SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ALAMO GROUP INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
ALAMO GROUP INC.
1502 E. Walnut St.
Seguin, Texas 78155
Dear Fellow Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Alamo Group Inc. to be held on Tuesday, April 28, 1998, at 8;30 a.m., on the 6th
Floor of the NationsBank Plaza, 300 Convent Street, San Antonio, Texas. We hope
that you will be able to attend the meeting. Matters on which action will be
taken at the meeting are explained in detail in the notice of meeting and proxy
statement accompanying this letter.
In addition to the specific matters to be acted upon, there will be a report on
the progress of the Company and an opportunity for questions of general interest
to the stockholders.
Whether or not you expect to be present and regardless of the number of shares
you own, please mark, sign and mail the enclosed proxy in the envelope provided
as soon as possible. If you attend the meeting, you may revoke your proxy and
vote in person.
Thank you for your support. We hope to see you at the meeting.
/s/ Donald J. Douglass
Donald J. Douglass
Chairman of the Board and CEO
March 27, 1998
<PAGE>
ALAMO GROUP INC.
1502 E. Walnut Street
Seguin, Texas 78155
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 28, 1998
To The Stockholders of Alamo Group Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alamo
Group Inc. (the "Company") will be held on the 6th Floor of the NationsBank
Plaza, 300 Convent Street, San Antonio, Texas, on Tuesday, April 28, 1998, at
8:30 am., for the following purposes:
(1) To elect seven (7) directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified;
(2) To approve the appoinment of Ernst & Young LLP as the Company's auditors
for the 1998 fiscal year; and
(3) To transact such other business as may properly come before the meeting of
any adjournment thereof.
In accordance with the By-Laws of the Company, the Board of Directos has fixed
the record date for the meeting at March 20, 1998. Only stockholders of record
at the close of business on that date will be entitled to vote at the meeting or
any adjournment thereof.
Stockholders who do not expect to attend the meeting in person are urged to sign
the enclosed proxy and return it promptly. A return envelope is enclosed for
that purpose.
By Order of the Board of Directors
/s/ Robert H. George
Robert H. George
Secretary
Dated: March 27, 1998
<PAGE>
ALAMO GROUP INC.
1502 E. Walnut Street
Seguin, Texas 78155
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of Alamo
Group Inc., a Delaware corporation (the "Company"), to be voted at the 1998
Annual Meeting of Stockholders to be held on April 28, 1998, and at any
adjournments thereof. The meeting will be held at 8:30 a.m., on the 6th Floor of
the NationsBank Plaza, 300 Convent St., San Antonio, Texas. This Proxy Statement
and the accompanying Proxy are being mailed to Stockholders on or about March
27, 1998. The annual report of the Company for 1997, including financial
statements, is enclosed.
VOTING AND PROXIES
Only holders of record of common stock of the Company at the close of
business on March 20, 1998, shall be entitled to vote at the meeting. There were
9,684,874 shares of common stock, par value $.10 per share ("Common Stock"), of
the Company issued and outstanding on the record date. Each share of Common
Stock is entitled to one vote. Any Stockholder giving a proxy has the power to
revoke the same at any time prior to its use by giving notice in person or in
writing to the Secretary of the Company.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
1998 Annual Meeting of Stockholders and any adjournment thereof.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the inspectors of election appointed by the Company for the meeting. The
inspectors of election will treat abstentions and broker non-votes as shares
that are present for purposes of determining the presence of a quorum.
Abstentions are present and entitled to vote for purposes of determining the
approval of any matter submitted to the stockholders for a vote. Abstentions
will thus have the same legal effect as a negative vote. If a broker indicates
on a proxy that it does not have the discretionary authority as to certain
shares to vote on a particular matter, those shares will not be considered
present and entitled to vote with respect to that matter.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Listed in the following table are the only beneficial owners that the
Company is aware of as of February 27, 1998, of more than five percent of the
Company's outstanding Common Stock. In addition, this table includes the
outstanding voting securities beneficially owned by the executive officers
listed in the Summary Compensation Table who are not directors of the Company
and the number of shares owned by directors and executive officers as a group.
Any voting securities beneficially owned by director nominees are disclosed
under Election of Directors, below.
<PAGE>
AMOUNT AND NATURE
BENEFICIAL OWNER OF BENEFICIAL PERCENT OF
OF COMMON STOCK OWNERSHIP(1) CLASS(2)
------------------------------- -------------------- -----------------
Capital Southwest Venture
Corporation 2,722,500 (3) 27.7%
12900 Preston Road, Suite 700
Dallas, TX 75230
Donald J. Douglass 1,282,640 (4) 13.1%
300 Convent Street, Suite 2700
San Antonio, TX 78205
T. Rowe Price Associates, Inc. 752,400 (5) 7.7%
100 E. Pratt Street
Baltimore, MD 21202
Jim A. Smith 12,000 (6) *
Robert H. George 14,850 (7) *
Geoffrey Davies 750 (8) *
Ian Burden 6,400 (9) *
John C. Moon 9,100 (10) *
All Directors and Executive
Officers
as a Group (14 Persons) 1,632,215 (11) 16.6%
- ---------------------
* Less than 1% of class
(1) In each case the beneficial owner has sole voting and investment power,
except as otherwise provided herein.
(2) The calculation of percent of class is based on the number of shares of
Common Stock outstanding as of February 27, 1998, 9,684,874 shares, plus
75,550 shares subject to options exercisable within 60 days, plus 62,500
shares subject to exercisable warrants.
(3) Includes warrants held by Capital Southwest Corporation ("Capital
Southwest"), the parent corporation of Capital Southwest Venture
Corporation, to purchase 62,500 shares of Common Stock at $16.00 per share
that are presently exercisable and will expire on January 3, 2000. Mr.
Thomas, a director of the Company, serves as Chairman of the Board and
President of both Capital Southwest Venture Corporation and Capital
Southwest Corporation and shares voting and investment power with respect to
the shares of Common Stock owned by Capital Southwest Venture Corporation.
Mr. Thomas, personally, disclaims beneficial ownership of these shares.
(4) Includes 20,000 shares subject to options exercisable within 60 days.
Includes 65,145 shares owned by The Douglass Foundation, a non-profit
organization of which Mr. Douglass is the President; 89,420 shares in the
Douglass Charitable Remainder Unitrust, of which Mr. Douglass is trustee;
63,100 shares owned by Helen D. Douglass, Mr. Douglass' wife. Approximately
350,000 shares, which are not included in the table, are held by various
other members of Mr. Douglass' family and Mr. Douglass disclaims beneficial
ownership of these shares.
(5) Based on a Schedule 13G dated February 12, 1998, in which T. Rowe Price
Associates, Inc. reported that as of December 31, 1997, it or T. Rowe Price
Small Cap Value Fund, Inc. had shared voting power over none of such shares,
sole voting power over 752,400 of such shares, and sole dispositive power
over 823,900 of such shares. T. Rowe Price Associates, Inc. and T. Rowe
Price Small Cap Value Fund, Inc. disclaim beneficial ownership of all such
shares.
(6) Includes 7,000 shares subject to options exercisable within 60 days.
(7) Includes 4,950 shares subject to options exercisable within 60 days.
(8) Includes 600 shares subject to options exercisable within 60 days.
(9) Includes 5,200 shares subject to options exercisable within 60 days.
(10) Includes 7,850 shares subject to options exercisable within 60 days.
(11) Includes 75,550 shares subject to options exercisable within 60 days.
2
<PAGE>
ITEM 1: ELECTION OF DIRECTORS
The By-Laws of the Company provide that the number of directors which
shall constitute the whole board shall be fixed and determined from time to time
by resolution adopted by the Board of Directors. Each director will serve until
the next annual meeting of stockholders and until his successor is elected and
qualified. Unless otherwise instructed, shares represented by properly executed
proxies in the accompanying form will be voted for the individuals nominated by
the Board of Directors. Although the Board of Directors anticipates that the
listed nominees will be able to serve, if at the time of the meeting any such
nominee is unable or unwilling to serve, such shares may be voted at the
discretion of the proxy holders for a substitute nominee. Certain information
concerning such nominees and the other directors, including all positions with
the Company and principal occupations during the last five years, is set forth
below:
3
<PAGE>
<TABLE>
<CAPTION>
SHARES OF STOCK
FIRST BENEFICIALLY PERCENTAGE
NAME AND PRINCIPAL BECAME OWNED AS OF OF COMMON
OCCUPATION A FEBRUARY 27, STOCK
OR EMPLOYMENT(1) AGE DIRECTOR 1998(2) OUTSTANDING(3)
----------------------------- ----- --------- ------------------- ------------
<S> <C> <C> <C> <C>
Donald J. Douglass 66 1969 1,282,640(4) 13.1%
Chairman of the Board of
Directors And Chief
Executive Officer of the
Company
Oran F. Logan 54 1984 262,329(5) 2.7%
President and Chief
Operating Officer
Of the Company
Joseph C. Graf 69 1969 100 *
Retired; Former Executive
Director Of The Cullen
Foundation
O. S. Simpson, Jr. 62 1969 25,830(6) *
President of Toddy
Products, Inc. (Coffee
maker manufacturer)
William R. Thomas 69 1969 __ (7) *
Chairman of the Board and
President Of Capital
Southwest Corporation (a
Business Development
Company Registered under
the Investment Company Act
of 1940)
James B. Skaggs (8) 60 1996 100 *
Chairman of the Board of
Directors, President and
Chief Executive Officer
Of Tracor, Inc.
David H. Morris (9) 56 1996 __ *
Retired President and
Chief Operating Officer
of The Toro Company
</TABLE>
- ------------
* Less than 1% of class
(1) Except as otherwise indicated, there has been no change in principal
occupation or employment during the past five years.
(2) Except as otherwise indicated, in no case is voting or investment power
shared with others.
(3) The calculation of percent of class is based on the number of shares of
Common Stock outstanding as of February 27, 1998, 9,684,874 shares, plus
75,550 shares subject to options exercisable within 60 days, plus 62,500
shares subject to exercisable warrants.
(4) See Footnote 4 on page 2.
(5) Includes 27,500 shares subject to options exercisable within 60 days.
(6) Excludes 13,916 shares owned by Mr. Simpson's wife. Mr. Simpson disclaims
beneficial ownership of these shares.
(7) See Footnote 3 on page 2.
(8) Mr. Skaggs has served as President and Chief Executive Officer of Tracor
since November 1990. He was elected Chairman of the Board in December 1993.
(9) Mr. Morris retired from his positions of President and COO and Director of
The Toro Company on November 1, 1995.
4
<PAGE>
INFORMATION CONCERNING DIRECTORS
None of the nominees for director or the executive officers of the Company
has a family relationship with any of the other executive officers or other
nominees for director. Except for Mr. Douglass, Mr. Morris, Mr. Skaggs and Mr.
Thomas, none of the directors or nominees is a director of any other company
which has a class of securities registered under, or is required to file reports
under, the Securities Exchange Act of 1934 or of any company registered under
the Investment Company Act of 1940. Mr. Douglass is a director of First City
Financial Corporation. Mr. Morris is a director of International Comfort
Corporation. Mr. Skaggs is a Director of Tracor, Inc. Mr. Thomas is a director
of Capital Southwest Corporation, Encore Wire Corporation and Palm Harbor Homes,
Inc.
VOTE REQUIRED. A PLURALITY OF THE VOTES CAST AT THE ANNUAL MEETING IS
REQUIRED FOR THE ELECTION OF EACH INDIVIDUAL NOMINATED BY THE BOARD OF
DIRECTORS. ALL PROXIES WILL BE VOTED FOR UNLESS A CONTRARY CHOICE IS INDICATED.
THE BOARD HAS UNANIMOUSLY APPROVED THE SLATE OF DIRECTORS AND
RECOMMENDS ITS APPROVAL BY THE STOCKHOLDERS
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended December 31, 1997, the Board of Directors
held eight meetings. Mr. Simpson missed one meeting, Mr. Morris missed three
meetings, and Mr. Skaggs missed three meetings. The other directors attended all
meetings. The Board of Directors adopted Resolutions by Unanimous Written
Consent on three occasions.
The Audit Committee of the Board of Directors, which consists of Messrs.
Graf, Morris and Simpson, met three times during fiscal 1997. Mr. Morris missed
one meeting. The functions of the Audit Committee are to recommend the
appointment of the Company's independent auditors, to review the arrangements
for and the scope of the annual audit and to review internal accounting
controls.
The Compensation/Nomination Committee of the Board of Directors, which
consists of Messrs. Graff, Morris, Simpson, Skaggs, and Thomas, each of whom is
an outside director, met three times during fiscal 1997. The functions of the
Compensation/Nomination Committee are to review and make recommendations
concerning the compensation of officers and other key management personnel,
including the granting of stock options and the nomination of directors.
5
<PAGE>
COMPENSATION OF OFFICERS AND DIRECTORS
The following table sets forth a summary of compensation for the fiscal
year ended December 31, 1997, paid by the Company to the Company's Chief
Executive Officer, Donald J. Douglass and the six highest paid executive
officers of the Company, as well as the compensation paid to each such
individual during the Company's last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
----------------------------- ----------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1)(2) (#) ($) (3)
- ------------------------------ ------ --------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Donald J. Douglass ........... 1997 200,000 105,000 -- 85,673
Chairman of the Board and .. 1996 200,000 180,000 -- 18,370
Chief Executive Officer .... 1995 200,000 180,000 -- 18,370
Oran F. Logan ................ 1997 200,000 85,000 -- 57,906
President and Chief ........ 1996 196,667 185,000 -- 7,121
Operating Officer .......... 1995 186,666 175,000 -- 7,121
Jim A. Smith(4) .............. 1997 136,668 40,700 -- 4,675
Executive Vice President and 1996 94,583 -- 20,000 --
Chief Financial Officer
Robert H. George ............. 1997 93,000 22,070 -- 2,820
Vice President, Secretary, . 1996 90,000 21,915 -- 2,310
and Treasurer .............. 1995 87,000 21,760 -- 2,400
Geoffrey Davies .............. 1997 100,173 43,711 -- 11,555(5)
Managing Director .......... 1996 86,695 31,210 5,000 10,849(5)
Alamo Group (EUR) Ltd. ..... 1995 80,636 26,322 8,000 9,811(5)
Ian Burden (6) ............... 1997 95,000 29,100 -- 3,184
Vice President ............. 1996 92,000 22,100 -- 2,622
Alamo Industrial Marketing . 1995 90,000 14,000 -- 2,925
John C. Moon(6) .............. 1997 88,333 28,100 -- 825
Vice President ............. 1996 83,333 22,100 5,000 3,345
Agricultural Marketing ..... 1995 78,333 29,920 -- 3,621
</TABLE>
- ------------
(1) Bonuses for 1997 include an Objective Bonus earned in 1997 but not paid
until 1998 and discretionary bonuses paid in 1997.
(2) 1996 and 1995 include discretionary bonuses approved and paid in those
years.
(3) The amounts represent the employer's contribution to the Alamo Group (USA)
Inc. tax-qualified retirement plan the "401(k) Plan" . In the case of Mr.
Douglass and Mr. Logan, the amounts include 401K restoration payments in
Fiscal 1997 of $65,873 and $49,889 respectively and life insurance
premiums paid by the Company in the amount of $13,600 and $2,494,
respectively, for each of Fiscal 1995, 1996 and 1997.
(4) Mr. Smith was employed in April, 1996,and his base annual salary was
$130,000.
(5) The amount reflects Alamo Group (EUR) Ltd. contribution to Mr. Davies'
retirement plan in the United Kingdom.
(6) Mr. Burden and Mr. Moon are Vice Presidents-Marketing of Alamo Group (USA)
Inc., a wholly-owned subsidiary of the Company.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted in 1997.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE FY-END (#) FY-END ($)
EXERCISE REALIZED EXERCISABLE(E)/ EXERCISABLE (E)/
NAME (#) ($)(1) UNEXERCISABLE(U) UNEXERCISABLE (U)(2)
- -------------------------- ------------ ------------ ---------------- ----------------------
<S> <C> <C> <C> <C>
Donald J. Douglass . 80,000 630,000 20,000 E 203,750 E
- U - U
Oran F. Logan ...... 85,000 666,875 27,500 E 276,406 E
- U - U
Jim A. Smith ....... 1,000 625 7,000 E 20,563 E
12,000 U 35,250 U
Robert H. George ... 750 5,024 4,950 E 41,362 E
600 U 3,785 U
Geoffrey Davies .... 150 1,106 600 E 5,813 E
- U - U
Ian Burden ......... 400 1,598 5,200 E 32,799 E
1,600 U 10,092 U
John C. Moon ....... 1,250 9,219 7,850 E 65,062 E
1,000 U 6,308 U
</TABLE>
- ------------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the stock as of the exercise date.
(2) These figures were calculated assuming a fiscal year-end market price of
$21.6875 per share.
7
<PAGE>
DIRECTOR AND ADVISOR COMPENSATION
Each director receives $1,000 for each meeting of the Board of Directors,
and $500 for each meeting of any committee thereof which does not occur on the
same day as the Board meeting, attended by the director. The Company pays
directors who are not employees of the Company an additional $6,000 per year.
All payments to directors are subject to an annual aggregate limit of $16,000 in
fees per director, exclusive of expense reimbursements. Directors are reimbursed
for reasonable expenses incurred as a result of attending meetings of the Board
or committees thereof. Mr. Thomas' fees are paid directly to his employer,
Capital Southwest.
The Company employs certain advisors, namely Messrs. H. Norman Abramson,
Stanley L. Blend, Robert R. Lende, and Donald K. Rice, to advise the Board of
Directors on certain business matters. For their services, each of the advisors,
except Donald K. Rice, receives $2,000 per year plus an additional $1,000 for
each meeting of the Board of Directors and $500 for each meeting of any
committee thereof which does not occur on the same day as the Board meeting,
attended by the advisor, subject to an annual aggregate limit of $8,000 in fees
per advisor, exclusive of expense reimbursements. Mr. Rice receives no fees for
his services. Advisors are also reimbursed for all reasonable expenses relating
to their attendance at meetings of the Board of Directors or any committees
thereof.
EMPLOYMENT AGREEMENTS
All executive officers of the Company serve at the discretion of the Board
of Directors. The executive officers are appointed to their positions by the
Board until the next annual meeting of directors or until their successors have
been duly qualified and elected.
The advisors serve pursuant to annual contracts that are renewable
annually at the discretion of the Compensation/Nomination Committee of the Board
of Directors. The advisors agree to use reasonable efforts to attend meetings of
the Board of Directors and to spend an additional four business days in each
fiscal year consulting or advising the Company with regard to any questions or
problems that may arise. Each advisor contract contains a confidentiality
agreement that impose certain restrictions on the advisor and an agreement by
the Company to indemnify the advisor to the fullest extent provided by Delaware
corporate law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1990 and 1997, the Company loaned $700,000 and $270,000 respectively to
Mr. Douglass. In 1997, the Company loaned $310,000 to Mr. Logan. Proceeds from
these loans were used to pay personal income taxes resulting from the exercise
of non-qualified options. The principal balance bears interest at the mid-term
Applicable Federal Rate and is payable quarterly. On December 31, 1991, pursuant
to approval of the Board of Directors, the 700,000 note was renewed with a
maturity date of December 31, 1999. Mr. Douglass's and Mr. Logan's notes for
$270,000 and $310,000, respectively, mature on December 31, 2006. Mr. Douglass's
loans are secured by 100,000 shares of the Company's Common Stock. Mr. Logan's
loan is secured by 23,000 shares of the Company's Common Stock.
The Company has adopted the Executive Loan Program of 1991 (the "Loan
Program") pursuant to which the Company may make loans from time to time to the
Chief Operating Officer, any Vice President or any other employee of the Company
designated by the Compensation/Nomination Committee of the Board of Directors
("Qualified Borrowers") to purchase stock of the Company. All loans are secured
by the pledge of the shares being purchased. Under the Loan Program, the maximum
aggregate amount which the Chief Operating Officer may borrow is $400,000 and
the maximum aggregate amount any other Qualified Borrower may borrow is
$200,000. Each loan under the Loan Program bears interest, payable quarterly, at
the base rate of interest as published by NationsBank of Texas, N.A. As of the
date hereof, there is outstanding under the Loan Program a total of $20,500 from
Mr. George and an aggregate of $25,569 from all other Qualified Borrowers.
The Company pays the premiums for life insurance policies in the face
amount of $500,000 and $250,000 for Mr. Douglass and Mr. Logan, respectively. In
the event of the death of either Mr. Douglass or Mr. Logan, the proceeds from
the applicable insurance policy will be applied to the payment of any
outstanding loans the decedent may have from the Company, with the balance, if
any, going to his estate.
8
<PAGE>
Management believes that the transactions described above were on terms no
less favorable to the Company than otherwise available from unaffiliated third
parties. Any future transactions between the Company and its officers,
directors, principal stockholders, affiliates or advisors will be on terms no
less favorable to the Company than those reasonably obtainable from third
parties and will be approved or ratified by a majority of the Company's
independent directors.
REPORT OF THE COMPENSATION/NOMINATION COMMITTEE
THE FOLLOWING PARAGRAPHS CONSTITUTE THE REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS (THE "COMMITTEE") ON EXECUTIVE COMPENSATION
POLICIES. IN ACCORDANCE WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION, THIS REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO
ANY STATEMENTS OR REPORTS FILED BY THE COMPANY WITH THE SEC THAT DO NOT
SPECIFICALLY INCORPORATE THIS REPORT BY REFERENCE.
The goals of the Company's compensation programs are to attract, retain
and motivate competent executive officers and key managers who have the
experience and ability to contribute materially to the long-term success of the
Company. The principal elements of compensation for the executive officers and
key managers are base salary, bonus payments and stock options.
In April 1997, the Committee reviewed and approved base salaries effective
May 1, 1997, for each of the executive officers and key managers on an
individual basis, taking into consideration individual contributions to the
Company's performance, length of tenure with the Company, surveys of
compensation levels of comparable positions and internal equities among
positions. Among other things, the Committee considered each officer and key
manager's contributions to the success of the Company's business in recent years
and to its foundations for sustained earnings growth, as well as each
participant's role in achieving a higher level of customer satisfaction,
increased market penetration, and efficient utilization of assets and employees
in his area of responsibility.
During 1997, the Committee, in its discretion, determined that the Chief
Executive Officer and Chief Operating Officer would not receive a cash bonus
based upon the Company's performance in 1996, and similarly other key managers'
bonuses would be materially reduced.
From time to time, the Committee has also granted stock options to
executive officers and key managers/employees to align their long-term interests
with those of stockholders. Such options are granted at an exercise price not
less than the fair market value of the stock on the date of the grant and thus
have no value unless the value of the Company's stock appreciates. The Committee
believes that these options provide a significant incentive for the option
holders to enhance the value of the Company's common stock by continually
improving the Company's performance. During the three years ended December 31,
1997, options to purchase 56,000 shares were granted and options on 224,400
shares were available for grant at the end of 1997.
In December 1997, the Committee established an Incentive Compensation Plan
for the Chief Executive Officer, Chief Operating Officer, key managers and
certain other designated key employees. The Incentive Compensation Plan
comprises an Objective Incentive Compensation Component ("Objective ICC") and a
Subjective Incentive Compensation Component ("Subjective ICC").
The Objective ICC at Target represents two-thirds (2/3) of each
participant's Target Bonus. Target earnings for the Company, or relevant
operating unit earnings, are determined by the Committee based upon projected
earnings and the Committee's judgment of a reasonable target, considering, in
its discretion, the performance of comparable businesses, anticipated market
conditions and appropriate goals for both earnings growth and return on capital.
At the beginning of each year, a Target Bonus is established for each
participant and approved by the Committee. Based upon the relationship of actual
earnings to target earnings, a participant's actual Objective Bonus may range
from zero to 175% of the Target Objective Bonus. The Target Objective Bonus is
increased at the rate of three times any percentage by which actual earnings
exceed target and reduced at the rate of five times any percentage short-fall.
Objective Bonuses for a year are paid in February of the following year. The
aggregate of all actual Objective Bonuses is subject to pro rata limitation to
the extent necessary to prevent any such bonuses from causing the Company's
annual net income to be less than fifteen percent of beginning shareholders'
equity.
9
<PAGE>
The Subjective ICC at target represents one-third (1/3) of a participant's
Target Bonus. The actual Subjective ICC Bonus is based upon a subjective
evaluation of the participant's performance and progress in achieving goals and
objectives. A participant's actual Subjective Bonus may range from zero to 100%
of the Target Subjective Bonus and is paid in April of each year. Subjective
Bonuses are not earned or paid, however, if actual earnings for the immediately
preceding fiscal year are less than sixty percent of target earnings.
The Committee established Target Bonuses for the years ended December 31,
1997 and December 31, 1998, expressed as a percentage of annual base salary, for
the Chief Executive Officer and Chief Operating Officer are as follows:
1997 1998
------------------------ ------------------------
Target Target Target Target
Objective Subjective Objective Subjective
Bonus Bonus Bonus Bonus
---------- ---------- ---------- ----------
CEO ..................... 50% _ 50% 25%
COO ..................... 40% _ 40% 20%
The Committee, in its sole discretion, reserves the right to modify or
terminate the Incentive Compensation Plans and/or discontinue payments under the
Plans at any time and the Committee, in its sole discretion, is entitled to
interpret the Plans.
Dated: March 27, 1998 William R. Thomas, Chairman
Joseph C. Graf
David H. Morris
O. S. Simpson, Jr.
James B. Skaggs
10
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth the cumulative total return to the
Company's Stockholders during a 57 month period ended December 31, 1997, as well
as the performance of an overall stock market index (S&P 500 Index) and the
Company's selected peer group index (Russell 2000 Index).
The Company believes that, at this point in its development, there does
not exist a representative industry peer group of companies with a similar
business segment profile. The Securities and Exchange Commission has indicated
that companies may use a base other than industry or line of business for
determining its peer group index, such as an index of companies with similar
market capitalization. Accordingly, the Company has selected the Russell 2000
Index, a widely used small market capitalization index, to use as a
representative peer group.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
Among S&P 500 Index, Russell 2000 Index, and Alamo Group Inc. ("ALG")
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
RUSSELL
2000
PERIOD S&P 500 INDEX INDEX ALG
------------------ --------------- ------------ --------------
March 1993 100.00 100.00 100.00
December 1993 107.70 117.63 139.38
December 1994 109.12 115.48 146.28
December 1995 150.13 148.27 166.99
December 1996 184.60 172.74 162.72
December 1997 246.19 211.49 210.74
- -------------
Assumes $100.00 invested on March 18, 1993 in ALG stock or on February 28, 1993
in the S&P 500 Index or Russell 2000 Index including reinvestment of dividends
11
<PAGE>
ITEM 2. APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP to
examine the financial statements of the Company for the 1998 fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting of Stockholders with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
A proposal will be presented at the Annual Meeting to ratify the
appointment of Ernst & Young LLP as the Company's independent auditors. If
Stockholder approval should be withheld, the Board of Directors would consider
an alternative appointment for the succeeding fiscal year. The Board of
Directors recommends that the Stockholders approve the appointment of Ernst &
Young LLP.
VOTE REQUIRED. THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE SHARES OF
COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING IS
REQUIRED. ALL PROXIES WILL BE VOTED FOR ITEM 2. UNLESS A CONTRARY CHOICE IS
INDICATED.
