plan encourages the creation of shareholder
wealth by creating incentives both to maximize operating profit for the Company
and minimize capital employed. Additionally, the bonus plan rewards efficiencies
in production and innovation in quality-based productivity techniques. The bonus
plan was based on 50% weighting for ROCE and 50% weighting for earnings growth
for 1998. For 1999, the bonus plan will be based on 38% weighting for ROCE, 38%
weighting for earnings growth and 24% for as new set of "Balanced Scorecard"
parameters. The Balanced Scorecard parameters for 1999 consist of three
different components, equally weighted, as follows: on time shipments, unplanned
employee turnover, and safety occurrence frequency. The formula for ROCE is the
sum of pretax earnings plus interest expense divided by the sum of average total
assets minus non-interest bearing liabilities. The cash bonus plan establishes
target base bonus levels as percentages of current base
14
<PAGE>
salary. The bonus is calculated based on actual performance numbers for ROCE as
compared to budget and earnings growth based on primary earnings per share as
compared to an Earnings Growth Rate Target established by the Board of Directors
at 10% for fiscal 1998 and 1999. The ROCE portion of the bonus is calculated as
follows based on the ratio of actual versus budget ROCE: under 75% of budgeted
ROCE--no bonus award; from 75% to 99% of budgeted ROCE--pro-rated bonus award;
at 100% of budgeted ROCE--100% of potential ROCE bonus award and for each 1%
above budgeted ROCE a $7,000 incremental increase for each officer.
For 1998, budgeted ROCE was 21.7% and actual ROCE was 23.2%. Targeted
earnings per share growth was 10% and actual primary earnings per share growth
was 17.9%. Amounts payable in 1999 under the cash bonus plan for 1998 to all
executive officers totaled $1,099,859 and the named executive officers, Messrs.
Olsson, Foudree, Kaiser, Marberg and Rosewall received the following amounts:
$216,490, $99,919, $87,268, $103,644 and $73,592, respectively.
LONG-TERM INCENTIVE PLANS.
On May 14, 1996, the shareholders of the Company approved the Company's 1996
Long-Term Incentive Plan ("LTIP"), which plan became effective May 31, 1996. The
purposes of the LTIP are (i) to align the interests of the Company's
shareholders and recipients of awards under the LTIP by increasing the
proprietary interests of such recipients in the Company's growth and success,
and (ii) to advance the interests of the Company by attracting and retaining
officers, other employees and non-employee directors. Upon adoption of the LTIP,
it replaced both the Company's 1988 Non-Qualified Director Option Plan and the
Company's 1990 Qualified Incentive Stock Option Plan. Outstanding options under
both the 1988 Non-Qualified Director Option Plan and the 1990 Incentive Stock
Option Plan remain valid although no new grants were permitted under either plan
after May 31, 1996.
Under the LTIP, the Compensation Committee establishes criteria for the
granting and vesting of options or other permitted awards under the LTIP. The
Compensation Committee currently anticipates that the primary awards vehicle
under the plan will consist of non-qualified options, with vesting over a
four-year period from the date of grant so that 20% of the grant amount will
vest each year. The exercise prices of such non-qualified options are equal to
the Closing price for the Company's stock on the date of grant. Under the LTIP,
the Compensation Committee currently anticipates that grants to executive
officers will be in the amount of 5,250 option shares per year so that 1,050
option shares will be vested as of the date of grant and an additional 1,050
option shares will vest over each of the following four years from the date of
grant. In addition, the Compensation Committee anticipates granting
non-qualified options to certain key employees of the Company, which grants will
be in the amount of 500 or 750 option shares, with similar vesting percentages
as those applied to the officers group. Finally, the Committee anticipates
grants of 1,500 non-qualified option shares each to certain Assistant Vice
Presidents with similar percentage vesting schedules to the officer grants.
