ABM INDUSTRIES INC /DE/, DEF 14A, 1997-02-20

ABM INDUSTRIES INC /DE/
DEF 14A, 1997-02-20
TO DWELLINGS & OTHER BUILDINGS

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

ABM Industries Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

LOGO
50 Fremont Street, 26th Floor
San Francisco, California 94105

------------------------

NOTICE OF THE 1997 ANNUAL MEETING OF STOCKHOLDERS

TUESDAY, MARCH 18, 1997
10:00 A.M.

------------------------

To Our Stockholders:

The 1997 Annual Meeting of Stockholders of ABM Industries Incorporated will
be held at 50 Fremont Street, 26th Floor, San Francisco, California 94105, on
Tuesday, March 18, 1997 at 10:00 a.m. for the following purposes:

(1) To elect four directors, each to serve for a term of three years;

(2) To approve the Company's Long-Term Senior Executive Stock Option
Plan (the "1996 Plan"), as set forth and further described in the
attached Proxy Statement; and

(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.

Only stockholders of record on the books of the Company at the close of
business on January 31, 1997 will be entitled to vote at the Annual Meeting and
any adjournments thereof.

By Order of the Board of Directors

Harry H. Kahn
Vice President, General Counsel and
Secretary
San Francisco, California
February 20, 1997

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE.
<PAGE> 3

LOGO
50 Fremont Street, 26th Floor
San Francisco, California 94105

------------------------

PROXY STATEMENT

The accompanying proxy is solicited on behalf of the Board of Directors of
ABM Industries Incorporated, a Delaware corporation (the "Company"), for use at
the 1997 Annual Meeting of Stockholders of the Company (the "Annual Meeting") to
be held at 10:00 a.m. on March 18, 1997, and at any adjournments of the Annual
Meeting, for the purposes set forth in the accompanying notice.

Only stockholders of record on the books of the Company at the close of
business on January 31, 1997 will be entitled to vote at the Annual Meeting. At
the close of business on that date, there were outstanding 19,980,753 shares of
Common Stock of the Company and 6,400 shares of Preferred Stock of the Company.
Each share of Common Stock and each share of Preferred Stock is entitled to one
vote upon each of the matters to be presented at the Annual Meeting.

The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
Annual Meeting. Abstentions and broker non-votes are counted as present in
determining whether the quorum requirement is satisfied. With regard to the
election of directors, votes may be cast "For" or "Withheld For" each nominee;
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions may be specified on all proposals except the election of
directors. Since the approval of the Company's Long-Term Senior Executive Stock
Option Plan (the "1996 Plan") (Item 2 of this Proxy Statement) requires the
affirmative vote of a majority of shares present in person or by proxy and
entitled to vote, abstentions will have the effect of a negative vote. Under
Delaware law, a broker non-vote will have no effect on the outcome of items
requiring the affirmative vote of a majority of the shares represented at the
Annual Meeting and entitled to vote thereon (Item 2 of this Proxy Statement).

If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted as recommended by
the Board of Directors. Any person signing a proxy in the form accompanying this
proxy statement has the power to revoke it prior to or at the Annual Meeting. A
proxy may be revoked by written request delivered to the Secretary of the
Company stating that the proxy is revoked, by a subsequent proxy signed by the
person who signed the earlier proxy or by attendance at the Annual Meeting and
voting in person.

The expense of soliciting proxies in the enclosed form will be paid by the
Company. Following the original mailing of the proxies and soliciting materials,
employees of the Company may solicit proxies by mail, telephone, telegraph and
personal interviews. The Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxies and soliciting materials
to persons for whom they hold shares of the Company's Common Stock or Preferred
Stock and to request authority for the exercise of proxies; in such cases, the
Company will reimburse such holders for their reasonable expenses.

This Proxy Statement and the accompanying proxy were first sent to
stockholders on or about February 20, 1997.
<PAGE> 4

ITEM 1 -- ELECTION OF DIRECTORS

The Company's Board of Directors is divided into three classes with each
director serving a three-year term and one class being elected at each Annual
Meeting. The total number of directors comprising the Board of Directors is
currently set by the Company's By-Laws at ten. Of this number, four members of
the Board of Directors have terms expiring at this year's Annual Meeting, three
members have terms expiring at the 1998 Annual Meeting and three members have
terms expiring at the 1999 Annual Meeting. Directors elected at this year's
Annual Meeting will hold office until the Annual Meeting to be held in the year
2000, or until their successors have been elected and qualified, whichever is
later.

In the absence of instructions to the contrary, shares represented by the
accompanying proxy will be voted for the election of the four nominees
recommended by the Board of Directors, who are named in the following table. The
four nominees receiving the highest number of votes will be elected. If a
stockholder withholds authority to vote for one or more of the nominees, such
stockholder's shares will be counted for purposes of determining whether a
quorum is present at the Annual Meeting but will have no effect on the outcome
of the election.

The Company has no reason to believe that the nominees for election will be
unable or unwilling to serve if elected as directors. However, if any such
nominee is unable or unwilling to be a candidate for the office of director at
the date of the Annual Meeting, or any adjournment thereof, the proxy holders
will vote for such substitute nominee as they shall in their discretion
determine.

The Nominating Committee will consider nominees recommended by
stockholders. The Company's By-Laws provide that stockholders intending to
nominate candidates for election as directors must give the prescribed notice to
the Secretary of the Company at least 60 days prior to the applicable meeting of
stockholders. No such notice has been given with respect to this year's Annual
Meeting.

The following table indicates certain information concerning the nominees
and the Company's other directors which is based on data furnished by them.

<TABLE>
<CAPTION>
SERVED
PRINCIPAL OCCUPATIONS AND AS
BUSINESS EXPERIENCE DIRECTOR
NAME AGE DURING PAST FIVE YEARS SINCE
- ---------------------------- --- ------------------------------------------------- -------
<S> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS FOR A
TERM ENDING AT THE 2000 ANNUAL MEETING
- ----------------------------------------------------------------------------------------------
Martinn H. Mandles.......... 56 Executive Vice President of the Company 1991
Sydney J. Rosenberg......... 82 Chairman of the Board of the Company; Chief 1962
Executive Officer of the Company from November of
1991 to November of 1994(1)
Theodore Rosenberg.......... 88 Chairman of the Company's Executive 1962
Committee(1)(2)
William W. Steele........... 60 President of the Company; Chief Executive Officer 1988
of the Company since November of 1994
</TABLE>

2
<PAGE> 5

Luke S. Helms............... 53 Vice Chairman of BankAmerica Corporation and Bank 1995
of America NT&SA from May of 1993 to October of
1996; Chairman and Chief Executive Officer of
Seattle First National Bank (a wholly-owned
subsidiary of BankAmerica Corporation) from
1991 to 1993

William E. Walsh............ 65 Management Consultant and Author; Football 1993
Consultant to the San Francisco 49ers, 1996; Head
Football Coach for Stanford University from
1992 to 1994

DIRECTORS CONTINUING IN OFFICE FOR A
TERM ENDING AT THE 1999 ANNUAL MEETING
- ----------------------------------------------------------------------------------------------

Maryellen B. Cattani, 53 Executive Vice President, General Counsel and 1993
Esq....................... Secretary of APL Limited(4)
John F. Egan................ 61 Vice President of the Company and President of 1988
the Company's Janitorial Services Division
Charles T. Horngren......... 70 Littlefield Professor of Accounting, Emeritus, 1973
Graduate School of Business, Stanford
University(5)
</TABLE>

- ---------------
(1) Theodore Rosenberg and Sydney J. Rosenberg are brothers and may each be
deemed to be a "control person" of the Company within the meaning of the
General Rules and Regulations adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.

(2) Effective as of December 31, 1989, Theodore Rosenberg retired as an officer
and employee of the Company. Theodore Rosenberg has retained his positions
as a director of the Company and as Chairman of the Executive Committee of
the Company's Board of Directors. Theodore Rosenberg also serves as a
consultant to the Company.

(3) Henry L. Kotkins, Jr. is a member of the Board of Directors of Skyway
Luggage Company.

(4) Maryellen B. Cattani is a member of the Board of Directors of Golden West
Financial Corporation.

(5) Charles T. Horngren is a member of the Board of Directors of Logicon, Inc.

FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS

COMMITTEES OF THE BOARD

The standing committees of the Company's Board of Directors are the
Executive Committee, Audit Committee, Nominating Committee and Executive Officer
Compensation & Stock Option Committee. The members and functions of these
committees are as follows:

Executive Committee. Except for the declaration of dividends and
certain other powers which may be exercised only by the full Board under
Delaware law, the Executive Committee has the authority to exercise all
powers of the Board with regard to the business of the Company. The current
members of the Executive Committee are Theodore Rosenberg, Chairman;
Martinn H. Mandles; Sydney J. Rosenberg; and William W. Steele.

3
<PAGE> 6

Audit Committee. The Audit Committee meets periodically with
management and the independent public accountants for the Company to make
inquiries regarding the manner in which their respective responsibilities
are being discharged and reports thereon to the full Board of Directors.
The Audit Committee also recommends the annual appointment of the
independent public accountants with whom the Audit Committee reviews the
scope of the audit and non-audit assignments and related fees, the
accounting principles applied by the Company in financial reporting,
internal financial auditing procedures and the adequacy of internal
controls. The current members of the Audit Committee are Charles T.
Horngren, Chairman; Maryellen B. Cattani; and Luke S. Helms. Boniface A.
Zaino, who served on the Audit Committee during the fiscal year ended
October 31, 1996, resigned from the Audit Committee effective October 31,
1996 and was replaced by Mr. Helms effective December 17, 1996.

Nominating Committee. The Nominating Committee is responsible for
making recommendations regarding the size of the Board of Directors,
recommending criteria for selection of candidates to serve on the Board of
Directors, evaluating all proposed candidates and recommending to the Board
of Directors a slate of nominees for election to the Board of Directors at
the Annual Meeting of Stockholders. The current members of the Nominating
Committee are Sydney J. Rosenberg, Chairman; Luke S. Helms; and Henry L.
Kotkins, Jr.

Executive Officer Compensation & Stock Option Committee. The
Executive Officer Compensation & Stock Option Committee reviews and
recommends to the Board of Directors executive officer compensation and
other terms and conditions of employment for the executive officers of the
Company, administers the Company's stock option plans and authorizes grants
thereunder and administers the Company's stock purchase plan. The current
members of the Executive Officer Compensation & Stock Option Committee are
Maryellen B. Cattani, Chairman; Henry L. Kotkins; and William E. Walsh.
Theodore Rosenberg, who served on the Executive Officer Compensation &
Stock Option Committee during the fiscal year ended October 31, 1996,
resigned and was replaced by Mr. Kotkins on the Executive Officer
Compensation & Stock Option Committee effective December 17, 1996.

MEETINGS AND ATTENDANCE

During the fiscal year ended October 31, 1996, the Board of Directors met
four times, the Executive Committee met 24 times, the Audit Committee met three
times, and the Executive Officer Compensation & Stock Option Committee met four
times. During this period, William E. Walsh attended fewer than 75% of the total
number of meetings of the Board of Directors and Committees of which he was a
member.

COMPENSATION OF DIRECTORS

Directors who are not employees of the Company ("Outside Directors") are
paid directors' fees of $18,000 per year and $1,500 for each Board meeting
attended. Each Outside Director also receives $1,500 for each Audit, Nominating
and Executive Officer Compensation & Stock Option Committee meeting attended, as
applicable. During fiscal 1996, Outside Directors were paid $14,400 per year and
$1,200 for each Board and Committee meeting attended. In addition, Outside
Directors serving as Chairmen of the Executive Committee, Audit Committee and
Officer Compensation & Stock Option Committee each receives $1,500 per year.
Each Outside Director also receives an annual grant of stock options in the
amount of 5,000 shares of Common Stock on the first day of each fiscal year,
pursuant to the terms of the Company's 1987 Stock Option Plan.

The Company has entered into Director Retirement Benefit Agreements with
all Outside Directors since June 1992. These agreements provide that, upon the
retirement of such Outside Directors, the Company will pay them the monthly
retainer they were receiving at the time of their retirement (subject to a 10%
reduction for every year of service as an Outside Director less than ten) for a
maximum period of ten years. Upon or after attaining the age of 72 years, the
retired Outside Director may elect to receive such payment monthly, or

4
<PAGE> 7

in a lump sum discounted to present value at the time of such election. Outside
Directors under the age of 72 years who retire with fewer than five years of
service as Outside Directors, however, are not entitled to any benefits under
these agreements.

The Company has also entered into Director Indemnification Agreements with
each of its Directors. These agreements, among other things, require the Company
to indemnify its Directors against certain liabilities that may arise by reason
of their status or service as directors, to the fullest extent provided by
Delaware law.

See "Executive Officer Compensation & Stock Option Committee Interlocks and
Insider Participation" for a discussion of certain payments made to Theodore
Rosenberg.

ITEM 2 -- APPROVAL OF THE COMPANY'S LONG-TERM
SENIOR EXECUTIVE STOCK OPTION PLAN

The Board of Directors has approved the adoption of the ABM Industries
Incorporated Long-Term Senior Executive Stock Option Plan (the "1996 Plan").
Adoption of the 1996 Plan is subject to the approval of a majority of the shares
of the Company's Common Stock (the "Common Stock") which are present in person
or by proxy and entitled to vote at the Annual Meeting. The following paragraphs
provide a summary of the principal features of the 1996 Plan and its operation.
The 1996 Plan is set forth in its entirety as Exhibit A to this Proxy Statement.
The following summary is qualified in its entirety by reference to Exhibit A.

PURPOSE OF THE 1996 PLAN

The 1996 Plan is intended to attract, retain and motivate senior
executives. The 1996 Plan is also intended to provide the Company and its
Affiliates with the ability to provide incentives more directly linked to the
profitability of the Company and increases in stockholder value.

GENERAL

The number of shares authorized to be issued pursuant stock options
("Options") granted under the 1996 Plan is 1,500,000. If an Option granted under
the 1996 Plan terminates without being exercised, shares subject to such Option
will be available for further grants under the 1996 Plan. None of the Options
will be "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code (the "Code").

In the event of a merger, reorganization, consolidation, recapitalization,
stock dividend, stock split, extraordinary distribution with respect to the
Common Stock or other similar event affecting the Common Stock, the Committee or
the Board will make adjustments or substitutions, as appropriate, in the number,
kind and option price of shares authorized or outstanding as Options.

ADMINISTRATION

The 1996 Plan will be administered by the Executive Officer Compensation &
Stock Option Committee of the Board of Directors (the "Committee"). The members
of the Committee must qualify as "non-employee directors" under Rule 16b-3 under
the Securities and Exchange Act of 1934, and as "outside directors" under
Section 162(m) of the Code.

Subject to the terms of the 1996 Plan, the Committee has the sole
discretion to determine the participants in the 1996 Plan, the number of shares
of Common Stock to be covered by each Option granted, and the terms and
conditions of such grants, except that during the life of the 1996 Plan, no
participant may be granted options for more than 100,000 shares. The Committee
also has the authority to adopt, alter and repeal administrative rules,
guidelines and practices, to interpret the terms and provisions of the 1996 Plan
and any Option issued thereunder and to otherwise supervise the administration
of the 1996 Plan.

ELIGIBILITY

Participants in the 1996 Plan are selected by the Committee. Only senior
executives who are actively employed on a full-time basis by the Company or any
of its Affiliates, and who are responsible for or

5
<PAGE> 8

contribute to the management, growth and profitability of the business of the
Company or any of its Affiliates, are eligible to be selected by the Committee.

TERM OF OPTIONS

The term of each Option will be ten (10) years, unless earlier terminated
under the circumstances described below.

EXERCISE PRICE OF OPTIONS

The exercise price of each Option will be the greater of: (i) $20.00 per
share, (ii) the Fair Market Value per share of Common Stock on the grant date of
the Option, or (iii) the Fair Market Value per share of Common Stock on the date
of stockholder approval of the 1996 Plan. "Fair Market Value" means, as of any
given date, the average of the highest and lowest reported trades of the Common
Stock on the New York Stock Exchange Composite Tape for such date, or if there
were no trades on such date, the average of the nearest trading day after such
date.

The exercise price of each Option must be paid in full in cash at the time
of exercise. The Committee also may permit payment through the tender of shares
of the Company's Common Stock that are already owned by the participant for six
months or more, or by any other form approved by the Committee.

EXERCISABILITY AND VESTING OF OPTIONS

Each Option is exercisable only if such Option has vested. Each Option has
assigned to it by the Committee a vesting price (the "Vesting Price") which will
be used to provide for accelerated vesting so that such Option will vest
immediately if, on or before the close of business on the fourth (4th)
anniversary of its date of grant, the Fair Market Value of the Common Stock will
at least equal the Vesting Price with respect to such Option for ten (10)
trading days in any period of thirty (30) consecutive trading days. (However, in
no event may any Option be exercised sooner than the first (1st) anniversary of
its date of grant.) Any option that has not vested on or before the close of
business on the fourth (4th) anniversary of its date of grant will vest at the
close of business on the business day immediately preceding the eighth (8th)
anniversary of its date of grant, if such Option has not previously terminated.

If the Optionee's employment terminates by reason of death, or disability
or if such employment is terminated by the Company without cause, in each case
prior to the vesting of an Option held by the Optionee, such Options will be
exercisable only within ninety (90) days of such termination, and only if such
Options are then vested. If the Optionee's employment terminates by reason of
retirement or other "voluntary quit" prior to the vesting of an Option, such
Options will terminate immediately. If the Optionee's employment is terminated
by the Company for cause prior to the vesting of an Option, such Options also
will terminate immediately. If the Optionee's employment is terminated for any
reason after an Option has vested, such Options will be exercisable only within
ninety (90) days of such termination.

The right of any participant to exercise an Option may not be transferred
in any way other than (i) to a beneficiary designation satisfactory to the
Committee, or (ii) by will or the laws of descent and distribution. All Options
are exercisable by an optionee during his or her lifetime only by the Optionee,
or any guardian or legal representative or permitted transferee.

1996 PLAN AWARDS

As described above, the Committee has discretion to determine the number of
Options (if any) to be granted to any individual under the 1996 Plan.
Accordingly, the actual number of Options to be granted to any individual is not
determinable. On December 17, 1996, the Committee awarded Options, subject to
stockholder approval of the 1996 Plan, to the senior executives listed in the
table below, covering the number

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<PAGE> 9

of shares of Common Stock and at the exercise prices and vesting prices
indicated (collectively, the "1996 Plan Awards").

<TABLE>
<CAPTION>
EXERCISE
NUMBER PRICE
OF PER VESTING
NAME AND POSITION SHARES SHARE(1) PRICE(2)
- ------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
William W. Steele.......................... 25,000 $20.00 $25.00
President, Chief Executive Officer,
Director 25,000 20.00 30.00
and member of the Executive Committee 25,000 20.00 35.00
25,000 20.00 40.00

John F. Egan............................... 15,000 $20.00 $25.00
Vice President and Director of the
Company, 15,000 20.00 30.00
and President of the Janitorial Services
Division 15,000 20.00 35.00
15,000 20.00 40.00

Sydney J. Rosenberg(3)..................... n/a n/a n/a
Chairman of the Board, Director,
and member of the Executive Committee

Martinn H. Mandles......................... 20,000 $20.00 $25.00
Executive Vice President, Director and 20,000 20.00 30.00
member of the Executive Committee 20,000 20.00 35.00
20,000 20.00 40.00

Jess E. Benton, III........................ 15,000 $20.00 $25.00
Senior Vice President 15,000 20.00 30.00
15,000 20.00 35.00
15,000 20.00 40.00

All executive officers as a group.......... 130,000 $20.00 $25.00
130,000 20.00 30.00
130,000 20.00 35.00
130,000 20.00 40.00

All directors who are not executive
officers
as a group(4)............................ n/a n/a n/a

All employees who are not executive
officers
as a group............................... 120,000 $20.00 $25.00
120,000 20.00 30.00
120,000 20.00 35.00
120,000 20.00 40.00
</TABLE>

- ---------------

(1) The exercise price of each Option will be the greater of: (i) $20.00 per
share, (ii) the Fair Market Value per share of Common Stock on the grant
date of the Option, or (iii) the Fair Market Value per share of Common Stock
on the date of stockholder approval of the 1996 Plan. On December 17, 1996
(the date on which the Options were granted), the Fair Market Value of a
share was $16.06.

(2) See discussion above under "Exercisability and Vesting of Options".

(3) Mr. Rosenberg has not received any Option awards to date under the 1996
Plan.

(4) Not eligible for the 1996 Plan.

7
<PAGE> 10

CHANGE IN CONTROL

Options will become fully vested and exercisable upon a Change in Control
(as defined in the 1996 Plan) during the ninety (90) day period from and after
such Change in Control.

The 1996 Plan also provides that during the 90-day period following a
Change in Control, the holder of an Option has the right to surrender such
Option for cash in an amount equal to the difference between the "Change in
Control Price" (as defined in the 1996 Plan) and the exercise price.

AMENDMENT AND TERMINATION

The 1996 Plan will terminate on December 17, 2006. Also, the Committee may
amend or terminate the 1996 Plan as of any earlier date.

TAX ASPECTS

The following discussion is intended to provide an overview of the U.S.
federal income tax laws which are generally applicable to Awards granted under
the 1996 Plan as of the date of this Proxy Statement. People in differing
circumstances may have different tax consequences, and the tax laws may change
in the future. This discussion is not to be construed as tax advice.

A participant will not realize income at the time an Option is granted.
Instead, upon exercise of the Option, the participant will recognize ordinary
income equal to the difference between the fair market value of the shares on
the date of exercise and the exercise price. Any gain or loss recognized upon
any later disposition of the shares generally will be capital gain or loss.

The Company generally will be entitled to a tax deduction for an Award in
an amount equal to the ordinary income realized by the participant at the time
the participant exercises an Option. In addition, Internal Revenue Code section
162(m) contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1 million. However, the Company can
preserve the deductibility of certain compensation in excess of $1 million if it
complies with conditions imposed by the new rules, including the establishment
of a maximum number of shares with respect to which Options may be granted to
any one employee. The 1996 Plan has been designed so that Options granted
thereunder will qualify as performance-based compensation.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE 1996 PLAN.

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<PAGE> 11

EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The compensation for each of the Chief Executive Officer and the four most
highly compensated executive officers of the Company for services in all
capacities rendered to the Company and its subsidiaries during the fiscal years
ended October 31, 1996, 1995 and 1994 is set forth below. Columns regarding
"Other Annual Compensation," "Restricted Stock Awards," "Long-Term Incentive
Plan [LTIP] Payouts" and "All Other Compensation" are excluded because no
reportable payments were made to such principal officers for the relevant years.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL -------------
COMPENSATION(1) SECURITIES
FISCAL --------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(2)
- ------------------------------------------------ ------ -------- -------- -------------
<S> <C> <C> <C> <C>
William W. Steele............................... 1996 $480,302 $327,794 50,000
President, Chief Executive Officer, Director, 1995 460,500 230,250 10,000
and
member of the Executive Committee 1994 360,500 159,135 50,000

John F. Egan.................................... 1996 327,928 108,200 30,000
Vice President and Director of the Company, 1995 314,408 90,616 0
and
President of the Janitorial Services Division 1994 301,446 83,921 40,000

Sydney J. Rosenberg............................. 1996 271,702 135,851 40,000
Chairman of the Board, Director, and member 1995 260,500 130,250 0
of the Executive Committee 1994 360,500 159,135 50,000

Martinn H. Mandles.............................. 1996 235,302 164,563 40,000
Executive Vice President, Director, and member 1995 225,601 112,800 12,000
of the Executive Committee 1994 216,300 106,090 30,000

Jess E. Benton, III............................. 1996 264,715 129,497 30,000
Senior Vice President 1995 253,801 109,610 0
1994 243,338 83,956 30,000
</TABLE>

- ---------------

(1) Includes amounts deferred under the Company's Deferred Compensation Plan.

(2) Adjusted to reflect a two-for-one stock split on July 15, 1996.

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<PAGE> 12

OPTIONS GRANTED TO EXECUTIVE OFFICERS

The Officer Compensation & Stock Option Committee of the Board of Directors
currently has authority to grant stock options under either the Executive Stock
Option Plan (the "1984 Plan") or the 1987 Stock Option Plan (the "1987 Plan").
The following table sets forth certain information regarding stock options
granted to, and exercised and owned by, the executive officers named in the
foregoing Summary Compensation Table.

<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME AND POSITION GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ------------------------------------------- -------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W. Steele............. 50,000 5.6% $ 18.75 (4) $589,594(5) $1,494,130(5)
President, Chief Executive
Officer, Director, and
member of the Executive
Committee
John F. Egan.................. 30,000 3.3% $ 18.75 (4) $353,756(5) $ 896,478(5)
Vice President and
Director of the Company,
and President of the
Janitorial Services Division
Sydney J. Rosenberg........... 40,000 4.4% $ 18.75 (4) $471,675(5) $1,195,304(5)
Chairman of the Board,
Director, and member of the
Executive Committee
Martinn H. Mandles............ 40,000 4.4% $ 18.75 (4) $471,675(5) $1,195,304(5)
Executive Vice President,
Director, and member of the
Executive Committee
Jess E. Benton, III........... 30,000 3.3% $ 18.75 (4) $353,756(5) $ 896,478(5)
Senior Vice President
</TABLE>

- ---------------
(1) All such stock options were granted under the 1987 Plan on June 18, 1996 and
become exercisable at a rate of 20% per year beginning one year after the
date of grant. The numbers indicated have been adjusted to reflect a
two-for-one stock split on July 15, 1996.

(2) The price has been adjusted to reflect a two-for-one stock split on July 15,
1996.

(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% annual rates of stock appreciation prescribed by the Securities
and Exchange Commission and are not intended to forecast future
appreciation, if any, of the Company's stock price. No gain to the optionees
is possible without an increase in the price of the Company's stock, which
will benefit all stockholders.

(4) The right to exercise such stock options expires three months after
termination of employment or, for non-employee directors, three months after
resignation from the Board of Directors. However, the stock options may be
immediately exercised in the event of dissolution or liquidation of the
Company or a merger or combination in which the Company is not the surviving
corporation.

(5) For purposes of calculating the potential realizable value, it has been
assumed that the stock options have a term of ten years.

10
<PAGE> 13

AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
(ADJUSTED TO REFLECT TWO-FOR-ONE STOCK SPLIT ON JULY 15, 1996)

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES NUMBER OF
UNDERLYING SECURITIES
UNEXERCISED UNDERLYING VALUE OF
OPTIONS AT UNEXERCISED UNEXERCISED
FY-END OPTIONS AT IN-THE-MONEY
UNDER THE FY-END OPTIONS UNDER
SHARES 1984 PLAN UNDER THE BOTH PLANS AT
ACQUIRED (#)(1) 1987 PLAN($) FY-END($)(2)
ON VALUE EXERCISABLE/ EXERCISABLE/ EXERCISABLE/
NAME AND POSITION EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ----------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
William W. Steele............. 0 $0 0/50,000 112,000/98,000 $1,220,520/874,480(3)
President, Chief Executive
Officer, Director, and
member
of the Executive Committee
John F. Egan.................. 0 0 0/46,000 88,800/57,200 $1,027,068/786,022(4)
Vice President and Director
of
the Company, and President
of
the Janitorial Services
Division
Sydney J. Rosenberg........... 20,000 $390,340 0/0 20,000/70,000 $ 174,300/261,450(5)
Chairman of the Board,
Director, and member of the
Executive Committee
Martinn H. Mandles............ 0 0 0/40,000 64,800/61,200 $1,036,608/595,852(7)
Executive Vice President,
Director, and member of
the Executive Committee
Jess E. Benton, III........... 0 0 0/40,000 44,800/51,200 $ 452,808/662,302(6)
Senior Vice President
</TABLE>

- ---------------

(1) Stock options granted under the 1984 Plan vest 50% on the 61st birthday of
the employee or member of the Board of Directors of the Company or its
subsidiaries and 50% on such option holder's 64th birthday. The right to
exercise such stock options expires one year after termination of employment
or termination from the Board of Directors. However, the stock options may
be immediately exercised in the event of dissolution or liquidation of the
Company or a merger or combination in which the Company is not the surviving
corporation.

(2) Based on a price per share of $17.625, which was the price of a share of
Common Stock on the New York Stock Exchange at the close of business on
October 31, 1996.

(3) Includes 40,000 stock options granted in 1983 at an exercise price of $5.72
per share, 60,000 stock options granted in 1988 at an exercise price of
$5.06 per share, 40,000 stock options granted in 1991 at an exercise price
of $8.49 per share, 50,000 stock options granted in 1994 at an exercise
price of $8.91, 10,000 stock options granted in 1995 at an exercise price of
$11.25 per share and 50,000 stock options granted in 1996 at an exercise
price of $18.75 per share.

(4) Includes 46,000 stock options granted in 1983 at an exercise price of $5.72
per share, 60,000 stock options granted in 1988 at an exercise price of
$4.78 per share, 16,000 stock options granted in 1991 at an exercise price
of $8.45 per share, and 40,000 stock options granted in 1994 at an exercise
price of $8.91 per share and 30,000 stock options granted in 1996 at an
exercise price of $18.75 per share.

(5) Includes 50,000 stock options granted in 1994 at an exercise price of $9.80
per share and 40,000 stock options granted in 1996 at an exercise price of
$20.63 per share.

(6) Includes 40,000 stock options granted in 1983 at an exercise price of $5.72
per share, 20,000 stock options granted in 1988 at an exercise price of
$6.06 per share, 16,000 stock options granted in 1991 at an exercise price
of $8.49 per share, 30,000 stock options granted in 1994 at an exercise
price of $8.91 per share and 30,000 stock options granted in 1996 at an
exercise price of $18.75 per share.

(7) Includes 28,000 stock options granted in 1983 at an exercise price of $5.72
per share, 40,000 stock options granted in 1988 at an exercise price of
$6.06 per share, 16,000 stock options granted in 1991 at an exercise price
of $8.49 per share, 30,000 stock options granted in 1994 at an exercise
price of $8.91 per share, 12,000 stock options granted in 1995 at an
exercise price of $11.25 per share and 40,000 stock options granted in 1996
at an exercise price of $18.75 per share.

11
<PAGE> 14

SERVICE AWARD BENEFIT PLAN

The Company's Service Award Benefit Plan became effective on November 1,
1989. This plan is an unfunded "severance pay plan" as defined in the Employee
Retirement Income Security Act of 1974, as amended. All qualified employees, as
defined in said Service Award Benefit Plan, earning more than the Internal
Revenue Service determination of a highly compensated individual as determined
each calendar year (currently over $80,000), are eligible for benefits under the
plan. The Company has a separate Profit Sharing and Employee Savings Plan for
all qualified employees, as defined in said Profit Sharing and Employee Savings
Plan, who earn less than such amount.

The plan provides that, upon termination, eligible employees will receive
seven days pay for each full fiscal year of employment subsequent to November 1,
1989. The Company, at its discretion, may also award additional days each year.
The amount of the payment is based on the average annual compensation, up to a
maximum of $175,000, received by the employee in the current calendar year and
the two calendar years preceding termination. The amount of the payment under
the plan, together with any other severance pay paid to the employee, cannot
exceed two times the compensation received by the employee in the 12 month
period preceding the termination of employment.

If employment terminates before the employee has been employed for five
years, except in the case of death, disability or normal retirement of the
employee, or if the employee is terminated for cause (such as theft or
embezzlement), such employee forfeits any benefits payable under the plan.

Following termination, eligible employees will receive their payments under
the plan in two equal installments. Executives, managers and salespersons of the
Company will receive their first payment in the eleventh month following
termination and the second payment no later than the last day of the
twenty-third month following termination. Other eligible employees will receive
their first payment as soon as administratively possible following termination
and their second payment in the thirteenth month following termination. The
payment schedule may be waived for employees who terminate employment after
reaching age 62, or if termination results from death or total disability.

EMPLOYMENT AGREEMENTS

The Company has entered into written employment agreements with all twelve
of its executive officers, including each of the five executive officers named
in the foregoing compensation tables, those being the Chief Executive Officer
and the four other most highly compensated executive officers of the Company for
the fiscal year ended October 31, 1996. All such written employment agreements
that would have expired in October 31, 1996 were extended and otherwise amended
as of November 1, 1996 and provide for annual salaries (in the following amounts
for fiscal 1997: $552,000 for William W. Steele; $350,000 for John F. Egan;
$283,928 for Sydney J. Rosenberg; $275,000 for Martinn H. Mandles and $276,627
for Jess E. Benton, III), annual bonuses based on pre-tax profits, plus other
customary benefits including, but not limited to, participation in the Company's
disability and life insurance programs and retirement plans. The Company also
provides all of its executive officers with certain other perquisites, such as
Company-provided automobiles or car allowances, an executive group health plan,
club memberships and dues, and/or incidental personal benefits.

The written employment agreements include several significant restrictions
on increases in annual salary and on payment of annual bonuses that are set
forth in the Executive Officer Compensation & Stock Option Committee Report on
Executive Officer Compensation that follows.

These written employment agreements also provide that upon an executive
officer's retirement from full-time employment with the Company at or after
reaching age 65 or in certain other specified events, the Company will pay them
or their respective estates consulting fees in the amounts of: $693,333, plus
$76,666 times the number of years of Mr. Steele's employment with the Company
after November 1, 1996, for

12
<PAGE> 15

William W. Steele; $471,428, plus $42,857 times the number of years of Mr.
Egan's employment with the Company after November 1, 1994, for John F. Egan;
$1,000,000 for Sydney Rosenberg; and $150,000 each for Martinn H. Mandles and
Jess E. Benton, III. Unless earlier terminated, or later extended pursuant to
their term, these employment agreements continue until October 31, 2000 for
William W. Steele; October 31, 1998 for John F. Egan; October 31, 1997 for
Sydney J. Rosenberg; and October 31, 1998 for Martinn H. Mandles and Jess E.
Benton, III.

MANAGEMENT INDEBTEDNESS

During fiscal 1984, John F. Egan relocated his personal residence from
Illinois to California in connection with his employment by the Company. As a
condition of his relocation, the Company loaned Mr. Egan $575,000 for the
purchase of a personal residence in California. This loan is secured by a deed
of trust on the residence. The loan, which initially contained a shared
appreciation provision, accrued interest at the rate of 3% per annum from August
of 1987 until July of 1989, and 4% per annum from August of 1989 to December 31,
1991. Effective January 1, 1992, the loan was amended to terminate the shared
appreciation provisions and to provide for an interest rate of 6% per annum. The
loan will mature in 1999, unless accelerated by the occurrence of certain
specified events such as the termination of Mr. Egan's employment with the
Company. As of December 31, 1996, the outstanding principal balance of this loan
was $515,670.

EXECUTIVE OFFICER COMPENSATION & STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION

Maryellen B. Cattani, Henry L. Kotkins, Jr. and William E. Walsh currently
serve as members of the Executive Officer Compensation & Stock Option Committee
of the Board of Directors. They have no relationships with the Company other
than as directors and stockholders.

Theodore Rosenberg, a director of the Company served on the Executive
Officer Compensation & Stock Option Committee during the fiscal year ended
October 31, 1996, and is a former officer and employee of the Company. He is the
brother of Sydney J. Rosenberg, the Company's Chairman of the Board. Upon
Theodore Rosenberg's retirement as an officer and employee of the Company in
December of 1989, the Company began and has continued making payments of
$8,333.33 per month for ten years pursuant to Theodore Rosenberg's previous
employment contracts with the Company. In addition, Theodore Rosenberg provides
consulting services to the Company on a month-to-month basis, for which services
he received a fee of $5,000 per month as of November 1, 1996. Said fee was
increased to $6,250 per month as of November 1, 1996. See also "Certain
Relationships and Related Transactions" herein for a description of an office
lease between the Company and certain other family members of Sydney J.
Rosenberg and Theodore Rosenberg. Neither Sydney J. Rosenberg nor Theodore
Rosenberg directly or indirectly receives any proceeds from this lease.

During fiscal 1996, no executive officer of the Company served as a
director, or as a member of the any compensation committee, of any other
for-profit entity other than subsidiaries of the Company.

OFFICER COMPENSATION & STOCK OPTION COMMITTEE REPORT ON OFFICER COMPENSATION

February 1, 1997

To the Board of Directors:

INTRODUCTION. Based upon its evaluation of the performance of both the
Company and its executive officers, and subject to existing employment
contracts, the Executive Officer Compensation & Stock Option Committee reviews
and recommends to the Board of Directors the compensation and other terms and
conditions of employment for all twelve executive officers of the Company, who
are: the Chairman of the Board; the President (Chief Executive Officer);
Executive Vice President; two Senior Vice Presidents; five Vice Presidents
(including the Chief Financial Officer); the Controller (Chief Accounting
Officer); and the Treasurer.

13
<PAGE> 16

COMPENSATION PROGRAM APPLICABLE TO EXECUTIVE OFFICERS. Because the Company
is primarily a service business, the leadership of its executive officers is
crucial to the Company's growth and prosperity. It is the Committee's goal that
the policies underlying the Company's executive compensation programs support
the Company's ultimate goal of enhancing stockholder value by providing value to
customers at a profit to the Company. Each executive officer is compensated
through a combination of annual salary and bonus, plus stock option grants from
time-to-time. Subject to the terms and conditions of the written employment
contracts described below, the Committee reviews the overall compensation of the
executive officers primarily by evaluating their past performance, expectations
as to their future performance, the Company's profitability and other factors
such as length of service to the Company.

To assist it in its review, the Committee retains, from time-to-time, the
services of an independent executive compensation consulting firm to evaluate
the Company's cash compensation of its executive officers. The consultant helped
to design the current compensation program and verified that this program was
competitive with companies of similar size and performance. Based upon the
results of the evaluation undertaken by our consulting firm, the Committee
believes that the Company's cash compensation program for its executive officers
in general, and the individual cash compensation of the Company's executive
officers in particular, are fair and reasonable. Through the consistent and fair
application of its executive compensation program, the Company believes it will
be able to recruit and retain executives who are best able to contribute to the
overall success of the Company, including the Company's ultimate goal of
enhancing stockholder value.

ANNUAL SALARIES AND BONUSES. The Company has entered into written
employment agreements with all twelve of its executive officers which set forth
the compensation and other terms and conditions of their employment with the
Company. With input from the independent executive compensation consulting firm,
all of these written employment agreements that would have expired on October
31, 1996 were extended and otherwise amended as of November 1, 1996.

Under these written employment agreements, each executive officer receives
cash compensation in the form of an annual salary, plus an annual bonus that is
related directly to the profit before taxes of the Company on a consolidated
basis or the division(s) of the Company for which that executive officer is
responsible.

For the Company's executive officers to be entitled to receive an increase
in annual salary under their written employment agreements as amended, the
Company's earnings per share for fiscal years beginning with 1995 must equal or
exceed the Company's earnings per share for the previous fiscal year, in which
case the annual salaries are increased by an amount equal to the percentage
change in the American Compensation Association Index for the Western Region, up
to a maximum of 6% per year.

The annual bonus of each executive officer is either a percentage of profit
for the current fiscal year, or it is a percentage of both the profit for the
current fiscal year and any increase in profit over the previous fiscal year.
All such bonuses are calculated and earned only after completion of the
Company's annual audit.

However, for any of the Company's executive officers to receive an annual
bonus under the written employment agreements, the Company's annual earnings per
share for any fiscal year after 1995 must exceed 80% of the Company's earnings
per share for the previous fiscal year.

The Committee views the annual bonus as an important part of the overall
compensation of each executive officer because it provides each of them with a
material stake in the financial performance of the Company and/or the
division(s) of the Company for which they are responsible. The members of the
Executive Officer Compensation & Stock Option Committee expect that such bonuses
will represent a significant portion of an executive officer's annual salary if
the Company and/or the applicable division(s) achieve their projected income.
Accordingly, a significant portion of the compensation of each executive officer
is related directly to the Company's profitability and, therefore, to the
Company's ultimate goal of enhancing stockholder value.

At the conclusion of fiscal 1996, based on the profitability of the Company
in 1995 and 1996, which caused the annual bonuses of the Company's President and
Chief Executive Officer, and the Executive Vice

14
<PAGE> 17

President for each of these years to exceed their then current contractual
limitations, the Company's Board of Directors, acting upon the recommendation of
our Executive Officer Compensation & Stock Option Committee and independent
executive compensation consultant, awarded discretionary bonuses to these
executive officers of $87,643 and $46,912, respectively, which are approximately
half of the bonus amounts that they did not receive because of their then
current contractural limitations.

Prior to the expiration of a written employment agreement between the
Company and an executive officer, the Committee will evaluate the compensation
of that officer in accordance with the executive compensation program described
above, focusing on motivating that officer to attain corporate and individual
performance objectives.

OTHER COMPENSATION. The Company's principal officers are also eligible to
participate in compensation and benefit programs generally available to other
employees, including, but not limited to, the Company's retirement, life and
disability insurance programs. In accordance with the terms and conditions of
the written employment agreements, the Company also provides its executive
officers with certain perquisites, such as Company-provided automobiles or car
allowances, an executive group health plan, club memberships and dues, and/or
incidental personal benefits.

BASIS FOR CEO COMPENSATION. The Chief Executive Officer's cash
compensation for fiscal 1995 was determined by such officer's employment
contract and the discretionary bonus set forth above. The Chief Executive
Officer's compensation is evaluated in accordance with the factors and criteria
used to evaluate all principal officers and is subject to the same limitations
described above.

IRS SECTION 162(M). Section 162(m) of the Internal Revenue Code of 1986
generally limits a corporation's annual federal tax deduction for compensation
(including stock-based compensation such as options) paid to certain top
executive officers. The Company generally may deduct such compensation only to
the extent that the amount paid to any such officer does not exceed $1,000,000
during any fiscal year or is "performance-based" as defined in Section 162(m).
The current levels of compensation paid to the Company's officers are below the
limits of Section 162(m) and, accordingly, the Company has not adopted an
overall policy regarding Section 162(m).

Officer Compensation & Stock Option
Committee

Maryellen B. Cattani, Chairman
Henry L. Kotkins, Jr., Member
William E. Walsh, Member

OFFICER COMPENSATION & STOCK OPTION COMMITTEE REPORT ON STOCK OPTION PLANS

February 1, 1996

To the Board of Directors:

The Executive Officer Compensation & Stock Option Committee administers the
Company's stock option plans and authorizes grants thereunder.

The Company's stock option plans provide executive officers and other
employees with an opportunity to purchase a proprietary interest in the Company
and thus encourage them to become and remain employed by the Company. The
Committee views the granting of stock options and the ownership of stock as
important mechanisms for relating overall compensation of executive officers and
other employees directly to the Company's ultimate goal of enhancing stockholder
value.

In March of 1996, the Company's Stockholders voted to increase the number
of shares authorized for issuance under the 1984 Plan by 1,000,000 shares
(adjusted for the two-for-one stock split on July 15, 1996). There were no
options granted under the 1984 Plan in fiscal 1996.

15
<PAGE> 18

Also in March of 1996, the Company's Stockholders voted to increase the
number of shares authorized for issuance under the 1987 Plan by 2,000,000 shares
(adjusted for a two-for-one stock split on July 15, 1996). In June of 1996, the
Committee approved stock options for 383 executive officers and other employees
to purchase 900,100 shares under the 1987 Plan, including the grant to executive
officers of stock options to purchase 312,000 of these shares (adjusted for a
two-for-one stock split on July 15, 1996).

In December of 1996, the Committee approved stock options for 21 senior
executives of the Company and its affiliates to purchase 1,000,000 of the
1,500,000 shares that would be authorized for issuance under the Company's
proposed 1996 Plan set forth herein, including the grant to executive officers
of stock options to purchase 520,000 of these shares, all subject to stockholder
approval at the 1997 Annual Meeting.

In determining the number of stock options to be granted to the executive
officers, the Committee considers each officer's performance, the Company's
overall profitability, the aggregate number of such stock options that had been
granted in recent years, and other factors such as length of service to the
Company.

Executive Officer Compensation & Stock
Option Committee

Maryellen B. Cattani, Chairman
Henry L. Kotkins, Jr., Member
William E. Walsh, Member

PERFORMANCE GRAPH

Set forth below is a graph comparing the five-year cumulative total
stockholder return on the Company's Common Stock with the five-year cumulative
total return of: (a) the Standard & Poor's 500 and (b) a peer group of companies
that, like the Company, (i) are currently listed on the New York Stock Exchange,
(ii) have been publicly-traded for at least five years and (iii) have a market
capitalization of $350 million to $375 million (based on the most recent
publicly-available number of shares outstanding on December 31, 1996 and the
closing price of such shares on that date). The peer group consists of the
following companies, in addition to the Company: American Heritage Life
Investment Corporation, Blackrock North American Government Income Trust, Inc.,
BP Prudhoe Bay Royalty Trust, The Brazil Fund, Inc., Chemed Corporation,
Diagnostic Products Corporation, Eastern Utilities Association, Griffon
Corporation, Laboratory Corporation of American Holdings, MFS Municipal Income
Trust, Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York
Select Quality Municipal Fund, Inc., Nuveen New York Quality Income Municipal
Fund, Inc., Public Service Company of North Carolina, Quanex Corporation,
Savannah Foods & Industries Inc., Southern Union Company, Southwestern Energy
Company, The Taiwan Fund, Inc. and Tesoro Petroleum Corporation.

Although the criteria for selecting companies to be included in the peer
group are the same as the criteria used in last year's proxy statement (except
that the range of market capitalization has been revised upward to take into
account the Company's increased capitalization), the following companies from
last year's peer group have been deleted from this year's peer group because
they failed to meet the market capitalization requirement set forth above and/or
they are not currently listed on the New York Stock Exchange: Benson Eyecare
Corporation; Brown Group Inc.; Capsure Holdings Corp.; Carmike Cinemas Inc.;
Coeur D'Alene Mines Corp.; Criimi Mae Inc.; Curtis-Wright Corp.; Empire District
Electric Co.; Energen Corp.; Morgan Keegan Inc.; New York Bancorp Inc; Nuevo
Energy Co.; Oregon Steel Mills Inc; Osmonics Inc; Philadelphia Suburban Corp.;
Phillips-Van Heusen; PHP Healthcare Corp.; Rohr Inc.; Russ Berne & Company Inc.;
Rykoff-Sexton Inc.; Teedegar Industries Inc.; WHX Corp.; Yankee Energy Systems
Inc.; and Zurn Industries Inc.

The Company does not believe it can reasonably identify a peer group of
companies on an industry or line of business basis for the purpose of developing
a comparative performance index. The building services

16
<PAGE> 19

industry is highly fragmented, primarily consisting of privately-owned
businesses that provide a limited range of services on a local or regional
basis. While the Company is aware that some other publicly-traded companies
market services in one or more of the Company's eight lines of business, none of
these other companies provide most or all of the services offered by the
Company, and many offer other services or products as well. Moreover, some of
these other companies that engage in one or more of the Company's eight lines of
business do so through divisions or subsidiaries that are not publicly-traded
and/or reported. For all of these reasons, no such comparison would, in the
opinion of the Company, provide a meaningful index of comparative performance.

The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.

FIVE YEAR CUMULATIVE TOTAL RETURN TO STOCKHOLDERS*

MEASUREMENT PERIOD ABM INDUSTRIES S&P 500 PEER
(FISCAL YEAR COVERED) INCORPORATED INDEX** GROUP
1991 100 100 100
1992 110 109 96
1993 102 126 101
1994 135 131 99
1995 174 166 97
1996 236 206 100

FISCAL YEARS ENDED OCTOBER 31ST

* Assumes: (a) $100.00 invested on November 1, 1991, and (b) immediate
reinvestment of all interim dividends.
** Source: Standard & Poor's Compustat.

17
<PAGE> 20

PRINCIPAL STOCKHOLDERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information as to the persons or
entities known to the Company to be beneficial owners of more than 5% of the
Company's Common Stock as of December 31, 1996.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES PERCENT
------------------------------------------------------------ ------------ -------
<S> <C> <C>
Theodore Rosenberg(1)....................................... 2,403,570(2) 12.1%
295-89th Street, Suite 200
Daly City, California 94015
Sydney J. Rosenberg(1)...................................... 2,347,696(3) 11.8%
9831 West Pico Boulevard
Los Angeles, California 90035
GeoCapital Corporation...................................... 1,898,148(4) 9.5%
767 Fifth Avenue
New York, New York 10153
David L. Babson and Company Incorporated.................... 1,671,480(5) 8.4%
One Memorial Drive
Cambridge, Massachusetts 02142
</TABLE>

- ---------------
(1) According to the Schedule 13D filed by such persons, Sydney J. and Theodore
Rosenberg may each be deemed to be a member of a group within the meaning of
Section 13(d)(5) of the Securities Exchange Act of 1934, as amended, and
therefore, each may be deemed to own an aggregate of 4,751,266 shares of
Common Stock or approximately 23.8% of the outstanding Common Stock. Subject
to the foregoing, each of Sydney J. and Theodore Rosenberg disclaims
beneficial ownership of shares held by the other.

(2) Includes 2,368,778 shares of Common Stock held by the Theodore Rosenberg
Trust, an inter vivos trust of which Theodore Rosenberg is sole Trustee.
Also includes 30,792 shares of Common Stock held by a family charitable
corporation, of which Theodore Rosenberg is a director. Theodore Rosenberg
disclaims beneficial ownership of the shares held by the family charitable
corporation. Also includes 4,000 shares subject to outstanding stock options
held by Theodore Rosenberg that were exercisable on or within 60 days after
December 31, 1996.

(3) Includes 2,231,264 shares of Common Stock held by the Sydney J. Rosenberg
Trust, an inter vivos trust of which Sydney J. Rosenberg, Seth M. Hufstedler
and Martinn H. Mandles are Co-Trustees. Messrs. Hufstedler and Mandles
disclaim beneficial ownership of all such shares. Also includes 63,732
shares of Common Stock held by Sydney J. Rosenberg's wife and 32,700 shares
held by a family charitable corporation, of which Sydney J. Rosenberg is a
director. Sydney J. Rosenberg disclaims beneficial ownership of the shares
held by his wife and by the family charitable corporation. Also includes
20,000 shares subject to outstanding stock options held by Sydney J.
Rosenberg that were exercisable on or within 60 days after December 31,
1996.

(4) Based on information provided as of February 10, 1997 to the Company by
GeoCapital Corporation. Does not include 10,000 shares held by a senior vice
president, as reported to the Company by GeoCapital Corporation.

(5) Based on a Schedule 13G filed with the Company reflecting beneficial
ownership as of December 31, 1996. David L. Babson and Company Incorporated,
in its capacity as investment advisor, has sole voting power over 483,600
shares, shared voting power over 1,187,880 shares and the sole dispositive
power over all of such shares.

18
<PAGE> 21

SECURITY OWNERSHIP OF MANAGEMENT

The following table indicates, as to each named principal officer, director
and nominee, and as to all directors and principal officers as a group, the
number of shares and percentage of the Company's Common Stock beneficially owned
as of December 31, 1996.

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED AS OF
DECEMBER 31, 1996
----------------------------
NUMBER OF
SHARES PERCENT(1)
--------- ----------
<S> <C> <C>
Jess E. Benton, III............................................... 86,972(2) *
Maryellen B. Cattani.............................................. 9,000(3) *
John F. Egan...................................................... 222,314(4) *
Luke S. Helms..................................................... 1,600(5) *
Charles T. Horngren............................................... 16,800(6) *
Henry L. Kotkins, Jr.............................................. 3,600(7) *
Martinn H. Mandles................................................ 2,390,730(8) 12.0%
Sydney J. Rosenberg............................................... 2,347,696(9)(10) 11.8%
Theodore Rosenberg................................................ 2,403,570(10)(11) 12.1%
William W. Steele................................................. 142,550(12) *
William E. Walsh.................................................. 12,000(13) *
Executive officers and directors as a group (18 persons).......... 5,612,159(14) 28.2%
</TABLE>

- ---------------
* Less than 1.00%

(1) Based on a total of 19,924,767 shares of Common Stock outstanding as of
December 31, 1996.

(2) Includes 48,000 shares subject to outstanding stock options held by Jess E
Benton, III that were exercisable on or within 60 days after December 31,
1996.

(3) Includes 4,000 shares subject to outstanding stock options held by
Maryellen B. Cattani that were exercisable on or within 60 days after
December 31, 1996.

(4) Includes 115,000 shares subject to outstanding stock options held by John
F. Egan that were exercisable on or within 60 days after December 31, 1996.

(5) Includes 1,600 shares subject to outstanding stock options held by Luke S.
Helms that were exercisable on or within 60 days after December 31, 1996.

(6) Includes 10,000 shares subject to outstanding stock options held by Charles
T. Horngren that were exercisable on or within 60 days after December 31,
1996.

(7) Includes 1,600 shares subject to outstanding stock options held by Henry L.
Kotkins, Jr. that were exercisable on or within 60 days after December 31,
1996.

(8) Includes 2,231,264 shares of Common Stock held by the Sydney J. Rosenberg
Trust, an inter vivos trust, of which Mr. Mandles is Co-Trustee with Sydney
J. Rosenberg and Seth M. Hufstedler. Messrs. Hufstedler and Mandles
disclaim beneficial ownership of all such shares. Also includes 50,736
shares of Common Stock held by the Leo L. Schaumer Trust, a testamentary
trust of which Mr. Mandles is Co-Trustee with Bank of America National
Trust and Savings Association. Mr. Mandles disclaims beneficial ownership
of all such shares. Also includes 68,000 shares subject to outstanding
stock options held by Martinn H. Mandles that were exercisable on or within
60 days after December 31, 1996.

(9) Includes 2,231,264 shares of Common Stock held by the Sydney J. Rosenberg
Trust, an inter vivos trust of which Sydney J. Rosenberg is a Co-Trustee.
Also includes 63,732 shares of Common Stock held by Sydney J. Rosenberg's
wife and 32,700 shares held by a family charitable corporation of which
Sydney J. Rosenberg is a director. Sydney J. Rosenberg disclaims ownership
of the shares held by his wife and

19
<PAGE> 22

the family charitable corporation. Also includes 20,000 shares subject to
outstanding stock options held by Sydney J. Rosenberg that were exercisable
on or within 60 days after December 31, 1996.

(10) According to the Schedule 13D filed by such persons, Sydney J. Rosenberg
and Theodore Rosenberg may each be deemed to be a member of a group within
the meaning of Section 13(d)(5) of the Securities and Exchange Act of 1934,
as amended, and therefore each may be deemed to own an aggregate of
4,751,266 shares of Common Stock or approximately 23.8% of the outstanding
Common Stock. Subject to the foregoing, each of them disclaims beneficial
ownership of shares held by the other.

(11) Includes 2,368,778 shares of Common Stock held by the Theodore Rosenberg
Trust, an inter vivos trust of which Theodore Rosenberg is sole Trustee.
Also includes 30,792 shares of Common Stock held by a family charitable
corporation of which Theodore Rosenberg is a director. Theodore Rosenberg
disclaims beneficial ownership of the shares held by the family charitable
corporation. Also includes 4,000 shares subject to outstanding stock
options held by Theodore Rosenberg that were exercisable on or within 60
days after December 31, 1996.

(12) Includes 120,000 shares subject to outstanding stock options held by
William W. Steele that were exercisable on or within 60 days after December
31, 1996.

(13) Includes 10,000 shares subject to outstanding stock options held by William
E. Walsh that were exercisable on or within 60 days after December 31,
1996.

(14) Includes 594,300 shares subject to outstanding stock options held by the
Company's executive officers and directors that were exercisable on or
within 60 days after December 31, 1996.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases office space in Los Angeles from several children of
Sydney J. Rosenberg and Theodore Rosenberg pursuant to a lease that expires in
June 1999. As of December 31, 1996, the aggregate rental payments made under the
lease since its inception on July 1, 1979 were $466,360. The current rental
payment for the leased property is $2,764 per month plus an increase of $62 per
month on July 1 of each year. Neither Sydney J. Rosenberg nor Theodore Rosenberg
directly or indirectly receives any proceeds from the lease.

APPOINTMENT OF AUDITORS

KPMG Peat Marwick LLP, independent certified public accountants, have been
selected as the Company's principal accountants for the current year.
Representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.

OTHER MATTERS

As of the date of this proxy statement, there are no other matters which
the Board of Directors intends to present or has reason to believe others will
present at the Annual Meeting of Stockholders. If other matters properly come
before the Annual Meeting, those persons named in the accompanying proxy will
vote in accordance with their judgment.

20
<PAGE> 23

1998 ANNUAL MEETING OF STOCKHOLDERS

Stockholders are entitled to present proposals for action at stockholders'
meetings if they comply with the requirements of the proxy rules. In connection
with this year's Annual Meeting, no stockholder proposals were presented. Any
proposals intended to be presented at the 1998 Annual Meeting must be received
at the Company's offices on or before October 23, 1997 in order to be considered
for inclusion in the Company's proxy statement and form of proxy relating to
such meeting.

By Order of the Board of Directors

Harry H. Kahn, Esq.
Vice President, General Counsel
and Secretary

February 20, 1997

21
<PAGE> 24

EXHIBIT A

ABM INDUSTRIES INCORPORATED
LONG-TERM SENIOR EXECUTIVE STOCK OPTION PLAN

1. Purpose; Definitions.

The purpose of The Plan is to give ABM Industries Incorporated and its
Affiliates a long-term stock option plan to help in attracting, retaining and
motivating senior executives, and to provide the Company and its Affiliates with
the ability to provide incentives more directly linked to the profitability of
the Company's businesses and increases in stockholder value.

For purposes of The Plan, the following terms are defined as set forth
below:

a. "Affiliate" or "Affiliates" means any and all subsidiary
corporations or other entities controlled by the Company and designated by
The Committee from time to time as such.

b. "Board" or "The Board" means the board of directors ("Directors")
of the Company.

c. "Cause" means:

(1) misconduct or any other willful or knowing violation of any
Company policy or employment agreement,

(2) unsatisfactory performance such that the Company notifies the
Optionee of the Company's intention not to renew the Optionee's
employment agreement with the Company,

(3) a material breach by The Optionee of his or her duties as an
employee which is committed in bad faith or without reasonable belief
that such breach is in the best interests of the Company and its
affiliated companies (other than a breach arising from the failure of
The Optionee to work as a result of incapacity due to physical or mental
illness) and which is not remedied in a reasonable period of time after
receipt of written notice from the Company specifying such breach, or

(4) the conviction of The Optionee of a felony that has been
affirmed on appeal or as to which the period in which an appeal can be
taken has lapsed.

d. "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 6b and 6c of The Plan, respectively.

e. "Code" or "The Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.

f. "Commission" or "The Commission" means the Securities and Exchange
Commission or any successor agency.

g. "Committee" or "The Committee" means the committee referred to in
Section 2 of The Plan.

h. "Company" or "The Company" means ABM Industries Incorporated, a
Delaware corporation.

i. "Disability" means the inability of The Optionee to perform his or
her duties as an employee on an active fulltime basis as a result of
incapacity due to mental or physical illness which continues for more than
ninety (90) days after the commencement of such incapacity, such incapacity
to be determined by a physician selected by the Company or its insurers and
acceptable to The Optionee or the Optionee's legal representative (such
agreement as to acceptability not to be withheld unreasonably).

j. "Eligible Person" has the meaning stated in Section 4 of The Plan.

k. "Exchange Act" or "The Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, and any successor thereto.

A-1
<PAGE> 25

l. "Fair Market Value" means, as of any given date, the average of the
highest and lowest reported trades of the Stock on the New York Stock
Exchange Composite Tape for such date, or of if there were no trades on
such date, the average of the nearest trading day after such date. If there
is no regular public trading market for such Stock, the Fair Market Value
of the Stock shall be determined by The Committee in good faith.

m. "Non-Employee Director" shall mean a member of The Board who
qualifies as a disinterested person as defined in Rule 16b-3, as
promulgated by The Commission under The Exchange Act, or any successor
definition adopted by The Commission, and also qualifies as an "outside
director" for the purposes of Section 162(m) of The Code and the
regulations promulgated thereunder.

n. "Optionee" shall mean any Eligible Person who has been granted
Stock Options under The Plan.

p. "Plan" or "The Plan" means the ABM Industries Incorporated
Long-Term Senior Executive Stock Option Plan, as set forth herein and as
hereinafter amended from time to time.

q. "Retirement" means retirement from active full-time employment with
the Company or any of its Affiliates at or after age sixty-four (64).

r. "Rule 16b-3" means Rule 16b-3, as promulgated by The Commission
under Section 16(b) of The Exchange Act, as amended from time to time.

s. "Stock" means common stock, par value $0.01 per share, of the
Company.

t. "Stock Option" or "Option" means an option granted under Section 5
of The Plan.

u. "Termination of Employment" means the termination of an Optionee's
employment with the Company or any of its Affiliates, excluding any such
termination where there is a simultaneous reemployment by the Company or
any of its Affiliates. An Optionee shall be deemed to have terminated
employment if he or she ceases to perform services for the Company or any
of its Affiliates on an active full-time basis, notwithstanding the fact
that such Optionee continues to receive compensation or benefits pursuant
to an employment contract or other agreement or arrangement with the
Company or any of its Affiliates. A non-medical leave of absence shall,
unless such leave of absence is otherwise approved by The Committee, be
deemed a Termination of Employment. An Optionee employed by an Affiliate of
the Company shall also be deemed to incur a Termination of Employment if
that Affiliate ceases to be an Affiliate of the Company, as the case may
be, and that Optionee does not immediately thereafter become an employee of
the Company or any other Affiliate of the Company.

