SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
(Name of Registrant as Specified in its Charter)
Railtex, Inc.
(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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
April 28, 1998
DEAR SHAREHOLDER:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
RailTex, Inc. to be held on Wednesday, May 27, 1998, at 10:00 a.m. (CDT) at the
McNay Art Museum, 6000 North New Braunfels, San Antonio, Texas. We look forward
to this opportunity to update you on developments here at RailTex and to greet
our new shareholders.
We hope you will attend the meeting in person. WHETHER OR NOT YOU EXPECT TO BE
PRESENT AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE MARK, SIGN AND
MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. Matters on which action will
be taken at the meeting are explained in detail in the Notice and Proxy
Statement following this letter.
Sincerely,
/s/ BRUCE M. FLOHR
Bruce M. Flohr
CHAIRMAN OF THE BOARD
/s/ LAURA D. DAVIES
Laura D. Davies
VICE PRESIDENT-FINANCE, CHIEF FINANCIAL OFFICER
AND CORPORATE SECRETARY
Enclosure
<PAGE>
RAILTEX, INC.
4040 Broadway, Suite 200
San Antonio, Texas 78209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1998
TO THE SHAREHOLDERS OF RAILTEX, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
RailTex, Inc., a Texas corporation, will be held at the McNay Art Museum, 6000
North New Braunfels, San Antonio, Texas, on Wednesday, May 27, 1998, at 10:00
a.m.(CDT) for the following purposes:
(1) To elect two (2) Directors to serve as Class III Directors for
terms expiring in 2001 and until their respective successors are
duly elected and qualified;
(2) To approve the appointment of Arthur Andersen LLP as the Company's
auditors for the 1998 fiscal year; and,
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the Bylaws of the Company and a resolution of the
Board of Directors, the record date for the meeting has been fixed at March 31,
1998. Only shareholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
A complete list of shareholders entitled to vote at the meeting will be
on file at the Company's corporate office at 4040 Broadway, Suite 200, San
Antonio, Texas, for a period of ten (10) days prior to the meeting. During such
time, the list will be open to the examination of any shareholder during
ordinary business hours for any purpose germane to the meeting.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED
TO SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY. A RETURN ENVELOPE IS ENCLOSED
FOR THAT PURPOSE.
RAILTEX, INC.
/s/LAURA D. DAVIES
Laura D. Davies
CORPORATE SECRETARY
Dated: April 28, 1998
<PAGE>
RAILTEX, INC.
4040 Broadway, Suite 200
San Antonio, Texas 78209
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of
RailTex, Inc., a Texas corporation (the "Company"), to be voted at the 1998
Annual Meeting of Shareholders at 10:00 a.m. (CDT) on Wednesday, May 27, 1998,
or at any adjournment thereof. This proxy statement and the accompanying proxy
are first being mailed to shareholders on or about April 28, 1998.
VOTING AND PROXIES
Only holders of record of Common Stock of the Company at the close of
business on March 31, 1998 will be entitled to vote at the meeting. There were
9,186,199 shares of common stock outstanding on the record date. Each share of
common stock outstanding is entitled to one vote. A majority of the shares
outstanding will constitute a quorum at the meeting.
All shares represented by proxies will be voted in accordance with the
shareholders' directions. If the proxy card is signed and returned without any
direction given, shares will be voted in accordance with the recommendations of
the Board of Directors as described in this proxy statement. Any shareholder
giving a proxy may revoke it at any time before the proxy is voted by giving
written notice of revocation to the Corporate Secretary, by submitting a
later-dated proxy, or by attending the meeting and voting in person.
The election of each nominee for Director requires a plurality of the
votes cast. The affirmative vote of a majority of the shares present and voting
at the meeting in person or by proxy is required for approval of the appointment
of auditors. Abstentions and broker non-votes will be included in determining
the presence of a quorum at the meeting; however, abstentions and broker
non-votes will not be included in determining the number of votes cast on any
matter.
PROPOSAL #1
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board of Directors of not less
than three (3) members and not more than ten (10) members. Currently, there are
seven (7) Directors. At the 1995 Annual Meeting of Shareholders, the Company's
Bylaws were amended to classify the Board of Directors into three classes, each
of which class of Directors, after an interim arrangement, will serve for three
years, with one class being elected each year. At the 1995 Annual Meeting of
Shareholders, the classified Board of Directors was implemented by the election
of the initial Class I, Class II, and Class III Directors to serve for terms of
one year, two years, and three years, respectively.
The Board of Directors propose the election of two (2) Directors at the
1998 Annual Meeting of Shareholders to serve as Class III Directors. The Class
III Director nominees are Robert M. Ayres, Jr. and Robert R. Lende. The nominees
for Class III Directors, if elected, will serve for a three year term expiring
in 2001 and until their respective successors are elected and qualified. The
Board of Directors recommends a vote FOR such nominees.
1
<PAGE>
The proxies named in the accompanying proxy, who have been designated by
the Board of Directors, intend to vote for the above mentioned nominees for
election as Directors, unless otherwise specified. Such nominees have indicated
a willingness to serve as Directors, but should any of them decline or be unable
to serve, the persons named as proxies may vote for another person in the place
of such nominees according to their best judgment and in the interest of the
Company.
The following information is furnished with respect to each of the
nominees. Such information includes all positions with the Company and principal
occupations during the last five years.
Notice for election as Class III Directors, whose terms expire in 2001:
ROBERT M. AYRES, JR., age 71, has served as a Director since 1988 and is
a member of the Compensation and Nominating Committees. Mr. Ayres is currently a
financial consultant and investor. From 1977 until 1988, Mr. Ayres was
President, Vice Chancellor, and Chief Executive Officer of the University of the
South. From 1973 to 1977, Mr. Ayres was Senior Vice President and a Director of
Rotan Mosle, Inc. From 1962 to 1973, he was President and Director of Russ and
Company, Inc., an investment banking firm. Mr. Ayres is also a Director of
Howell Corporation, Rochelle Communications, PatOil Corporation, and James Avery
Craftsmen.
ROBERT R. LENDE, age 57, served as a Director, Executive Vice President,
and Chief Financial Officer of RailTex from 1980 until he retired in June 1995.
He currently serves as a Director of RailTex and is a member of the Nominating
and Audit Committees. From 1975 through 1980, Mr. Lende was employed by Rotan
Mosle, Inc., a Texas-based regional investment banking firm, most recently as
Vice President-Corporate Finance. From 1971 to 1975, Mr. Lende was Vice
President-Marketing for Heatransfer Corporation, a manufacturer of automobile
air conditioners. Mr. Lende is also an advisor to the Alamo Group, Inc.
The following information is furnished with respect to each of the
continuing Directors. Such information includes all positions with the Company
and principal occupations during the last five years.
Class I Directors, whose terms expire in 1999:
BRUCE M. FLOHR, age 58, founded RailTex in 1977, and currently serves as
Chairman of the Board of Directors and Chief Executive Officer. From 1977 to
October 1995, Mr. Flohr also had served as President of RailTex. From 1975
through 1977, Mr. Flohr held the positions of Deputy Administrator and Acting
Administrator of the Federal Railroad Administration in Washington, D.C. In
those positions, he had primary responsibility for rail safety, operation of the
Alaska Railroad, and operation of the Transportation Test Center at Pueblo,
Colorado. Mr. Flohr was employed by Southern Pacific Transportation Company from
1965 through 1975 and served as Division Superintendent of its San Antonio
Division from 1971 through 1975. He is a founder and past Chairman of the
Regional Railroads of America and is a Director of the Association of American
Railroads. Mr. Flohr is also a Director of Harmon Industries, Inc. and the
Transportation Technology Center, Inc.
PALMER L. MOE, age 54, has served as a Director since June 1996 and is a
member of the Audit Committee. Mr. Moe is the Executive Director of the
Kronkowsky Charitable Foundation. From 1992 to August 1997, Mr. Moe was
President of Storen Resources, Inc., a privately owned corporation which is now
dormant. From 1983 to 1992, Mr. Moe was President and Chief Operating Officer of
Valero Energy Corporation. From 1965 to 1983, Mr. Moe held various positions
with Arthur Andersen LLP, including Managing Partner of the San Antonio office
from 1978 to 1983.
LAURA D. DAVIES, age 39, has served as a Director of RailTex since June
1996. She has been Vice President-Finance and Chief Financial Officer of RailTex
since July 1995. Mrs. Davies was Vice President-Finance of RailTex Service Co.,
Inc. ("RSC"), a subsidiary of RailTex, from February 1995 to June 1995 and
served as Controller of RSC since 1986. Mrs. Davies is a Certified Public
Accountant and from 1981 to 1986 was employed by Arthur Andersen LLP. Mrs.
Davies has tendered her resignation as Vice President-Finance and Chief
Financial Officer of RailTex effective May 31, 1998.
2
<PAGE>
Class II Directors, whose terms expire in 2000:
HEATHER J. GRADISON, age 45, has served as a Director since 1990 and is
a member of the Nominating and Compensation Committees. Ms. Gradison is an
international and domestic consultant specializing in advising on issues for
regulatory reform. From 1990 until 1994, Ms. Gradison served as Assistant to the
President for the American Enterprise Institute for Public Policy Research. From
1985 until 1990, Ms. Gradison served as Chairman of the Interstate Commerce
Commission, and from 1982 until 1985, she was a Commissioner of the Interstate
Commerce Commission. From 1975 to 1982, Ms. Gradison was employed by the
Southern Railway System.
FERD. C. MEYER, JR., age 58, has served as a Director since 1977 and is
a member of the Audit and Compensation Committees. Mr. Meyer is Executive Vice
President and General Counsel of Central and South West Corporation, a public
holding company for five electric utility companies operating in Texas,
Oklahoma, Arkansas, Louisiana, and the United Kingdom. From 1988 to January
1998, Mr. Meyer was Senior Vice President and General Counsel of Central and
South West Corporation. From 1986 to 1988, Mr. Meyer was Vice President and
Assistant General Counsel of Central and South West Services, Inc., a subsidiary
of Central and South West Corporation.
MEETINGS AND COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of Directors
held seven (7) meetings. During the fiscal year ended December 31, 1997, no
Director attended fewer than seventy-five percent (75%) of the aggregate of (i)
the total number of meetings of the Board of Directors held during the period
for which he has been a Director and (ii) the total number of meetings held by
all committees of the Board of Directors on which he has served.
The members of the Board of Directors who are not full time employees of
the Company are compensated at the rate of $20,000 per year and $1,000 per
meeting attended. Members of committees of the Board of Directors are
compensated at the rate of $1,000 per meeting attended. In addition, each
Outside Director of the Company receives an annual grant of options to purchase
3,000 shares of Common Stock. The exercise price for these options is the
closing sale price on the last business day prior to January 1 of the year for
which the options are granted ($14.31 per share for 1998).
The Board of Directors has standing Audit, Compensation and Nominating
Committees. The Board of Directors also forms ad hoc committees from time to
time.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors, which currently consists
of Robert R. Lende, Palmer L. Moe and Ferd. C. Meyer, Jr., met twice during the
1997 fiscal year. The functions of the Audit Committee are to recommend the
selection of independent accountants, review and recommend approval of annual
audited financial statements, and review significant changes in accounting
policies and procedures. In addition, the Audit Committee reviews the adequacy
of internal control and record-keeping systems, reviews compliance with
applicable regulations and policies (including environmental regulations and
policies on insider trading), and monitors litigation, fraud, and conflict of
interest and their potential impact on financial results.
3
<PAGE>
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors currently consists
of Robert M. Ayres, Jr., Heather J. Gradison and Ferd. C. Meyer, Jr. The
Compensation Committee met five (5) times during the 1997 fiscal year. The
functions of the Compensation Committee are to review the compensation of
officers and other management personnel and to make recommendations concerning
such compensation. The Compensation Committee also administers the employee
benefit plans of the Company, including the Company's 1993 Stock Plan, as
amended. No officer of the Company is a member of the Compensation Committee.
NOMINATING COMMITTEE
The Nominating Committee of the Board of Directors currently consists of
Robert M. Ayres, Jr., Heather J. Gradison and Robert R. Lende. The Committee met
twice (2) during the 1997 fiscal year. The function of the Nominating Committee
is to consider and recommend nominees for election as Directors. The Nominating
Committee will consider nominees recommended by security holders. The names of
any nominees to be recommended by security holders to the Nominating Committee
must be submitted in writing to the Nominating Committee at the Company's
corporate office at 4040 Broadway, Suite 200, San Antonio, Texas 78209, no later
than December 23, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors, executive officers, and any persons holding more than ten
percent of the Company's Common Stock to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities Exchange Commission and to provide copies of such reports to the
Company. Based upon the Company's review of copies of such reports received by
the Company and written representations of its Directors and executive officers,
the Company believes that during the year ended December 31, 1997, all Section
16(a) filing requirements were satisfied, except for (i) an inadvertent late
filing of a Form 3 for James R. Davis, after becoming Interim Vice
President-Operations in September 1997; (ii) an inadvertent late filing of a
Form 4 for Greg B. Petersen reporting the May 21, 1997 grant of 35,000
non-qualified stock options and the right to receive a future conditional grant
of 30,000 non-qualified stock options; and (iii) an inadvertent late filing of a
Form 4 for Clement J. Wydra reporting the May 21, 1997 grant of 5,000
non-qualified stock options.
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth the beneficial ownership of the Company's
Common Stock at March 31, 1998 by (i) each person who is known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each Director, (iii) the Chief Executive Officer and the other four most highly
compensated officers of the Company (the "Named Executives"), and (iv) all
Directors and executive officers as a group. The address for each of the
Directors and the Named Executives is the address of the Company.
4
<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS (CONTINUED)
SHARES %OF TOTAL
BENEFICIALLY SHARES
5% SHAREHOLDERS, DIRECTORS AND NAMED EXECUTIVES OWNED(1) OUTSTANDING
- ------------------------------------------------------- ----------- ------------
The Capital Group Companies, Inc.(2) 928,000 10.1%
State of Wisconsin Investment Board ...................... 898,600 9.8
Bruce M. Flohr(3) ........................................ 598,720 6.5
David L. Babson & Co. .................................... 530,200 5.8
Robert M. Ayres, Jr.(4) .................................. 198,374 2.2
Robert R. Lende(5) ....................................... 145,683 1.6
Laura D. Davies(6) ....................................... 76,919 0.8
David P. Valentine(7) .................................... 69,618 0.8
Ferd. C. Meyer, Jr.(8) ................................... 18,950 0.2
Palmer L. Moe (9) ........................................ 17,318 0.2
Heather J. Gradison(10) .................................. 11,100 0.1
Michael T. Brigham (11) .................................. 9,859 0.1
Greg B. Petersen (12) .................................... 8,000 0.1
James R. Davis (13) ...................................... 7,100 0.1
Michael A. Nosil (14) .................................... 5,107 0.1
James C. Dodge (15) ...................................... 4,700 0.0
James H. Wagner (16) ..................................... 2,297 0.0
Directors and executive officers as a group
(14 persons)(17)........................................ 1,173,745 12.5
- --------------
(1) Each holder has advised the Company that, except as noted below, it has
sole investment and voting power with respect to the shares indicated.
(2) The Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies. Capital Guardian Trust Company, a bank
as defined in Section 3(a)6 of the Act and a wholly owned subsidiary of The
Capital Group Companies, Inc., is the beneficial owner of 678,000 shares or
7.4% of the total shares outstanding. The remaining shares reported as
being beneficially owned by The Capital Group Companies, Inc. are
beneficially owned by other subsidiaries of The Capital Group Companies,
Inc.
(3) The number of shares of Common Stock beneficially owned by Mr. Flohr
includes 22,599 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days, and 4,000 shares of stock
held in trusts for members of Mr. Flohr's family for which Mr. Flohr has
voting but not investment power. Not included are an aggregate of 20,565
shares beneficially owned by certain relatives of Mr. Flohr not living in
his home.
(4) The number of shares of Common Stock beneficially owned by Mr. Ayres
includes 6,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days. Also included are 11,000
shares of Common Stock held by a private foundation for which Mr. Ayres has
voting and investment power.
(5) The number of shares of Common Stock beneficially owned by Mr. Lende
includes 33,612 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days. Also included are 7,500
shares held by a private foundation, of which Mr. Lende is a co-trustee.
Mr. Lende disclaims beneficial ownership of these shares.
(6) The number of shares of Common Stock beneficially owned by Mrs. Davies
includes 55,982 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(7) The number of shares of Common Stock beneficially owned by Mr. Valentine
includes 58,159 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days and does not include an
aggregate of 9,468 shares of Common Stock beneficially owned by Mr.
Valentine's adult children.
(8) The number of shares of Common Stock beneficially owned by Mr. Meyer
includes 6,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(9) The number of shares of Common Stock beneficially owned by Mr. Moe includes
6,000 shares of Common Stock reserved for issuance under stock options
which are exercisable within 60 days.
(10) The number of shares of Common Stock beneficially owned by Ms. Gradison
includes 6,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(11) The number of shares of Common Stock beneficially owned by Mr. Brigham
includes 8,609 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(12) The number of shares of Common Stock beneficially owned by Mr. Petersen
includes 7,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(13) The number of shares of Common Stock beneficially owned by Mr. Davis
includes 4,200 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(14) The number of shares of Common Stock beneficially owned by Mr. Nosil
includes 4,527 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
5
<PAGE>
(15)The number of shares of Common Stock beneficially owned by Mr. Dodge
includes 4,200 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(16)The number of shares of Common Stock beneficially owned by Mr. Wagner
includes 2,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(17)The number of shares of Common Stock beneficially owned by the Directors
and executive officers as a group includes 224,887 shares of Common Stock
reserved for issuance under stock options which are exercisable within 60
days.
EXECUTIVE COMPENSATION
The following table shows all cash and non-cash compensation paid to the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers (collectively, the "Named Executives") for their services to
the Company during the years ended December 31, 1997, 1996, and 1995. The
Company has an employment contract with Greg B. Petersen, Vice
President-Corporate Development, whereby one year of his base salary is
guaranteed should the Company choose to terminate his employment within the
first two years of his employment for any reason other than performance or
violation of company policy. The Company does not have employment contracts with
any other of the Named Executives.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
-------------------------------- ---------
FISCAL OTHER ANNUAL ALL OTHER
YEAR SALARY BONUS(1)(2) COMPENSATION OPTIONS COMPENSATION(5)
---- ------ ----------- ------------ ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bruce M. Flohr 1997 $275,000 $110,000 $ -- 15,459 $80,846
CHAIRMAN AND CHIEF 1996 261,397 68,750 -- 6,260 80,846
EXECUTIVE OFFICER 1995 234,192 41,733 -- 14,338 71,134
Greg B. Petersen 1997 86,559 116,843(3) -- 35,000 6,127
VICE PRESIDENT-CORPORATE 1996 -- -- -- -- --
DEVELOPMENT 1995 -- -- -- -- --
Laura D. Davies (6) 1997 150,000 45,000 -- 4,743 32,925
VICE PRESIDENT-FINANCE 1996 150,000 28,125 -- 22,593 28,175
CHIEF FINANCIAL OFFICER 1995 129,363 17,289 -- 4,085 13,454
David P. Valentine (7) 1997 159,086 30,000 -- 4,192 --
VICE PRESIDENT-LINE 1996 159,086 19,884 -- 2,416 --
ACQUISITIONS 1995 159,086 16,107 -- 5,213 --
James H. Wagner 1997 120,297 40,000(4) -- 20,000 18,131
VICE PRESIDENT-CHIEF 1996 -- -- -- -- --
MECHANICAL OFFICER 1995 -- -- -- -- --
</TABLE>
- ------------------
(1) Bonuses are paid to executive officers, as well as all other employees of
the Company, pursuant to the Company's performance-based incentive
compensation program.
(2) The amount shown in the bonus column reflects bonuses paid in subsequent
periods for performance during the named period.
(3) Includes a signing bonus paid to Mr. Petersen of $90,875.
(4) Includes a signing bonus paid to Mr. Wagner of $20,000.
(5) Consists of amounts contributed by the Company pursuant to the Company's
401(k) profit sharing plan in the amounts of $19,000 and $16,000 for Mr.
Flohr and Mrs. Davies, respectively, in 1997. In addition, ALL OTHER
COMPENSATION consists of premiums paid by the Company for split dollar life
insurance in the amounts of $61,846, $6,127, $16,925 and $18,131 for Mr.
Flohr, Mr. Petersen, Mrs. Davies and Mr. Wagner, respectively.
(6) Mrs. Davies has tendered her resignation as Vice President-Finance and Chief
Financial Officer, effective May 31, 1998.
(7) Mr. Valentine retired on February 28, 1998.
6
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS IN 1997 FOR OPTION TERM (1)
---------------------------------------------- ----------------------------
% OF
TOTAL
NUMBER OPTIONS
OF GRANTED
SECURITIES TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN PRICE EXPIRATION
NAME GRANTED(2) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -------------------- ------------ ----- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce M. Flohr ..... 15,459 8.18% $18.50(4) 3/12/2007 $179,788 $455,731
Greg B. Petersen ... 35,000(3) 18.52 17.88(5) 5/21/2007 393,400 997,500
Laura D. Davies .... 4,743 2.51 18.50(4) 3/12/2007 55,161 139,824
David P. Valentine . 4,192 2.22 18.50(4) 3/12/2007 48,753 123,580
James H. Wagner .... 10,000 5.29 17.88(5) 5/21/2007 112,400 285,000
James H. Wagner .... 10,000 5.29 17.63(6) 6/19/2007 110,900 281,000
</TABLE>
- --------------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. The amounts represent certain assumed rates of appreciation only,
based on rules promulgated by the Securities and Exchange Commission. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, overall market conditions and the option
holders' continued employment through the vesting period. The amounts
reflected in this table may not necessarily be achieved. One share of stock
purchased at $18.50 in 1997 would yield profits of $11.63 at 5.0%
appreciation per year over ten years, or $29.48 at 10.0% appreciation per
year over the same period. One share of stock purchased at $17.88 in 1997
would yield profits of $11.24 at 5.0% appreciation per year over ten years,
or $28.50 at 10.0% appreciation per year over the same period. One share of
stock purchased at $17.63 in 1997 would yield profits of $11.09 at 5.0%
appreciation per year over ten years, or $28.10 at 10.0% appreciation per
year over the same period.
(2) All options granted in 1997 by the Company vest over a five year period from
the date of grant, provided the option holder remains employed with the
Company.
(3) Mr. Petersen also received a right to receive a future conditional grant of
30,000 non-qualified stock options on May 21, 1997.
(4) The options were granted in March 1997. The exercise price was set at
$18.50, the last sale price for the Company's Common Stock on March 11,
1997.
(5) The options were granted in May 1997. The exercise price was set at $17.88,
the last sale price for the Company's Common Stock on May 20, 1997.
(6) The options were granted in June 1997. The exercise price was set at $17.63,
the last sale price for the Company's Common Stock on June 18, 1997.
The following table describes the exercisable and unexercisable options
to purchase shares of the Company's Common Stock held by the Company's Named
Executives and the value of such options as of December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED 12/31/97 12/31/97(2)
ON VALUE --------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Bruce M. Flohr .........25,970(1) $680,413(1) 38,562 33,270 162,891 --
Greg B. Petersen ....... None N/A -- 35,000 -- --
Laura D. Davies ........ None N/A 51,159 28,497 374,456 10,194
David P. Valentine ..... None N/A 52,880 12,947 424,393 11,765
James H. Wagner ........ None N/A -- 20,000 -- --
</TABLE>
- -------------
(1) Mr. Flohr exercised 48,003 options which resulted in a gain of $680,413, a
result of the difference between the exercise price of the options and the
market price of the options on the date the options were exercised. 22,033
shares were sold to fund the exercise of the options and income taxes. As a
result, 25,970 shares were acquired.
(2) The value of unexercised options is based on the difference between the
closing sales price of $14.31 per share of Common Stock on December 31, 1997
and the option exercise price.
7
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR UNDER NON-STOCK
OTHER PERIOD PRICE-BASED PLANS
UNTIL ------------------------------------
NUMBER OF MATURATION
NAME SHARES (1) OR PAYOUT THRESHOLD(2) TARGET(3) MAXIMUM(4)
- --------------- ---------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Bruce M. Flohr .......... 5,203 2 Years 2,601 5,203 10,406
Greg B. Petersen ........ 1,490 2 Years 745 1,490 2,980
Laura D. Davies ......... 1,596 2 Years 798 1,596 3,192
David P. Valentine ...... 1,411 2 Years 705 1,411 2,822
James H. Wagner(5) ...... -- -- -- -- --
</TABLE>
- --------------
(1) Represents the number of performance shares granted on March 12, 1997,
pursuant to the 1993 Stock Plan, as amended. The final payouts for
performance shares are made in the Company's Common Stock and are based on
the Company's total shareholder return as compared to a group of publicly
traded railroad, trucking and transportation logistic companies and the
"Russell 2000" index. Employees must be employed by the Company at the end
of two years from the date of the award to receive the performance shares.
During the two year period, the number of shares to be awarded can increase
by a maximum of 200 percent or decrease to zero.
(2) The threshold amount assumes a total shareholder return, which, when
compared to the benchmarks, yields a 50 percent payout.
(3) The target amount assumes a total shareholder return, which, when compared
to the benchmark yields, a 100 percent payout.
(4) The maximum amount assumes a total shareholder return, which, when compared
to the benchmarks, yields a 200 percent payout.
(5) Mr. Wagner was not eligible to receive performance shares in 1997.
CHANGE IN CONTROL SEVERANCE ARRANGEMENTS
On February 25, 1998, the Board of Directors authorized the Company to
enter into Change in Control Agreements with the Chief Financial Officer, the
Vice President-Sales and Marketing, the Vice President-Administration, the Vice
President-Operations, the Vice President-Chief Engineer, the Vice
President-Chief Mechanical Officer, and the Vice President-Corporate
Development. The Board authorized the Change in Control Agreements in order to,
among other things, (i) assure the ability of the Company and its subsidiaries
to attract and retain competent senior executives and the continuity of
management in the event of an actual or threatened change in control of the
Company, and (ii) assure that management is, as a practical matter, able to
evaluate any actual or threatened takeover bid objectively. The Change in
Control Agreements were not entered into in response to any actual or threatened
change in control of the Company.
Under the Change in Control Agreements, an officer will receive a
lump-sum payment equal to three times the officer's current base pay and
targeted cash bonus upon the termination of the officer's employment with the
Company within two (2) years after a change in control. An officer will also be
permitted to participate, for three (3) years after termination, in the
Company's various health care, dental, group life and group long-term disability
benefit plans, and will be provided with the title to any Company car the
officer is using at the time of termination. Except in certain situations, the
Company will also pay any additional amounts necessary to cover any federal
excise taxes the officer may incur as a result of the Change in Control
Agreements and, provided the officer has not acted in bad faith or with no
colorable claim of success, the Company will pay all of the legal fees incurred
by the officer in enforcing the Change in Control Agreements. In general, a
change in control is deemed to have occurred upon any of the following: (i) an
individual, entity or group acquires 20% or more of the outstanding voting stock
of the Company, (ii) the individuals who constitute the incumbent Board of
Directors cease to constitute at least a majority of the Board of Directors,
(iii) the consummation of a reorganization, merger or consolidation, the sale or
disposition of all or substantially all of the Company's assets or other
transaction (a "Business Combination") unless immediately after the Business
Combination (a) the beneficial owners before the Business Combination own
two-thirds of the voting stock, (b) no person beneficially owns 20% or more of
the voting stock in the entity resulting from the Business Combination, and (c)
at least a majority of the Company's Board of Directors before the Business
Combination comprise the Board of the entity resulting from the Business
Combination, or (iv) approval of the complete liquidation or dissolution of the
Company by the Company's shareholders. The Company may, however,
8
<PAGE>
terminate an officer's employment and not pay him or her any amounts under the
Change in Control Agreements if the officer is convicted of a criminal violation
involving fraud, embezzlement or theft in connection with his or her duties,
intentionally engages in wrongful damage to the property of the Company or
intentionally engages in the wrongful disclosure of confidential information,
any of which demonstrably and materially harms the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, consisting of
three independent Directors (the "Committee"), presents the following report on
executive compensation. The report describes the Company's executive
compensation programs and the basis on which the Committee made compensation
decisions for 1997 with respect to the Company's executive officers, including
those named in the above compensation tables.
COMPENSATION OBJECTIVES. RailTex's executive compensation program has as
its foundation the following objectives:
o Maintaining a total compensation program consisting of base salary,
performance incentives and benefits designed to support the corporate goal
of providing superior value to RailTex shareholders and customers;
o Providing comprehensive programs which serve to facilitate the recruitment,
retention and motivation of qualified executives; and
o Rewarding key executives for achieving financial, operating and individual
objectives that produce a corresponding and direct return to RailTex's
shareholders in both the long-term and the short-term.
To achieve that objective, the Committee has developed a compensation
program which combines annual base salaries with annual bonuses, stock option
grants and performance share awards tied to corporate and individual
performance.
ANNUAL BASE SALARIES. The Committee annually establishes the base salaries
to be paid to the Company's executive officers during the coming year, subject
to approval by the Board of Directors. The Committee's decisions regarding the
1997 base salary to be paid to each executive officer and the executive officers
as a group were based upon several factors (without any particular emphasis
given by the Committee to one factor over another), including the executive's
job performance, competitive compensation data, and the executive's experience,
responsibilities and management abilities. The Committee also considered the
Company's performance in 1996, noting the Company's 1996 consolidated net income
increased by 44.4% and its operating revenues increased by 12.3%.
ANNUAL INCENTIVE COMPENSATION. The Company maintains a performance-based,
incentive compensation program through which a portion of the Company's earnings
are distributed as compensation to all of its employees. Cash incentive
compensation to the Company's executive officers are paid annually. The
incentive compensation plan for executive officers provides for cash incentive
compensation to be paid based upon a predetermined target (expressed as a
percentage of annual salary). The target is increased or decreased based upon
the Company's net income achieved relative to the business plan as approved by
the Board of Directors and the executive officer's personal performance. In
addition, executive officers are also awarded, through the 1993 Stock Plan, as
amended, a calculated value of stock options and performance shares based upon a
predetermined percentage of the cash incentive compensation, as defined in the
incentive compensation plan. The Compensation Committee may also award special
bonuses to recognize special achievements. The executive officer bonuses for
1997 were determined and paid in March 1998.
9
<PAGE>
STOCK OPTIONS AND PERFORMANCE SHARES. In order to encourage executive
officers to focus on the Company's long-term performance, the Committee granted
its executive officers non-qualified stock options to purchase shares of the
Company's Common Stock. The options, with a ten-year term, vest and become
exercisable at the rate of 20% per year commencing on the first anniversary of
the date of grant, provided the executive officer remains an employee of the
Company. In addition, the Company awarded its executive officers (except James
H. Wagner, Vice President-Chief Mechanical Officer who was not eligible in 1997)
performance shares. Payouts for performance shares are made in the Company's
Common Stock and are based on the Company's total shareholder return over a two
year period as compared to a group of publicly traded railroad, trucking and
transportation logistic companies and the "Russell 2000" index. Employees must
be employed by the Company at the end of two years from the date of the award to
receive the performance shares. At the conclusion of the two year period, the
number of shares awarded can increase by a maximum of 200 percent or decrease to
zero based on the Company's total shareholder return versus the benchmark groups
during the two year performance period.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Flohr's base annual salary for
the year ended December 31, 1997 was $275,000, a 5% increase over 1996. In March
1998, he was paid a bonus for 1997 of $110,000, which constituted 40% of his
base annual salary and a 60% increase from the $68,750 bonus paid to him for
1996. Mr. Flohr also received options to purchase 15,459 shares of the Company's
Common Stock at $18.50 per share and was awarded 5,203 performance shares. In
establishing the 1997 annual salary for Mr. Flohr, the Committee considered the
same factors it considered in the setting the 1997 annual salaries for the other
executive officers as described above.
COMPENSATION COMMITTEE:
ROBERT M. AYRES, JR.
HEATHER J. GRADISON
FERD. C. MEYER, JR.
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The Company's Common Stock first began publicly trading on the National
Market System of Nasdaq on November 18, 1993. The graph below compares the
cumulative total shareholder return on the Company's Common Stock for the period
November 18, 1993 through December 31, 1997, with the cumulative total return on
the Nasdaq U.S. Composite Index, the Nasdaq Truck and Transportation Index, and
a composite comparison group determined by the Company consisting of certain
Class I railroads, trucking companies, and rail equipment companies. Conrail,
Inc. has been excluded from the composite comparison group in 1997 due to its
merger with CSX Transportation, Inc. and Norfolk Southern Railway Company in
mid-1997. The return calculations presented assume an investment of $100 on
November 18, 1993 in the Company's Stock and each of the indices, and the
reinvestment of all dividends.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
11/18/93 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
RailTex 100 168 144 127 153 86
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
NASDAQ US Composite Index 100 106 103 146 179 220
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
NASDAQ Truck/Transportation Index 100 103 93 109 120 154
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
Comparator Group 100 101 85 121 138 157
- ----------------------------------- --------- --------- --------- ---------- --------- ---------
</TABLE>
11
<PAGE>
PROPOSAL #2
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed the firm of Arthur
Andersen LLP to audit the accounts of the Company for the 1998 fiscal year.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting of Shareholders with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
Approval of the appointment of auditors is not a matter which is
required to be submitted to a vote of shareholders, but the Board of Directors
considers it appropriate for the shareholders to express or withhold their
approval of the appointment. If shareholder approval should be withheld, the
Board would consider an alternative appointment for the succeeding year. The
Board recommends that the shareholders vote FOR approval of the appointment of
Arthur Andersen LLP. The affirmative vote of a majority of the shares present
and voting at the meeting in person and by proxy is required for approval.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received in writing by the Company at its
corporate office no later than December 23, 1998. The Company's corporate office
is located at 4040 Broadway, Suite 200, San Antonio, Texas 78209.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies may
be solicited through the mail and through telephonic or telegraphic
communication to, or by meeting with, shareholders or their representatives by
Directors, officers and other employees of the Company who will receive no
additional compensation therefor.
The Company requests persons such as brokers, nominees and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy material to their
principals and to request authority for the execution of the proxy. The Company
reimburses such persons for their reasonable expenses.
OTHER MATTERS
No business other than the matters set forth in this proxy statement is
expected to come before the meeting, but should any other matters requiring a
vote of shareholders arise, including a question of adjourning the meeting, the
persons named in the accompanying proxy will vote thereon according to their
best judgment in the interest of the Company.
RAILTEX, INC.
/s/ LAURA D. DAVIES
Laura D. Davies
VICE PRESIDENT-FINANCE, CHIEF FINANCIAL OFFICER,
AND CORPORATE SECRETARY
Dated: April 28, 1998
<PAGE>
RAILTEX, INC.
4040 Broadway, Suite 200 San Antonio, TX 78209
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
MAY 27,1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RAILTEX, INC.
The undersigned acknowledges receipt of the Notice of Annual Meeting of Railtex,
Inc. (the "Company") and hereby appoints Robert M. Ayers, Jr., Ferd. C. Meyer,
Jr., Palmer L. Moe, and each of them, the attorneys of the undersigned, with
power of substitution, for and in the name of the undersigned, to vote as
proxies for the undersigned according to the number of shares of Common Stock
the undersigned would be entitled to vote if then personally present at the
Annual Meeting of Shareholders of the Company to be held May 27,1998, or at any
adjournment thereof and to vote all shares of Common Stock of the Company held
by the undersigned and entitled to be voted upon the following matters as
indicated on the reverse side.
This Proxy may be revoked at any time prior to the voting thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS, NUMBER 1, NUMBER 2 AND NUMBER 3.
- --------------------------------------------------------------------------------
Comments/Address Change
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
<PAGE>
PLEASE MARK [X]
YOUR VOTES AS
INDICATED BY
THIS EXAMPLE
(1) ELECTION OF CLASS III DIRECTORS
FOR ALL NOMINEES WITHHOLD ROBERT M. AYRES, JR. AND ROBERT R. LENDE
LISTED TO THE RIGHT AUTHORITY (INSTRUCTIONS: To withhold authority to
TO VOTE FOR ALL vote for any individual nominee, write
NOMINEES LISTED that nominee's name in the space provided
TO THE RIGHT below).
[ ] [ ] __________________________________________
(2) To approve the appointment of Arthur (3) In their discretion, to vote
Andersen LLP as the Company's auditors upon such other business as may
for the year ending December 31, 1998. properly come before the meeting
or any adjournment thereof
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
COMMENTS/ADDRESS CHANGE [ ]
The undersigned(s) acknowledges receipt of the Notice of 1998 Annual Meeting of
Shareholders and the proxy statement accompanying the same, each dated April 28,
1998.
Please date this proxy and sign your name exactly as it appears hereon. If there
is more than one owner, each should sign. When signing as an agent, attorney,
administrator, guardian or trustee, please indicate your title as such. If
executed by a corporation this proxy should be signed in the corporate name by a
duty authorized officer who should so indicate his or her title.
PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
_______________________________________
Date
_______________________________________
Signature
_______________________________________
Signature if held jointly
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