Under the LTIP, on the last business day of May, commencing May 31, 1996 (or
if later, on the date on which the person is first elected or begins to serve as
a non-employee director, other than by reason of termination of employment) and,
thereafter on the date of each annual meeting of shareholders of the Company,
each person who is a non-employee director after such meeting of stockholders
shall be granted a non-qualified option for 1,500 option shares of the Common
Stock of the Company. The option amount shall be prorated if such non-employee
director is first elected or begins to serve as a non-employee director on a
date other than the date of an annual meeting of stockholders. Options granted
to non-employee directors pursuant to the LTIP immediately vest and have a term
of seven years for exercise.
On March 19, 1998, each executive officer (13 in all) received grants of
ten-year non-qualified options under the LTIP for 5,250 option shares, vesting
over 4 years at an exercise price of $20.88 per
15
<PAGE>
option share. On May 29, 1998, each of the non-employee directors received a
grant of 1,500 non-qualified options, with an exercise price of $23.88 per
share. In March 1998, non-qualified ten-year options for 45,000 option shares
(750 to each key employee) were issued to 60 key employees under the LTIP. The
option exercise price of the non-qualified options granted to key employees was
$20.88 per option share with vesting over 4 years.
MINIMUM STOCKHOLDING REQUIREMENT.
During 1996, the Compensation Committee, with the Board of Director's
approval, established a minimum stockholding requirement for Company stock
(exclusive of ESOP and unexercised option shares) in amounts equal to two times
base salary for the CEO, one-time base salary for the Executive Vice Presidents
and one-half of base salary for all other members of the Executive Officer
Group. For any person subject to the minimum stockholding requirements who holds
less than the minimum stockholding requirement (measured at each year-end), the
delinquency will result in up to one-third of that person's annual cash bonus
being utilized to purchase shares of the Company's stock in the name of such
individual. New officers will be given five years in which to satisfy their
minimum stockholding requirement before application of the bonus withholding
procedure. At December 31, 1998, each member of the Company's Executive Group,
including each of the Named Executive Officers, satisfied their respective
minimum stockholding requirements.
Rodney L. Gray Douglass Wm. List (Chair)
Bruce M. Flohr
TOTAL RETURN TO SHAREHOLDERS
PERFORMANCE GRAPH.
The Company has included in this proxy statement, a graph of five-year
shareholder returns on an indexed basis comparing the Company's common stock
performance to other broad market indices, the index of selected peer group
companies shown last year (the "Old Peer Group") and a new index of selected
peer group companies (the "New Peer Group"). The Board of Directors has
constructed a peer group consisting of the Company and nine other manufacturing
and service companies in the railroad supply industry. Revenues (on a 12-month
trailing basis) for this group of companies range from $219.5 Million to $2,862
Million, as compared to $265.2 Million for the Company. Total Assets for these
companies range from $116.8 Million to $1,635.4 Million, as compared to $162.9
Million for the Company. The Old Peer Group consists of the following companies:
Harsco Corporation; Trinity Industries, Inc.; Varlen Corporation; L.B. Foster
Company; Ansaldo Signal NV, Timken Company; ABC Rail Products,Inc.; Wabash
National Corporation and the Company. The New Peer Group consists of the
following companies: Harsco Corporation; Trinity Industries, Inc.; Varlen Corp.;
LB Foster Company; Ansaldo Signal NV; ABC Rail Products, Inc.; Wabash National
Corporation; Westinghouse Air Brake Co.; Motivepower Industries, Inc. and the
Company. Effective February 23, 1999 ABC Rail Products Corp. changed its name to
ABC-NACO Inc. The performance graph shows comparisons between the Company, the
peer group and the S&P Composite 500 Stock Index. Data points for the
performance graph comparisons are included in the legend below. All indices have
been weighted for market capitalization. The following performance graph also
sets forth the percentage of cumulative total return for the last fiscal year
and cumulative return since January 1, 1994.
16
<PAGE>
Comparison of Five-Year Cumulative Total Return* Among the Company, Peer
Performance Group and S&P Composite 500 Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HARMON INDUSTRIES OLD PEER GROUP NEW PEER GROUP S&P 500
<S> <C> <C> <C> <C>
1993 100.0 100.0 100.0 100.0
1994 85.5 98.9 96.1 101.4
1995 69.7 106.2 94.5 139.5
1996 83.2 124.1 109.4 172.0
1997 124.7 168.7 157.4 229.6
1998 158.2 130.2 138.8 295.2
</TABLE>
The reference points on the foregoing graph are as follows:
<TABLE>
<CAPTION>
DEC. 1993 DEC. 1994 DEC. 1995 DEC. 1996 DEC. 1997 DEC. 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Harmon Industries.................... 100.00 85.50 69.70 83.20 124.70 158.20
Old Peer Group....................... 100.00 98.90 106.20 124.10 168.70 130.20
New Peer Group....................... 100.00 96.10 94.50 109.40 157.40 138.80
S&P 500.............................. 100.00 101.40 139.50 172.00 229.60 295.20
</TABLE>
* Assumes that the value of the Company's common stock, Performance Peer Group
and S&P 500 Index were each $100 on December 31, 1993 and that all dividends
were reinvested.
DIRECTOR COMPENSATION
From May 14, 1996 to May 12, 1998, the Board of Directors' compensation
consisted of annual fees of $8,000 plus travel expenses to and from the meetings
for each director. Effective May 14, 1996, only non-employee directors were
entitled to receive annual directors fees. In addition, the directors who were
not employees of the Company received $500 for each Board or separate committee
meeting in which the director participates by attending or through telephonic
conference. In addition, each chairperson of the respective committees of the
Board of Directors received an annual payment of $500 for acting as chairperson
of a committee.
Effective May 12, 1998, each non-employee director receives an annual cash
director's fee of $6,000 and 360 shares of Common Stock of the Company per year
issued in January of each year. In January 1999, 180 shares (prorated for the
first partial year of existence of the 1998 Director Stock Plan) were issued to
each of eight non-employee directors. In addition, non-employee directors
receive $1,500 per Board meeting, $750 per committee meeting and $500 for
special telephonic board meetings on specific subjects. Board and committee
meeting fees are payable for attendance in person or for
17
<PAGE>
telephonic participation. Each chair of a committee receives $250 per quarter.
Finally, each non-employee director may receive $500 for a three-hour block of
such director's time (capped at $1,500 total per day) for special or ad hoc
projects assigned to such non-employee director by the Board.
The package also grants each director an annual non-qualified option to
purchase 1,500 shares of the Company's Common Stock at a price equal to the
closing market price on the date of grant. The non-qualified options are granted
under and are governed by the Company's 1996 Long-Term Incentive Plan. These
options are exercisable at any time during a seven year period following the
date of grant. On May 29, 1998, options for 1,500 shares were granted to each of
the Non-Employee Directors pursuant to the LTIP. Such options have an exercise
price of $23.88 per share, are fully vested and are exercisable over a term of
seven years. On May 13, 1997, options for 1,500 shares were granted to each of
the non-employee directors pursuant to the LTIP. These options have an exercise
price of $13.00 per share, are fully vested and have a term of seven years. As
of March 15, 1999, none of such options granted have been exercised other than
the exercise in March 1998 by Bruce M. Flohr of both the 1996 and 1997 grants
for 1,500 shares each. See discussion above under "Executive Compensation--Long-
Term Incentive Plan" for a description of the non-qualified LTIP options granted
annually to the Non-Employee Directors.
On December 8, 1994, the Board of Directors approved a compensation package
for Mr. Robert E. Harmon, in his capacity as Chairman of the Board effective
January 1, 1995. The Chairman of the Board is treated as a Non-Employee Director
for annual and director meeting fees. The defined duties of the Chairman include
the following: representing the Company at national trade association meetings;
assisting in lobbying efforts; assisting in overseas representation of the
Company; assisting the CEO in acquisitions; assisting in the development of
relationships with securities analysts and investors; assisting with sales and
promotional calls; providing advisory services to the CEO; and conducting all
Board meetings. The Chairman's annual fee, subject to review each year, was
approximately $79,000 for the period of September 1996 to August 1998 will be
approximately $86,000 per 12-month period commencing September 1998.
APPROVAL OF SELECTION OF AUDITORS
Management recommends voting to approve the selection of KPMG LLP, as
Auditors for the Company for the 1999 fiscal year. This firm has served
continuously as Auditors for the Company since 1969.
A representative of KPMG LLP will be present at the Annual Meeting of
Shareholders and will be available to make a statement, if he or she desires to
do so, and to answer appropriate questions asked by the shareholders.
SHAREHOLDER PROPOSALS-1999 MEETING
In the event any shareholder intends to present a proposal at the Annual
Meeting of Shareholders to be held in 2000, such proposal must be received by
the Company, in writing, on or before November 11, 1999, to be considered for
inclusion in the Company's next Proxy Statement. Shareholder proposals for
suggested nominees for director should be submitted to the Company's Director
Nomination and Compensation Committee on or before November 11, 1999.
18
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OTHER MATTERS
Management is not aware of any other matters which may come before the
meeting. However, if any other matters properly come before the meeting, it is
the intention of the persons named in the accompanying form of proxy to vote the
proxy in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Harmon
Chairman
April 1, 1999
19
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HARMON INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
COUNTRY CLUB OF BLUE SPRINGS
1600 N. CIRCLE DRIVE
Blue Springs, Missouri
Tuesday, May 11, 1999
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately
submitted. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and follow the
instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 5:00
p.m. Central Time, May 10, 1999.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR PROXY BY MAIL.
THANK YOU FOR YOUR VOTE.
Cut or tear along perforated edge.
PROXY
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 11, 1999
The undersigned holders of shares of Common Stock of Harmon Industries, Inc.
(the "Company") hereby appoint Robert E. Harmon and Charles M. Foudree, and
each of them, attorneys, agents and proxies of the undersigned with full
power of substitution and revocation to each of them, to vote all the shares
of Common Stock which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the Country Club of Blue
Springs, 1600 N. Circle Drive, Blue Springs, Missouri on Tuesday, May 11,
1999, and at any adjournments of such meeting, with all powers which the
undersigned would possess if personally present.
1. Election of three (3) Directors in Class I: (for an initial term of one
year) Bruce M. Flohr, Gerald E. Myers, Judith C. Whittaker
/ / FOR all Nominees / / AUTHORITY WITHHELD from all Nominees
/ / FOR all Nominees except vote(s) withheld for the following Nominee(s):
------------------------------------------------------------------------
2. Election of three (3) Directors in Class II: (for an initial term of two
years) Robert E. Harmon, Herbert M. Kohn, Douglass Wm. List
/ / FOR all Nominees / / AUTHORITY WITHHELD from all Nominees
/ / FOR all Nominees except vote(s) withheld for the following Nominee(s):
------------------------------------------------------------------------
3. Election of three (3) Directors in Class III: (for an initial term of
three years) Rodney L. Gray, Bjorn E. Olsson, John A. Sprague
/ / FOR all Nominees / / AUTHORITY WITHHELD from all Nominees
/ / FOR all Nominees except vote(s) withheld for the following Nominee(s):
------------------------------------------------------------------------
4. Selection of KPMG LLP as auditors for the Company.
/ / FOR / / AGAINST / / ABSTENTION
(Please sign reverse side and return promptly)
UNLESS OTHERWISE DIRECTED, THE MANAGEMENT PROXY COMMITTEE WILL VOTE FOR THE
ELECTION OF THREE (3) DIRECTORS IN CLASS I AS LISTED IN THE PROXY STATEMENT,
FOR THE ELECTION OF THREE (3) DIRECTORS IN CLASS II AS LISTED IN THE PROXY
STATEMENT AND FOR THE ELECTION OF THREE (3) DIRECTORS IN CLASS III AS LISTED
IN THE PROXY STATEMENT AND FOR THE SELECTION OF KPMG LLP.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting and Proxy Statement of the Company dated April 1, 1999.
DATED__________________________, 1999
_____________________________________
(Where stock is registered jointly in
the names of two or more persons, all
should sign. Signatures should
correspond exactly with the name or
names on the stock certificate.
Executing partners, trustees, guardians,
etc., should so indicate when signing.)
THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS
