<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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)(12))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RAILAMERICA, 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):
/ / No fee required.
/ / Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date Filed:
- -------------------------------------------------------------------------------
<PAGE> 2
RAILAMERICA, INC.
301 Yamato Road, Suite 1190
Boca Raton, Florida 33431
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1999
----------------------------------------------------
To the Stockholders of RailAmerica, Inc.:
YOU ARE HEREBY INVITED to attend the 1999 Annual Meeting of
Stockholders (the "Annual Meeting") of RailAmerica, Inc., a Delaware
corporation (the "Company"), which will be held at The Empress, 761 Government
Street, Victoria, British Columbia, Canada, on Thursday, June 24, 1999, at
10:00 a.m., local time, for the following purposes:
1. To elect two Class I Directors to hold office for terms of three
years or until their successors are duly elected and qualified;
2. To consider and vote upon a proposal to approve and adopt an
amendment to the Company's 1995 Non-Employee Director Stock Option Plan; and
3. To transact such other business as may properly come before the
Annual Meeting and any and all postponements or adjournments thereof.
You are cordially invited to attend; however, only stockholders of
record at the close of business on May 3, 1999, shall be entitled to notice
of and to vote at the Annual Meeting or any postponements or adjournments
thereof.
By order of the Board of Directors
GARY O. MARINO
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
Boca Raton, Florida
May 21, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. EVEN IF
YOU EXECUTE A PROXY CARD, YOU MAY NEVERTHELESS ATTEND THE MEETING, REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
1999 ANNUAL MEETING OF STOCKHOLDERS
OF
RAILAMERICA, INC.
--------------------------------------
PROXY STATEMENT
--------------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of RailAmerica, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par
value $.001 per share (the "Common Stock"), for use at the 1999 Annual Meeting
of Stockholders of the Company to be held at The Empress, 721 Government
Street, Victoria, British Columbia, Canada, on Thursday, June 24, 1999, at
10:00 a.m., local time, or at any and all postponements or adjournments thereof
(the "Annual Meeting"), pursuant to the foregoing Notice of Annual Meeting of
Stockholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is on or about May 21, 1999.
Stockholders should review the information provided herein in conjunction with
the Company's 1998 Annual Report to Stockholders, which accompanies this Proxy
Statement. The Company's principal executive offices are located at 301 Yamato
Road, Suite 1190, Boca Raton, Florida 33431, and its telephone number is (561)
994-6015.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement,
the Notice of Annual Meeting of Stockholders and the enclosed proxy is to be
borne by the Company. In addition to the solicitation of proxies by mail, the
Company, through its directors, officers, employees and agents, may also
solicit proxies personally and by telephone. Only independent third party
agents not otherwise affiliated with the Company will be specifically
compensated for such solicitation activities. The Company, at this time, does
not anticipate retaining a third party proxy solicitation firm. The Company
will also request persons, firms and corporations holding shares in their names
or in the names of their nominees, which are beneficially owned by others, to
send proxy materials to and obtain proxies from such beneficial owners, and
will reimburse such holders for their reasonable expenses in doing so. American
Stock Transfer & Trust Company acts as the Company's transfer agent and, as
part of its services to the Company, may solicit the return of voted proxies
from banks, brokers, nominees and intermediaries. American Stock Transfer &
Trust Company does not receive any set compensation for such services, other
than compensation it receives for acting as transfer agent.
1
<PAGE> 4
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and
vote upon the following matters:
1. The election of two Class I Directors to hold office for terms of
three years or until their successors are duly elected and qualified;
2. To consider and vote upon a proposal to approve and adopt an
amendment to the Company's 1995 Non-Employee Director Stock Option Plan (the
"Directors Plan"); and
3. Such other business as may properly come before the Annual Meeting,
including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the two nominees for Class I director
named below and (b) FOR the proposal to approve and adopt the amendment to the
Directors Plan. In the event a stockholder specifies a different choice by
means of the enclosed proxy, his, her or its shares will be voted in accordance
with the specification so made.
The Board of Directors does not know of any other matters that may be
brought before the Annual Meeting nor does it foresee or have reason to believe
that proxy holders will have to vote for substitute or alternate director
nominees. In the event that any other matter should come before the Annual
Meeting or any nominee is not available for election, the persons named in the
enclosed proxy will have discretionary authority to vote all proxies not marked
to the contrary with respect to such matters in accordance with their best
judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on May 3, 1999,
as the record date (the "Record Date") for determining stockholders of the
Company entitled to notice of, and to vote at, the Annual Meeting. As of the
Record Date, there were 11,151,819 shares of Common Stock issued and
outstanding (not including treasury shares), all of which are entitled to be
voted at the Annual Meeting. Each share of Common Stock is entitled to one vote
on each matter submitted to stockholders for approval at the Annual Meeting.
Stockholders do not have the right to cumulate their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum. Directors will be elected by a plurality
of the votes cast by the shares of Common Stock represented in person or by
proxy at the Annual Meeting. The affirmative vote of a majority of the shares
of Common Stock present and voting at the Annual Meeting is required to approve
and adopt the amendment to the Directors Plan. Any other matter that may be
submitted to a vote of the stockholders will be approved if the number of
shares of Common Stock voted in favor of the matter exceeds the number of
shares voted in opposition to the matter, unless such matter is one for which a
greater vote is required by law or by the Company's Certificate of
Incorporation or Bylaws. If less than a majority of outstanding shares entitled
to vote are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time or place if the new date, time
or place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
2
<PAGE> 5
Pursuant to Delaware law, abstentions and broker non-votes are counted
as present for purposes of determining the presence of a quorum. However,
abstentions are treated as present and entitled to vote and thus have the
effect of a vote against a matter. A broker non-vote on a matter is considered
not entitled to vote on that matter and thus is not counted in determining
whether a matter requiring approval of a majority of the shares present and
entitled to vote has been approved or whether a plurality of the shares present
and entitled to vote has been voted.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 301 Yamato Road, Suite 1190, Boca Raton,
Florida 33431, for a period of ten days prior to the Annual Meeting and at the
Annual Meeting itself for examination by any stockholder.
The Company's Common Stock has been quoted on the Nasdaq Stock
Market's National Market under the symbol "RAIL" since March 6, 1997. Prior to
March 6, 1997 the Company's Common Stock traded on the Nasdaq SmallCap Market
tier of the Nasdaq Stock Market. Set forth below are the high and low sales
prices for the Common Stock as reported on the Nasdaq System for each of the
calendar quarters of 1997 and 1998 and for the first two calendar quarters of
1999.
HIGH LOW
------ -------
1997
----
First Quarter........................... $ 6 1/8 $4 5/8
Second Quarter.......................... 5 4 1/4
Third Quarter........................... 6 5/16 4 1/8
Fourth Quarter.......................... 7 3/8 5 3/8
1998
----
First Quarter........................... $ 7 23/32 $6
Second Quarter.......................... 7 3/16 5 15/16
Third Quarter........................... 6 3/8 5
Fourth Quarter.......................... 8 3/4 5 5/16
1999
----
First Quarter........................... $10 3/4 $7 1/4
Second Quarter (through April 29)....... 10 1/4 8 1/2
The Company has never declared or paid a dividend on its Common Stock.
The Company is prohibited from paying dividends on the Common Stock pursuant to
certain restrictive covenants contained in its loan agreements.
3
<PAGE> 6
SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, the number of
shares of Common Stock that were owned beneficially by (i) each person who is
known by the Company to beneficially own more than 5% of the Common Stock, (ii)
each director and nominee for director, (iii) the Named Executive Officers (as
defined in "Executive Compensation") and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING SHARES(1)
------------------- ----------------------- ---------------------
<S> <C> <C>
William Ehrman and Group(2)............................. 1,324,025 11.9
c/o Arthur Goetchius
300 Park Avenue, 21st Floor
New York, New York 10022
Luther King Capital Management Corporation(3)........... 1,040,000 9.4
301 Commerce, Suite 1600
Fort Worth, TX 76102
Gary O. Marino(4)....................................... 724,000 7.2
RailAmerica, Inc.
301 Yamato Road, Suite 1190
Boca Raton, Florida 33431
John H. Marino(5)....................................... 266,811 2.4
RailAmerica, Inc.
King Street Station
Suite 150, 1800 Diagonal Road
Alexandria, Virginia 22314
Donald D. Redfearn(6)................................... 107,876 *
RailAmerica, Inc.
301 Yamato Road, Suite 1190
Boca Raton, Florida 33433
John M. Sullivan(7)..................................... 31,100 *
10279 SW Stones Throw Terrace
Palm City, Florida 34990
Richard Rampell(8)...................................... 51,000 *
122 North County Road
Palm Beach, Florida 33480
Charles Swinburn(9)..................................... 51,000 *
1800 M. Street, NW
Washington, D.C. 20036
Douglas R. Nichols(10).................................. 332,380 2.9
260 State Street
Dallas, Texas 75201
W. Graham Claytor III(11)............................... 26,000 *
Pier 33 North
San Francisco, California 94111
Robert B. Coward(12).................................... 128,690 1.1
U.S. Highway 84 West
P.O. Box 487
Gatesville, Texas 76528
Jack F. Conser(13)...................................... 37,255 *
RailAmerica, Inc.
301 Yamato Road, Suite 1190
Boca Raton, Florida 33431
All directors and executive officers as a group 1,776,051(14) 14.2
(10 persons).........................................
</TABLE>
4
<PAGE> 7
- -----------------------
* Less than 1%
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and that are exercisable within 60 days
have been exercised. Unless otherwise noted, the Company believes that
all persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(2) Based on Amendment No. 3, dated April 24, 1998, to Schedule 13D dated
July 8, 1997. Consists of (i) 363,300 shares of Common Stock beneficially
owned by EGS Associates, L.P. ("EGS Associates"), (ii) 146,525 shares of
Common Stock beneficially owned by Bev Partners, L.P. ("Bev Partners"),
(iii) 30,000 shares of Common Stock beneficially owned by Jonas Partners,
L.P. ("Jonas Partners"), (iv) 30,000 shares of Common Stock beneficially
owned by William Ehrman ("Ehrman") and members of his immediate family,
and (v) 10,000 shares of Common Stock beneficially owned by Frederick
Ketcher ("Ketcher"). In addition, by reason of the provisions of Rule
13D-3 of the Securities Exchange Act of 1934, as amended (the "Act"), (x)
EGS Partners, L.L.C. ("EGS Partners") may be deemed to own beneficially
789,675 shares of Common Stock purchased for discretionary accounts
managed by it, as to which EGS Partners disclaims beneficial ownership,
and (y) each of Ehrman, Ketcher, Frederick Greenberg ("Greenberg"), Jonas
Gerstl ("Gerstl"), James McLaren ("McLaren") and William D. Lautman
("Lautman," and together with Ehrman, Ketcher, Greenberg, Gerstl and
McLaren, the "General Partners"), since each of the General Partners, is
a general partner of each of EGS Associates, Bev Partners and Jonas
Partners and a member of EGS Partners may be deemed to own the 363,300
shares beneficially owned by EGS Associates, the 789,675 shares that may
be deemed to be beneficially owned by EGS Partners, the 146,525 shares
beneficially owned by Bev Partners and the 30,000 shares beneficially
owned by Jonas Partners, as to which the General Partners disclaim
beneficial ownership.
(3) Based on Amendment No. 2, dated February 10, 1999, to Schedule 13G.
Consists of 1,015,000 shares of Common Stock beneficially owned by Luther
King Capital Management, 12,500 shares of Common Stock beneficially owned
by Bryan King, and 12,500 shares of Common Stock beneficially owned by
Bryan and Mason King.
(4) Includes (i) 87,500 shares of Common Stock issuable upon the
exercise of presently exercisable options to purchase Common Stock at
$3.40 per share, (ii) 87,500 shares of Common Stock issuable upon the
exercise of presently exercisable options to purchase Common Stock at
$3.75 per share, (iii) 87,500 shares of Common Stock issuable upon the
exercise of presently exercisable options to purchase Common Stock at
$4.15 per share, (iv) 75,000 shares of Common Stock issuable upon
exercise of presently exercisable options to purchase Common Stock at
$7.25 per share, (v) 75,000 shares of Common Stock issuable upon exercise
of presently exercisable options to purchase Common Stock at $8.00 per
share, (vi) 75,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $8.75 per
share, (vii) 75,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $9.50 per
share, and (viii) 20,000 shares issuable upon exercise of presently
exercisable options to purchase Common Stock at $5.00 per share, granted
under the Incentive Plan. See "Executive Compensation." Mr. Gary O.
Marino is the brother of Mr. John H. Marino.
(5) Mr. John H. Marino is the brother of Mr. Gary O. Marino.
(6) Includes (i) 25,000 shares of Common Stock issuable upon the exercise of
presently exercisable options to purchase Common Stock at $5.00 per share
granted under the Company's Incentive Plan, (ii) 10,000 shares of Common
Stock issuable upon the exercise of presently exercisable options to
purchase Common Stock at $3.50 per share granted under the Company's 1995
Non-Employee Director Stock Option Plan and (iii) 50,000 shares of Common
Stock issuable upon the exercise of presently exercisable options to
purchase Common Stock at $5.00 per share granted under the Incentive
Plan.
(7) Includes 30,000 shares of Common Stock issuable upon the exercise of
presently exercisable options to purchase Common Stock at $3.50 per share
granted under the Company's 1992 Stock Option Plan.
(8) Includes 50,000 shares of Common Stock issuable upon the exercise of
presently exercisable options to purchase Common Stock at $4.81 per share
granted under the Company's 1995 Non-Employee Director Stock Option Plan.
(9) Includes 50,000 shares of Common Stock issuable upon the exercise of
presently exercisable options to purchase Common Stock at $4.19 per share
granted under the Company's 1995 Non-Employee Director Stock Option Plan.
(10) Consists of 50,000 shares of Common Stock issuable upon the exercise of
presently exercisable options to purchase Common Stock at $3.50 per share
granted under the Company's 1995 Non-Employee Director Stock Option Plan.
Mr. Nichols is President and principal shareholder of First London
Securities Corporation. See "Certain Transactions."
5
<PAGE> 8
(11) Includes 10,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $3.65 per share
and 15,000 shares of Common Stock issuable upon exercise of presently
exercisable options to purchase Common Stock at $5.00 per share granted
under the Incentive Plan.
(12) Includes 25,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $5.00 per share
granted under the Incentive Plan and 100,000 shares of Common Stock
issuable upon conversion of a presently convertible promissory note at a
conversion price of $2.25 per share.
(13) Includes (i) 16,800 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $3.50 per
share, (ii) 10,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $3.625 per
share, and (iii) 10,000 shares of Common Stock issuable upon exercise of
presently exercisable options to purchase Common Stock at $5.00 per
share, all of which were granted pursuant to the Incentive Plan.
(14) See notes (4) - (13) above.
ELECTION OF DIRECTORS; NOMINEES AND CONTINUING DIRECTORS
Pursuant to the Company's Amended and Restated Certificate of
Incorporation, the Company's Board of Directors is divided into three classes,
as nearly equal in number as possible, designated Class I, Class II and Class
III. At each annual meeting of stockholders, successors to the class of
directors whose term expires at that annual meeting are elected for a
three-year term. The current term of the Class I Directors terminates on the
date of the Company's 1999 Annual Meeting; the current term of the Class II
Directors terminates on the date of the Company's 2000 annual meeting of
stockholders; and the current term of the Class III Directors terminates on the
date of the Company's 2001 annual meeting of stockholders. Messrs. Donald D.
Redfearn and Charles Swinburn currently serve as Class I directors and will
stand for re-election at the Annual Meeting. Messrs. John H. Marino and John M.
Sullivan currently serve as Class II directors, and Messrs. Gary O. Marino,
Richard Rampell and Douglas R. Nichols currently serve as Class III directors.
If elected at the Annual Meeting, Messrs. Redfearn and Swinburn will serve
until the Company's 2002 annual meeting of stockholders and until their
successors are duly elected and qualified.
Messrs. Redfearn and Swinburn have consented to serve on the Company's
Board of Directors and the Board of Directors has no reason to believe that the
nominees will not serve if elected. However, if any or all of them should
become unavailable to serve as a director, and if the Board shall have
designated a substitute nominee or nominees, the persons named as proxies will
vote for such substitute nominee or nominees.
NOMINEES FOR CLASS I DIRECTORS
DONALD D. REDFEARN - Mr. Redfearn has served as the Company's Executive
Vice President - Administration and Secretary since December 1994 and has served
as an officer and director of the Company since its formation in April 1992. Mr.
Redfearn joined the Company on a full-time basis in January 1996. From September
1993 until September 1995, Mr. Redfearn served as President of Jenex Financial
Services, Inc., a financial consulting firm. From 1984 until September 1993, Mr.
Redfearn served in various capacities at Boca Raton Capital Corporation
("BRCC"), a publicly-traded venture capital firm and a former stockholder of the
Company, including Senior Vice President, Assistant Secretary and Treasurer. Mr.
Redfearn also served as a Vice President of Huron Transportation Group, Inc.
("HTG") until merged with RailAmerica Services Corporation in December 1993 (the
"HTG Merger"). Mr. Redfearn received his B.A. degree in Business Administration
from the University of Miami and graduated from the School of Banking of the
South at Louisiana State University.
CHARLES SWINBURN - Mr. Swinburn has served as a director of the Company
since February 1995. Mr. Swinburn is currently a practicing attorney in the
Washington, D.C. office of Morgan, Lewis & Bockius, where he specializes in
environmental law. From April 1990 through August 1993, Mr. Swinburn served as a
consultant to private industry and the government. Prior to that time, Mr.
Swinburn served as Vice President of Rollins Environmental Services, Inc. Mr.
Swinburn has served in various capacities at the U.S. Department of
Transportation, most recently as Deputy Assistant Secretary for Policy and
International Affairs. Mr. Swinburn received his B.A. degree from Princeton
University in 1969, his M.B.A. from Harvard Business School in 1971 and his J.D.
from the University of Pennsylvania in 1993.
6
<PAGE> 9
CONTINUING CLASS II DIRECTORS
JOHN H. MARINO - Mr. Marino served as Vice Chairman of the Company's
Board of Directors from July 1996 to July 1998 and as a director of the Company
since its formation in April 1992. From April 1992 until July 1996, Mr. Marino
served as the Company's President and Chief Operating Officer. Mr. Marino
founded, and from 1986 until April 1996, served as the President and a director
of Huron & Eastern Railway Company, Inc. ("HESR"), a subsidiary of the Company.
Mr. Marino also served as the President of HTG from its formation in January
1987 until the HTG Merger. Prior to founding HESR in 1985, Mr. Marino served as
President and Chief Executive Officer of several shortline railroads, as an
officer of the Reading Railroad and with the United States Railway Association,
Washington, D.C. Mr. Marino received his B.S. degree in civil engineering from
Princeton University in 1961 and his M.S. degree in transportation engineering
from Purdue University in 1963. From 1963 to 1965, Mr. Marino served as an
officer of the United States Army Corps of Engineers.
JOHN M. SULLIVAN - Mr. Sullivan has served as a director of the
Company since January 1993. From 1977 until 1981, Mr. Sullivan served, upon
appointment by President Carter, as head of the United States Federal Railroad
Administration. From 1982 until 1990, Mr. Sullivan was President and Chief
Executive Officer of Haug Die Casting, Inc., where he remains a director. Mr.
Sullivan received his B.S. degree in engineering from the United States Naval
Academy and served with the United States Navy as an officer, and ultimately as
a carrier aviator from 1946 to 1954.
CONTINUING CLASS III DIRECTORS
GARY O. MARINO - Mr. Marino has served as Chairman of the Company's
Board of Directors and Treasurer since the Company's formation in April 1992, as
Chief Executive Officer of the Company since March 1, 1994 and as President
since July 1996. Mr. Marino has also served as the Chairman of the Board and
Treasurer of HESR since 1986 and as Chairman of the Board, President and Chief
Executive Officer of Kalyn/Siebert, Inc., a wholly owned subsidiary of the
Company ("Kalyn/Siebert"), since its acquisition in 1994. Mr. Marino joined the
Company on a full-time basis in March 1994. Mr. Marino also served as Chairman
of HTG from its formation in 1987 until the HTG Merger. From 1984 until October
1993, Mr. Marino served as Chairman, President and Chief Executive Officer of
BRCC. Mr. Marino received his B.A. degree from Colgate University in 1966 and an
M.B.A. from Fordham University in 1973. From 1966 to 1969, Mr. Marino served as
an officer of the United States Army Ordnance Corps.
RICHARD RAMPELL - Mr. Rampell has served as a director of the Company
since July 1995. Mr. Rampell, a certified public accountant, is currently the
Chief Executive of Rampell & Rampell, P.A., Certified Public Accountants, of
Palm Beach, Florida. Mr. Rampell is a past President of the Palm Beach Tax
Institute and a past President of the Florida Institute of CPA's, East Coast
Chapter. Mr. Rampell graduated with honors from Princeton University with an
A.B. degree and received an M.B.A. from the Wharton School at the University of
Pennsylvania.
DOUGLAS R. NICHOLS - Mr. Nichols has served as a director of the
Company since July 1996. Mr. Nichols is a certified public accountant and the
founder, President and principal stockholder of First London Securities
Corporation, a securities broker-dealer specializing in equity trading and
investment banking. From 1989 to 1991, Mr. Nichols was a Vice President with the
Dallas, Texas office of Smith Barney and from 1986 to 1989 was a broker with the
Dallas branch of Shearson Lehman Brothers. Mr. Nichols is currently a member of
the National Railway Historical Society. Mr. Nichols received a B.A. degree from
Allegheny College in 1974.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors of the
Company held a total of four meetings and took a number of actions by unanimous
written consent. During 1998, no director attended fewer than 75% of the
aggregate of (i) the number of meetings of the Board of Directors held during
the period he served on the Board, and (ii) the number of meetings of
committees of the Board of Directors held during the period he served on such
committees.
Messrs. Swinburn, Sullivan and Rampell are the current members of the
Company's Audit Committee, which committee held two meetings during the year
ended December 31, 1998. The duties and responsibilities of the Audit
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<PAGE> 10
Committee include (i) recommending to the Board of Directors the appointment of
the Company's auditors and any termination of engagement, (ii) reviewing the
plan and scope of audits, (iii) reviewing the Company's significant accounting
policies and internal controls and (iv) having general responsibility for all
audit related matters.
Messrs. Swinburn, Nichols and Rampell are also the current members of
the Company's Compensation Committee, which committee held two meetings during
the year ended December 31, 1998. The Compensation Committee reviews and
approves the compensation of the Company's executive officers and administers
each of the Company's compensation and benefit plans.
In addition to the foregoing committees, the Board has established an
Executive Committee consisting of Messrs. Gary O. Marino, Donald D. Redfearn and
Richard Rampell, and a Government Affairs Committee consisting of Messrs. John
H. Marino, John Sullivan and Charles Swinburn.
The Board does not have a standing nominating committee.
ADDITIONAL INFORMATION CONCERNING DIRECTORS
Each non-employee director of the Company receives a directors fee of
$2,000 per month, as well as $500 per Board meeting and $400 for each
additional day spent on Company business. All directors are reimbursed for
reasonable out-of-pocket expenses associated with travel to meetings of the
Company's Board of Directors or committees thereof. Directors who are also
employees of the Company do not receive additional compensation for their
services as directors.
As more fully described herein, non-employee directors are eligible to
receive options under the Company's Directors Plan. The Directors Plan provides
for an automatic grant of an option to purchase 50,000 shares of Common Stock
upon a person's election as a non-employee director of the Company. As of the
Record Date, options to purchase 235,000 shares of Common Stock have been
granted under the Directors Plan at exercise prices ranging from $3.50 - $6.125
per share.
MANAGEMENT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary O. Marino.................... 54 Chairman of the Board, Chief Executive
Officer and President
Donald D. Redfearn................ 46 Executive Vice President-Administration and
Secretary
W. Graham Claytor, III............ 48 Senior Vice President-International Rail
Group
Robert B. Coward.................. 53 Senior Vice President-Manufacturing Group
Jack F. Conser.................... 55 Senior Vice President-North American Rail
Group
</TABLE>
The business experience of each of Messrs. Gary O. Marino and Donald
D. Redfearn appears under the caption "Election of Directors; Nominees and
Continuing Directors" above.
W. GRAHAM CLAYTOR, III - Mr. Claytor has served as a Senior Vice
President of the Company since joining the Company in March 1996. Prior to
joining the Company, Mr. Claytor served as Managing Director of Southern
Pacific's Plant Rationalization function, charged with selling, leasing and
abandoning surplus branch and mainline trackage. Prior
8
<PAGE> 11
to joining Southern Pacific, Mr. Claytor served as Superintendent of the Buffalo
& Pittsburgh Railroad and as Trainmaster for Norfolk Southern Corporation, and
supervised marine terminal operations of the Virginia Maryland Railroad. Mr.
Claytor received his B.S. degree from Boston University.
ROBERT B. COWARD - Mr. Coward has served as the Company's Senior Vice
President-Manufacturing Group since the Company's acquisition of Kalyn/Siebert
in 1994. Mr. Coward is responsible for performing all functions related to
Kalyn/Siebert's government contracting business. From 1981 until 1994, Mr.
Coward served as the President and Chief Executive Officer of Kalyn/Siebert and
as General Manager from 1969 until 1981. Mr. Coward received his B.S. in
Industrial Arts from North Texas University.
JACK F. CONSER - Mr. Conser joined the Company in 1992 as General
Manager of HESR. Mr. Conser served as a Vice President of the Company from 1994
to 1997 and has served as a Senior Vice President of the Company since July
1997. From 1985 to 1992, Mr. Conser was General Manager of the Genesee &
Wyoming Railroad, the Rochester & Southern Railroad, the Buffalo & Pittsburgh
Railroad and the Dansville & MT. Morris Railroad, affiliates of Genesee Wyoming
Industries. From 1973 to 1985, Mr. Conser was superintendent of traffic for the
Providence & Worcester Railroad.
ELECTION OF EXECUTIVE OFFICERS
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of the Company's outstanding Common Stock, to file with the
Securities and Exchange Commission (the "SEC"), initial reports of ownership
and reports of changes in ownership of Common Stock. Such persons are required
by SEC regulation to furnish the Company with copies of all such reports.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written or oral representations that
no other reports are required, during the year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent (10%) beneficial owners were complied with, except for
the following: Messrs. Charles Swinburn, John Sullivan, Richard Rampell and
Douglas Nichols may have failed to file a Form 5 in connection with their grant
of 5,000 options each as of June 30, 1998, under the Director Plan; and Messrs.
W. Graham Clayton, Robert Coward and Jack Conser may have failed to file a Form
5 in connection with their grant of 11,500, 11,500 and 8,000 options,
respectively, as of June 30, 1998, under the Company's 1998 Omnibus Executive
Incentive Compensation Plan.
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 1998,
1997 and 1996, the aggregate compensation awarded to, earned by or paid to (i)
Gary O. Marino, the Company's Chairman of the Board, Chief Executive Officer,
President and Treasurer, (ii) Donald D. Redfearn, the Company's Executive Vice
President-Administration and Secretary, (iii) W. Graham Claytor III, the
Company's Senior Vice President-International Rail Group, (iv) Jack F. Conser,
the Company's Senior Vice President-North American Rail Group, and (v) Robert
B. Coward, the Company's Senior Vice President-Manufacturing Group
(collectively, the "Named Executive Officers") during each of such years. Mr.
John H. Marino served as the Company's President and Chief Operating Officer
until July 1996. The Company did not grant any restricted stock awards or stock
appreciation rights or make any long term incentive plan payouts during such
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------------- ----------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gary O. Marino.............. 1998 $301,000 $230,617(8) $301,875(9) 350,000(10) --
Chairman of the Board, 1997 $275,000(2) $ 93,736(3) $115,235(9) 20,000(4) --
Chief Executive Officer, 1996 $231,000(5) $ 21,000(6) -- 10,000(7) --
President and Chief
Financial Officer
Donald D. Redfearn ......... 1998 $151,000 $ 52,031 -- 20,000(11) --
Executive Vice President 1997 $125,000 $ 20,275 $ 93,556(9) 25,000(4) --
and Secretary 1996 $113,750 $ 13,500 -- 50,000(7) --
W. Graham Claytor........... 1998 $115,000 $ 45,000 -- 11,500(11) --
Senior Vice President 1997 $ 93,333 $ 83,000 -- 15,000(5) --
1996 $ 50,000 -- -- 10,000(12) --
Jack Conser................. 1998 $ 96,000 $ 9,797 $ 11,200(9) 8,000(11) --
Senior Vice President 1997 $ 81,250 $ 9,110 $ 7,500 10,000(4) --
1996 $ 75,000 $ 8,500 -- 10,000(7) --
Robert Coward............... 1998 $115,000 $ 57,000 -- 11,500(11) --
Senior Vice President 1997 $ 96,977 $ 47,500 -- 25,000(4) --
1996 $ 85,010 $ 8,500 -- -- --
</TABLE>
- ------------------------------
(1) The aggregate amount of perquisites and other personal benefits provided
to each Named Executive Officer is less than 10% of the total amount of
salary and bonus of such officer.
(2) Includes deferred compensation of $25,000 which was contributed to a
nonqualified deferred compensation plan in January 1997.
(3) Includes a forgiveness of a promissory note to the Company in the
amount of $47,500.
(4) Represents options granted under the Company's Incentive Plan which have
an exercise price of $5.00 per share.
(5) Includes (i) a payment of $20,000 in lieu of Mr. Gary Marino's
participation in a retirement benefits plan and (ii) deferred
compensation of $1,000 which was contributed to a nonqualified deferred
compensation plan in January 1997.
(6) Represents a bonus which was paid to Mr. Gary Marino in 1997 based upon
the performance of the Company for the year ended December 31, 1996.
(7) Represents options granted under the Company's Incentive Plan which have
an exercise price of $3.625 per share.
(8) Includes forgiveness of promissory notes to the Company in the amount of
$80,617.
(9) Represents gains on exercise of stock options and subsequent sales of the
Common Stock.
10
<PAGE> 13
(10) Granted pursuant to the terms of Mr. Gary Marino's employment agreement.
Such options have exercise prices ranging from $7.25 to $9.50 per share.
(11) Represents options granted under the Company's 1998 Omnibus Executive
Incentive Compensation Plan which have an exercise price of $6.125 per
share.
(12) Represents options granted which have an exercise price of $3.65 per
share.
EMPLOYMENT AGREEMENTS
As of January 1, 1998, Mr. Gary O. Marino entered into a new employment
agreement (the "Agreement") with the Company which provides that he serve as
Chief Executive Officer of the Company. Under the Agreement, Mr. Marino is to
receive a base salary of $300,000 per year. Mr. Marino's base salary is subject
to increase in accordance with the Consumer Price Index, as well as any
additional increases in the discretion of the Board of Directors. Mr. Marino is
also entitled to a $1,000 monthly car allowance. Under the Agreement Mr. Marino
is entitled to such benefits (including medical, dental, disability and life
insurance) as the Company and its subsidiaries typically provides to their
employees generally. The Agreement also provides that the Company make annual
cash payments for retirement benefits to a trust for the benefit of Mr. Marino.
In addition, pursuant to the Agreement, Mr. Marino was issued options
to purchase an aggregate of 300,000 shares of Common Stock at exercise prices
ranging from $7.25 to $9.50 per share. All of such options are currently
exercisable and have a term of ten (10) years from the date they became
exercisable. The Agreement has an initial term expiring on December 31, 2000,
and is subject to automatic one year renewal terms, unless either party
notifies the other of non-renewal 180 days prior to the expiration of the then
current term. In the event Mr. Marino's employment is terminated without cause
pursuant to a change in control of the Company, Mr. Marino is entitled to
receive as of the date of termination a lump sum equal to 150% of his total
compensation for the 12 month period prior to the date of termination. The
Agreement also contains certain non-competition provisions applicable to Mr.
Marino should he resign from the Company or be terminated with cause.
STOCK OPTION AND BONUS PLANS
1992 STOCK OPTION PLAN
The Company's 1992 Stock Option Plan provides officers, employees and
consultants of the Company and its subsidiaries who are not directors of the
Company or 5% stockholders (directly or indirectly) with the ability to receive
grants of options to purchase shares of Common Stock. The 1992 Stock Option
Plan was approved by the Company's stockholders as of July 1, 1992, and became
effective as of such date. The Company has reserved 250,000 shares of Common
Stock for the grant of options under the 1992 Stock Option Plan, all of which
have been granted and 41,800 of which are currently outstanding at an exercise
price of $3.50 per share.
The Bonus Plan was replaced by the 1998 Omnibus Executive Incentive
Compensation Plan (see below) as of April 1998.
1995 STOCK INCENTIVE PLAN. Effective January 1, 1995, the Company
adopted the Incentive Plan pursuant to which key personnel of the Company
selected as participants are eligible to receive awards of various forms of
equity-based incentive compensation, including stock options, stock
appreciation rights, stock bonuses, restricted stock awards, performance units
and phantom stock units, and awards consisting of combinations of such
incentives. The Company has reserved 1,000,000 shares of Common Stock for the
grant of options under the 1995 Stock Incentive Plan, 609,500 of which have
been granted and 475,200 of which are currently outstanding at an exercise
prices ranging from $3.50-$5.00.
DIRECTORS PLAN. Effective January 1, 1995, the Board of Directors
adopted the Directors Plan, under which 250,000 shares of Common Stock have
been reserved for issuance. The terms of the Directors Plan are set forth below
11
<PAGE> 14
under "Proposal to Approve and Adopt an Amendment to the Company's 1995
Non-Employee Director Stock Option Plan."
As of the date hereof, options under the Directors Plan to purchase
(i) 10,000 shares of Common Stock have been granted to Donald D. Redfearn at an
exercise price of $3.50 per share, (ii) 50,000 shares of Common Stock have been
granted to Charles Swinburn at an exercise price of $4.19 per share, (iii)
50,000 shares of Common Stock have been granted to Richard Rampell at an
exercise price of $4.81 per share, (iv) 50,000 shares of Common Stock have been
granted to Douglas Nichols at an exercise price of $3.50 per share, and (v)
5,000 shares of Common Stock have been granted to John H. Marino, Douglas
Nichols, Richard Rampell, John M. Sullivan and Charles Swinburn, each at an
exercise price of $6.125 per share.
1995 EMPLOYEE STOCK PURCHASE PLAN. The Board of Directors of the
Company has adopted, effective January 1, 1995, the 1995 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), under which 250,000 shares of Common
Stock are reserved for issuance. During the first quarter of 1996, the Company
implemented the Stock Purchase Plan. The Stock Purchase Plan, which is designed
to qualify under Section 423 of the Internal Revenue Code, is designed to
encourage stock ownership by employees of the Company. Employees of the Company
other than members of the Board of Directors and owners of 5% or more of the
Company's Common Stock are eligible to participate in the Stock Purchase Plan,
with certain exceptions, if they are employed by the Company for at least 20
hours per week and more than five months per year. No employee is eligible to
participate who, after the grant of options under the Stock Purchase Plan, owns
(including all shares which may be purchased under any outstanding option) 5%
or more of the Company's Common Stock.
On January 1 of each year (the "Enrollment Date"), the Company will
grant to each participant an option to purchase on December 31 of such year
(the "Exercise Date"), at a price determined in the manner described below (the
"Purchase Price"), the number of full shares of Common Stock which his or her
accumulated payroll deductions on the Exercise Date will purchase at the
Purchase Price. The Purchase Price will be the lesser of (i) a percentage (not
less than 85%) of the fair market value of the Common Stock on the Enrollment
Date, or (ii) a percentage (not less than 85%) of the fair market value of the
Common Stock on the Exercise Date. As soon as practicable after any Exercise
Date on which a purchase of shares of Common Stock occurs, the Company will
deliver to each participant a certificate representing the shares purchased
upon exercise of his or her option; however, the Compensation Committee may
determine to hold a participant's certificates until the participant ceases
participation in the Stock Purchase Plan or requests delivery of the
certificates.
1998 OMNIBUS EXECUTIVE INCENTIVE COMPENSATION PLAN. In April 1998, the
Board of Directors adopted the Company's 1998 Omnibus Executive Incentive
Compensation Plan (the "1998 Plan") and was approved by the Company's
stockholders in June 1998. The terms of the 1998 Plan provide for grants of
stock options, stock appreciation rights ("SARs"), restricted stock, deferred
stock, other stock-related awards and performance or annual incentive awards
that may be settled in cash, stock or other property (collectively, "Awards").
The 1998 Plan supersedes the Company's 1992 and 1995 Stock Option Plans and the
Bonus Plan (collectively, the "Preexisting Plan"). The effective date of the
1998 Plan is April 16, 1998 (the "Effective Date"). Awards to purchase 76,000
shares of Common Stock were made under the 1998 Plan during 1998.
Although certain types of Awards authorized under the 1998 Plan are
similar to those under the Preexisting Plan, the Board determined to adopt an
entirely new plan in order to respond to a number of changes and proposed
changes relating to Rule 16b-3 under the Exchange Act and regulations under
Section 162(m) of the Code, to broaden the types of performance goals that may
be set and the types of Awards that may be granted by the Committee and
otherwise to add flexibility to annual incentive awards and other
performance-based awards intended to qualify for corporate tax deductions under
Section 162(m), to increase the number of shares of Common Stock that may be
subject to Awards, and to otherwise adopt provisions intended to enable the
Committee to better promote the goals of the Company's compensation policies
and programs, as discussed above.
Under the 1998 Plan, the total number of shares of Common Stock that
may be subject to the granting of Awards under the 1998 Plan at any time during
the term of the Plan shall be equal to 930,000 shares, plus the number of
shares with respect to which Awards previously granted under the Preexisting
Plan that terminate without
12
<PAGE> 15
being exercised, and the number of shares that are surrendered in payment of any
Awards or any tax withholding requirements.
The 1998 Plan limits the number of shares which may be issued pursuant
to incentive stock options to 930,000 shares.
In addition, the 1998 Plan imposes individual limitations on the
amount of certain Awards in part to comply with Code Section 162(m). Under
these limitations, during any fiscal year the number of options, SARs,
restricted shares of Common Stock, deferred shares of Common Stock, shares as a
bonus or in lieu of other Company obligations, and other stock-based Awards
granted to any one participant may not exceed 400,000 for each type of such
Award, subject to adjustment in certain circumstances. The maximum amount that
may be paid out as an annual incentive Award or other cash Award in any fiscal
year to any one participant is $1,000,000, and the maximum amount that may be
earned as a performance Award or other cash Award in respect of a performance
period by any one participant is $2,000,000.
The Committee is authorized to adjust the limitations described in the
two preceding paragraphs and is authorized to adjust outstanding Awards
(including adjustments to exercise prices of options and other affected terms
of Awards) in the event that a dividend or other distribution (whether in cash,
shares of Common Stock or other property), recapitalization, forward or reverse
split, reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange or other similar corporate transaction or event
affects the Common Stock so that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of participants. The Committee is
also authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
The persons eligible to receive Awards under the 1998 Plan are the
officers, directors, employees and independent contractors of the Company and
its subsidiaries. No independent contractor will be eligible to receive any
Awards other than stock options. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary for purposes
of eligibility for participation in the 1998 Plan. As of April 27, 1999,
approximately 650 persons were eligible to participate in the 1998 Plan.
OPTION/SAR GRANT TABLE
The following table sets forth information concerning grants of stock
options made during the year ended December 31, 1998 to the Named Executive
Officers. No stock appreciation rights were granted in 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME SARS GRANTED(#) FISCAL YEAR ($/SH) DATE
- ---- -------------------- ----------------------- -------------- ----------
<S> <C> <C> <C> <C>
Gary O. Marino 300,000 57% $7.25-$9.50 01/01/08
Donald D. Redfearn 20,000 4% $6.125 06/30/08
W. Graham Claytor 11,500 2% $6.125 06/30/08
Robert Coward 11,500 2% $6.125 06/30/08
Jack F. Conser 8,000 2% $6.125 06/30/08
</TABLE>
13
<PAGE> 16
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers at December 31,
1998. No stock options were exercised by the Named Executive Officers during
the year ended December 31, 1998, except that Mr. Gary O. Marino exercised
options to purchase 87,500 shares of Common Stock. No stock appreciation rights
were granted or are outstanding.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary O. Marino......... 87,500 $301,875 582,500(2) -- $1,425,000 --
Donald D. Redfearn..... -- -- 85,000(3) 20,000 $ 312,500 $47,500
W. Graham Claytor...... -- -- 25,000(4) 11,500 $ 101,000 $27,313
Robert B. Coward....... -- -- 25,000(5) 11,500 $ 87,500 $27,313
Jack F. Conser......... 3,200 $11,200 36,800 8,000 $ 167,750 $19,000
</TABLE>
- ------------------------------
(1) The closing sale price of the Common Stock on December 31, 1998 as
reported by Nasdaq was $8.50 per share. Value is calculated by
multiplying (a) the difference between $8.50 and each option exercise
price by (b) the number of shares of Common Stock underlying the option.
(2) At December 31, 1998, Mr. Gary Marino had been granted the following
options to purchase Common Stock, which options were exercisable at year
end: (i) options to purchase 87,500 shares of Common Stock at an
exercise price of $3.40 per share, (ii) options to purchase 87,500
shares of Common Stock at an exercise price of $3.75 per share, (iii)
options to purchase 87,500 shares of Common Stock at an exercise price
of $4.15 per share, (iv) options to purchase 20,000 shares of Common
Stock at an exercise price of $5.00 per share (v) option to purchase
75,000 shares of Common Stock at an exercise price of $7.50 per share,
and (vi) options to purchase 75,000 shares of Common Stock at an
exercise price of $8.00 per share.
(3) At December 31, 1998, Mr. Redfearn had been granted the following
options to purchase Common Stock, which options were exercisable at year
end: (i) options to purchase 10,000 shares of Common Stock at an
exercise price of $3.50 per share, (ii) options to purchase 50,000
shares of Common Stock at an exercise price of $5.00 per share and (iii)
options to purchase 25,000 shares of Common Stock at an exercise price
of $5.00 per share.
(4) At December 31, 1998, Mr. Claytor had been granted the following options
to purchase Common Stock, which options were exercisable at year end:
(i) options to purchase 10,000 shares of Common Stock at an exercise
price of $3.65 per share and (ii) options to purchase 15,000 shares of
Common Stock at an exercise price of $5.00 per share.
(5) At December 31, 1998, Mr. Coward had been granted the following options
to purchase Common Stock, which options were exercisable at year end
options to purchase 25,000 shares of Common Stock at an exercise price
of $5.00 per share.
(6) At December 31, 1998, Mr. Conser had been granted the following options
to purchase Common Stock, which options were exercisable at year end:
(i) options to purchase 6,800 shares of Common Stock at an exercise
price of $3.50 per share and (ii) options to purchase 10,000 shares of
Common Stock at an exercise price of $3.50 per share, (iii) options to
purchase 10,000 shares of Common Stock at an exercise price of $3.625
per share, (iv) options to purchase 10,000 shares of Common Stock at an
exercise price of $5.00 per share.
14
<PAGE> 17
PERFORMANCE GRAPH
The Securities and Exchange Commission requires the Company to present
a line graph comparing cumulative stockholder returns on an indexed basis with
the Total Return Index for the Nasdaq Stock Market (U.S. and foreign) or
another broad-based index, and either a nationally-recognized industry standard
or a group of peer companies selected by the Company. The Company has selected,
for purposes of this comparison, Nasdaq Trucking and Transportation Stocks. The
graph is to present the shorter of 5 years or the period the Company's common
stock has been registered under Section 12 of the 1934 Act. The graph assumes
that $100 was invested on December 31, 1993 in each of the Common Stock, the
Total Return Index for the Nasdaq Stock Market (U.S. and foreign) and the Peer
Group consisting of Nasdaq Trucking and Transportation Stocks, and that all
dividends were reinvested.
[OBJECT OMITTED]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LEGEND
<S> <C> <C> <C> <C> <C> <C> <C>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ------ RailAmerica, Inc. 100.0 144.9 185.3 249.1 329.0 434.4
- ------ Nasdaq Stock Market (US & Foreign) 100.0 97.0 136.2 166.8 203.7 281.6
- ------ Nasdaq Trucking & Transportation 100.0 90.7 105.8 116.8 149.5 134.5
Stocks SIC 3700-3799, 4200-4299,
4400-4599, 4700-4799 US & Foreign
NOTES:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/93.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 18
CERTAIN TRANSACTIONS
First London Securities Corporation ("First London"), of which Douglas
Nichols, a director of the Company, is President a principal shareholder,
served as the exclusive placement agent for the Company's private placement of
its Common Stock and warrants to purchase Common Stock, which closed in March
1999. A portion of the private placement was received by the Company and closed
in May 1999. First London received a total of $436,450 in placement fees and
cost reimbursements on this transaction and one-year warrants to purchase
141,504 shares of Common Stock at an exercise price of $10.125 per share.
First London also served as the exclusive placement agent for the
Company's private placement of its Series A Convertible Redeemable Preferred
Stock which had a final close in January 1999. A portion of the private
placement was received by the Company and closed in December 1998. First London
received a total of $822,700 in placement fees and cost reimbursements during
December 1998 and the first quarter of 1999 on this transaction and one-year
warrants to purchase 140,727 shares of Common Stock at an exercise price of
$8.25 per share.
First London also served as exclusive placement agent for the
Company's private placement which closed in September 1996. First London
received as part of the September 1996 private placement a $225,000 placement
fee, a $45,000 nonaccountable expense fee and one-year warrants to purchase
125,000 shares of Common Stock at an exercise price of $4.60 per share. First
London exercised its option on these warrants on September 30, 1997. First
London received as part of the January 1997 private placement a $375,750
placement fee, a $75,150 nonaccountable expense fee and one-year warrants to
purchase 167,000 shares of Common Stock at an exercise price of $5.75 per
share. First London exercised its option on these warrants in January 1998.
During 1997, the Company sold all the outstanding stock of its
wholly-owned subsidiary Huron Distribution Services to a company owned by its
Vice Chairman. The sale price was approximately $50,000, which consisted of
cash and 10,085 shares of the Company's common stock valued at $44,629. A gain
of approximately $17,000 was recognized on the transaction and is included in
other income (expense) in the consolidated income statement for 1997.
During 1997, the Company sold all the outstanding stock of its
wholly-owned subsidiary Evansville Terminal Company ("ETC") to a group of
investors which included a company owned by its Vice Chairman. This company
owns a minority interest in ETC. The sale price was approximately $540,000,
which consisted of cash, a short-term note, a $450,000 purchase money mortgage
with interest at 8% and a maturity date of October 2002 and 8,502 shares of the
Company's common stock valued at $50,000. A gain of approximately $10,000 was
recognized on the transaction and is included in other income (expense) in the
consolidated income statement for 1997.
During 1997, the Company sold all the outstanding stock of its
wholly-owned subsidiary Gettysburg Scenic Rail Tours, Inc. ("GSRT"), certain
railroad equipment and substantially all the assets of Gettysburg Railway
("GBR") to a company owned by its Vice Chairman. The sale price for GSRT and
the railroad equipment was $500,000, which consisted of cash and 62,602 shares
of the Company's common stock valued at $385,000. A gain of approximately
$240,000 was recognized on the transaction and is included in other income
(expense) in the consolidated income statement for 1997. The sale price for
substantially all of the assets of GBR was $1.45 million, which consisted of
cash, an $800,000 promissory note due June 30, 1998 and a $350,000 mortgage
note, which calls for monthly payments of $3,037, at an interest rate of 8.5%
with a maturity date of June 30, 2003. A gain of approximately $170,000 was
recognized on the transaction and is included in other operating income in the
consolidated income statement. The $800,000 promissory note's maturity date was
extended until June 1999.
As of December 31, 1998, $0.8 million of notes receivable from related
parties is included in current assets and $0.35 million of notes receivable
from related parties is included in notes receivable, less current portions on
the consolidated balance sheet.
16
<PAGE> 19
PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO THE
COMPANY'S 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
BACKGROUND AND PURPOSE.
The Company has in effect the Director Plan, adopted by the Board of
Directors on January 1, 1995 and ratified by the Company's stockholders on June
29, 1995.
On April 8, 1999, the Board of Directors adopted the Amended and
Restated 1995 Non-Employee Director Stock Option Plan and recommended that it
be submitted to the Company's stockholders for their approval at the Annual
Meeting. The Plan has been amended to increase the number of shares eligible
for grant from 250,000 to 500,000, subject to adjustment as discussed below.
The purpose of the Directors Plan is to promote the interests of the
Company by providing an inducement to obtain and retain the services of
qualified persons who are not employees of the Company or any affiliate to
serve as members of the Board of Directors of the Company or any of its direct
or indirect subsidiaries and to provide for a portion of their annual
compensation to be tied directly to stockholder return. In furtherance of this
purpose, the Directors Plan authorizes, among other things, (a) the granting of
nonqualified stock options to purchase Common Stock (collectively, "Options")
to each non-employee director of the Company (the "Non-Employee Director"), and
(b) the use of already owned Common Stock as payment of the exercise price for
Options granted under the Directors Plan.
The effective date of the Directors Plan, as amended, is the date of
the Annual Meeting (the "Effective Date"). As of the date of this Proxy
Statement, Options to purchase 260,000 shares of Common Stock have been granted
under the Directors Plan, of which option grants for 25,000 shares are subject
to stockholder approval of the Directors Plan, as amended and restated,
included herein.
The following is a summary of certain principal features of the
Directors Plan. This summary is qualified in its entirety by reference to the
complete text of the Directors Plan, which is attached to this Proxy Statement
as Exhibit A. Stockholders are urged to read the actual text of the Directors
Plan in its entirety.
ADMINISTRATION OF THE PLAN.
The Directors Plan provides that it shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"), the members of which may also be participants therein. Subject to
the provisions of the Directors Plan, the Committee has the authority to
establish rules and regulations as it deems necessary for the proper
administration of the Directors Plan, and to make whatever determinations and
interpretations in connection with the Directors Plan it deems necessary or
advisable. All determinations and interpretations made by the Committee are
final, conclusive and binding on all interested parties, including the Company,
its stockholders, its officers and employees, recipients of grants under the
Directors Plan, and all persons or entities claiming by or through such
persons.
Subject to stockholder approval of the Directors Plan, as amended and
restated, an aggregate of 500,000 shares of Common Stock (subject to adjustment
described below) are reserved for issuance upon the exercise of Options granted
under the Directors Plan. Each Non-Employee Director will be granted an option
to purchase 50,000 shares of Common Stock on the date of his or her initial
election as a director, which Options shall vest and become exercisable as
follows: one-third shall vest immediately upon the date of grant, one-third
shall vest immediately on the first anniversary of the date of grant, and the
remaining one-third shall vest immediately upon the second anniversary of the
date of grant.
The shares acquired upon exercise of Options granted under the
Directors Plan will be authorized and issued shares of Common Stock. The
Company's stockholders will not have any preemptive rights to purchase or
subscribe for any Common Stock by reason of the reservation and issuance of
Common Stock under the
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Directors Plan. If any Option granted under the Directors Plan should expire or
terminate for any reason other than having been exercised in full, the
unpurchased shares subject to that Option will again be available for purposes
of the Directors Plan.
CERTAIN TERMS AND CONDITIONS.
All Options granted under the Directors Plan must be evidenced by a
written agreement between the Company and the grantee. The agreement will
contain such terms and conditions as the Committee shall prescribe, consistent
with the Directors Plan, including, without limitation, the exercise price,
term and any restrictions on the exercisability of the Options granted.
For any Option granted under the Directors Plan, the exercise price
per share of Common Stock will be the greater of (i) $3.50 per share, or (ii)
the Fair Market Value of the Common Stock. For purposes of the Directors Plan,
the "Fair Market Value" on any date of reference means (i) the average (on that
date) of the high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common Stock is
then traded on a national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the Nasdaq National Market List, if
the Common Stock is not then traded on a national securities exchange; or (iii)
the closing bid price (or average of bid prices) last quoted (on that date) by
an established quotation service for over-the-counter securities, if the Common
Stock is not reported on the Nasdaq National Market List. However, if the
Common Stock is not publicly-traded at the time an Option is granted under the
Directors Plan, "Fair Market Value" shall be deemed to be the fair value of the
Common Stock as determined by the Committee after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at
arm's length.
The Committee may permit the exercise price of an Option to be paid
for in cash, by certified or official bank check or personal check, by money
order, with already owned shares of Common Stock that have been held by the
Optionee for at least six (6) months (or such other shares as the Company
determines will not cause the Company to recognize for financial accounting
purposes a charge for compensation expense), by delivery of a properly executed
exercise notice together with such documentation as shall be required by the
Committee (or, if applicable, the broker) to effect a cashless exercise, or a
combination of the above. If paid in whole or in part with shares of already
owned Common Stock, the value of the shares surrendered is deemed to be their
Fair Market Value on the date the Option is exercised.
Options granted under the Directors Plan shall not be assignable or
transferable, other than by will or by the laws of descent and distribution,
and shall be exercisable during the Optionee's lifetime only by the Optionee.
The expiration date of an Option under the Directors Plan will be determined by
the Committee at the time of grant, but in no event may such an Option be
exercisable after 10 years from the date of grant. An Option may be exercised
at any time or from time to time or only after a period of time in
installments, as the Committee determines. Each outstanding Option granted
under the Directors Plan may become immediately fully exercisable in the event
of certain transactions, including certain changes in control of the Company,
certain mergers and reorganizations, and certain dispositions of substantially
all the Company's assets.
In the event that an Optionee ceases to be a member of the Board for
any reason other than retirement, death or disability, the unexercised portion
of any Option granted under the Directors Plan shall automatically be
terminated ninety (90) days after the date on which the Optionee ceases to be a
member of the Board, but in no event later than the expiration date of the
Option. In the event that an Optionee ceases to be a member of the Board due to
retirement, death or disability, the unexercised portion of any Option granted
under the Directors Plan shall automatically be terminated on the first
anniversary of the date on which the Optionee's employment is terminated by
reason of retirement, death or disability, but in no event later than the
expiration date of the Option.
To prevent dilution of the rights of a holder of an Option, the
Directors Plan provides for appropriate adjustment of the number of shares for
which Options may be granted, the number of shares subject to outstanding
Options and the exercise price of outstanding Options, in the event of any
increase or decrease in the number of issued and outstanding shares of the
Company's capital stock resulting from a stock dividend, a recapitalization or
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<PAGE> 21
other capital adjustment of the Company. The Committee has discretion to make
appropriate antidilution adjustments to outstanding Options in the event of a
merger, consolidation or other reorganization of the Company or a sale or other
disposition of substantially all of the Company's assets.
The Directors Plan will expire on December 31, 2004, and any Option
outstanding on such date will remain outstanding until it expires or is
exercised. The Committee may amend, suspend or terminate the Directors Plan or
any Option, provided that such amendment shall be subject to the approval of
the Company's Stockholders if the amendment (a) increases the maximum number of
shares for which options may be granted under the Directors Plan or the number
of shares for which an option may be granted to any Non-Employee Director
hereunder; (b) changes the provisions of the Directors Plan regarding the
termination of the options or the time when they may be exercised; (c) changes
the period during which any options may be granted or remain outstanding or the
date on which the Directors Plan shall terminate; (d) changes the designation
of the class of persons eligible to receive options; (e) changes the price at
which options are to be granted; (f) materially increases benefits accruing to
option holders under the Directors Plan; or (g) if such stockholder approval is
required by any federal or state law or regulation or the rules of any Stock
exchange or automated quotation system on which the Common Stock may then be
listed or granted. In addition, no amendment, suspension or termination shall
substantially impair the rights or benefits of any Optionee, pursuant to any
Option previously granted, without the consent of the Optionee.
FEDERAL INCOME TAX CONSEQUENCES.
The Directors Plan is not qualified under the provisions of section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and is
not subject to any of the provisions of the Employee Retirement Income Security
Act of 1974, as amended.
The grant of an Option under the Directors Plan will have no immediate
tax consequences to the Company or to the Optionee. Upon exercise of the
Option, however, an Optionee will recognize ordinary income equal to the
excess, if any, of the fair market value on the date of exercise of the shares
of Common Stock acquired on exercise of the Option over the exercise price. The
Optionee's tax basis in those shares will be equal to their fair market value
on the date of exercise of the Option, and his holding period for those shares
will begin on that date.
If an Optionee pays for shares of Common Stock on exercise of an
Option by delivering shares of the Company's Common Stock, the Optionee will
not recognize gain or loss on the shares delivered, even if their fair market
value at the time of exercise differs from the Optionee's tax basis in them.
The Optionee, however, otherwise will be taxed on the exercise of the Option in
the manner described above as if he had paid the exercise price in cash. If a
separate identifiable stock certificate is issued for that number of shares
equal to the number of shares delivered on exercise of the Option, the
Optionee's tax basis in the shares represented by that certificate will be
equal to his tax basis in the shares delivered, and his holding period for
those shares will include his holding period for the shares delivered. The
Optionee's tax basis and holding period for the additional shares received on
exercise of the Option will be the same as if the Optionee had exercised the
Option solely in exchange for cash.
If a sale of Common Stock received on the exercise of an option could
subject a Non-Employee Director to liability under Section 16(b) of the
Exchange Act, such Director's rights in the Stock are treated as subject to a
substantial risk of forfeiture and as nontransferable for the period of time
during which the sale of such Common Stock at a profit would subject the
participating Director to suit under Section 16(b) of the Exchange Act. Since
the grant and award of options under the Directors Plan are made under a Rule
16(b)-3 plan, Non-Employee Directors would be subject to potential liability
under Section 16(b) of the Exchange Act if the Common Stock awarded upon
exercise of the option were sold within six months of the grant date. The grant
date of an option is considered the purchase of securities for purposes of
Section 16(b) of the Exchange Act, if a Non-Employee Director sells the Common
Stock received upon exercise within six months of the grant date. If the
exercise date of the option is more than six months after the date the option
was originally granted, then the Non-Employee Director would immediately
recognize ordinary income equal to the difference between the fair market value
of the Common Stock on the exercise date and the exercise price. If the
exercise date is within six months of the date the option was originally
granted, then the Non-Employee Director would recognize ordinary income on the
six month anniversary of the grant of the option in an amount equal to the
difference between the exercise price and the fair market value of the Common
Stock on the six
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month grant date anniversary. Non-Employee Directors may, however, elect to
recognize income immediately upon exercise of an option without regard to the
six month Section 16(b) period, by filing an appropriate election with the
Internal Revenue Service within thirty days following exercise of the option. If
a Non-Employee Director elects to recognize income without regard to the Section
16(b) period, his or her ordinary income would be an amount equal to the excess
of the fair market value of the Common Stock on the exercise date over the
exercise price.
The Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to the Optionee,
provided that amount constitutes an ordinary and necessary business expense for
the Company and is reasonable in amount, and either the employee includes that
amount in income or the Company timely satisfies its reporting requirements
with respect to that amount.
The information set forth above is a summary only and does not purport
to be complete. In addition, the information is based upon current Federal
income tax rules and therefore is subject to change when those rules change.
Moreover, because the tax consequences to any Optionee may depend on his
particular situation, each Optionee should consult his tax adviser as to the
Federal, state, local and other tax consequences of the grant or exercise of an
Option or the disposition of Common Stock acquired on exercise of an Option.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL
TO APPROVE AND RATIFY THE AMENDMENT TO THE DIRECTORS PLAN.
PRIOR GRANTS OF OPTIONS
As of the Record Date, options to purchase an aggregate of 260,000
shares of Common Stock had been granted under the Directors Plan to
non-employee directors of the Company. The options granted under the Directors
Plan have exercise prices ranging from $3.50 to $8.75 and have terms of 10
years.
The following table indicates, as of the Record Date, certain
information regarding options which have been granted under the Director s Plan
to the persons and groups indicated:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE VALUE OF OPTIONS AT
NAME AND POSITION SUBJECT TO OPTIONS PER SHARE APRIL 15, 1999(1)
- ----------------- ------------------ -------------- --------------------
<S> <C> <C> <C>
Donald D. Redfearn 10,000 $3.50 $ 65,000
Charles Swinburn 60,000(1) $4.19- $8.75 $316,125
Richard Rampell 60,000(1) $4.81 - $8.75 $285,125
Douglas Nichols 60,000(1) $3.50 - $8.75 $350,625
John Marino 10,000(1) $6.125 - $8.75 $ 25,625
John Sullivan 10,000(1) $6.125 - $8.75 $ 25,625
</TABLE>
- -----------------------------
(1) Includes Options to purchase 5,000 shares of Common Stock at an exercise
price of $8.75 per share, which are subject to stockholder approval
hereby.
OTHER BUSINESS; REPRESENTATIVES OF THE COMPANY'S AUDITORS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
Representatives of Coopers & Lybrand LLP, the Company's independent
auditors, are not expected to be present at the Annual Meeting, and,
accordingly, may not be available to respond to stockholder inquiries.
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INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a stockholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 2000 Annual Meeting of Stockholders
must deliver a proposal in writing to the Company's principal executive offices
no later than February 17, 2000.
Rule 14a-4 of the Securities and Exchange Commission's proxy rules
allows a company to use discretionary voting authority to vote on matters coming
before an annual meeting of stockholders, if the company does not have notice of
the matter at least 45 days before the date corresponding to the date on which
the company first mailed its proxy materials for the prior year's annual meeting
of stockholders or the date specified by an overriding advance notice provision
in the company's bylaws. The Company's bylaws do not contain such an advance
notice provision. Accordingly, for the Company's 2000 Annual Meeting of
Stockholders, stockholders must submit such written notice to the Corporate
Secretary on or before April 6, 2000.
By Order Of The Board of Directors
GARY O. MARINO
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
Boca Raton, Florida
May 21, 1999
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EXHIBIT A
RAILAMERICA, INC
AMENDED AND RESTATED
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The 1995 Non-Employee Director Stock Option Plan (the
"Plan") is intended to promote the interests of RailAmerica, Inc. (the
"Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees of the Company or any affiliate to
serve as members of the Board of Directors of the Company or any of its direct
or indirect subsidiaries and to provide for a portion of their annual
compensation to be tied directly to shareholder return.
2. RIGHTS TO BE GRANTED. Under the Plan, options are granted that give
an optionee the right for a specified time period to purchase a specified
number of shares of common stock, par value $0.001, of the Company (the "Common
Stock"). The option price is determined in each instance in accordance with the
terms of the Plan. Options granted under the Plan are not intended to be
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
3. AVAILABLE SHARES. The total number of shares of Common Stock for
which options may be granted shall not exceed five hundred thousand (500,000)
shares, subject to adjustment in accordance with Section 12 hereof. Shares
subject to the Plan are authorized but unissued shares or shares that were once
issued and subsequently reacquired by the Company. If any options granted under
the Plan are surrendered before exercise or lapse without exercise, in whole or
in part, the shares reserved therefor revert to the option pool and continue to
be available for grant under the Plan.
4. GRANT OF OPTIONS.
(a) Each non-employee director of the Company will be granted
options to purchase 50,000 shares of the Company's Common Stock
exercisable at the greater of (i) $3.50 per share, or (ii) the then
Fair Market Value as defined below. Thereafter, each new non-employee
director of the Company shall receive options to purchase 50,000
shares of the Company's Common Stock at the great of (i) $3.50 per
share, or (ii) the then Fair Market Value, at the date of appointment
as a director of the Company.
(b) "Fair Market Value" means (i) the average (on that date)
of the high and low prices of the Common Stock on the principal
national securities exchange on which the Common Stock is traded, if
the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock
on the NASDAQ National Market List, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on
<PAGE> 25
that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the NASDAQ National
Market List. However, if the Common Stock is not publicly-traded at
the time an option is granted under the Plan, "Fair Market Value"
shall be deemed to be the fair market value of the Common Stock as
determined by the Compensation Committee of the Board of Directors of
the Company (the "Committee") after taking into consideration all
factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
5. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it sees necessary for the proper
administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it sees as necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants in the Plan and on their legal
representatives and beneficiaries.
6. OPTION AGREEMENT. Each option granted under the provisions of the
Plan shall be evidenced by an Option Agreement, in such form as may be approved
by the Committee, which Agreement shall be duly executed and delivered on
behalf of the Company and by the individual to whom such option is granted. The
Agreement shall contain such terms, provisions, and conditions not inconsistent
with the Plan as may be determined by the Committee.
7. ELIGIBILITY AND LIMITATIONS. Options may be granted pursuant to the
Plan only to members of the Board of Directors of the Company (the "Board") who
are not employees of the Company or an affiliate at the time of grant
("Non-Employee Directors").
8. TERM OF THE PLAN AND OPTIONS. The options granted hereunder shall
expire on a date which is ten (10) years after the date of grant of the options
and the Plan shall terminate ten (10) years after the date of its adoption by
the Company.
9. EXERCISE OF OPTION. Options shall be exercised by the delivery to
the Company at its principal office or at such other address as may be
established by the Committee (Attention: Chief Financial Officer) of written
notice of the number of shares of Common Stock with respect to which the option
is being exercised accompanied by payment in full of the purchase price of such
shares. Unless otherwise determined by the Committee at the time of grant,
payment for such shares may be made (i) in cash, (ii) by certified check or
bank cashier's check payable to the order of the Company in the amount of such
purchase price, (iii) by delivery to the Company of Common Stock having a Fair
Market Value equal to such purchase price, provided that such Common Stock has
been owned by the optionee for at least six months or such period as the
Committee may determine as necessary to avoid adverse accounting treatment by
the Company, (iv) by irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds necessary to pay such
purchase price and to sell the Common Stock to be issued upon exercise of the
Option and delivery the cash proceeds less commissions and brokerage fees to
the optionee or to deliver the remaining shares of Common Stock to the
optionee, or (v) by any combination of the methods of payment described in (i)
through (iv)
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above. Except as provided in Section 11 hereof, no option may be exercised
unless the holder thereof is then a director of the Company. An option holder
shall have none of the rights of a stockholder with respect to the Common Stock
subject to the option until such Common Stock shall be transferred to the
holder upon the exercise of his option.
10. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS.
(a) VESTING. Subject to Section 13 herein, options granted
under the Plan to new directors shall vest and become exercisable over
a two-year period at the rate of one-third of each grant on the date of
appointment as a director and then one-third annually on each of the
two consecutive anniversaries of the date of appointment provided the
director's service as a director continues through each anniversary.
The Committee may, in its discretion, provide for a longer vesting
period at the time the option is granted.
(b) LEGEND ON CERTIFICATES. The certificates representing
shares of Common Stock acquired under the Plan shall carry such
appropriate legend, and such written instructions shall be given to
the Company's transfer agent, as may be deemed necessary or advisable
by counsel to the Company in order to comply with the requirements of
the Securities Act of 1933 or any state securities laws.
(c) NON-TRANSFERABILITY. Options granted pursuant to the Plan
shall not be assignable or transferable other than by the will or the
laws of descent and distribution, and shall be exercisable during an
optionee's lifetime only by the optionee.
11. TERMINATION OF OPTION RIGHTS.
(a) In the event an optionee ceases to be a member of the
Board for any reason other than retirement, death or disability, any
then unexercised options granted to such optionee which were
exercisable at the time the optionee ceased to be a member of the
Board may be exercised within a period of ninety (90) days following
such time the optionee so ceased to be a member of the Board, but in
no event later than the expiration date of the option.
(b) In the event that an optionee ceases to be a member of
the Board by reason of his or her retirement, disability or death, any
then unexercised options granted to such optionee which were
exercisable at the time the optionee ceased to be a member of the
Board may be exercised (by the optionee's personal representative,
heir or legatee, in the event of death) during the period ending one
year after the date the optionee so ceased to be a member of the
Board, but in no event later than the expiration date of the option.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS.
Options and any agreements evidencing such options shall be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Common Stock or other
consideration subject to such options or as otherwise determined by the
Committee to be equitable (i) in the event of changes in the outstanding Common
Stock or in the capital structure of the Company, by reason of stock dividends,
stock splits, recapitalizations,
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<PAGE> 27
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the date of grant of any
such option or (ii) in the event of any change in applicable laws or any change
in circumstances which results in or would result in any substantial dilution
or enlargement of the rights granted to, or available for, Non-Employee
Directors, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan. In addition, in the event
of any such adjustments or substitution, the aggregate number of shares of
Common Stock available under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Any adjustment under this
Section 13 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company shall give each Non-Employee
Director notice of an adjustment hereunder and, upon notice, such adjustment
shall be conclusive and binding for all purposes.
13. EFFECT OF CHANGE IN CONTROL.
(a) In the event of a Change in Control (as hereunder
defined), notwithstanding any vesting schedule provided for hereunder
or by the Committee with respect to an award of options, such options
shall become immediately exercisable with respect to 100 percent of
the shares subject to such option.
(b) "Change in Control" shall, unless the Board of the
Company otherwise directs by resolution adopted prior thereto, be
deemed to occur if (i) any "person" (as that term is used in Sections
13 and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 25% or more of the voting stock of the
Company, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company's
shareholders of each new director was approved by a vote of at least
three-quarters of the directors of the Company then still in office
who were directors at the beginning of the period. Any merger,
consolidation or corporate reorganization in which the owners of the
Company's capital stock entitled to vote in the election of directors
("Voting Stock") prior to said combination, own 50% or more of the
resulting entity's Voting Stock shall not, by itself, be considered a
Change in Control.
(c) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Company, or
upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Company. The
Company agrees that it will make appropriate provisions for the
preservation of an optionee's rights under the Plan in any agreement
or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
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14. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions
of Section 9 hereof, the Company shall have no obligation to deliver any
certificate or certificates upon exercise of an option until the following
conditions shall be satisfied:
(a) The shares with respect to which the option has been
exercised are at the time of the issue of such shares effectively
registered under applicable federal and state securities acts as now
in force or hereafter amended; or
(b) Counsel for the Company shall have given an option that
such shares are exempt from registration under federal and state
securities acts as now in force or hereafter amended;
and the Company has complied with all applicable laws and regulations,
including without limitation all regulations required by any stock exchange
upon which the Common Stock is then listed.
The Company shall use its best efforts to satisfy or cause to be
satisfied the above conditions within a reasonable time, except that the
Company shall be under no obligation to cause a registration statement or
post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issue of shares in respect of
which any option may be exercised.
15. REPRESENTATION OF OPTIONEE. The Company may require the optionee
to deliver written warranties and representations upon exercise of the option
that are necessary to show compliance with federal and state securities laws
including to the effect that a purchase of shares under the option is made for
investment and not with a view to their distribution (as that term is used in
the Securities Act of 1933).
16. APPROVAL OF STOCKHOLDERS. The effectiveness of this Plan and of
the grant of all options hereunder is in all respects subject to, and the Plan
and options granted under it shall be of no force and effect unless and until,
and no option granted hereunder shall in any way vest or become exercisable in
any respect unless and until, the approval of the Plan by the affirmative vote
of a majority of the Company's shares present in person or by proxy and
entitled to vote at a meeting of shareholders at which the Plan is presented
for approval, or by written consent of shareholders enforceable under
applicable state law.
17. TERMINATION AND AMENDMENT OF PLAN. The Board of the Company may at
any time terminate the Plan or make such modification or amendment thereof as
it deems advisable; provided, however, that (i) the Board of the Company may
not, without approval by the affirmative vote of the holders of a majority of
the shares present in person or by proxy and entitled to vote at the meeting,
(a) increase the maximum number of shares for which options may be granted
under the Plan or the number of shares for which an option may be granted to
any Non-Employee Director hereunder; (b) change the provisions of the Plan
regarding the termination of the options or the time when they may be
exercised; (c) change the period during which any options may be granted or
remain outstanding or the date on which the Plan shall terminate; (d) change
the designation of the class of persons eligible to receive options; (e)
5
<PAGE> 29
change the price at which options are to be granted; or (f) materially increase
benefits accruing to option holders under the Plan; and (ii) the Plan shall in
no event be amended more than once every six months other than to comport with
changes in the Code. Termination or any modification or amendment of the Plan
shall not, without consent of a Non-Employee Director, affect his rights under
an option previously granted to him.
18. APPLICABLE LAW. The Plan will be administered in accordance with
federal laws, or in the absence thereof, the laws of the State of Florida.
19. COMPLIANCE WITH SECTION 16. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provisions of the Plan or action by the Plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Plan administrators.
Moreover, in the event the Plan does not include a provision required by Rule
16b-3 to be stated therein, such provision (other than one relating to
eligibility requirements, or the price and amount of awards) shall be deemed
automatically to be incorporated by reference into the Plan insofar as
participants subject to Section 16 are concerned.
* * *
As adopted by the Board of Directors of
RailAmerica, Inc.
as of January 1, 1995
As amended and restated by the Board of Directors of
RailAmerica, Inc. as of April 8, 1999
6
<PAGE> 30
RAILAMERICA, INC.
301 Yamato Road, Suite 1190
Boca Raton, Florida 33341
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
The undersigned holder of Common Stock of RailAmerica, Inc., a
Delaware corporation (the "Company"), hereby appoints Gary O. Marino and Donald
D. Redfearn, and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated below, all of the shares of Common Stock
of the Company that the undersigned is entitled to vote at the 1999 Annual
Meeting of Stockholders of the Company, to be held at The Empress, 721
Government Street, Victoria, British Columbia, Canada, on Thursday, June 24,
1999, at 10:00 a.m., local time, or at any adjournments or postponements
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED IN PROPOSAL (1) SET FORTH BELOW AND FOR THE OTHER
PROPOSALS SET FORTH.
PROPOSAL 1. Election of Donald D. Redfearn and Charles Swinburn as Class I
directors of the Company.
/ / VOTE FOR all nominees listed above, except vote
withheld from the following nominee(s) (if any).
---------------------------------------------------------
/ / VOTE WITHHELD from all nominees.
PROPOSAL 2.
To approve and adopt the amendment to the Company's 1995 Non-Employee
Directors Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the 1999 Annual Meeting, or
at any adjournments or postponements thereof.
(SEE REVERSE SIDE)
<PAGE> 31
(CONTINUED FROM OTHER SIDE)
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" ALL OF THE PROPOSALS.
The undersigned hereby acknowledges receipt of (i) the Notice of
Annual Meeting, (ii) the Proxy Statement and (iii) the Company's 1998 Annual
Report to Stockholders.
Dated: ___________________________, 1999
________________________________________
(Signature)
________________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your
name appears hereon and mail it promptly
even though you may plan to attend the
meeting. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY
CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY
IF MAILED IN THE UNITED STATES.
