<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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
ABM INDUSTRIES INCORPORATED
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(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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE> 2
[LOGO]
160 Pacific Avenue, Suite #222
San Francisco, California 94111
------------------------
NOTICE OF THE 1999 ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MARCH 16, 1999
10:00 A.M.
------------------------
To Our Stockholders:
The 1999 Annual Meeting of Stockholders of ABM Industries Incorporated will
be held at The World Trade Club, Ferry Building, The Embarcadero, San Francisco,
California 94111, on Tuesday, March 16, 1999 at 10:00 a.m. for the following
purposes:
(1) To elect three directors, each to serve for a term of three years;
(2) To approve an amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock, par
value $.01 per share, that the Company shall have the authority to
issue from 28,000,000 to 100,000,000 as set forth and further
described in the attached Proxy Statement;
(3) To approve a further amendment to the Company's Employee Stock
Purchase Plan, adopted in 1985, as previously amended, to increase
the number of shares authorized for issuance thereunder by 1,200,000
shares, as set forth and further described in the attached Proxy
Statement; and
(4) to transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of the Company at the close of business on January 29,
1999 will be entitled to vote at the Annual Meeting and any adjournments
thereof.
By Order of the Board of Directors
[/s/ HARRY H. KAHN, ESQ.]
Harry H. Kahn, Esq.
Vice President, General Counsel &
Corporate Secretary
San Francisco, California
February , 1999
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
160 Pacific Avenue, Suite #222
San Francisco, California 94111
------------------------
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 1999 Annual Meeting of Stockholders of the Company (the "Annual Meeting") to
be held at 10:00 a.m. on March 16, 1999, and at any adjournments of the Annual
Meeting, for the purposes set forth in the accompanying notice.
Only stockholders of the Company at the close of business on January 29,
1999 will be entitled to vote at the Annual Meeting. At the close of business on
that date, there were outstanding 21,832,865 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.
A majority of the Company's outstanding shares as of the record date must
be present at the meeting in order to hold the meeting and conduct business.
This is called a quorum. Shares are counted as present at the meeting if (a) the
stockholder is present and votes in person at the meeting or, (b) has properly
submitted a proxy card. 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. On Items 2 and 3 of this Proxy Statement,
votes may be cast "For," "Against" or "Abstain." Item 2 will require the
approval of a majority of the outstanding shares. Abstentions will have the
effect of a negative vote. A broker non-vote will also have the effect of a vote
against Item 2. Item 3 requires the approval of a majority of the shares
represented at the meeting and entitled to vote. Abstentions will have the
effect of a negative vote. However, a broker non-vote will have no effect on the
outcome of Item 3.
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 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 , 1999.
<PAGE> 4
ITEM 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes with each
class 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 Bylaws at ten. Of this number, three members of
the Board of Directors have terms expiring at this year's Annual Meeting, four
members have terms expiring at the Annual Meeting to be held in the year 2000,
and three members have terms expiring at the Annual Meeting to be held in the
year 2001. Directors elected at this year's Annual Meeting will hold office
until the Annual Meeting to be held in the year 2002, 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 three nominees
recommended by the Board of Directors, who are named in the following table. The
three 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, Governance & Succession Committee will consider nominees
recommended by stockholders. The Company's Bylaws provided that stockholders
intending to nominate candidates for election as directors at the Annual Meeting
must give the prescribed notice to the Secretary of the Company at least 60 days
prior to the applicable Annual Meeting of Stockholders. No such notice has been
given with respect to this year's Annual Meeting. The Company's Bylaws have been
amended to provide that stockholders intending to nominate candidates for
election as directors at a future Annual Meeting of Stockholders must give the
prescribed notice to the Secretary of the Company at least 60 days prior to the
first anniversary of the mailing of the Proxy Statement in connection with the
previous 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.
NOMINEES FOR ELECTION AS DIRECTORS FOR A
TERM ENDING AT THE 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE DIRECTOR
NAME AGE DURING PAST FIVE YEARS SINCE
---- --- --------------------------------------------- ---------
<S> <C> <C> <C>
Maryellen B. Cattani, Esq... 56 Attorney-at-law; Executive Vice President, 1993
General Counsel & Corporate Secretary of APL
Limited from 1991 to December of 1997(1)
John F. Egan................ 63 Vice President of the Company, and President of 1988
the Janitorial Services Division
Charles T. Horngren......... 72 Edmund W. Littlefield Professor of Accounting, 1973
Emeritus, Stanford University Graduate School
of Business, author and consultant(2)
</TABLE>
2
<PAGE> 5
DIRECTORS CONTINUING IN OFFICE FOR A
TERM ENDING AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE DIRECTOR
NAME AGE DURING PAST FIVE YEARS SINCE
---- --- --------------------------------------------- ---------
<S> <C> <C> <C>
Linda Chavez................ 51 President of the Center for Equal Opportunity; 1997
nationally syndicated columnist and
television commentator(3)
Martinn H. Mandles.......... 58 Chairman of the Board of the Company since 1991
December of 1997; Chief Administrative
Officer since November of 1991; Executive
Vice President from November of 1991 to
December of 1997
Theodore Rosenberg.......... 90 Chairman of the Company's Executive 1962
Committee(4)
William W. Steele........... 62 Chief Executive Officer of the Company since 1988
November of 1994; President since November of
1991
</TABLE>
DIRECTORS CONTINUING IN OFFICE FOR A
TERM ENDING AT THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
SERVED AS
PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE DIRECTOR
NAME AGE DURING PAST FIVE YEARS SINCE
---- --- --------------------------------------------- ---------
<S> <C> <C> <C>
Luke S. Helms............... 55 Vice Chairman of KeyBank since March of 1998; 1995
Vice Chairman of BankAmerica Corporation and
Bank of America NT&SA from May of 1993 to
October of 1996
Henry L. Kotkins, Jr........ 50 President & Chief Executive Officer of Skyway 1995
Luggage Company(5)
William E. Walsh............ 67 General Manager of the San Francisco 49ers 1993
since January of 1999; author, management
consultant and NFL Hall of Fame Coach
</TABLE>
- ---------------
(1) Maryellen B. Cattani is a member of the Board of Directors of Golden West
Financial Corporation and World Savings Loan Association.
(2) Charles T. Horngren is a member of the Board of Directors of Interplast,
Inc.
(3) Linda Chavez is a member of the Board of Directors of Greyhound Lines, Inc.
(4) Theodore Rosenberg is 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. Effective as of December 31, 1989, Theodore Rosenberg retired as an
officer and employee of the Company after more than fifty years of such
service. 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.
(5) Henry L. Kotkins, Jr. is a member of the Board of Directors of Skyway
Luggage Company.
3
<PAGE> 6
FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The standing committees of the Company's Board of Directors are the Audit
Committee, Executive Committee, Executive Officer Compensation & Stock Option
Committee, and the Nominating, Governance & Succession Committee. The members
and functions of these committees are as follows:
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.
Executive Committee. Except for the declaration of dividends and certain
other powers which may be exercised only by the full Board of Directors 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;
and William W. Steele.
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 employee stock purchase plan. The current members of the Executive
Officer Compensation & Stock Option Committee are Maryellen B. Cattani,
Chairman; Henry L. Kotkins, Jr.; and William E. Walsh.
Nominating, Governance & Succession Committee. The Nominating, Governance &
Succession 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
Committee is also responsible for executive officer succession and matters of
corporate governance in general. The current members of the Nominating,
Governance & Succession Committee are Luke Helms, Chairman; Linda Chavez; and
Henry L. Kotkins, Jr.
MEETINGS AND ATTENDANCE
During the fiscal year ended October 31, 1998, the Board of Directors met
four times, the Executive Committee met 24 times, the Audit Committee met three
times, and the Executive Officer Compensation and Stock Option Committee met
four times. During this period, no director attended fewer than 83% of the total
number of meetings of the Board and Committees of which he or she was a member.
COMPENSATION OF DIRECTORS
During the Company's fiscal year ending October 31, 1998, Directors who are
not employees of the Company ("Outside Directors") were paid retainer fees of
$18,000 per year and $1,500 for each Board or Committee meeting attended.
Outside Directors who serve as chairpersons of the standing committees received
an additional retainer fee of $1,500 per year. Effective November 1, 1998, the
retainer fee paid to outside directors was increased to $24,000 per year,
meeting fees were increased to $2,000 per meeting, and the additional retainer
fee paid to outside directors who serve as chairpersons of standing committees
was increased to $2,000 per year. Pursuant to the terms of the Company's
"Time-Vested" Incentive Stock Option Plan adopted in 1987, as amended, 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.
4
<PAGE> 7
Since June of 1992, the Company has entered into Director Retirement
Benefit Agreements with all Outside Directors. 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 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.
Theodore Rosenberg, a director of the Company, retired as an officer and
employee of the Company in 1989. Upon his retirement as an officer and employee,
the Company began and has continued making payments of $8,333.33 per month for
ten years pursuant to his previous employment contract 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 $6,250 per month.
Effective November 1, 1998, Mr. Rosenberg's consulting fees were increased to
$8,333.33 per month. The late Sydney J. Rosenberg retired as a director, officer
and employee of the Company in December of 1997. Upon his retirement, the
Company began and has continued making payments of $8,333.33 per month to Sydney
J. Rosenberg or his estate for a period of ten years pursuant to his previous
employment contract.
ITEM 2 -- AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
In December of 1998, the Board of Directors approved, subject to approval
of the stockholders at the Annual Meeting, an increase in the number of shares
of authorized Common Stock from 28,000,000 shares to 100,000,000 shares by
adopting an amendment (the "Amendment") to the Certificate of Incorporation of
the Company. At January 29, 1999, 21,721,472 shares of Common Stock were issued
and outstanding, 6,400 shares of Preferred Stock were issued and outstanding,
and 10,480,000 shares of Common Stock were reserved for issuance under the stock
option and stock purchase plans of the Company. It is intended that, unless
otherwise directed by stockholders, proxies will be voted for approval of the
Amendment. The affirmative vote of a majority of the outstanding shares will be
necessary to approve adoption of the Amendment. The Board of Directors
recommends a vote FOR adoption of the Amendment.
The Board of Directors believes the proposed Amendment is desirable
primarily to provide flexibility to declare stock splits or stock dividends
without further authorization by the stockholders. However, the Company has no
present plans to effect any such stock split or stock dividend. The additional
stock authorized by the Amendment may also be used for other issuances deemed to
be in the best interest of the Company and its stockholders such as
acquisitions, equity financings, retirement of outstanding indebtedness or
employee stock benefit plans that have received stockholder approval or which do
not require stockholder approval.
The Company currently has no agreements or arrangements for the issuance of
shares of Common Stock other than the issuance of shares of Common Stock
pursuant to employee stock benefit plans which have been previously approved by
the stockholders. The Company will apply for the listing on each exchange on
which its Common Stock presently is listed of the additional shares of Common
Stock which will be authorized as and when such shares are authorized to be
issued by the Board of Directors. Unless required by applicable laws or stock
exchange regulations, no further authorization by vote of the stockholders will
be solicited for the issuance of additional shares of Common Stock.
The proposed increase in authorized shares of Common Stock could, under
some circumstances, make attempts to acquire the Company more difficult,
although the Company has no present intention of issuing additional shares for
such purpose. Issuance of shares of Common Stock could dilute the ownership
interest and voting power of stockholders of the Company who are seeking
control. Shares of Common Stock could be issued in a private placement to
persons who support the position of the Board of Directors and management in
opposing a takeover bid, or other circumstances that could make more difficult,
and thereby discourage
5
<PAGE> 8
attempts to acquire control of the Company. To the extent that it impedes any
such attempts, the proposed Amendment may serve to continue present management.
Certain provisions of the Company's charter documents and the Stockholder
Rights Plan, both described below, may be deemed to have an "anti-takeover"
effect. However, the Board of Directors believes that the charter provisions and
such Rights Plan are for the benefit of all stockholders and will serve to
preserve and enhance stockholder value in the event certain transactions are
proposed regarding an acquisition of the Company or its assets.
Subject to applicable law, the Board of Directors of the Company may issue
shares of Common Stock held in the treasury of the Company, and may issue the
authorized but unissued shares of Preferred Stock available with such voting,
conversion and other rights as the Board of Directors determines in its sole
discretion and without further stockholder action. Depending upon the features
of the shares and to whom and when such shares are issued, the issuance of such
shares might make the acquisition of control of the Company more difficult, and
deter a takeover attempt not approved by the Board of Directors in which
stockholders receive for some or all of their shares, a premium, above-market
value at the time such takeover attempt is made. Additionally, issuance of
shares of Preferred Stock could result in a class of securities outstanding that
has certain preferences with respect to dividends and in liquidation over the
Common Stock and that may enjoy certain voting rights, contingent or otherwise,
in addition to that of the Common Stock and could result in the dilution of the
voting rights, net income per share, and net book value of the Common Stock.
The Company's Certificate of Incorporation requires that certain business
combination transactions between the Company and a "Related Person" (beneficial
owner of 10% or more of the Company's voting stock) be approved by the
affirmative vote of holders of not less that 70% of the then outstanding shares
of voting stock unless certain specified conditions are met. If the conditions
are met, then the transaction would require only such affirmative vote as is
required by law, any national securities exchange or otherwise. Business
combinations subject to this provision include a merger or consolidation of the
Company with, or a sale or transfer of all or substantially all of the Company's
assets to, a Related Person. The "fair price" provision could make it more
difficult, and may therefore discourage, an attempt by another company or group,
through the acquisition of a substantial block of the Company's Common Stock, to
acquire control of the Company with a view to imposing a merger, consolidation
or sale of the Company's assets which may not be in the best interests of all
stockholders.
The Company's Certificate of Incorporation also provides that (i) the
Company's Board of Directors is divided into three classes so that approximately
one third of the Board of Directors stands for election each year; (ii) any
action required or permitted to be taken by the stockholders of the Company may
be effected only at an annual or special meeting of the stockholders and that
stockholder action may not be by written consent in lieu of a meeting; (iii)
special meetings of stockholders may only be called by the Board of Directors or
a committee of the Board; (iv) vacant directorships may only be filled by the
Board of Directors; and (v) any director may be removed from office only
pursuant to the affirmative vote of the holders of seventy percent (70%) of the
outstanding voting stock of the Company and only for cause.
The provisions of the Certificate of Incorporation described above may not
be repealed or amended in any respect unless such amendment is approved by the
affirmative vote of not less than seventy percent (70%) of the total voting
stock.
The Bylaws establish an advanced notice procedure for the nomination, other
than by or at the direction of the Board of Directors or a committee thereof, of
candidates for election as directors and for other stockholder proposals to be
considered at an annual meeting of stockholders. To be timely, notice of a
stockholder's nomination or proposal must be received at least 60 days prior to
the first anniversary of the mailing of the Proxy Statement in connection with
the previous year's Annual Meeting. With respect to the election of directors to
be held at a special meeting of stockholders, notice of a stockholder's
nomination must be received no later than the tenth day following the date on
which notice of such meeting is first given to stockholders.
6
<PAGE> 9
In March of 1998, the Company's Board of Directors adopted a stockholder
rights plan (the "Rights Plan") to replace an existing rights plan that expired
on April 22, 1998. The Rights Plan contains provisions intended to protect
stockholders in the event of an unsolicited offer to acquire the Company,
including offers that do not treat all stockholders equally, the acquisition in
the open market of shares constituting control without offering fair value to
all stockholders, and other coercive or unfair takeover tactics that could
impair the Board's ability to represent the stockholders' interests fully and
which the Board believes are not in the best interests of stockholders. The
Rights Plan is designed to deal with unilateral actions by hostile acquirers
that are calculated to deprive the Company's Board of Directors and its
stockholders from determining the future of the Company by confronting a
potential acquirer or raider with the prospect of significant dilution of its
equity ownership if such acquirer or raider meets or exceeds a specified
ownership threshold (20%). The Rights Plan is not intended to prevent an
acquisition of the Company on terms that are favorable and fair to all
stockholders and the mere declaration of the rights dividend should not affect
any prospective offeror willing to make an all cash offer at a full and fair
price, or to negotiate with the Board of Directors, and will not interfere with
a merger or other business combination transaction that the Board of Directors
approves as fair and as constituting a recognition of full value to the
stockholders. Set forth below is a summary of the Rights Plan, which is not
complete and is qualified in its entirety by reference to the Rights Agreement,
a copy of which may be obtained without charge from the Company.
The Rights Plan provides for a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of common stock,
distributed to stockholders of record on April 22, 1998. The Rights will be
exercisable only if a person or group acquires 20% or more of the Company's
Common Stock (an "Acquiring Person") or announces a tender offer for 20% or more
of the Common Stock. Each Right will entitle stockholders to buy one
one-thousandth of a share of newly created Participating Preferred Stock, par
value $.01 per share, of the Company at an initial exercise price of $175 per
Right, subject to adjustment from time to time. However, if any person becomes
an Acquiring Person, each Right will then entitle its holder (other than the
Acquiring Person) to purchase, at the exercise price, Common Stock (or, in
certain circumstances, Participating Preferred Stock) of the Company having a
market value at that time of twice the Right's exercise price. These
Rightsholders would also be entitled to purchase an equivalent number of shares
at the exercise price if the Acquiring Person were to control the Company's
Board of Directors and cause the Company to enter into certain mergers or other
transactions. In addition, if an Acquiring Person acquired between 20% and 50%
of the Company's voting stock, the Company's Board of Directors may, at its
option, exchange one share of the Company's common stock for each Right held
(other than Rights held by the Acquiring Person). Rights held by the Acquiring
Person will become void.
The Rights Plan excludes from its operation Theodore Rosenberg, the late
Sydney J. Rosenberg, and any trust or foundation to which either Theodore
Rosenberg and the late Sydney J. Rosenberg has transferred or may transfer
shares, and any person who acquires shares of Common Stock from Theodore
Rosenberg, Sydney J. Rosenberg, or any such trust or foundation by gift,
inheritance or in a transaction in which no consideration is exchanged. As a
result, the holdings of The Theodore Rosenberg Trust, The Sydney J. Rosenberg
Trust and certain related parties will not cause the Rights to become
exercisable or nonredeemable or trigger the other features of the Rights. The
Rights will expire on April 22, 2008, unless earlier redeemed by the Board at
$0.01 per Right.
ITEM 3 -- FURTHER AMENDMENT TO THE COMPANY'S EMPLOYEE
STOCK PURCHASE PLAN, ADOPTED IN 1985, AS PREVIOUSLY AMENDED
Since 1970, the Company's stockholders have approved seven separate stock
purchase plans to provide employees of the Company with an opportunity to
purchase Common Stock through payroll deductions.
The Employee Stock Purchase Plan adopted in 1985, (the "1985 Plan") was
approved by stockholders and became effective in April of 1985. Under the 1985
Plan, 2,000,000 shares were initially reserved for issuance. In 1994, the
stockholders approved amendments to the 1985 Plan, including an amendment to
increase the number of shares of Common Stock authorized for issuance under the
1985 Plan by 500,000. In 1996, the stockholders approved an amendment to the
1985 Plan to increase the number of shares issuable thereunder by 600,000.
7
<PAGE> 10
In December of 1998, the Board of Directors adopted an amendment to the
1985 Plan to increase the number of shares of Common Stock authorized for
issuance under the 1985 Plan by 1,200,000. This amendment to the 1985 Plan is
subject to approval by the stockholders at the Annual Meeting.
Every employee of the Company and of its subsidiaries is eligible to
participate in the 1985 Plan, except that an employee is not eligible if he or
she owns, or has the right to acquire, 5% or more of the voting stock of the
Company or of any subsidiary of the Company. As of December 31, 1998,
approximately 55,000 employees were eligible to participate and 3,981 employees
were actively participating in the 1985 Plan.
The 1985 Plan is administered by the Executive Officer Compensation & Stock
Option Committee of the Board of Directors (the "Committee"). The Committee has
the authority to make rules and regulations to administer the 1985 Plan. The
interpretations and decisions of the Committee are final and conclusive.
The Board of Directors has the discretion to amend or terminate the 1985
Plan at any time. The Plan shall continue until the earliest of (i) the day on
which participating employees become entitled to purchase a number of shares
equal to or greater than the number of shares available for purchase under the
Plan, or (ii) any time at the discretion of the Company's Board of Directors.
Upon termination of the Plan, all contributions in the accounts of participating
employees will be promptly refunded.
As of December 31, 1998, 161,585 shares of Common Stock remained available
for future issuance under the 1985 Plan. In the event of any stock split or
other change in the capital structure of the Company, appropriate adjustments
will be made in the number, kind and purchase price of the shares available for
purchase under the 1985 Plan.
Eligible employees voluntarily can elect to invest up to 10% of their cash
compensation through after-tax payroll deductions for the purchase of shares of
Common Stock. After an offering period has begun, an employee may increase or
decrease his or her contribution percentage (subject to the 1985 Plan rules).
Employees elect to participate for offering periods which last one year.
Employees who have joined the 1985 Plan automatically are re-enrolled for
additional rolling one-year periods; provided, however, that an employee may
cancel his or her enrollment at any time (subject to the 1985 Plan rules).
Shares of Common Stock are purchased on the last business day of each
calendar month in the offering period. The purchase price of the shares
purchased is 85% of the lower of (i) the Common Stock's fair market value on the
first business day of the offering period, or (ii) the Common Stock's fair
market value on the last business day of any calendar month when a participant
has a sufficient amount accumulated from payroll deductions to purchase ten or
more shares. Fair market value under the 1985 Plan means the average of the high
and low prices of the Company's Common Stock on the New York Stock Exchange for
the day in question. However, during any single year, no employee may purchase
more than $25,000 of Common Stock under the 1985 Plan (based on the market value
on the applicable first business day of the offering period).
Participation in the 1985 Plan terminates when a participating employee's
employment with the Company ceases for any reason, the employee withdraws from
the 1985 Plan, or the 1985 Plan is terminated or amended such that the employee
no longer is eligible to participate.
Given that the number of shares that may be purchased under the 1985 Plan
is determined, in part, on the Common Stock's market value on the date of
purchase or on the first day and last day of the offering period, and that
participation in the 1985 Plan is voluntary on the part of employees, the actual
number of shares of Common Stock that may be purchased by any individual is not
determinable in advance. The
8
<PAGE> 11
following table sets forth (a) the aggregate number of shares of the Company's
Common Stock which were purchased under the 1985 Plan during fiscal 1998, and
(b) the average price per share paid for such shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES AVERAGE PER SHARE
NAME OF INDIVIDUAL OR GROUP PURCHASED PURCHASE PRICE
--------------------------- ---------------- -----------------
<S> <C> <C>
William W. Steele........................................... 765 $15.78
President & Chief Executive Officer
Martinn H Mandles........................................... 775 $15.92
Chairman of the Board & Chief Administrative Officer
John F. Egan................................................ 813 $15.78
Vice President of the Company, and President of the
Janitorial Services Division
Jess E. Benton, III......................................... 843 $15.78
Senior Vice President
Henrik Slipsager............................................ 784 $16.58
Senior Vice President of the Company, and Executive Vice
President of the Janitorial Services Division
All Executive Officers, as a group.......................... 9,480 $16.58
All Directors who are not Executive Officers, as a
group(1).................................................. n/a n/a
All employees who are not Executive Officers, as a group.... 552,909 $19.42
</TABLE>
- ---------------
(1) Directors who are not employees of the Company are not eligible to
participate in the 1985 Plan.
Based on management's interpretation of current federal income tax law, the
tax consequences of selling shares of Common Stock purchased under the 1985 Plan
generally are as follows:
The 1985 Plan is intended to qualify under Section 423 of the Internal
Revenue Code of 1986, as amended. An employee will not have taxable income when
shares of Common Stock are purchased for him or her, but income taxes will
generally be due when the employee sells or otherwise disposes of stock
purchased through the 1985 Plan.
For shares of Common Stock that are not disposed of until more than two
years after the first day of the applicable offering period, (the "two-year
holding period"), gain up to the amount of the discount (if any) from the market
price of the Common Stock on the enrollment date (or re-enrollment date) is
taxed as ordinary income. Any additional gain above that amount is taxed at
long-term capital gain rates. If, after the two-year holding period, the
employee sells the stock for less than the purchase price, the difference is a
long-term capital loss. Shares sold within the two-year holding period are taxed
at ordinary income rates on the amount of discount received from the Common
Stock's market price on the purchase date. Any additional gain (or loss) is
taxed as long-term or short-term capital gain (or loss). The purchase date
begins the holding period for determining whether the gain (or loss) is
short-term or long-term.
The Company generally receives a deduction for federal income tax purposes
for the ordinary income an employee recognizes when the employee disposes of
stock purchased under the 1985 Plan within the two-year holding period. The
Company does not receive a deduction for shares disposed of after such two-year
period.
It is intended that, unless otherwise directed by stockholders, proxies
will be voted for approval of the amendment to the 1985 Plan. The affirmative
vote of a majority of the shares represented at the Annual Meeting and entitled
to vote on this matter will be necessary to approve adoption of the amendment.
The Board of Directors believes that the 1985 Plan has been valuable to the
Company in recruiting, incentivizing and retaining employees upon whom the
Company's success depends. Accordingly, the Board of Directors recommends a vote
FOR adoption of the amendment.
9
<PAGE> 12
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of the Chief Executive Officer and the four most highly
compensated executive officers of the Company for all services in all capacities
rendered to the Company and its subsidiaries during the fiscal years ended
October 31, 1998, 1997 and 1996 are set forth below. Columns regarding "Other
Annual Compensation," "Restricted Stock Awards," "Long-Term Incentive Plan
Payouts" and "All Other Compensation" are excluded because no reportable
payments were made to these executive officers in or for the relevant years.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) STOCK
FISCAL ---------------------- OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) GRANTED(#)
--------------------------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C>
William W. Steele................................... 1998 $577,944 $484,544 15,000
President & Chief Executive Officer 1997 552,000 462,598 100,000
1996 480,302 327,794 10,000
Martinn H. Mandles.................................. 1998 375,425 242,272 12,500
Chairman of the Board since December of 1997; 1997 275,000 231,299 80,000
Chief Administrative Officer since November of 1996 235,302 164,563 40,000
1991; Executive Vice President from November of
1991 until December of 1997
John F. Egan........................................ 1998 366,450 165,664 12,500
Vice President of the Company, and President of 1997 350,000 126,537 60,000
the Janitorial Services Division 1996 327,928 108,200 30,000
Jess E. Benton, III................................. 1998 324,207 124,849 12,500
Senior Vice President 1997 276,627 150,477 60,000
1996 264,715 129,497 30,000\
Henrik Slipsager.................................... 1998 366,450 106,126 42,500
Senior Vice President of the Company since March 1997 271,702 135,851 50,000
of 1998, and Executive Vice President of the 1996 n/a n/a n/a
Janitorial Services Division since being hired in
January of 1997
</TABLE>
- ---------------
(1) Includes amounts deferred under the Company's Deferred Compensation Plan.
10
<PAGE> 13
OPTIONS GRANTED TO EXECUTIVE OFFICERS
The Executive Officer Compensation & Stock Option Committee of the Board of
Directors currently has authority to grant stock options under either the
"Age-Vested" Career Stock Option Plan adopted in 1984, as amended (the "1984
Plan"), the "Time-Vested" Incentive Stock Option Plan adopted in 1987, as
amended (the "1987 Plan"), or the "Price-Vested" Performance Stock Option Plan
adopted in 1996 (the "1996 Plan"). The following tables set 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
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME AND POSITION GRANTED(#) FISCAL YEAR ($/SH) DATE $ @ 5% $ @ 10%
----------------- ---------- ------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W. Steele.............. 15,000(3) 0.85% $29.406 (4) $277,350 $ 703,020
President & Chief Executive
Officer
Martinn H. Mandles............. 12,500(3) 0.70% $29.406 (4) $231.162 $ 585,850
Chairman of the Board &
Chief Administrative Officer
John F. Egan................... 12,500(3) 0.70% $29,406 (4) $231,162 $ 585,850
Vice President of the
Company, and President of the
Janitorial Services Division
Jess E. Benton, III............ 12,500(3) 0.70% $29.406 (4) $231,162 $ 585,850
Senior Vice President
Henrik Slipsager............... 10,000(3) 0.56% $29.406 (4) $184,930 $ 468,680
Senior Vice President 2,500(3) 0.14% 36.594 (4) 56,500 145,500
of the Company, and 10,000(5) 0.56% 36.594 (6) 230,200 583,200
Executive Vice President 20,000(7) 1.12% 36.594 (8) 460,400 1,166,420
of the Janitorial Services
Division
</TABLE>
- ---------------
(1) 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.
(2) For purposes of calculating the potential realizable value, it has been
assumed that the stock options have a term of ten years.
(3) Stock options granted under the 1984 Plan. 50% of the recipient's options
vest on the recipient's 61st birthday and the remaining 50% vest on the
recipient's 64th birthday.
(4) To the extent vested, these stock options may be exercised at any time prior
to one year after termination of employment. However, all stock options vest
and 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) Stock options granted under the 1987 Plan. These options vest at a rate of
20% per year over five years commencing one year from the grant date
(6) Stock options expire ten years from the grant date. However, all stock
options vest and 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.
(7) Stock options granted under the 1996 Plan. These stock options vest
according to a schedule tied to the price of the Company's Common Stock. Mr.
Slipsager's options will become exercisable at any time after March 17, 1999
if the Fair Market Value of the Company's Common Stock shall have been equal
to or
11
<PAGE> 14
greater than the assigned vesting price of $40.00 per share for ten (10)
trading days in any period of thirty (30) consecutive trading days prior to
such date. Stock options that have not vested on or before the close of
business on the fourth (4th) anniversary of the grant date shall vest at the
close of business on the business day immediately preceding the eighth
anniversary of the date of grant, if such options have not previously
terminated.
(8) To the extent vested, these stock options may be exercised at any time prior
to ninety days after termination of employment. However, all stock options
vest and may be immediately exercised in the event of dissolution or
liquidation of the Company or a merger or combination in which the Company
is not the surviving corporation.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
COMMON SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS ON IN-THE-MONEY OPTIONS
ACQUIRED OCTOBER 31, 1998(1) ON OCTOBER 31, 1998(2)
ON VALUE --------------------------- ------------------------------
NAME AND POSITION EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William W. Steele......... 60,000 $1,662,420 202,500(3) 92,500(4) $2,775,000(3) $2,590,000(4)
President and
Chief Executive Office
Martinn H. Mandles........ 40,000 $1,120,000 116,000(5) 90,500(6) $1,398,520(5) $2,534,000(6)
Chairman of the Board
and Chief Administrative
Officer
John F. Egan.............. 60,000 $1,483,080 134,250(7) 70,250(8) $1,906,720(7) $1,967,000(8)
Vice President of the
Company, and President
of the Janitorial
Services Division
Jess E. Benton, III....... 20,000 $ 448,333 97,000(9) 91,500(10) $1,241,520(9) $2,562,000(10)
Senior Vice President
Henrik Slipsager.......... 10,000 $ 82,925 24,000(11) 68,500(12) $ 200,000(11) $1,918,000(12)
Senior Vice President of
the Company, and
Executive Vice President
of the Janitorial
Services Division
</TABLE>
- ---------------
(1) Includes stock options granted under the 1984 Plan, 50% of which vest upon
the optionee's 61st birthday and 50% of which vest upon the optionee's 64th
birthday; stock options granted under the 1987 Plan, which vest at a rate
of 20% per year commencing one year after the date of grant; and stock
options granted under the 1996 Plan which will vest according to a schedule
tied to the price of the Company's Common Stock.
(2) Based on a price per share of $28.00 which was the price of a share of the
Company's Common Stock on the New York Stock Exchange at the close of
business on October 31, 1998.
(3) Includes 20,000 stock options granted in 1983 at an exercise price of $5.72
per share, 40,000 stock options granted in 1991 at an exercise price of
$8.49 per share, 40,000 stock options granted in 1994 at exercise price of
$8.91 per share, 20,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 75,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share, and 7,500 stock
options granted in 1997 at an exercise price of $29.41 per share.
(4) Includes 20,000 stock options granted in 1983 at an exercise price of $5.72
per share, 10,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 30,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 25,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share, and 7,500 stock
options granted in 1997 at an exercise price of $29.41 per share.
12
<PAGE> 15
(5) Includes 16,000 stock options granted in 1991 at an exercise price of $8.49
per share, 24,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 16,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, and 60,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share.
(6) Includes 28,000 stock options granted in 1983 at an exercise price of $5.72
per share, 6,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 24,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 20,000 stock options granted in
December of 1996 at an exercise price of $20.0 per share, and 12,500 stock
options granted in 1997 at an exercise price of $29.41 per share.
(7) Includes 23,000 stock options granted in 1983 at an exercise price of $5.72
per share, 16,000 stock options granted in 1991 at an exercise price of
$8.49 per share, 32,000 stock options granted in 1994 at an exercise price
of $8.91 per share, 12,00 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 45,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share, and 6,250 stock
options granted in 1997 at an exercise price of $29.41 per share.
(8) Includes 23,000 stock options granted in 1983 at an exercise price of $5.72
per share, 8,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 18,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 15,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share, and 6,250 stock
options granted in 1997 at an exercise price of $29.41 per share.
(9) Includes 16,000 stock options granted in 1991 at an exercise price of $8.49
per share, 24,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 12,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, and 45,000 stock options granted in
December of 1996 at an exercise price of $20.00 per share.
(10) Includes 40,000 stock options granted in 1983 at an exercise price of $5.72
per share, 6,000 stock options granted in 1994 at an exercise price of
$8.91 per share, 18,000 stock options granted in June of 1996 at an
exercise price of $18.75 per share, 15,000 stock options granted in 1996 at
an exercise price of $20.00 per share, and 12,500 stock options granted in
1997 at an exercise price of $29.41 per share.
(11) Includes 20,000 stock options granted in 1996 at an exercise price of
$20.00 per share, and 4,000 stock options granted in 1997 at an exercise
price of $18.00 per share.
(12) Includes 10,000 stock options granted in 1996 at an exercise price of
$20.00 per share, 16,000 stock options granted in March of 1997 at an
exercise price of $18.00 per share, 10,000 stock options granted in
December of 1997 at an exercise price of $29.41 per share, and 32,500 stock
options granted in 1998 at an exercise price of $36.49 per share.
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 401(k) and Profit Sharing Plan (the "401(k)
Plan") for all qualified employees, as defined in said 401(k) Plan, who earn
less than such amount. The Service Award Benefit Plan provides that, upon
termination, eligible employees will receive seven days pay for each full
calendar year of employment subsequent to December 31, 1991. 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 embezzle-
13
<PAGE> 16
ment), 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 of its
executive officers, including the 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, 1998. All such written employment agreements that would have
expired in October 31, 1998 were extended and otherwise amended as of November
1, 1998, and provide for annual salaries (in the following amounts for fiscal
1999: $605,107 for William W. Steele; $406,157 for Martinn H. Mandles; $383,673
for John F. Egan; $339,445 for Jess E. Benton, III, and $383, 673 for Henrik
Slipsager), annual bonuses based on pretax profits, plus other customary
benefits including, but not limited to, participation in the Company's group
health, disability and life insurance programs. 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 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 and 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: (i) for William
W. Steele, $693,333, plus $76,666 times the number of years of Mr. Steele's
employment with the Company after November 1, 1996; (ii) for Martinn H. Mandles,
$500,000; (iii) for John F. Egan, $471,428, plus $42,857 times the number of
years of Mr. Egan's employment with the Company after November 1, 1994; and
$250,000 each for Jess E. Benton, III and Henrik Slipsager. Unless earlier
terminated, or later extended pursuant to their term, these employment
agreements continue until October 31, 2000 for each of the above-named executive
officers.
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 an interest rate of 6% per annum. The
loan will mature on August 1, 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, 1998, the outstanding principal balance of this
loan was $496,876.13
EXECUTIVE OFFICER COMPENSATION AND 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. During fiscal 1998, no executive officer of
the Company served as a director, or as a member of the compensation committee,
of any other for-profit entity other than subsidiaries of the Company.
14
<PAGE> 17
EXECUTIVE OFFICER COMPENSATION & STOCK OPTION COMMITTEE REPORT ON COMPENSATION
February 1, 1999
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 eleven executive officers of the Company, who
are: the Chairman of the Board and Chief Administrative Officer; the President
and Chief Executive Officer; three Senior Vice Presidents; four Vice Presidents
(including the Chief Financial Officer); the Controller and Chief Accounting
Officer; and the Treasurer.
COMPENSATION PROGRAM. 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 services 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 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 confirmed that this program was
competitive with companies of similar size and performance. Based upon the
results of the evaluation undertaken by its 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, incentivize 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 eleven of its executive officers which set forth
the compensation and other terms and conditions of their employment with the
Company. 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, the Company's
earnings per share for each fiscal year 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 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
15
<PAGE> 18
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 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.
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 executive officers are also eligible to
participate in compensation and benefit programs generally available to other
employees, including, but not limited to, the Company's group health, disability
and life 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
incidental personal benefits.
BASIS FOR CEO COMPENSATION. The Chief Executive Officer's cash compensation
for fiscal 1998 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
executive officers and is subject to the same limitations described above.
IRS SECTION 162(m). The Company does not expect the deductibility limit of
Section 162(m) to have a material effect on the Company because cash
compensation paid to each of the Company's executive officers currently is less
than $1,000,000 per year, except with respect to the Company's President & Chief
Executive Officer, whose fiscal 1998 cash compensation exceeded $1,000,000 by a
relatively small amount. In addition, the Company believes that non-qualified
stock options granted under the Company's stock option plans are exempt from the
deductibility limitation because such options have been qualified as
"performance-based" compensation under Section 162(m). Incentive stock options
granted under the Company's stock option plans generally do not entitle the
Company to a tax deduction without regard to Section 162(m).
Executive Officer Compensation
& Stock Option Committee
Maryellen B. Cattani, Chairman
Henry L. Kotkins, Jr., Member
William E. Walsh, Member
EXECUTIVE OFFICER COMPENSATION & STOCK OPTION COMMITTEE REPORT ON STOCK OPTIONS
February 1, 1999
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. During 1998, the
Committee approved stock options for newly-hired or recently promoted employees
to purchase a total of 570,000 shares under the "Age-Vested" Career Stock Option
Plan adopted in 1984, as amended; approved stock options for 423 newly hired or
recently promoted employees to purchase of total of 266,100 shares under the
"Time-Vested" Incentive Stock Option Plan adopted in 1987, as amended; and
approved Stock Options for five newly-hired or recently promoted employees to
purchase 140,000 shares under the "Price-Vested" Performance Stock Option Plan
adopted in 1996.
16
<PAGE> 19
In determining the number of stock options to be granted to employees, the
Committee considers each employee's responsibility and 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 $625 million to $650 million (based on the most recent
publicly available number of shares outstanding on December 31, 1998 and the
closing price of such shares on that date). The peer group consists of the
following companies, in addition to the Company: AAR Corp., Ackerley Group Inc.,
Baker Fentress & Co., Ballard Medical Products, CBL & Associates Properties
Inc., Credicorp Ltd., F & M National Corp., Muniyield Fund Inc., Newpark
Resources, Omega Healthcare Investors Inc., Overseas Shipholding Group, Pilgrims
Pride Corp., Sierra Health Services, and Smucker (JM) Co.
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, 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: ACM Government Income Fund, American Health Properties, Colonial
Properties Trust, D. R. Horton, Inc. Foremost Corporation of America, Graco
Inc., Hudson Foods Inc., Hughes Supply Inc., Nonics Inc., Irvine Apartment
Communities, KCS Energy Inc., Kellwood Co., Kuhlman Corp., Mastec Inc., Orange &
Rockland Utilities, Plantronics Inc., Spelling Entertainment Group Inc., True
North Communications, and United Illuminating Co.
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 facility services 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 nine 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 nine 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.
17
<PAGE> 20
The comparisons in the graph shown are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
<TABLE>
<CAPTION>
PEER GROUP: BROAD MARKET: COMPANY:
----------- ------------- --------
<S> <C> <C> <C>
'1993' 100 100 100
'1994' 103 104 132
'1995' 112 131 170
'1996' 132 163 231
'1997' 175 215 363
'1998' 149 262 381
</TABLE>
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, 1998.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT
------------------------------------ --------- -------
<S> <C> <C>
The Theodore Rosenberg Trust(1).......................... 2,411,370(2) 11.1%
295-89th Street, Suite 200
Daly City, California 94015
The Sydney J. Rosenberg Trust(1)......................... 2,256,384(3) 10.4%
c/o Bank of America NT&SA
2049 Century Park East, Suite 200
Los Angeles, California 90067
GeoCapital Corporation................................... 1,770,000(4) 8.1%
767 Fifth Avenue
New York, New York 10153
Palisade Asset Management................................ 1,629,900(5) 7.5%
One Bridge Plaza, #695
Fort Lee, New Jersey 07024
Citigroup Inc............................................ 1,255,835(6) 5.8%
153 East 53rd Street
New York, NY 10043
</TABLE>
- ---------------
(1) The Theodore Rosenberg Trust and The Sydney J. Rosenberg Trust constitute a
group within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, because under certain circumstances they may act in
concert with respect to the shares of Common Stock held by each.
Accordingly, each trust may be deemed to own an aggregate of 4,667,754
shares of Common Stock or
18
<PAGE> 21
approximately 21.5% of the outstanding Common Stock. Subject to the foregoing,
The Theodore Rosenberg Trust and The Sydney J. Rosenberg Trust. disclaim
beneficial ownership of shares held by the other.
(2) Includes 2,368,778 shares of Common Stock held by The Theodore Rosenberg
Trust, a revocable trust of which Theodore Rosenberg is the only Trustee and
sole beneficiary. Also includes 30,792 shares of Common Stock held by a
family charitable foundation, of which Theodore Rosenberg is a director. The
Theodore Rosenberg Trust disclaims beneficial ownership of the shares held
by the family charitable foundation. Also includes 11,800 shares subject to
outstanding stock options held by Theodore Rosenberg that were exercisable
on or within 60 days after December 31, 1998.
(3) The Sydney J. Rosenberg Trust is an irrevocable trust of which S. Brad
Rosenberg, Martinn H. Mandles and Bank of America NT&SA are the only
Co-Trustees and of which there are numerous beneficiaries. Except to the
extent of their shared voting and investment power, S. Brad Rosenberg,
Martinn H. Mandles and Bank of America NT&SA, as Co-Trustees, disclaim
beneficial ownership of the shares of Common Stock held in the name of The
Sydney J. Rosenberg Trust.
(4) Based on information provided to the Company as of February 3, 1999 by
GeoCapital Corporation. Does not include 10,000 shares held by their senior
vice president, as reported to the Company by GeoCapital Corporation.
(5) Based on information provided to the Company as of February 3, 1999 by
Palisade Asset Management.
(6) Based on information provided to the Company as of February 3, 1999 by
Citigroup Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates, as to each named executive officer, director
and nominee, and as to all directors and executive officers as a group, the
number of shares and percentage of the Company's Common Stock beneficially owned
as of December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED AS OF
DECEMBER 31, 1998
--------------------------
NUMBER OF
EXECUTIVE OFFICER AND/OR DIRECTOR SHARES PERCENT(L)
--------------------------------- --------- ----------
<S> <C> <C>
Jess E. Benton, III................................ 148,352(2) *
Maryellen B. Cattani............................... 16,800(3) *
Linda Chavez....................................... 1,800(4) *
John F. Egan....................................... 303,701(5) 1.4%
Luke S. Helms...................................... 8,800(6) *
Charles T. Horngren................................ 24,600(7) *
Henry L. Kotkins, Jr............................... 9,800(8) *
Martinn H. Mandles................................. 2,499,652(9) 11.5%
Theodore Rosenberg................................. 2,411,370(10) 11.1%
Henrik Slipsager................................... 24,000(11) *
William W. Steele.................................. 286,960(12) 1.3%
William E. Walsh................................... 21,150(13) *
Executive officers and directors as a group (19
persons)......................................... 6,194,703(14) 28.5%
</TABLE>
- ---------------
* Less than 1.00%
(1) Based on a total of 21,721,472 shares of Common Stock outstanding as of
December 31, 1998.
(2) Includes 97,000 shares subject to outstanding stock options held by Jess E.
Benton, III that were exercisable on or within 60 days after December 31,
1998.
(3) Includes 11,800 shares subject to outstanding stock options held by
Maryellen B. Cattani that were exercisable on or within 60 days after
December 31, 1998.
19
<PAGE> 22
(4) Includes 1,800 shares subject to outstanding options held by Linda Chavez
that were exercisable on or within 60 days after December 31, 1998.
(5) Includes 134,250 shares subject to outstanding stock options held by John
F. Egan that were exercisable on or within 60 days after December 31, 1998.
(6) Includes 7,800 shares subject to outstanding stock options held by Luke S.
Helms that were exercisable on or within 60 days after December 31, 1998.
(7) Includes 17,800 shares subject to outstanding stock options held by Charles
T. Horngren that were exercisable on or within 60 days after December 31,
1998.
(8) Includes 7,800 shares subject to outstanding stock options held by Henry L.
Kotkins, Jr. that were exercisable on or within 60 days after December 31,
1998.
(9) Includes 2,256,384 shares of Common Stock held by The Sydney J. Rosenberg
Trust, an irrevocable trust, of which S. Brad Rosenberg, Martinn H. Mandles
and Bank of America NT&SA are the only Co-Trustees and of which there are
numerous beneficiaries. Except to the extent of his shared voting and
investment power, Mr. Mandles disclaims beneficial ownership of all such
shares. Also includes 50,736 shares of Common Stock held by The Leo L.
Schaumer Trust, an irrevocable trust of which Mr. Mandles is Co-Trustee
with Bank of America NT&SA. Except to the extent of his shared voting and
investment power, Mr. Mandles disclaims beneficial ownership of all such
shares. Also includes 116,000 shares subject to outstanding stock options
held by Martinn H. Mandles that were exercisable on or within 60 days after
December 31, 1998. See also footnote (1) of "Security Ownership of
Management."
(10) Includes 2,368,778 shares of Common Stock held by the Theodore Rosenberg
Trust, an inter-vivos trust of which Theodore Rosenberg is the only Trustee
and sole beneficiary. Also includes 30,792 shares of Common Stock held by a
family charitable foundation, of which Theodore Rosenberg is a director.
The Theodore Rosenberg Trust disclaims beneficial ownership of the shares
held by the family charitable foundation. Also includes 11,800 shares
subject to outstanding stock options held by Theodore Rosenberg that were
exercisable on or within 60 days after December 31, 1998.
(11) Includes 24,000 shares subject to outstanding options held by Henrik
Slipsager that were exercisable on or within 60 days after December 31,
1998.
(12) Includes 202,500 shares subject to outstanding stock options held by
William W. Steele that were exercisable on or within 60 days after December
31, 1998.
(13) Includes 17,800 shares subject to outstanding stock options held by William
E. Walsh that were exercisable on or within 60 days after December 31,
1998.
(14) Includes 657,750 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, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and persons who own more than 10% of a registered class of
the Company's registered securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Based on a review of the
reporting forms and representations of its directors, officers and 10%
stockholders, the Company believes that during 1998 all such persons were in
compliance with the reporting requirements with the exception of Jess E. Benton,
III who inadvertently failed to report a charitable gift of 800 shares in July
of 1998.
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.
20
<PAGE> 23
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 judgement.
2000 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 Annual Meeting to be held in the year
2000 must be received at the Company's offices on or before October , 1999 in
order to be considered for inclusion in the Company's proxy statement and form
of proxy relating to such meeting.
The accompanying proxy card grants the proxy holders discretionary
authority to vote on any matter raised at the Annual Meeting. If a stockholder
intends to submit a proposal at the 2000 Annual Meeting of Stockholders of the
Company, which proposal is not intended to be included in the Company's proxy
statement and form of proxy relating to such meeting, the stockholder must give
proper notice no later than December , 1999. If a stockholder fails to submit
the proposal by such date, the Company will not be required to provide any
information about the nature of the proposal in its proxy statement, and the
proposal will not be considered at the 2000 Annual Meeting of Stockholders as it
will not have been properly brought before the Annual Meeting as set forth in
the Company's Bylaws.
By Order of the Board of Directors
[/s/ HARRY H. KAHN, ESQ.]
Harry H. Kahn, Esq.
Vice President, General Counsel
and Corporate Secretary
February , 1999
21
<PAGE> 24
APPENDIX A
ABM INDUSTRIES INCORPORATED
1985 EMPLOYEE STOCK PURCHASE PLAN
(As amended March 16, 1997)
The purpose of this 1985 Employee Stock Purchase Plan (the "Plan") is to
provide employees the opportunity to purchase Common Stock of ABM Industries
Incorporated through annual offerings. An aggregate of 3,100,000 shares of such
stock may be issued under the Plan (the "Shares").
1. ELIGIBILITY. Only employees of ABM Industries Incorporated (the
"Corporation") and its subsidiary corporations will be eligible to participate
in the Plan. All such employees will be eligible to participate, except
employees who own or hold options to purchase or who, as a result of
participation in this Plan, would own or hold options to purchase, stock of the
Corporation possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Corporation and any current or
future parent and/or subsidiary corporation(s) of the Corporation. An employee
shall be considered as owning stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
which an employee may purchase under outstanding options shall be treated as
stock owned by the employee.
2. OFFERINGS. The Plan shall be implemented by granting eligible employees
the right to purchase Shares (an "Offering") during offering periods of one (1)
year duration (each such period being referred to herein as an "Offering
Period") commencing at such times as the Corporation shall determine. The first
working day during an Offering Period shall be the "Offering Date" for such
Offering Period.
3. PARTICIPATION. An employee eligible on the Offering Date of any Offering
may participate in such Offering by completing and forwarding a Payroll
Deduction Authorization for Purchase of ABM Stock form ("Payroll Deduction
Authorization Form") to the Payroll Department at such employee's branch
location on or before the Offering Date. The form will authorize a regular
payroll deduction from the employee's compensation.
Unless otherwise indicated, a participating employee shall automatically
participate in the first Offering which commences immediately after the
expiration of each Offering in which such employee acquires Shares upon
expiration of the standard one (1) year Offering Period. A participating
employee is not required to file an additional Payroll Deduction Authorization
Form in order to automatically participate therein. Unless otherwise indicated
in an additional Payroll Deduction Authorization Form, the rate at which payroll
deductions shall be accumulated with respect to any such subsequent Offering
shall equal the rate applicable to the previously expired Offering. Any balance
in an employee's payroll deduction account at the end of an Offering will remain
in the employee's account as funds available for purchase of shares in the
subsequent Offering.
4. DEDUCTIONS. The Corporation will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction up to a maximum of 10% of the
compensation he receives during the Offering Period specified for the Offering
(or during such portion thereof as he may elect to participate). As a minimum,
an employee must authorize a payroll deduction which, based on his rate of pay
at the time of such authorization, would enable him by the end of the Offering
Period to accumulate in his account an amount equal to at least the Offering
Price (as defined below) of ten Shares for that Offering.
5. DEDUCTION CHANGES. An employee may at any time increase or decrease his
payroll deduction by filing a new Payroll Deduction Authorization Form. The
change will become effective for the next pay period after receipt of the form.
A payroll deduction may be increased only once and reduced only once during any
Offering Period. An employee will be deemed to have withdrawn from an Offering
if such employee reduces the payroll deduction amount to zero.
<PAGE> 25
6. WITHDRAWAL OF FUNDS. An employee may at any time and for any reasondraw
out the balance accumulated in his account, and thereby withdraw from
participation in an Offering. He may not thereafter participate during the
remainder of the Offering Period specified for the Offering. Partial withdrawals
will not be permitted.
7. PURCHASE OF SHARES. Each employee participating in any Offering under
this Plan will be granted, upon the Offering Date of such Offering, a right to
purchase as many full Shares (but not less than ten) as he may elect to purchase
for up to 10% of compensation received during the specified Offering Period to
be paid by payroll deductions during such period, provided that the maximum
number of Shares which may be purchased in any Offering shall be equal to the
number obtained by dividing the employee's annual compensation on the Offering
Date of such Offering by the fair market value of one Share on the Offering Date
of such Offering.
The purchase price for each Share purchased under any Offering will be the
lesser of:
(a) 85% of the fair market value of one Share on the Offering Date of
such Offering (the "Offering Price"), or
(b) 85% of the fair market value of one Share on the day on which the
right to purchase is exercised and the Shares are purchased
pursuant to the terms of this Plan (the "Alternate Offering
Price").
As of the last working day of each calendar month during any Offering, the
account of each participating employee shall be totalled. When a participating
employee shall have sufficient funds in his account to purchase ten or more
Shares at the lesser of either the Offering Price or the Alternate Offering
Price as of that date, the employee shall be deemed to have exercised his right
to purchase the number of full Shares purchasable with the funds in his account
at such price, his account shall be charged for the amount of the purchase, and
a stock certificate shall be issued to him as of such day. Subsequent Shares
covered by the employee's right to purchase will be purchased in the same manner
whenever sufficient funds have again accrued in his account.
Payroll deductions may be made under each Offering to the extent authorized
by the employee, subject to the maximum and minimum limitations imposed for each
such Offering. A separate employee account will be maintained with respect to
each Offering.
A participating employee may not purchase shares under any Offering beyond
12 months from the Offering Date thereof. Any balance in an employee's account
at the end of 12 months from the Offering Date of any Offering which is not
sufficient to purchase ten Shares will, unless otherwise indicated, remain in
the employee's account for the purchase of shares in the next Offering.
8. LIMITATION TO PURCHASE OF SHARES. Anything contained in this Plan
notwithstanding, no employee may be granted a right to purchase which permits
such employee's rights to purchase stock under all employee stock purchase plans
of the Corporation and its parent and subsidiary corporations to accrue at a
rate which exceeds $25,000 of fair market value of such stock (determined at the
time such right to purchase is granted) for each calendar year in which such
right to purchase is outstanding at any time. For this purpose (a) the right to
purchase stock accrues when such right (or any portion thereof) first becomes
exercisable during the calendar year; (b) the right to purchase stock accrues at
the rate provided in the Offering, but in no case may such rate exceed $25,000
of fair market value of such stock (determined at the time such right to
purchase is granted) for any one calendar year; and (c) a right to purchase
which has accrued under one Offering may not be carried over to any other
Offering.
<PAGE> 26
9. REGISTRATION OF CERTIFICATES. Stock Certificates may be registered only
in the name of the employee, or if he so indicates on his Payroll Deduction
Authorization Form, in his name jointly with a member of his family with rights
of survivorship, in the name of a family trust, or in the name of a family
member pursuant to a gift which satisfies the requirements of the Uniform Gifts
to Minors Act. An employee who is a resident of a jurisdiction which does not
recognize such a joint tenancy may have certificates registered in his name as
tenant in common with a member of his family, without right of survivorship.
10. DEFINITIONS.
"Working Day" means a day other than a Saturday, Sunday or scheduled
holiday.
"Fair Market Value" means the average of the high and low prices of the
Corporation's common stock composite transactions on the New York Stock Exchange
on a given day, or if no sales were made on that day, the average of the high
and low prices on the next preceding day on which sales are made.
"Parent corporation" means a corporation described in Section 424(e) of the
Internal Revenue Code of 1986, as amended (the "Code").
"Subsidiary corporation" means a corporation described in Section 424(f) of
the Code.
The Plan is intended to be an "employee stock purchase plan" as defined in
Section 423 of the Code and its provisions shall be interpreted in a manner
consistent with this intent.
11. RIGHTS AS A STOCKHOLDER. None of the rights or privileges of a
stockholder of the Corporation shall exist with respect to Shares purchased
under this Plan unless and until certificates representing such Shares shall
have been issued.
12. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's retirement, death, or termination of employment,
no payroll deduction shall be taken from any pay due and owing to him at such
time and the balance in his account shall be paid to him, or, in the event of
death, to his estate.
13. RIGHTS NOT TRANSFERABLE. Rights granted under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during his lifetime only.
14. APPLICATION OF FUNDS. Funds received or held by the Corporation under
this Plan may be used for any corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING THE STOCK. In the event of a
subdivision of outstanding shares, or the payment of a stock dividend, the
number of shares reserved or authorized to be reserved under this Plan,
including shares covered by outstanding grants to participating employees, shall
be increased proportionately, and the Offering Price for each participant at
such time reduced proportionately, and such other adjustment shall be made as
may be deemed equitable by the Board of Directors. In the event of any other
change affecting the Corporation's common stock, such adjustment shall be made
as may be deemed equitable by the Board of Directors to give proper effect to
such event.
16. AMENDMENT OF THE PLAN. The Board of Directors may at any time, or from
time to time, amend this Plan in any respect, except that, to the extent
required to maintain this Plan's qualification under Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended, any such amendment shall
be subject to stockholder approval.
<PAGE> 27
17. TERMINATION OF THE PLAN. This Plan and all rights of employees under
any Offering hereunder shall terminate:
(a) on the day that participating employees become entitled to
purchase a number of Shares equal to or greater than the number of Shares
remaining available for purchase. If the number of Shares so purchasable is
greater than the Shares available, Shares shall be allocated on a pro rata basis
among such participating employees; or
(b) at any time, at the discretion of the Board of Directors of the
Corporation.
Upon termination of this Plan, all amounts in the accounts of participating
employees shall be promptly refunded.
18. ADMINISTRATION. The Plan will be administered by the Officer
Compensation & Stock Option Committee of the Board of Directors. The Committee
will have authority to make rules and regulations for the administration of the
Plan. Its interpretations and decisions with regard thereto shall be final and
conclusive.
19. GOVERNMENTAL REGULATIONS. The Corporation's obligation to sell and
deliver its Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such stock.
<PAGE> 28
PROXY
ABM INDUSTRIES INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 16, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ABM INDUSTRIES INCORPORATED
The undersigned hereby appoints William W. Steele, Martinn H. Mandles
and Harry H. Kahn, 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 to the held at The World Trade Club,
Ferry Building, The Embarcadero, San Francisco, California, on Tuesday, March
16, 1999 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 be checked.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(CONTINUED ON OTHER SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 29
Please mark [X]
your votes
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
Item 1. ELECTION OF DIRECTORS
FOR WITHHOLD
all nominees AUTHORITY
listed (except to vote for
as withheld) nominees listed
[ ] [ ]
Nominees: Maryellen B. Cattani, John F. Egan and Charles T. Horngren
Item 2. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK THAT THE COMPANY
SHALL HAVE THE AUTHORITY TO ISSUE FROM 28,000,000 TO 100,000,000
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN ADOPTED IN
1985, AS AMENDED, TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
THEREUNDER BY 1,200,000 SHARES
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Signature(s) __________________________________ Date __________________________
- -------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