In addition, certain other terms have definitions given to them as they are
used herein.

2. Administration.

The Plan shall be administered by the Executive Officer Compensation &
Stock Option Committee of The Board or such other committee of The Board,
composed solely of not less than two Non-Employee Directors, each of whom shall
be appointed by and serve at the pleasure of The Board. If at any time no such
committee(s) shall be in office, the functions of The Committee specified in The
Plan shall be exercised by The Board.

The Committee shall have all discretionary authority to administer the Plan
and to grant Stock Options pursuant to the terms of The Plan to senior
executives of the Company and any of its Affiliates.

Among other things, The Committee shall have the discretionary authority,
subject to the terms of The Plan:

a. to select the Eligible Persons to whom Stock Options may from time
to time be granted;

b. to determine the number of shares of Stock to be covered by each
Stock Option granted hereunder; and

A-2
<PAGE> 26

c. to determine the terms and conditions of any Stock Option granted
hereunder including, but not limited to, the option price (subject to
Section 5a of The Plan) and any vesting condition, restriction or
limitation based on such factors as The Committee shall determine.

The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing The Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of The
Plan and any Stock Option issued under The Plan (and any agreement relating
thereto) and to otherwise supervise the administration of The Plan.

The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of The
Committee.

Any determination made by The Committee or pursuant to delegated authority
pursuant to the provisions of The Plan with respect to any Stock Option shall be
made in the sole discretion of The Committee or such delegate at the time of the
grant of the Stock Option or, unless in contravention of any express term of The
Plan, at any time thereafter. All decisions made by The Committee or any
appropriately delegated officer pursuant to the provisions of The Plan shall be
final and binding on all persons, including the Company and Plan participants,
and shall be given the maximum deference permitted by law.

3. Stock Subject to Plan.

Subject to adjustment as provided herein, the total number of shares of
Stock available for grant under The Plan shall be one million five hundred
thousand (1,500,000). No individual shall be eligible to receive Stock Options
to purchase more than 100,000 shares of Stock under The Plan. Shares subject to
a Stock Option under The Plan may be authorized and unissued shares or may be
treasury shares.

If any Stock Option terminates without being exercised, shares subject to
such Stock Option shall be available for further grants under The Plan.

In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or extraordinary distribution
with respect to the Stock or other change in corporate structure affecting the
Stock, The Committee or The Board may make such substitution or adjustments in
the number, kind and option price of shares authorized or outstanding as Stock
Options, and/or such other equitable substitution or adjustments as its may
determine to be appropriate in its sole discretion; provided, however, that the
number of shares subject to any Stock Option shall always be a whole number.

4. Eligibility.

Senior executives who are actively employed on a full-time basis by the
Company or any of its Affiliates, and who are responsible for or contribute to
the management, growth and profitability of the business of the Company or any
of Affiliates, are eligible to be granted Stock Options under The Plan
("Eligible Persons").

5. Stock Options.

Any Stock Option granted under The Plan shall be in the form attached
hereto as Annex "A", which is incorporated herein and made a part of The Plan,
with such changes as The Committee may from time to time approve which are
consistent with The Plan. None of the Stock Options granted under The Plan shall
be "incentive stock options" within the meaning of Section 422 of The Code.

The grant of a Stock Option shall occur on the date The Committee selects a
Senior Executive of the Company or any of its Affiliates to receive any grant of
a Stock Option, determines the number of shares of Stock to be subject to such
Stock Option to be granted to such Senior Executive, and specifies the terms and
provisions of said Stock Option. Such selection shall be evidenced in the
records of the Company whether in the minutes of the meetings of The Committee
or by their consent in writing. The Company shall notify an

A-3
<PAGE> 27

Optionee of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Company to the Optionee.

Stock Options granted under The Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
The Committee shall deem desirable:

a. Option Price. The option price per share of Stock purchasable under
a Stock Option shall be the greater of: (i) $20.00 per share, (ii) the Fair
Market Value per share of Stock on the grant date, or (iii) the Fair Market
Value per share of Stock on the date of Stockholder approval of The Plan.

b. Option Term. The term of each Stock Option shall be ten (10) years
from its date of grant, unless earlier terminated.

c. Exercisability. Except as otherwise provided herein, each Stock
Option shall be exercisable during its term only if such Stock Option has
vested, and only after the first (1st) anniversary of its date of grant.

d. Vesting. Each Stock Option shall have assigned to it by The
Committee a vesting price (the "Vesting Price") which will be used to
provide for accelerated vesting so that such Stock Option will vest
immediately if, on or before the close of business on the fourth (4th)
anniversary of its date of grant, the Fair Market Value of the Common Stock
shall have been equal to or greater than the Vesting Price with respect to
such Stock Option for ten (10) trading days in any period of thirty (30)
consecutive trading days. Any Stock Option that has not vested on or before
the close of business on the fourth (4th) anniversary of its date of grant
shall vest at the close of business on the business day immediately
preceding the eighth (8th) anniversary of its date of grant, if such Option
has not previously terminated.

e. Method of Exercise. Subject to the provisions of this Section 5 of
The Plan, Stock Options may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of shares
of Stock subject to the Stock Option to be purchased.

The option price of Stock to be purchased upon exercise of any Option
shall be paid in full:

(1) in cash (by certified or bank check or such other instrument as
the Company may accept),

(2) in the discretion of The Committee, in the form of unrestricted
Stock already owned by The Optionee for six (6) months or more and based
on the Fair Market Value of the Stock on the date the Stock Option is
exercised,

(3) in any other form approved in the discretion of The Committee, or

(4) by any combination thereof.

In the discretion of The Committee, payment for any shares subject to
a Stock Option may also be made by delivering a properly executed exercise
notice to the Company, together with a copy of irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan
proceeds to pay the purchase price, and, if requested, the amount of any
federal, state, local or foreign withholding taxes. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms.

No shares of Stock shall be issued until full payment therefor has
been made. The Optionee shall have all of the rights of a stockholder of
the Company holding the Stock that is subject to such Stock Option
(including, if applicable, the right to vote the share and the right to
receive dividends), only when The Optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given the
representation described in Section 9a of The Plan.

A-4
<PAGE> 28

f. Non-transferability of Stock Options. No Stock Option shall be
transferable by The Optionee other than:

(1) to a beneficiary designation satisfactory to The Committee, or

(2) by will or by the laws of descent and distribution.

All Stock Options shall be exercisable, during The Optionee's
lifetime, only by The Optionee or by the guardian or legal representative
of The Optionee, it being understood that the terms "holder" and "Optionee"
include the guardian and legal representative of The Optionee named in the
option agreement and any person to whom an option is transferred by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order. The Committee may establish such procedures as it deems
appropriate for an Optionee to designate a beneficiary to whom any amounts
payable in the event of the Optionee's death are to be paid or by whom any
rights of the Optionee, after the Optionee's death, may be exercised.

g. Termination by Death, Disability, Retirement or by the Company
Without Cause. If The Optionee's employment terminates by reason of death,
Disability or Retirement, or if such employment is terminated by the
Company without Cause, in each case prior to the vesting of a Stock Option
held by The Optionee, the following provisions shall apply:

(1) if termination occurs by death or Disability, or by the Company
without Cause, such Stock Options shall be exercisable only within
ninety (90) days of such termination, and only if such Stock Options are
then vested;

(2) if termination occurs by Retirement or other "voluntary quit,"
such Stock Options shall terminate immediately; and

h. Termination by the Company for Cause. If The Optionee's employment
is terminated by the Company for Cause prior to the vesting of a Stock
Option, such Stock Options shall terminate immediately.

i. Termination After Vesting. If The Optionee's employment is
terminated for any reason after a Stock Option has vested, such Stock
Options shall be exercisable only within ninety (90) days of such
termination,

j. Change in Control Cash Out. Notwithstanding any other provision of
The Plan, upon the occurrence of a Change of Control all outstanding Stock
Options shall immediately vest and become fully exercisable, and during the
ninety (90) day period from and after such Change in Control (the "Exercise
Period"), The Optionee shall have the right, in lieu of the payment of the
exercise price for the shares of Stock being purchased under the Stock
Option and by giving notice to the Company, to elect (within the Exercise
Period) to surrender all or part of the Stock Option to the Company and to
receive cash, within ninety (90) days of such notice, in an amount equal to
the amount by which the Change in Control Price per share of Stock on the
date of such election shall exceed the exercise price per share of Stock
under the Stock Option (the "Spread"), multiplied by the number of shares
of Stock granted under the Stock Option as to which the right granted under
this Section 5j of The Plan shall have been exercised.

Notwithstanding the foregoing, if any right granted pursuant to this
Section 5j of The Plan would make a Change in Control transaction
ineligible for pooling of interests accounting under APB No. 16 than but
for this Section 5j of The Plan would otherwise be eligible for such
accounting treatment, The Committee shall have the authority to replace the
cash payable pursuant to this Section 5j of The Plan with Stock having a
Fair Market Value equal to the cash that would otherwise be payable
hereunder. For purposes of this Section 5j only, the date of grant of any
Stock Option approved by The Committee on December 17, 1996 shall be deemed
to be the date on which The Plan is approved by the Company's stockholders.

