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
RAILTEX, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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>
[RAILTEX LOGO]
April 26, 1999
DEAR SHAREHOLDER:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders of
RailTex, Inc. to be held on Wednesday, May 26, 1999, 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, DATE
AND MAIL THE ENCLOSED PROXY CARD 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.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
/s/ RONALD A. RITTENMEYER
Ronald A. Rittenmeyer
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
RAILTEX, INC.
4040 Broadway, Suite 200
San Antonio, Texas 78209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1999
TO THE SHAREHOLDERS OF RAILTEX, INC.:
NOTICE IS HEREBY GIVEN that the 1999 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 26, 1999, at 10:00
a.m. (CDT) for the following purposes:
(1) To elect three (3) Directors to serve as Class I Directors for terms
expiring in 2002 and one (1) Director to serve as a Class II Director
for a term expiring in 2001, and until their respective successors
are duly elected and qualified;
(2) To increase by 400,000 the maximum number of shares of Common Stock
issuable under the Company's 1993 Stock Plan, as amended (the "1993
Plan");
(3) To approve the appointment of Arthur Andersen LLP as the Company's
auditors for the 1999 fiscal year; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only Shareholders of record at the close of business on March 31, 1999
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.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON PLEASE SIGN,
DATE AND MAIL THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. A POSTAGE-PREPAID
RETURN ENVELOPE IS ENCLOSED FOR THAT PURPOSE. The 1998 Annual Report of the
Company and Form 10-K has been mailed with this Notice and Proxy Statement to
each Shareholder entitled to vote at the meeting.
If because of a disability you will need auxiliary aids or services to
attend the meeting, please contact the Secretary prior to the meeting.
RAILTEX, INC.
/s/ THOMAS W. ARNST
Thomas W. Arnst
VICE PRESIDENT-GENERAL COUNSEL
AND SECRETARY
Dated: April 26, 1999
<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 ("RailTex" or the "Company"), to be voted at the 1999
Annual Meeting of Shareholders at 10:00 a.m. (CDT) on Wednesday, May 26, 1999,
or at any adjournment thereof. This Proxy Statement and the accompanying proxy
card are first being mailed to Shareholders on or about April 26, 1999.
VOTING AND PROXIES
Only holders of record of Common Stock of the Company at the close of
business on March 31, 1999 will be entitled to vote at the meeting. There were
9,286,126 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 Secretary of the Company 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 (i) the
increase by 400,000 in the maximum number of shares of Common issuable under the
Company's 1993 Stock Plan, as amended (the "1993 Plan"), and (ii) 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.
PROCEDURES FOR THE MEETING
Business at the meeting will be conducted in accordance with the
procedures determined by the Chairman of the meeting and will be limited to
matters properly brought before the meeting pursuant to the procedures
prescribed in the Company's Bylaws. Those procedures include the requirement
that any Shareholder who desires either to bring a Shareholder proposal before
an Annual Meeting or to nominate a person for election as a Director at an
Annual Meeting give written notice, prior to such Annual Meeting, to the Company
with respect to the proposal or nominee. (See "Shareholder Proposals for 2000
Annual Meeting.") The Chairman of the meeting may refuse to acknowledge any
Shareholder proposal or any nomination for Director not made in accordance with
the foregoing.
1
<PAGE>
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
nine (9) 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 proposes the election of three (3) Directors to
serve as Class I Directors and one (1) Director to serve as a Class III Director
at the 1999 Annual Meeting of Shareholders. The Class I Director nominees are
Laura D. Davies, Bruce M. Flohr and Palmer L. Moe and the Class III Director
nominee is Ronald A. Rittenmeyer. The nominees for Class I Directors, if
elected, will serve for a three year term expiring in 2002 and until their
respective successors are elected and qualified. The Class III Director, if
elected, will serve a two year term expiring in 2001 and until his respective
successor is elected and qualified. The Board of Directors recommends a vote FOR
such nominees.
The proxies named in the accompanying proxy card, 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 (5) years.
Nominees for election as Class I Directors, whose terms expire in 2002:
LAURA D. DAVIES, age 40, served as Director, Vice President-Finance and
Chief Financial Officer of RailTex from July 1995 until she resigned in May
1998. She currently serves as a Director of RailTex. 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.
BRUCE M. FLOHR, age 59, founded RailTex in 1977, and has served as
Chairman of the Board of Directors since that date until February 1999 when he
became Founder and Chairman Emeritus. From October 1995 to August 1998, Mr.
Flohr served as Chief Executive Officer of RailTex. From 1977 to October 1995,
Mr. Flohr also 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
has previously served as 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 55, has served as a Director since June 1996 and is the
Chairman of the Audit Committee. Mr. Moe is the Executive Director of the
Kronkosky Charitable Foundation. Mr. Moe has also served as president of 20
Resources, LLC, a privately held mining joint venture since July 1997. In
addition, since 1992, Mr. Moe has served as President of Storen Resources, Inc.,
a privately owned corporation. 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.
2
<PAGE>
Nominee for election as Class III Director, whose term expires in 2001:
RONALD A. RITTENMEYER, age 51, has served as President, Chief Executive
Officer and Director of RailTex since August 1998 and Chairman of the Board of
Directors since February 1999. Prior to joining RailTex, Mr. Rittenmeyer was
President and Chief Operating Officer of Ryder TRS, Inc. from 1996 to August
1998. From 1995 to 1996, Mr. Rittenmeyer was President and Chief Operating
Officer of Merisel, Inc. From 1994 to 1995, Mr. Rittenmeyer was with Burlington
Northern, Inc. as Executive Vice President and most recently, Chief Operating
Officer. Prior to 1994, Mr. Rittenmeyer was with Frito-Lay, Inc. for almost 20
years where he rose to become Vice President-Operations.
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 II Directors, whose terms expire in 2000:
HEATHER J. GRADISON, age 46, has served as a Director since 1990 and is
the Chairman of the Compensation Committee and a member of the Nominating
Committee. 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 59, 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.
WILLIAM G. PAGONIS, age 57, has served as a Director since February 1999.
Mr. Pagonis is Executive Vice President of Logistics for Sears, Roebuck and
Company, where he is responsible for all of Sears' logistics functions,
including vendor relations, transportation, distribution, international
logistics, outlet stores, home delivery services and the integration of
logistics information services. Prior to joining Sears in November 1993, Mr.
Pagonis served in the U.S. Army for 29 years, retiring with the three-star rank
of Lieutenant General.
Class III Directors, whose terms expire in 2001:
ROBERT M. AYRES, JR., age 72, has served as a Director since 1988 and is
the Chairman of the Nominating Committee and a member of the Compensation
Committee. 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 and
James Avery Craftsmen.
ROBERT R. LENDE, age 58, 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 Audit and
Nominating 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.
3
<PAGE>
PROPOSAL #2
INCREASE BY 400,000 THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK ISSUABLE UNDER THE 1993 PLAN
The purpose of the 1993 Plan is to provide incentives to its officers,
employees and Directors and to help the Company attract and retain qualified
officers, employees and Directors. Because only 185,569 shares of Common Stock
are available for issuance under the 1993 Plan as of March 31, 1999, the Board
of Directors has approved and recommends that the Shareholders vote FOR the
proposal to increase by 400,000 the maximum number of shares of Common Stock
issuable under the 1993 Plan. In determining whether to vote in favor of this
proposal, it is important to note the following:
o The 400,000 additional shares being sought by the Company for issuance
under the 1993 Plan shall be used only for issuance in connection with
the exercise of stock options granted under the 1993 Plan;
o None of the additional 400,000 shares being sought by the Company for
issuance under the 1993 Plan may be issued as restricted shares,
Awards, SARs, Units or Purchases, as these terms are defined below; and
o If this proposal is approved by the Shareholders, neither the
Compensation Committee nor the Board of Directors will have authority
under the 1993 Plan to reprice the exercise price of outstanding stock
options or to cancel outstanding stock options and issue replacement
stock options at a lower exercise price without shareholder approval.
The 1993 Plan currently provides that the maximum number of shares
issuable under the 1993 Plan is 1,250,000 shares. As of March 31, 1999, 848,771
shares are issuable under outstanding options, 98,107 shares have been issued as
restricted shares and 117,553 have been issued upon the exercise of previously
outstanding stock options. As a result, as of March 31, 1999, only 185,569
shares are available for issuance under the 1993 Plan. The Board of Directors
believes this number of shares is insufficient for the Company to continue its
efforts to attract and retain qualified officers, employees and Directors.
Accordingly, the Board of Directors recommends that the maximum number of shares
issuable under the 1993 Plan be increased by 400,000 shares.
Under the 1993 Plan, officers and other employees of the Company may be
awarded Incentive Stock Options ("ISO"), as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended, (the "Code") and Directors, officers,
employees and consultants of the Company, and other persons or entities may be
granted (i) options which do not qualify as ISOs ("NQOs"), (ii) awards of stock
in the Company ("Awards"), (iii) stock appreciation rights ("SARs") in
conjunction with, or independently of, options granted thereunder, (iv)
performance awards in the form of units ("Units") representing phantom shares of
stock, and (v) opportunities to make direct purchases of stock in the Company
("Purchases"). In addition, each outside Director of the Company receives an
annual grant of options to purchase 3,000 shares of Common Stock, all of which
are exercisable over a ten year period at the fair market value of the Common
Stock on the date of grant ("Outside Directors' Options"). ISOs, NQOs, Awards,
SARs, Units, Purchases and Outside Directors' Options collectively are referred
to as "Stock Rights."
The 1993 Plan is administered by the Compensation Committee, a committee
of the Board of Directors composed of three outside Directors. Subject to the
provisions of the 1993 Plan, the Compensation Committee has the authority to
determine the persons to whom Stock Rights shall be granted, the number of
shares covered by each such grant, the exercise or purchase price per share, the
time or times at which Stock Rights shall be granted and exercisable, whether
each option granted shall be an ISO or a NQO, whether restrictions such as
repurchase options are to be imposed on shares subject to Stock Rights and the
nature of such restrictions, if any; however, the Compensation Committee does
not have authority to determine whether or when a Director
4
<PAGE>
may receive or exercise Outside Directors' Options and, if this proposal is
approved by the Shareholders, neither the Compensation Committee nor the Board
of Directors will have authority under the 1993 Plan to reprice the exercise
price of outstanding stock options or to cancel outstanding stock options and
issue replacement stock options at a lower exercise price without Shareholder
approval. In addition, none of the additional 400,000 shares being sought by the
Company for issuance under the 1993 Plan may be issued by the Compensation
Committee as Restricted Shares, Awards, SARs, Units or Purchases.
The affirmative vote of the holders of a majority of the shares present
and voting at the meeting in person or by proxy is required to approve this
proposal. For the reasons set forth above, the Board of Directors has approved
and recommends that the Shareholders vote FOR this proposal.
PROPOSAL #3
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 1999 fiscal year.
Representatives of Arthur Andersen LLP are expected to be present at the 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 of
Directors 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.
MEETINGS AND COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of Directors
held eight (8) meetings. During the fiscal year ended December 31, 1998, no
incumbent 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 or she has been a Director and (ii) the total
number of meetings held by all committees of the Board of Directors on which he
or she 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 ($11.313 per share for 1999).
The Board of Directors has standing Audit, Compensation and Nominating
Committees. The Board of Directors also forms ad hoc committees from time to
time.
5
<PAGE>
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 two (2) times during
the 1998 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.
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 seven (7) times during the 1998 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 administers the 1993 Plan. 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
two (2) times during the 1998 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 Shareholders.
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, 1998, all Section
16(a) filing requirements were satisfied, except for (i) an inadvertent late
filing of a Form 4 for Clement J. Wydra, reporting the January 1, 1998 grant of
1,000 non-qualified stock options; (ii) an inadvertent late filing of a Form 3
for Ronald A. Rittenmeyer after becoming President and Chief Executive Officer,
(iii) an inadvertent late filing of a Form 3 for Thomas W. Arnst, after becoming
Vice President-General Counsel and Secretary; and (iv) an inadvertent late
filing of a Form 3 for John M. Hovis, after becoming Vice President-Operations.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all cash and non-cash compensation paid to the
Company's present and former Chief Executive Officer, and the four most highly
compensated executive officers (collectively, the "Named Executives") for their
services to the Company during the years ended December 31, 1998, 1997, and
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
----------------------------------------- -------------------------------
FISCAL OTHER ANNUAL RESTRICTED STOCK ALL OTHER
YEAR SALARY BONUS(1)(2) COMPENSATION AWARDS OPTIONS COMPENSATION(3)
-------- ---------- ------------- -------------- ------------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce M. Flohr (4) 1998 $350,000 $ -- (5) $ -- -- 18,159 $ 73,795
FOUNDER AND 1997 275,000 110,000 -- -- 15,459 80,846
CHAIRMAN EMERITUS 1996 261,397 68,750 -- -- 6,260 80,846
Ronald A. Rittenmeyer (6) 1998 160,431 157,855 106,038(7) $834,375(8) 300,000 --
CHAIRMAN, PRESIDENT AND 1997 -- -- -- -- -- --
CHIEF EXECUTIVE OFFICER 1996 -- -- -- -- -- --
Greg B. Petersen 1998 151,667 54,942 -- -- 45,105 23,501
VICE PRESIDENT-STRATEGIC 1997 86,559 116,843(9) -- -- 35,000 6,127
PLANNING AND DEVELOPMENT 1996 -- -- -- -- -- --
Michael A. Nosil 1998 145,000 45,049 -- -- 26,013 66,532
VICE PRESIDENT- 1997 133,885 33,093 -- -- 2,635 12,389
ADMINISTRATION 1996 159,086 10,000 -- -- 20,000 --
Joseph P. Jahnke 1998 92,313 51,017 -- -- 21,820 11,231
VICE PRESIDENT-CHIEF 1997 72,503 20,000 -- -- 1,000 7,671
FINANCIAL OFFICER 1996 76,335 15,233 -- -- 5,000 5,250
James R. Davis 1998 142,500 23,301 -- -- 15,658 9,814
VICE PRESIDENT-OPERATIONS 1997 96,667 23,083 -- -- 1,000 --
1996 87,199 8,000 -- -- -- --
</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) Consists of amounts contributed by the Company pursuant to the Company's
401(k) profit sharing plan in the amounts of $11,949, $7,161, $8,758 and
$11,231 for Mr. Flohr, Mr. Petersen, Mr. Nosil and Mr. Jahnke,
respectively, in 1998. In addition, ALL OTHER COMPENSATION consists of
premiums paid by the Company for split dollar life insurance in the amounts
of $61,846, $16,340, $57,774 and $9,814 for Mr. Flohr, Mr. Petersen, Mr.
Nosil and Mr. Davis respectively in 1998.
(4) Mr. Flohr served as Chief Executive Officer until August 1998.
(5) Per Mr. Flohr's employment agreement effective January 1, 1998, he was not
eligible for a bonus in 1998.
(6) Mr. Rittenmeyer was hired as President and Chief Executive Officer in
August 1998.
(7) Represents a one-time moving expense reimbursement of $106,038.
(8) Represents the value on the date of grant (15,000 shares on July 29, 1998
and 50,000 shares on December 2, 1998) of restricted stock awards
authorized under the 1993 Plan. The value of the total shares awarded in
1998 as of December 31, 1998 is $735,345. The 15,000 shares of restricted
stock awarded on July 29, 1998 vest ratably over three years or immediately
in the event of a change in control, death, disability or involuntary
termination other than for cause. The unvested portion of the restricted
stock forfeit as a result of termination for cause during the restriction
period. The 50,000 shares of restricted stock vest ratably over five years
or immediately in the event of a change in control, death, disability or
involuntary termination other than for cause. The unvested portion of the
restricted stock forfeit as a result of termination for cause during the
restriction period.
(9) Includes a signing bonus paid to Mr. Petersen of $90,875.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS IN 1998 FOR OPTION TERM (1)
--------------------------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED(2) FISCAL YEAR ($/SHARE) EXPIRATION DATE 5%($) 10% ($)
-------- ------------ ------------- ------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce M. Flohr............ 18,159 2.50% $ 15.75(4) 02/25/2008 $ 179,867 $ 455,817
Ronald A. Rittenmeyer..... 150,000 20.67 14.38(5) 07/29/2008 1,356,054 3,436,507
Ronald A. Rittenmeyer..... 50,000(7) 6.89 14.38(5) 07/29/2008 452,018 1,145,502
Ronald A. Rittenmeyer..... 50,000(8) 6.89 14.38(5) 07/29/2008 452,018 1,145,502
Ronald A. Rittenmeyer..... 50,000(9) 6.89 14.38(5) 07/29/2008 452,018 1,145,502
Greg B. Petersen.......... 5,571(11) 0.77 15.75(4) 02/25/2008 55,181 139,840
Greg B. Petersen.......... 39,534(10) 5.45 11.94(6) 11/10/2008 296,799 752,146
Michael A. Nosil.......... 5,386(11) 0.74 15.75(4) 02/25/2008 53,349 135,196
Michael A. Nosil.......... 20,627(10) 2.84 11.94(6) 11/10/2008 154,856 392,435
Joseph P. Jahnke.......... 1,000(11) 0.14 14.31(3) 01/01/2008 8,934 22,741
Joseph P. Jahnke.......... 20,820(10) 2.87 11.94(6) 11/10/2008 156,305 396,107
James R. Davis............ 5,200(11) 0.72 15.75(4) 02/25/2008 51,506 130,528
James R. Davis............ 10,458(10) 1.44 11.94(6) 11/10/2008 78,513 198,967
</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 $11.94 in 1998 would yield profits of $7.51 at 5.0%
appreciation per year over ten years, or $19.03 at 10.0% appreciation per
year over the same period. One share of stock purchased at $14.31 in 1998
would yield profits of $8.93 at 5.0% appreciation per year over ten years,
or $22.74 at 10% appreciation per year over the same period. One share of
stock purchased at $14.38 in 1998 would yield profits of $9.04 at 5.0%
appreciation per year over ten years, or $22.91 at 10.0% appreciation per
year over the same period. One share of stock purchased at $15.75 in 1998
would yield profits of $9.91 at 5.0% appreciation per year over ten years,
or $25.10 at 10.0% appreciation per year over the same period.
(2) All options granted in 1998 by the Company, except as noted, vest over a
five year period from the date of grant, provided the option holder remains
employed with the Company. The options expire ten years from date of grant.
(3) The options were granted in January 1998. The exercise price was set at
$14.31, the last sale price for the Company's Common Stock on December 31,
1997.
(4) The options were granted in February 1998. The exercise price was set at
$15.75, the last sale price for the Company's Common Stock on February 24,
1998.
(5) The options were granted in July 1998. The exercise price was set at
$14.38, the last sale price for the Company's Common Stock on July 28,
1998.
(6) The options were granted in November 1998. The exercise price was set at
$11.94, the last sale price for the Company's Common Stock on November 10,
1998.
(7) The option becomes fully vested on the ninth anniversary of the grant date,
provided the holder remains employed with the Company; however, the option
becomes exercisable earlier at the close of the first 15 consecutive -
trading - day period over which the average closing price of the Company's
Common Stock is at least equal to a target price of $17 per share. Upon
achievement of the target price, the option will then become exercisable
20% per year determined retrospectively as of each of the first five
anniversary dates of the grant date. The option expires ten years from date
of grant.
(8) The option becomes fully vested on the ninth anniversary of the grant date,
provided the holder remains employed with the Company; however, the option
becomes exercisable earlier at the close of the first 15 consecutive -
trading - day period over which the average closing price of the Company's
Common Stock is at least equal to a target price of $21 per share. Upon
achievement of the target price, the option will then become exercisable
20% per year determined retrospectively as of each of the first five
anniversary dates of the grant date. The option expires ten years from date
of grant.
(9) The option becomes fully vested on the ninth anniversary of the grant date,
provided the holder remains employed with the Company; however, the option
becomes exercisable earlier at the close of the first 15 consecutive -
trading - day period over which the average closing price of the Company's
Common Stock is at least equal to a target price of $25 per share. Upon
achievement of the target price, the option will then become exercisable
20% per year determined retrospectively as of each of the first five
anniversary dates of the grant date. The option expires ten years from date
of grant.
(10) Represents new stock options granted as a result of repricing on November
10, 1998. In order to obtain these stock options the employees were
required to tender all previously granted stock options. The amount of
shares included under the new options were reduced from the number of
shares covered by the tendered options by the same percentage as the new
stock option exercise price was less than the tendered option exercise
price.
(11) Tendered and canceled in connection with repricing on November 10, 1998.
8
<PAGE>
The following table describes the exercisable and unexercisable options to
purchase shares of the Company's Common Stock held by the Company's Named
Executives and the value of such options as of December 31, 1998.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/98 OPTIONS AT 12/31/98(2)
ACQUIRED ON VALUE ----------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bruce M. Flohr........... 25,275(1) $200,007(1) 22,599 42,117 -- --
Ronald A. Rittenmeyer.... None N/A -- 300,000 -- --
Greg B. Petersen......... None N/A -- 39,534 -- --
Joseph P. Jahnke......... None N/A -- 20,820 -- --
Michael A. Nosil......... None N/A -- 20,627 -- --
James R. Davis........... None N/A -- 10,458 -- --
</TABLE>
- ------------
(1) Mr. Flohr exercised 25,275 options which resulted in a gain of $200,007, 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.
(2) The value of unexercised options is based on the difference between the
closing sales price of $11.313 per share of Common Stock on December 31,
1998 and the option exercise price.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD UNTIL ESTIMATED FUTURE VALUE OF PAYOUTS UNDER
NAME NUMBER OF SHARES(1) MATURATION OR PAYOUT NON-STOCK PRICE-BASED PLANS(2)
------ -------------------- ---------------------- ---------------------------------------------
THRESHOLD(3) TARGET(4) MAXIMUM(5)
------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Bruce M. Flohr.................. 6,111 3 Years 34,573 69,134 138,267
Ronald A. Rittenmeyer(6)........ -- -- -- -- --
Greg B. Petersen................ 1,875 3 Years 10,612 21,212 42,424
Michael A. Nosil................ 1,813 3 Years 10,261 20,510 41,021
Joseph P. Jahnke................ 300 3 Years 1,697 3,394 6,788
James R. Davis.................. 1,750 3 Years 9,899 19,798 39,596
</TABLE>
- -------------
(1) Represents the number of performance shares granted on February 25, 1998
(except Mr. Jahnke's which were granted on January 1, 1998), pursuant to
the 1993 Plan. 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 three years from the date of
the award to receive the performance shares. During the three year period,
the number of shares to be awarded can increase by a maximum of 200 percent
or decrease to zero.
(2) Assumes a price of $11.313 per share.
(3) The threshold amount assumes a total shareholder return, which, when
compared to the benchmarks, yields a 50 percent payout.
(4) The target amount assumes a total shareholder return, which, when compared
to the benchmark yields, a 100 percent payout.
(5) The maximum amount assumes a total shareholder return, which, when compared
to the benchmarks, yields a 200 percent payout.
(6) Mr. Rittenmeyer did not receive performance shares in 1998.
Effective November 10, 1998, the Board of Directors of the Company granted
stock options to its current employee optionholders (other than Mr. Flohr, then
Chairman of the Board, and Mr. Rittenmeyer, President and Chief Executive
Officer) at an exercise price of $11.94 per share, the market value of the
Company's Common Stock on the date of grant. These options vest over five years
in accordance with the 1993 Plan. In order to obtain the newly granted stock
options the employees were required to tender all previously granted employee
options for cancellation. As to any employee, the amount of shares included
under the new options was reduced from the number of shares covered by the
canceled options by the same percentage as the new option exercise price was
less than the canceled option exercise price. All employees tendered their
previously granted options for cancellation. 344,259 stock options were
cancelled, and 246,647 stock options were issued, as a result of the repricing.
The following table details the options canceled for any Named Executive during
1998. The Company has not canceled and repriced options prior to 1998.
9
<PAGE>
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE OF EXERCISE PRICE LENGTH OF ORIGINAL
OPTIONS STOCK AT TIME AT TIME OF NEW EXERCISE OPTION TERM REMAINING
NAME DATE REPRICED(#) OF REPRICING REPRICING PRICE AT DATE OF REPRICING
-------- -------- ----------- --------------- -------------- ------------ ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Greg B. Petersen 11/10/98 35,000(1) $11.94 $17.88 $11.94 8.5
VICE PRESIDENT - STRATEGIC 11/10/98 30,000(1) 11.94 30.00 11.94 8.5
PLANNING AND DEVELOPMENT..... 11/10/98 5,571(1) 11.94 15.75 11.94 9.4
Michael A. Nosil 11/10/98 20,000(2) 11.94 24.25 11.94 7.7
VICE PRESIDENT - 11/10/98 2,635(2) 11.94 18.50 11.94 8.4
ADMINISTRATION............... 11/10/98 5,386(2) 11.94 15.75 11.94 7.7
Joseph P. Jahnke 11/10/98 5,000(3) 11.94 23.75 11.94 8.0
VICE PRESIDENT - 11/10/98 1,000(3) 11.94 25.25 11.94 8.2
CHIEF FINANCIAL OFFICER...... 11/10/98 1,000(3) 11.94 14.31 11.94 9.2
James R. Davis 11/10/98 10,000(4) 11.94 19.75 11.94 7.1
VICE PRESIDENT - OPERATIONS . 11/10/98 1,000(4) 11.94 25.25 11.94 8.2
11/10/98 5,200(4) 11.94 15.75 11.94 7.7
</TABLE>
- ---------------
(1) Options were canceled and replaced with a total of 39,534 options at the
date of repricing.
(2) Options were canceled and replaced with a total of 15,627 options at the
date of repricing.
(3) Options were canceled and replaced with a total of 3,820 options at the
date of repricing.
(4) Options were canceled and replaced with a total of 10,458 options at the
date of repricing.
CHANGE IN CONTROL AND EMPLOYMENT AGREEMENTS
CHANGE IN CONTROL AGREEMENTS:
On February 25, 1998, the Board of Directors authorized the Company to
enter into Change in Control Agreements with its executive officers. 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 (3) 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)
10
<PAGE>
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, 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.
EMPLOYMENT AGREEMENTS:
BRUCE M. FLOHR. Effective January 1, 1998, the Company entered into an
employment agreement with Bruce M. Flohr, then Chairman of the Board and Chief
Executive Officer. The term of Mr. Flohr's employment agreement is January 1,
1998 through August 31, 2004. Under the employment agreement, Mr. Flohr is
entitled to a monthly salary of $29,166.67 from January 1, 1998 to August 31,
1999 and $8,333.33 from September 1, 1999 to August 31, 2004. Beginning on
September 1, 1999 and on each September 1 during the term of the employment
agreement, the applicable monthly salary shall be increased based upon increases
in the Consumer Price Index. Mr. Flohr shall continue to be entitled to
participate in the Company's 401(k) plan, but shall not receive any additional
grants, awards, or payments as an employee under the 1993 Plan, or under any
other incentive compensation program or plan of the Company. In addition, Mr.
Flohr will not receive any additional cash compensation for serving as a
director during the term of his employment contract; however, after September 1,
1999, Mr. Flohr will receive the same stock and other non-cash compensation paid
to directors of the Company. The Company agrees to maintain during Mr. Flohr's
employment, at its expense and subject to a lien in the Company's favor, a
$910,890 split dollar life insurance contract payable to Mr. Flohr's estate
and/or beneficiaries as designated. The employment agreement with Mr. Flohr
shall terminate if any one of the following events occur: (1) expiration of the
term of the employment agreement, (b) death or total and permanent disability of
Mr. Flohr, (c) change in control of the Company, (d) Mr. Flohr's written notice
to the Company of his voluntary resignation, (e) termination without cause, or
(f) termination for cause. If Mr. Flohr's employment agreement is terminated due
to the voluntary resignation from employment of the Company, compensation
payable to Mr. Flohr shall cease as of the effective date of such termination.
If employment is terminated due to death or total and permanent disability of
Mr. Flohr or for cause, Mr. Flohr is entitled to receive six (6) months' salary
from the time of such termination. If Mr. Flohr's employment agreement is
terminated due to a change in control, as defined in the employment agreement
and which definition is virtually identical to the definition of change of
control in the Change of Control Agreements, Mr. Flohr is entitled to a lump sum
payment on the date of such termination in an amount equal to the unpaid amounts
of compensation under the employment agreement, which amounts may be "grossed
up" should any portion of Mr. Flohr's benefits be subject to any excise taxes.
If the employment agreement is terminated without cause, Mr. Flohr is entitled
to receive from the Company the remaining applicable monthly salary payments as
if the agreement had not been terminated. Mr. Flohr agrees to refrain during his
employment by the Company and for a period of one (1) calendar year thereafter,
without written permission from the Company, from becoming interested in any way
in the business of owning, leasing or operating freight railroads or freight
cars except as a 'passive' shareholder of a publicly-traded corporation, with
the further understanding that Mr. Flohr shall not own more than one percent
(1%) of any class of capital stock of such a publicly-traded corporation without
advance approval of the Board of Directors of the Company.
11
<PAGE>
RONALD A. RITTENMEYER. In connection with the Company's hiring of Ronald
A. Rittenmeyer as President and Chief Executive Officer, the Company entered
into an employment agreement with Mr. Rittenmeyer effective July 29, 1998. The
term of Mr. Rittenmeyer's employment agreement commenced on August 24, 1998 and
terminates on August 24, 2003. The employment agreement will be automatically
renewed and the term extended for additional one-year periods commencing on
August 24, 2003, and on each anniversary date thereafter, unless the Company or
Mr. Rittenmeyer elect in writing not to extend the term. Under the employment
agreement Mr. Rittenmeyer is entitled to an annual base salary of not less than
$400,000. Mr. Rittenmeyer's annual cash incentive target percentage will not be
less than 50% of his annual base salary and his long-term incentive compensation
award will not be less than 150% of his annual incentive award. Mr. Rittenmeyer
will be provided a disability policy such that in the aggregate, the disability
benefits provided to him will equal 60% of his annual base salary. The
employment agreement with Mr. Rittenmeyer shall terminate if any one of the
following events occur: (a) death, (b) total and permanent disability, (c)
termination for cause, (d) involuntary termination other than for cause or (e)
voluntary termination by Mr. Rittenmeyer. If the employment agreement is
terminated due to death or disability, Mr. Rittenmeyer or his estate is entitled
to the unpaid annual base salary, any accrued and/or unused vacation days, the
target bonus under the Company's bonus plan prorated for the number of days
until termination and any death or disability benefits available under any
applicable employee benefit plan. If the employment agreement is involuntarily
terminated other than for cause, as defined in the agreement, Mr. Rittenmeyer is
entitled to his unpaid annual base salary, any accrued and/or unused vacation
days, the target bonus under the Company's bonus plan prorated for the number of
days until termination, a payment equal to two times the sum of his annual base
salary plus two times his target annual bonus, any payments under applicable
Company plans or programs, continuance of welfare benefits for 24 months after
termination and outplacement services in an amount up to $30,000. Pursuant to
his employment agreement, Mr. Rittenmeyer received 15,000 shares of restricted
Common Stock, which shares are held in escrow and subject to forfeiture;
provided, however, that on each of the first three anniversary dates of the date
of award, 5,000 shares of such restricted Common Stock will no longer be subject
to forfeiture and will be released from escrow. Mr. Rittenmeyer also received an
option to purchase 150,000 shares of Common Stock, which vest 20% per year
beginning on the first anniversary of the date of grant. Additionally, three
separate options to purchase 50,000 shares of Common Stock each were granted to
Mr. Rittenmeyer, which options do not become exercisable until the earlier of
(i) the ninth anniversary of the date of grant or (ii) the close of the first
15-consecutive-trading-day period over which the average closing price of the
Company's Common Stock is at least equal to a specified target price, as defined
in the agreement. The exercise price of the options is equal to the closing
price of the Company's Common Stock on the day immediately preceding the date of
grant and the options expire 10 years from the date of grant. All restrictions
pertaining to the shares of restricted Common Stock will lapse if Mr.
Rittenmeyer's employment agreement with the Company is involuntarily terminated
other than for cause or in the event of a change in control of the Company,
death or disability. All options granted will become fully vested if Mr.
Rittenmeyer's employment agreement with the Company is involuntarily terminated
other than for cause or in the event of a change in control of the Company.
GREG B. PETERSEN. The Company has an employment contract with Greg B.
Petersen, Vice President-Strategic Planning and Development, whereby one year of
his base salary is guaranteed should the Company choose to terminate his
employment before May 1999 for any reason other than performance or violation of
Company policy.
The Company does not have employment contracts with any other Named
Executives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, consisting of three
(3) 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 1998 with respect to the Company's executive officers, including
those named in the above compensation tables.
12
<PAGE>
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 these objectives, 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. The Committee, from time to time, has retained Hewitt Associates,
an independent compensation consultant to assist the Committee with the
Company's compensation program.
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
1998 base salary to be paid to each executive officer and the executive officers
as a group were based upon several factors, 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 1997.
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 Plan, 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
1998 were determined and paid in February 1999.
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 furtherance of the Company's compensation objectives - namely, to
motivate and retain the Company's employees - 344,259 stock options outstanding
as of November 1998 which had exercise prices substantially above the current
market price of the Company's Common Stock and which were held by employees of
the Company (other than Ronald A. Rittenmeyer, President and Chief Executive
Officer and Bruce M. Flohr, then Chairman of the Board) were cancelled in
November 1998, and 246,647 new stock options were simultaneously granted to the
employees, with new exercise prices and vesting schedules. (See "Ten-Year Option
Repricing.")
In addition, the Company awarded its executive officers performance shares
(except for Thomas W. Arnst, Vice President-General Counsel and Secretary, John
M. Hovis, Vice President-Operations and Ronald A. Rittenmeyer, President and
Chief Executive Officer, who were not eligible in 1998). Payouts for performance
shares are made in the Company's Common Stock and are based on the Company's
total shareholder return over a three 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
three 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 three year performance
period.
13
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Rittenmeyer's compensation for
1998 was determined by the terms of his employment agreement entered into in
connection with his hiring as Chief Executive Officer and President. (See
"Change in Control and Employment Agreements.") Pursuant to Mr. Rittenmeyer's
employment agreement, Mr. Rittenmeyer received $160,431 as salary for the
portion of the year ended December 31, 1998 during which Mr. Rittenmeyer was
employed by the Company. Mr. Rittenmeyer also received options to purchase
300,000 shares of the Company's Common Stock at $14.38 per share, the price of
the Company's Common Stock on the date of grant, and was awarded 65,000 shares
of restricted stock. Mr. Rittenmeyer also received a cash bonus of $73,082, in
accordance with his employment agreement, plus an additional $84,773 cash bonus
in recognition for Mr. Rittenmeyer's and the Company's accomplishments in the
third and fourth quarter of 1998. In agreeing upon the terms of Mr.
Rittenmeyer's employment agreement, the Committee considered, among other
things, his experience and the salaries of Chief Executive Officers of
comparable companies.
DEDUCTIBILITY OF COMPENSATION. In accordance with Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Section 162(m)"), the deductibility
for corporate federal income tax purposes of certain compensation paid to
certain individual executive officers of the Company in excess of $1 million in
any year may be restricted. No executive officer of the Company was paid
compensation in 1998 that would result in a loss of deductibility for the
Company under Section 162(m); however, in the event the Company's Change in
Control Agreements are triggered, the Company at such time could be required to
pay compensation to certain executive officers that would be in excess of such
deductibility limit. (See "Change in Control and Employment Agreements.")
Although it is not currently contemplated, the Committee may in the future
recommend additional compensation for executive officers that may exceed the
limits of deductibility under Section 162(m), provided the Committee determines
that it is in the best interest of the Company and its Shareholders.
COMPENSATION COMMITTEE:
ROBERT M. AYRES, JR.
HEATHER J. GRADISON, CHAIRMAN
FERD. C. MEYER, JR.
14
<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
December 31, 1993 through December 31, 1998, 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 1998 and 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
December 31, 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>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RailTex 100 86 76 91 52 41
NASDAQ US Composite Index 100 98 139 171 210 295
NASDAQ Truck/Transportation Index 100 91 106 117 150 133
Peer Group 100 84 120 137 155 149
-------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
The following table sets forth the beneficial ownership of the
Company's Common Stock at March 15, 1999 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) 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.
SHARES % OF TOTAL
BENEFICIALLY SHARES
5% SHAREHOLDERS, DIRECTORS AND NAMED EXECUTIVES OWNED(1) OUTSTANDING
- ----------------------------------------------- ------------ -----------
State of Wisconsin Investment Board 1,078,600 11.6%
P.O. Box 7842
Madison, WI 53707
David L. Babson & Co. 935,600 10.1
One Memorial Drive
Cambridge, MA 02142
The Capital Guardian Trust Company 705,000 7.6
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Bruce M. Flohr(2) 607,663 6.5
Dimensional Fund Advisors Inc. 461,200 5.0
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Robert M. Ayres, Jr.(3) 200,374 2.2
Robert R. Lende(4) 152,264 1.6
Laura D. Davies(5) 79,919 0.9
Ronald A. Rittenmeyer 65,000 0.7
Ferd. C. Meyer, Jr.(6) 21,950 0.2
Palmer L. Moe (7) 21,318 0.2
Heather J. Gradison(8) 14,100 0.2
James R. Davis 2,900 0.0
Greg B. Petersen 1,000 0.0
Michael A. Nosil 580 0.0
Joseph P. Jahnke 200 0.0
Directors and executive officers
as a group (14 persons) (9) 1,182,268 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 number of shares of Common Stock beneficially owned by Mr. Flohr
includes 29,322 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days. Not included are an aggregate
of 20,565 shares beneficially owned by certain relatives of Mr. Flohr not
living in his home.
(3) The number of shares of Common Stock beneficially owned by Mr. Ayres
includes 9,000 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days. Also included are 10,000
shares of Common Stock held by a private foundation for which Mr. Ayres has
voting and investment power.
(4) The number of shares of Common Stock beneficially owned by Mr. Lende
includes 40,193 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.
(5) The number of shares of Common Stock beneficially owned by Mrs. Davies
includes 58,982 shares of Common Stock reserved for issuance under stock
options which are exercisable within 60 days.
(6) The number of shares of Common Stock beneficially owned by Mr. Meyer
includes 9,000 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. Moe includes
9,000 shares of Common Stock reserved for issuance under stock options which
are exercisable within 60 days.
(8) The number of shares of Common Stock beneficially owned by Ms. Gradison
includes 9,000 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 the Directors and
Executive Officers as a group includes 170,717 shares of Common Stock
reserved for issuance under stock options which are exercisable within 60
days.
16
<PAGE>
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pursuant to Securities and Exchange Commission ("SEC") regulations, in
order to be included in the Company's Proxy Statement for the 2000 Annual
Meeting, Shareholder proposals must be received at the principal executive
offices of the Company, 4040 Broadway, Suite 200, San Antonio, Texas 78209,
Attention: Secretary, no later than December 24, 1999, as well as meet all other
SEC requirements. In addition, the Company's Bylaws provide that any Shareholder
who desires either to bring a Shareholder proposal before an Annual Meeting or
to present a nomination for director at an Annual Meeting must give advance
notice to the Company regarding the proposal or nominee. The Bylaws require that
written notice be delivered to and received by the Secretary of the Company at
the principal executive offices of the Company not less than 90 days nor more
than 120 days prior to the first anniversary of the date of the Company's Proxy
Statement for the Company's previous year's Annual Meeting of Shareholders and
contain certain information regarding the Shareholder desiring to present a
proposal or make a nomination, as the case may be. A copy of the Company's
Bylaws is available upon request from the Secretary of the Company.
PROXY SOLICITATION
The cost of solicitation of proxies, including expenses in connection with
the preparation and mailing of this Proxy Statement, will be borne by the
Company. The Company has retained Corporate Investor Communications, Inc. to aid
in the solicitation of proxies. For their services, Corporate Investor
Communications, Inc. will receive a fee estimated at $6,000 plus reimbursement
of reasonable out-of-pocket expenses. The Company does not otherwise expect to
pay any compensation for the solicitation of proxies, but will reimburse brokers
and nominees for their reasonable expenses for sending proxy material to
principals and obtaining their proxies. In addition to solicitation by mail,
Directors, officers and employees of the Company may solicit proxies personally
or by telephone or other means of communication.
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 card will vote thereon according to
their best judgment in the interest of the Company.
RAILTEX, INC.
/s/ THOMAS W. ARNST
Thomas W. Arnst
VICE PRESIDENT-GENERAL COUNSEL
AND SECRETARY
Dated: April 26, 1999
17
<PAGE>
P RAILTEX, INC.
R 4040 Broadway, Suite 200 San Antonio, TX 78209
O
X PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
Y MAY 26, 1999
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. Ayres, 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 26, 1999, 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 |
|
|
o FOLD AND DETACH HERE o
Please mark
your votes as
indicated in [X]
this example
(1) ELECTION OF CLASS I AND CLASS III DIRECTORS
FOR all WITHHOLD LAURA D. DAVIES, BRUCE M. FLOHR,
nominees listed AUTHORITY PALMER L. MOE AND
to the right to vote for all RONALD A. RITTENMEYER
nominees listed
to the right (INSTRUCTIONS: To withhold
[ ] [ ] authority to vote for any
individual nominee, write that
nominee's name in the space
provided below).
_________________________________
(2) To increase by 400,000 the maximum (4) In their discretion, to vote upon
number of shares of Common Stock such other business as may
issuable under the Company's 1993 properly come before the meeting
Stock Plan, as amended. or any adjournment thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) To approve the appointment of COMMENTS/ADDRESS CHANGE
Arthur Andersen LLP as the
Company's auditors for the year The undersigned(s) acknowledges
ending December 31, 1999. receipt of the Notice of 1999 Annual
Meeting of Shareholders and the proxy
FOR AGAINST ABSTAIN statement accompanying the same,
[ ] [ ] [ ] each dated April 26, 1999.
__________
| Please date this proxy card 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 card should be
signed in the corporate name by a
duly authorized officer who should so
indicate his or her title.
PLEASE DATE, SIGN AND RETURN THIS
PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
_____________________________________
Date
_____________________________________
Signature
_____________________________________
Signature if held jointly
o FOLD AND DETACH HERE o