THE BOARD HAS UNANIMOUSLY APPROVED APPOINTMENT OF
ERNST & YOUNG LLP
AND RECOMMENDS APPROVAL BY THE STOCKHOLDERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Donald J. Douglass, Chairman of the Board, filed a Form 4 seven days
late reporting a purchase of stock. Joseph C. Graf, Director, failed to file a
Form 4 to report stock sold in December, 1997 by his Charitable Remainder
Unitrust, but timely filed a form 5.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting must be received in writing by the Company at its principal executive
offices not later than November 18, 1998. The Company's principal executive
offices are located at 1502 E. Walnut St., Seguin, Texas, 78155. Please direct
all such proposals to the attention of the President of the Company.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies may
be solicited through the mail and through telephonic communications, or meetings
with Stockholders or their representatives by directors, officers and other
employees of the Company who will receive no additional compensation therefor.
The Company requests persons such as brokers, nominees and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy material to their
principals and to request authority for the execution of the proxy, and the
Company will reimburse such persons for their reasonable expenses.
12
<PAGE>
OTHER MATTERS
No business other than the matters set forth in this Proxy Statement is
expected to come before the meeting, but should any other matters requiring a
vote of Stockholders arise, including a question of adjourning the meeting, the
persons named in the accompanying Proxy will vote thereon according to their
best judgment in the interests of the Company. If any of the nominees for office
of director should withdraw or otherwise become unavailable for reasons not
presently known, the persons named as proxies may vote for another person in his
place in what they consider the best interests of the Company.
A copy of the Company's Annual Report on Form 10-K including financial
statements filed with the Securities and Exchange Commission for the year ended
December 31, 1997, is included in the Annual Report to Shareholders which
accompanies these proxy materials. Copies of any exhibit(s) to the Form 10K will
be furnished on request and upon the payment of the Company's expenses in
furnishing such exhibit(s). Any request for exhibits should be in writing
addressed to Robert H. George, Secretary, Alamo Group Inc., 1502 E. Walnut St.,
Seguin, Texas 78155.
By Order of the Board of Directors
Robert H. George
Secretary
Dated: March 27, 1998
13
<PAGE>
ALAMO GROUP INC.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTOR
The undersigned hereby appoints Donald J. Douglass, Oran F. Logan or
Robert H. George any one of them, as proxies or proxy with full power of
substitution and revocation as to each of them, to represent the undersigned and
to act and vote, with all powers which the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of Alamo Group Inc. to
be held at 8:30 a.m. on the 6th floor of the NationsBank Plaza, 300 Canvent
Street, San Antonio, Texas, Tuesday, April 28, 1998 on the following matters and
in their discretion on any other matters which may come before the meeting or
any adjournments thereof. Receipt of Notice-Proxy Statement dated March 27, 1998
is acknowledged.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
^FOLD AND DETACH HERE^
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
---
ITEM 1. ELECTION OF CLASS I DIRECTORS FOR TERMS EXPIRING IN 2001:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY Donald J. Douglass
to vote for all nominees Joseph C. Graf
listed at right Oran F. Logan
David H. Morris
O.S. Simpson, Jr.
James B. Skaggs
William R. Thomas
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
________________________________________________
ITEM 2 - Proposal FOR ratification of appointments of Ernst & Young as
the Company's auditors for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 3 - In thier discretion, upon such other business as may properly
come before the meeting
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
In the absence of such direction the proxy will be voted FOR the
nominees listed in Item 1 and FOR the Proposal set forth in Item 2.
I PLAN TO ATTEND THE MEETING [ ]
- --------------------------------------------------------------------------------
(Sign exactly as name(s) appears at left. If
shares are held jointly, each holder should
sign. If signing for an estate, trust or
corporation, title or capacity should be
stated.)
Please date, sign and return this Proxy in
the enclosed business envelope.
Date ________________________________, 1998
____________________________________________
____________________________________________
(SIGNATURE IF HELD JOINTLY)
^FOLD AND DETACH HERE^