A-5
<PAGE> 29

k. Initial Grants. On December 17, 1996, The Committee granted the
following Stock Options to the senior executives set forth below, in the
share amounts and at the Vesting Prices and exercise prices indicated,
subject to approval by the Stockholders of the Company on March 18, 1997:

<TABLE>
<CAPTION>
OPTIONEES # OF OPTIONS EXERCISE PRICE* VESTING PRICES
-------------------------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
William W. Steele........................... 25,000 $ 20.00 $25.00
President, Chief Executive Officer,
Director, and 25,000 20.00 35.00
member of the Executive Committee 25,000 20.00 30.00
25,000 20.00 40.00
John F. Egan................................ 15,000 $ 20.00 $25.00
Vice President and Director of the
Company, 15,000 20.00 30.00
and President of the Janitorial Services
Division 15,000 20.00 35.00
15,000 20.00 40.00

Sydney J. Rosenberg......................... n/a n/a n/a
Chairman of the Board, Director,
and member of the Executive Committee

Martinn H. Mandles.......................... 20,000 $ 20.00 $25.00
Executive Vice President, Director and
member 20,000 20.00 30.00
of the Executive Committee 20,000 20.00 35.00
20,000 20.00 40.00
Jess E. Benton, III......................... 15,000 $ 20.00 $25.00
Senior Vice President 15,000 20.00 30.00
15,000 20.00 35.00
15,000 20.00 40.00
All executive officers as a group........... 130,000 $ 20.00 $25.00
130,000 20.00 30.00
130,000 20.00 35.00
130,000 20.00 40.00
All employees who are not executive officers
as a group................................ 120,000 $ 20.00 $25.00
120,000 20.00 30.00
120,000 20.00 35.00
120,000 20.00 40.00
</TABLE>

- ---------------

* The exercise price of each Option will be the greater of: (i) $20.00 per
share, (ii) the Fair Market Value per share of Common Stock on the grant date
of the Option, or (iii) the Fair Market Value per share of Common Stock on the
date of stockholder approval of the 1996 Plan.

6. Change in Control Provisions.

a. Impact of Event. Notwithstanding any other provision of The Plan to the
contrary, in the event of a Change in Control, any Stock Options outstanding as
of the date such Change in Control is determined to have occurred, and not then
vested and exercisable, shall become vested and exercisable to the full extent
of the original grant, provided that such accelerated vesting shall occur only
if The Optionee is an active full-time employee of the Company or any of its
Affiliates as of such date.

A-6
<PAGE> 30

b. Definition of Change in Control. For purposes of The Plan, a "Change in
Control" shall mean the happening of any of the following events:

(1) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of The Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
The Exchange Act) of thirty percent (30%) or more of either:

(a) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or

(b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
Directors (the "Outstanding Company Voting Securities"),

(c) excluding, however, the following acquisitions of Outstanding
Company Common Stock and Outstanding Company Voting Securities:

(i) any acquisition directly from the Company (other than an
acquisition pursuant to the exercise of a conversion privilege),

(ii) any acquisition by the Company,

(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporate
controlled by the Company or

(iv) any acquisition by any Person pursuant to a reorganization,
merger or consolidation if, following such reorganization, merger or
consolidation, the conditions described in Section 6b(3) of The Plan
are satisfied; or

(2) Individuals who, as of the effective date of The Plan, constitute
The Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of The Board; provided, however, that any individual who
becomes a member of The Board subsequent to such effective date, whose
election, or nomination for election by the Company's shareholders, was
approved by:

(a) a vote of at least a majority of Directors then comprising the
Incumbent Board, or

(b) a vote of at least a majority of the Directors then
constituting the Executive Committee of The Board at a time when such
Committee comprised at least five members and all members of such
Committee were either members of the Incumbent Board of considered as
being members of the Incumbent Board, pursuant to Section 6b(2)(a),
shall be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under The Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than The Board shall not be so considered as a member of
the incumbent Board; or

(3) Approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Business Combination");
excluding, however, such a Business Combination pursuant to which:

(a) all or substantially all of the individuals and entities who
are the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination own, directly or indirectly, more than
sixty percent (60%) of, respectively, the outstanding shares of common
stock, and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company

A-7
<PAGE> 31

or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be,

(b) no Person (other than the Company, any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or such corporation resulting from
such Business Combination and any Person beneficially owning,
immediately prior to such Business Combination, directly or indirectly,
twenty percent (20%) or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be) will
beneficially own, directly or indirectly, twenty (20%) or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of
the outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and

(c) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial
agreement, or of the action of The Board, providing for such Business
Combination; or

(4) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.

c. Change in Control Price. For purposes of The Plan, "Change in Control
Price" means the higher of:

(1) the highest reported sales price, regular way, of a share of Stock
in any transaction reported on the New York Stock Exchange Composite Tape
or other national securities exchange on which such shares are listed or on
NASDAQ, as applicable, during the ninety (90) day period prior to and
including the date of a Change in Control, and or

(2) if the Change in Control is the result of a tender or exchange
offer or a Business Combination, the highest price per share of Stock paid
in such tender or exchange offer or Business Combination; provided,
however, that in the case of a Stock Option which:

(a) is held by an Optionee who is an officer of the Company and is
subject to Section 16(b) of The Exchange Act, and

(b) was granted within two hundred and forty (240) days of the
Change in Control,

then the Change in Control Price for such Stock Option shall be the
Fair Market Value of the Stock on the date such Stock Option is exercised
or canceled. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
non-cash consideration, the value of such securities or other non-cash
consideration shall be determined in the sole discretion of The Board.

7. Term, Amendment and Termination.

The Plan will terminate on December 17, 2006. Stock Options outstanding as
of December 17, 2006 shall not be affected or impaired by the termination of The
Plan.

The Committee shall have authority to amend The Plan without the approval
of the Company's stockholders to take into account changes in law and tax and
accounting rules, including Rule 16b-3 and Section 162(m) of The Code; provided
that no amendment shall be made without the Optionee's consent which would
impair the rights of an Optionee under a Stock Option theretofore granted.

A-8
<PAGE> 32

8. Unfunded Status of Plan.

It is presently intended that The Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under The Plan to
deliver Stock or make payments; provided, however, that, unless The Committee
otherwise determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of The Plan.

9. General Provisions.

a. The Committee may require each person purchasing shares pursuant to a
Stock Option to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which The Committee deems
appropriate to reflect any restrictions on transfer.

Notwithstanding any other provision of The Plan or agreements made pursuant
thereto, the Company shall not be required to issue or deliver any certificate
or certificates for shares of Stock under The Plan prior to fulfillment of all
of the following conditions:

(1) the listing or approval for listing

(2) any registration or other qualification

(3) the obtaining of any other consent, approval, or permit from any
state or federal governmental agency which The Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.

b. Nothing contained in The Plan shall prevent the Company or any of its
Affiliates from adopting other or additional compensation arrangements for any
Optionee.

c. The adoption of The Plan shall not confer upon any Optionee any right to
continued employment, nor shall it interfere in any way with the right of the
Company or any of its Affiliates to terminate the employment of any Optionee
with or without cause at any time whatsoever absent a written employment
contract to the contrary.

d. No later than the date as of which an amount first becomes includable in
the gross income of the Optionee for federal income tax purposes with respect to
any Stock Option under The Plan, and prior to the delivery of any shares of
Stock to any Optionee, the Optionee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld by the
Company with respect to such amount. In the discretion of The Committee,
withholding obligations may be settled with Stock in an amount having a Fair
Market Value not exceeding the minimum withholding tax payable by the Optionee
with respect to the income recognized, including Stock that is subject to the
Stock Option that gives rise to the withholding requirement. The obligations of
the Company under The Plan shall be conditional on such payment or arrangements,
and the Company and any of its Affiliates shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
Optionee. The Committee shall establish such procedures as it deems appropriate,
including the making of irrevocable elections, for the settlement of withholding
obligations with Stock.

e. In the case of a grant of a Stock Option to any employee of a Company
Affiliate, the Company, may, if The Committee so directs, issue or transfer the
shares of Stock covered by the Stock Option to the Affiliate, for such lawful
consideration as The Committee may specify, upon the condition or understanding
that the Affiliate will transfer the shares of Stock to that Optionee in
accordance with the terms of the Stock Option specified by The Committee
pursuant to the provisions of The Plan.

A-9
<PAGE> 33

f. The Plan and all Stock Options made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the State of
California, without reference to principles of conflict of law.

10. Effective Date of Plan.

Subject to approval by the Stockholders of the Company on March 18, 1997,
The Plan shall be effective on December 17, 1996.

A-10
<PAGE> 34
ABM INDUSTRIES INCORPORATED

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

March 18, 1997

This Proxy is Solicited on Behalf of the Board of Directors of
ABM Industries Incorporated

The undersigned hereby appoints Harry H. Kahn, Sydney J. Rosenberg and
Theodore Rosenberg, and each of them, proxies for the undersigned, with full
power of substitution, to vote all shares of ABM Industries Incorporated
capital stock which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of ABM Industries Incorporated at 50 Fremont Street,
26th Floor, San Francisco, California, on Tuesday, March 18, 1997 at 10:00
a.m., or at any adjournment thereof, upon the matters set forth on the reverse
side and described in the accompanying Proxy Statement and upon such other
business as may properly come before the meeting or any adjournment thereof.

Please mark this proxy as indicated on the reverse side to vote on any item.
If you wish to vote in accordance with the Board of Directors' recommendations,
please sign the reverse side; no boxes need to be checked.

COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE

(Continued and to be signed on other side)

- --------------------------------------------------------------------------------
'FOLD AND DETACH HERE'
<PAGE> 35
[X] Please mark your votes as this

---------- -----------
COMMON PREFERRED

The Board of Directors recommends a vote FOR items 1 and 2.

Item 1: ELECTION OF DIRECTORS

Nominees: Martinn H. Mandles; Sydney J. Rosenberg; Theodore Rosenberg; and
William W. Steele

[ ] FOR [ ] WITHHELD FOR ALL

WITHHELD FOR: (Write that nominee's name in the space provided below).

- --------------------------------------------------------------------------------
Item 2: APPROVAL OF LONG-TERM SENIOR EXECUTIVE STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN

ADDRESS CHANGE. Please mark this box if you have an address change and
indicate such change below. [ ]

Receipt is hereby acknowledged of the ABM Industries Incorporated Notice of
Meeting and Proxy Statement.

Signature(s) ________________________________________ Date __________________

NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- --------------------------------------------------------------------------------

'FOLD AND DETACH HERE'

YOUR VOTE IS IMPORTANT TO THE COMPANY

PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THE SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE