<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 Section 240.14a-11(c) or Section 240.14a-12
ABC RAIL PRODUCTS CORPORATION
- --------------------------------------------------------------------------------
(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 (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:
---------------------------------------------------------------------------
[_] 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:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
ABC RAIL PRODUCTS CORPORATION
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
ABC Rail Products Corporation (the "Company") to be held at the Stock Exchange
Trading Room of The Art Institute of Chicago, located at 230 South Columbus
Drive, Chicago, Illinois, 60603, on Friday, November 21, 1997 at 9:00 a.m.
This booklet includes the Notice of Annual Meeting of Stockholders and the
Proxy Statement. The Proxy Statement describes the business to be transacted
at the meeting and provides other information concerning the Company which you
should consider when voting your shares. The principal business of the Annual
Meeting will be the election of directors and the ratification of the
appointment of independent accountants.
All stockholders are urged to attend the meeting or to vote by proxy. If you
do not expect to attend the meeting in person, please sign, date and return
the accompanying proxy in the enclosed postage prepaid envelope. If you later
find that you are able to attend the Annual Meeting and would like to vote in
person, you can revoke your proxy at any time before the voting, and vote in
person.
LOGO
Donald W. Grinter
Chairman of the Board
and Chief Executive Officer
October 15, 1997
<PAGE>
LOGO
ABC RAIL PRODUCTS CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 21, 1997
----------------
Notice is hereby given that the annual meeting of stockholders of ABC Rail
Products Corporation (the "Company") will be held at the Stock Exchange
Trading Room, located at The Art Institute of Chicago, 230 South Columbus
Drive, Chicago, Illinois, 60603, on Friday, November 21, 1997 at 9:00 a.m. for
the following purposes:
1.To elect seven directors;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending July 31, 1998;
and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on September 30, 1997 are
entitled to receive notice of, and to vote at, the annual meeting and any
postponements or adjournments thereof.
By Order of the Board of Directors
LOGO
D. Chisholm MacDonald
Secretary
Chicago, Illinois
October 15, 1997
<PAGE>
ABC RAIL PRODUCTS CORPORATION
200 SOUTH MICHIGAN AVENUE
SUITE 1300
CHICAGO, ILLINOIS 60604
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ABC Rail Products Corporation, a Delaware
corporation (the "Company") to the holders of the Company's Common Stock, $.01
par value (the "Common Stock"), in connection with the annual meeting of
stockholders of the Company (the "Annual Meeting") to be held at 9:00 a.m. on
Friday, November 21, 1997, and all postponements or adjournments thereof. This
Proxy Statement, Notice of Annual Meeting of Stockholders and accompanying
proxy card are first being mailed to stockholders on or about October 15,
1997, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders.
GENERAL
Only stockholders of record at the close of business on September 30, 1997
(the "Record Date") are entitled to receive notice of the Annual Meeting and
to vote the shares of Common Stock held by them on that date at the Annual
Meeting or any postponements or adjournments thereof. The presence at the
Annual Meeting, in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding at the close of business on the Record Date
will constitute a quorum. Each outstanding share entitles its holder to cast
one vote on each matter to be voted upon at the Annual Meeting. As of the
Record Date, 8,954,082 shares of Common Stock were outstanding.
If the accompanying proxy card is properly signed and returned to the
Company and is not revoked, it will be voted in accordance with the
instructions contained therein. Unless contrary instructions are given, the
persons designated as proxy holders in the proxy card will vote for the
election as directors of the slate of nominees proposed by the Board of
Directors, for ratification of the appointment of Arthur Andersen LLP ("Arthur
Andersen") as the Company's independent accountants for the fiscal year ending
July 31, 1998 ("Fiscal 1998") and as recommended by the Board of Directors or,
if no such recommendation is given, in their own discretion, with regard to
all other matters. Each stockholder may revoke a previously granted proxy at
any time before it is voted by filing with the Secretary of the Company a
revoking instruction or another duly executed and subsequently dated proxy or
by attending the meeting and voting in person. Attendance at the Annual
Meeting will not, in itself, constitute revocation of a previously granted
proxy.
Under Delaware law, properly executed proxies that are marked "abstain" or
are held in "street name" by brokers that are not voted on one or more
particular proposals (if otherwise voted on at least one proposal) will be
counted for purposes of determining whether a quorum has been achieved at the
Annual Meeting. Abstentions will have the same effect as a vote against the
proposal to which such abstention applies. Broker non-votes will be treated
neither as a vote for nor as a vote against any of the proposals to which such
broker non-votes apply. Proxies and ballots will be received and tabulated by
American Stock Transfer and Trust Company, the Company's transfer agent.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. The Company will also request brokerage firms, banks, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares of Common Stock as of the Record Date and will reimburse the cost of
forwarding the proxy materials in accordance with customary practice.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 1, 1997 of (a) persons owning of
record or known to the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, (b) each director, (c) each of the
Named Executive Officers (as defined under "Executive Compensation" below) and
(d) all current directors and executive officers of the Company as a group.
All information with respect to beneficial ownership has been furnished by the
respective director, executive officer or stockholder, as the case may be, or
has been derived from documents filed by such stockholder with the Securities
and Exchange Commission (the "Commission"). To the knowledge of the Company,
each of such stockholders has sole voting and investment power over the shares
indicated unless otherwise noted.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES PERCENT
---- ------------ -------
<S> <C> <C>
Investment Advisers, Inc............................. 853,000 (1) 9.5%
The Capital Group Companies, Inc. ................... 621,100 (2) 6.9
Capital Guardian Trust Company....................... 600,100 (2) 6.7
Schroder Wertheim Investment Services, Inc........... 504,400 (3) 5.6
State of Wisconsin Investment Board.................. 500,000 (4) 5.6
LGT Asset Management, Inc............................ 454,950 (5) 5.1
Janus Capital Corporation/Thomas H. Bailey/
Janus Venture Fund.................................. 450,000 (6) 5.0
Donald W. Grinter.................................... 360,216 (7) 4.0
D. Chisholm MacDonald................................ 115,000 (8) 1.3
David G. Kleeschulte................................. 68,668 (9) *
Rick M. Turner....................................... 6,500 (10) *
Ben R. Yorks......................................... 0 *
Eugene S. Ziemba..................................... 0 *
Norman M. Doerr...................................... 13,107 *
Jean-Pierre M. Ergas................................. 15,000 (11) *
Donald R. Gant....................................... 22,000 (12) *
Clarence E. Johnson.................................. 25,000 (13) *
James E. Martin...................................... 18,000 (14) *
George W. Peck IV.................................... 13,000 (15) *
All current directors and executive
officers as a group (12 persons).................... 884,461 (16) 9.6%
</TABLE>
- --------
*Less than 1.0%
(1) According to the most recently filed Schedule 13G of this entity, this
entity exercises sole voting and dispositive power over 651,000 shares
and shared voting and dispositive power over 202,000 shares. The shares
are held by various custodian banks for various clients of the listed
entity. The address for Investment Advisers, Inc. is 3700 First Bank
Place, Box 357, Minneapolis, Minnesota 55440.
(2) According to the most recently filed joint Schedule 13G of these
entities, The Capital Group Companies, Inc. ("CGC") has sole voting power
over 591,100 shares and sole dispositive power over 621,100 shares. CGC
is the parent holding company of a group of investment management
companies that hold dispositive power, and in some cases, voting power
over the shares. Such investment management companies provide investment
advisory and management services for their respective clients, which
include registered investment companies and institutional accounts. CGC
states in its Schedule 13G that it does not have dispositive power or
voting power over any of the shares and has disclaimed beneficial
ownership of the shares. The shares reported by CGC include the shares
owned by Capital Guardian Trust Company ("CGTC"), a wholly-owned bank
subsidiary of CGC, and other subsidiaries of CGC, none of which by itself
owns 5% or more of the outstanding shares. CGTC is the beneficial owner
of the 600,100 shares as a
2
<PAGE>
result of its serving as the investment manager of various institutional
accounts. It states in its Schedule 13G that it has sole voting power over
570,100 shares and sole dispositive power over 600,100 shares and
disclaims beneficial ownership of all shares. The address of CGC and CGTC
is 333 South Hope Street, Los Angeles, California 90071.
(3) According to the most recently filed joint Schedule 13G of this entity
("SWIS"), Schroder Capital Management International Inc. ("SCMI Inc.")
and Schroder Capital Management International Ltd. ("SCMI Ltd."), these
entities are registered investment advisers and affiliates, but do not
affirm group status. SWIS has sole voting and dispositive power over
504,400 shares; SCMI Inc. has sole voting and dispositive power over
191,526 shares; and SCMI Ltd. has sole voting and dispositive power over
12,700 shares.
(4) According to the most recently filed Schedule 13G of this entity, it is a
government agency which manages public pension funds subject to
provisions comparable to the Employee Retirement Income Security Act of
1974 ("ERISA") and has sole voting and dispositive power over all shares.
Its address is P.O. Box 7842, Madison, Wisconsin 53707.
(5) According to the most recently filed Schedule 13G of this entity, its
address is 50 California, 27th Fl., San Francisco, California 94111.
(6) According to the most recently filed joint Schedule 13G of these entities
and Mr. Bailey, these entities and Mr. Bailey share voting and
dispositive power over all shares. Janus Capital Corporation ("Janus
Capital") is the beneficial owner of these shares through its role as
investment adviser or sub-adviser which furnishes investment advice to
several investment companies registered under Section 8 of the Investment
Company Act and individual and institutional clients (the "Managed
Portfolios") which hold these shares. Thomas H. Bailey is a 12.2% owner
and the President and Chairman of the Board of Janus Capital. Janus
Venture Fund is one of the Managed Portfolios to which Janus Capital
provides investment advice, and the interest of Janus Venture Fund
amounts to all shares. The address for these entities and Mr. Bailey is
100 Fillmore Street, Suite 300, Denver, Colorado 80206-4923.
(7) Includes 87,000 shares subject to outstanding options which are
exercisable as of or within 60 days of September 1, 1997.
(8) Includes 55,000 shares subject to outstanding options which are
exercisable as of or within 60 days of September 1, 1997.
(9) Includes 43,750 shares subject to outstanding options which are
exercisable as of or within 60 days of September 1, 1997.
(10) Represents 6,500 shares subject to outstanding options which are
exercisable as of or within 60 days of September 1, 1997.
(11) Includes 10,000 shares subject to outstanding stock options which are
exercisable as of or within 60 days of September 1, 1997.
(12) Includes 15,000 shares subject to outstanding stock options which are
exercisable as of or within 60 days of September 1, 1997.
(13) Includes 15,000 shares subject to outstanding stock options which are
exercisable as of or within 60 days of September 1, 1997.
(14) Includes 10,000 shares subject to outstanding stock options which are
exercisable as of or within 60 days of September 1, 1997. Also includes
3,000 shares held in an irrevocable trust created for the benefit of Mr.
Martin's grandchildren, with respect to which Mr. Martin's shares
dispositive power with the trustee, who is his daughter.
(15) Includes 10,000 shares subject to outstanding stock options which are
exercisable as of or within 60 days of September 1, 1997.
(16) Includes 252,250 shares subject to outstanding options which are held by
current directors and executive officers and are exercisable as of or
within 60 days of September 1, 1997. In connection with the Company's
acquisition of American Systems Technologies, Inc. ("AST") in December of
1996, Steven M. Yoder, President of AST and an executive officer of the
Company, pursuant to the Supplemental Agreement by and among the Company
and certain shareholders of AST, agreed to vote for the election
3
<PAGE>
of the slate of nominees to the Board of Directors of the Company
presented by the Board of Directors of the Company and on all other
matters to be voted upon by the stockholders, in accordance with the
recommendation of the Board of Directors of the Company. Mr. Yoder
beneficially owns 227,970 shares, or approximately 2.5%, of the
outstanding Common Stock of the Company as of September 1, 1997.
ELECTION OF DIRECTORS
The Board of Directors presently consists of eight members. The Board has
determined that, in keeping with trends in stockholder governance, at the next
annual meeting only one Director who has a current position with the Company
should be nominated as a candidate. In that connection, Mr. MacDonald, a
current member of the Board of Directors, will not seek reelection as a
Director at the Annual Meeting. The Board of Directors has reduced the size of
the Board of Directors to seven members upon Mr. MacDonald's resignation as a
Director effective the day immediately preceding the Annual Meeting.
Accordingly, the proxies cannot be voted for more than seven directors. All
directors hold office until their successors have been elected or until their
earlier resignation or removal.
At the Annual Meeting, stockholders will elect a board consisting of seven
directors. Unless authority to do so is specifically withheld, the persons
named in the accompanying proxy will vote for the election as directors of the
slate of nominees named below. Under Delaware law, the seven nominees who
receive the most votes at the meeting will be elected as directors. All of the
nominees are currently directors of the Company.
The name, duration of service as a director, age and current principal
position(s) with the Company of each director nominee of the Company is as
follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE PRINCIPAL POSITION(S)
---- -------- --- --------------------------------------
<S> <C> <C> <C>
Donald W. Grinter.... 1991 60 Chairman of the Board, Chief Executive
Officer and Director
Norman M. Doerr...... 1997 62 Director
Jean-Pierre M. Ergas. 1995 58 Director
Donald R. Gant....... 1994 68 Director
Clarence E. Johnson.. 1994 70 Director
James E. Martin...... 1995 70 Director
George W. Peck IV.... 1991 65 Director
</TABLE>
Donald W. Grinter. Mr. Grinter has served as a director of the Company since
1991. Mr. Grinter has also served as the Company's Chairman of the Board and
Chief Executive Officer since December 1993. From August 1991 until December
1993, Mr. Grinter served as the Company's President and Chief Executive
Officer and from August 1989 until August 1991, he served as the Company's
President and Chief Operating Officer. Prior to joining the Company, from June
1987 until August 1989, Mr. Grinter was President of the Supermarket Group of
Hussmann Corporation, a subsidiary of IC Industries (now Whitman Corporation),
the parent company of Abex Corporation ("Abex"), from which the Company
purchased substantially all of its assets in 1989. Mr. Grinter served as an
Executive Vice President of Abex from June 1984 until June 1987.
Norman M. Doerr. Mr. Doerr has served as a director of the Company since
January 1997. He has held various positions at Burlington Northern Santa Fe
Corporation during his 42 year career there, most recently serving as Vice
President--Purchasing and Material Management from 1990 to 1995. He also
serves on the Advisory Board for the Locomotive Management Officers
Association and as a member of the National Association of Purchasing
Management ("NAPM") and the Boy Scouts of America. He is the former director
of the Center for Advanced Purchasing Studies, which is affiliated with
Arizona State University, and the former Chairman of NAPM.
4
<PAGE>
Jean-Pierre M. Ergas. Mr. Ergas has served as a director of the Company
since July 1995. Since January 1996, he has been the Executive Vice President
of Alcan Aluminum Limited ("Alcan"), an international manufacturer of
aluminum. From June 1995 to January 1996, Mr. Ergas served as Senior Advisor
to the Chief Executive Officer of Alcan. During 1994, he served as a trustee
in residence of DePaul University. From 1991 to 1993, he served as Chairman
and Chief Executive Officer of American National Can Company ("ANC"), a
manufacturer of consumer goods packaging. From 1989 to 1991, Mr. Ergas served
as Chief Executive Officer of ANC. Mr. Ergas also serves as a director of
Brockway Standard Inc. and Dover Corporation.
Donald R. Gant. Mr. Gant has served as a director of the Company since 1994.
Since December 1990, he has been a limited partner of The Goldman Sachs Group,
L.P., of which Goldman, Sachs & Co., an investment banking firm, is its
principal affiliate. From 1962 to December 1990, he was a general partner of
Goldman, Sachs & Co. Mr. Gant is a director of Diebold Incorporated and The
Stride Rite Corporation.
Clarence E. Johnson. Mr. Johnson has served as a director of the Company
since 1994. Mr. Johnson previously served as President and Chief Executive
Officer and as a director of Borg-Warner Corporation, a manufacturing/service
conglomerate, from 1983 to 1987. From December 1987 to February 1990, he
served as Senior Vice President and Consultant of Kidder, Peabody & Co.
Incorporated, an investment banking firm.
James E. Martin. Mr. Martin has served as a director of the Company since
July 1995. From May 1995 until December, 1995, he served as the Senior Vice
President, Operations of Chicago and North Western Railway Company. From April
1994 to May 1995, he served as Executive Vice President, Operations of Chicago
and North Western Transportation Company. From 1989 to March 1994, Mr. Martin
was the President of The Belt Railway Company of Chicago. He is a member of
the National Freight Traffic Association.
George W. Peck IV. Mr. Peck has served as a director of the Company since
August 1991. Mr. Peck has been a special limited principal of Kohlberg & Co.,
LLC, a New York merchant banking firm, since 1987. From 1963 to 1987, he was a
Director and Vice President of Canny, Bowen Inc., an executive recruiting
firm. Mr. Peck serves as a director of Northwestern Steel and Wire Company,
ABT Building Products Corporation and The Lion Brewery, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE SLATE OF NOMINEES SET FORTH ABOVE.
COMMITTEES AND MEETINGS
The Company has standing Audit and Compensation Committees. The Company also
has a Committee (the "Director Plan Committee") for the 1994 Director Stock
Option Plan (the "Director Plan"). The Company does not have a nomination
committee.
Audit Committee. The Audit Committee is currently comprised of Messrs.
Doerr, Ergas and Gant. The functions of the Audit Committee are to recommend
annually to the Board of Directors the appointment of the independent public
accountants of the Company, discuss and review the scope and the fees of the
prospective annual audit, review the results thereof with the Company's
independent public accountants, review compliance with existing major
accounting and financial policies of the Company, review the adequacy of the
financial organization of the Company, review management's procedures and
policies relative to the adequacy of the Company's internal accounting
controls and compliance with federal and state laws relating to accounting
practices, and review and approve (with the concurrence of a majority of the
independent directors of the Company) transactions, if any, with affiliated
parties.
Compensation Committee. The Compensation Committee is currently comprised of
Messrs. Johnson, Martin and Peck. The functions of the Compensation Committee
are to review and approve annual salaries and bonuses for all officers,
administer the Company's existing stock option plans (other than the Director
Plan), and carry out the responsibilities required by the rules of the
Securities and Exchange Commission (the "Commission").
5
<PAGE>
Director Plan Committee. The Director Plan Committee is currently comprised
of Mr. Grinter and Mr. MacDonald, who was appointed to the Director Plan
Committee in October, 1996. Mr. MacDonald will cease to be a member of the
Director Plan Committee upon the effectiveness of his resignation from the
Board of Directors. The Director Plan Committee administers the Director Plan.
During the fiscal year ended July 31, 1997 ("Fiscal 1997"), five meetings of
the Board of Directors were held, four meetings of the Audit Committee were
held, four meetings of the Compensation Committee were held and one meeting of
the Director Plan Committee was held. All incumbent directors attended at
least 75%, in the aggregate, of the number of meetings held during their
tenure on the Board of Directors and the committees of which they were
members.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information relating to compensation for Fiscal
1997 and the fiscal years ended July 31, 1996 ("Fiscal 1996") and 1995
("Fiscal 1995") for the Company's chief executive officer, the other most
highly compensated executive officers of the Company whose total annual salary
and bonus exceeded $100,000, of whom there were only three in Fiscal 1997, and
two individuals who would have been one of the most highly compensated
executive officers but for the fact that they were not serving as executive
officers at the end of Fiscal 1997 (collectively, the "Named Executive
Officers") (determined by reference to Fiscal 1997). The amounts shown include
compensation for services in all capacities provided to the Company.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)(1)
- ------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donald W. Grinter 1997 274,992 0 0 0 9,092
(Chairman of the
Board and 1996 256,192 0 0 0 8,712
Chief Executive
Officer) 1995 240,000 0 0 20,000 9,172
D. Chisholm Mac-
Donald 1997 185,000 0 0 0 4,500
(Executive Vice
President-- 1996 172,898 0 0 0 4,557
Administration and 1995 165,000 0 0 20,000 1,547
Business Develop-
ment and Chief
Financial Officer)
David G.
Kleeschulte 1997 134,167 100,000 0 0 3,684
(President--China 1996 122,761 0 0 0 2,921
Investment Corpo-
ration) 1995 120,000 0 0 5,000 3,165
Rick M. Turner 1997 103,769 0 35,113(2) 12,000 3,138
(Vice President
and General 1996 0 0 0 0 0
Manager-Wheel 1995 0 0 0 0 0
Services
Division)
Ben R. Yorks 1997 40,832 0 0 0 134,414
(Former President
and Chief 1996 242,628 0 0 0 4,287
Operating Officer) 1995 225,000 0 12,232(2) 15,000 1,969
Eugene S. Ziemba 1997 26,667 0 0 0 136,975
(Former Vice Pres-
ident and 1996 152,309 0 15,560(3) 0 4,701
General Manager 1995 142,000 40,600 13,115(3) 10,000 3,950
- -Mechanical Divi-
sion)
</TABLE>
- --------
6
<PAGE>
- --------
(1) With the exception of amounts shown for Mr. Grinter, Mr. Yorks and Mr.
Ziemba, amounts represent employer matching contributions under the
Company's Savings and Investment 401(k) Plan (the "401(k) Plan"). Amounts
shown for Mr. Grinter for Fiscal 1997, Fiscal 1996 and Fiscal 1995 include
$4,092 for premiums paid on a life insurance policy on Mr. Grinter's life,
of which Mr. Grinter's spouse is the beneficiary and employer matching
contributions of $5,000, $4,620 and $5,080, respectively, under the 401(k)
Plan. The amount shown for Mr. Yorks for Fiscal 1997 consists of employer
matching contributions of $1,994 under the 401(k) Plan and $132,420 paid
pursuant to his retirement agreement dated as of October 2, 1996 (the
"Yorks Retirement Agreement"). See "Retirement and Change-in-Control
Arrangements." The amount shown for Mr. Ziemba consists of employer
matching contributions of $3,600 under the 401(k) Plan and $133,375
pursuant to the Company's severance program.
(2) Consists of relocation expenses.
(3) Consists of living expenses.
OPTIONS GRANTED AND VALUE OF OPTIONS
The following tables disclose, for each of the Named Executive Officers,
information regarding stock options granted during Fiscal 1997 and the value
of all stock options held by the Named Executive Officers at the end of Fiscal
1997. Mr. Turner was the only Named Executive Officer who was granted options
in Fiscal 1997. Mr. Ziemba was the only Named Executive Officer who exercised
any stock options in Fiscal 1997. There were no stock appreciation rights
granted or exercised during such year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS/SARS EXERCISE FOR OPTION TERM
OPTIONS/SARS GRANTED TO OR BASE (2)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ ------------ -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Rick M. Turner... 12,000 8.6% $15.625 4/18/07 125,248 310,499
</TABLE>
- --------
(1) Options are non-qualified stock options. Options vest with respect to 25%
of the shares per year over a four-year period beginning on the first
anniversary of the date of grant of the option, provided the optionee has
been continuously employed by the Company from the date of grant. In the
event of a "Sale of the Company," the Board may provide by written notice
that all outstanding options will become immediately exercisable and that
such options will terminate if not exercised as of the date of the Sale of
the Company or any other designated date, or that such options will
thereafter represent only the right to receive the excess of the
consideration per share of Common Stock offered in such Sale of the
Company over the exercise price of such options. A "Sale of the Company"
is defined as a merger, consolidation, sale of securities of the Company
or similar transaction effecting a change of control. A "change of
control" is the acquisition by any person or group of persons (other than
holders of Common Stock on July 1, 1993) of a majority of the outstanding
shares of Common Stock. Upon termination of employment other than a
termination for cause, (a) all options or portions thereof that are not
vested and exercisable on the date of such termination expire and are
forfeited as of such date and (b) all vested options will expire (i) on
the first anniversary of the date of termination due to death, disability
or normal retirement, (ii) 30 days after termination in the event of
voluntary termination by the optionee and (iii) 90 days after termination
in the event of termination by the Company without cause. In the event of
termination of employment for cause, all options, whether vested or
unvested, expire on the date of such termination.
(2) Value is calculated by multiplying the difference between the product of
(a) the difference between (i) the product of the market price at the time
of the grant (the closing price of the Common Stock ($16.00) on the date
of grant (April 18, 1997) as reported on the Nasdaq National Market System
("Nasdaq")) and the sum of one plus the adjusted stock price appreciation
rate based on a ten year option term and annual
7
<PAGE>
compounding and (ii) the exercise price of the option and (b) the number of
securities underlying the grant at the end of Fiscal 1997. The appreciation
calculations do not take into account any appreciation in the price of the
Common Stock to date and are not necessarily indicative of future values of
the options or of the Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES ACQUIRED VALUE OPTIONS/SARS AT FY-END (#) AT FY-END ($)
NAME ON EXERCISE REALIZED ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (2)
---- --------------- --------------- -------------------------- -----------------------------
<S> <C> <C> <C> <C>
Donald R. Grinter
1993 Grant............ 0 0 72,000/0 603,000/0
1994 Grant............ 0 0 10,000/10,000 0/0
D. Chisholm MacDonald 0 0
1993 Grant............ 0 0 40,000/0 335,000/0
1994 Grant............ 0 0 10,000/10,000 0/0
David G. Kleeschulte
1993 Grant............ 0 0 40,000/0 335,000/0
1994 Grant............ 0 0 2,500/2,500 0/0
Rick M. Turner
January 1995 Grant.... 0 0 4,000/4,000 0/0
November 1995 Grant... 0 0 2,500/7,500 0/0
1997 Grant............ 0 0 0/12,000 0/33,000
Ben R. Yorks............ 0 0 0/0 0/0
Eugene S. Ziemba........ 15,000 86,250 0/0 0/0
</TABLE>
- --------
(1) Value is calculated by multiplying the number of shares acquired on
exercise by the difference between the fair market value of the shares
underlying the options on the date of exercise and the exercise price of
such options.
(2) Value is calculated by multiplying the number of shares by the difference
between the closing price of the Common Stock ($18.375) on July 31, 1997,
as reported on Nasdaq and the respective exercise prices.
RETIREMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Yorks had an employment agreement with the Company, which provided that
if Mr. Yorks' employment was terminated without cause, he would be entitled
for one year following such termination to continue to receive his salary and
other benefits and to receive outplacement services. Pursuant to the Yorks
Retirement Agreement, the earlier employment agreement was terminated. In
addition, under the Yorks Retirement Agreement, Mr. Yorks agreed to serve as a
consultant to the Company until March 31, 1997, for which he is entitled to
receive a specified salary and certain insurance benefits. The Yorks
Retirement Agreement prohibits Mr. Yorks from competing with the Company for
as long as he is entitled to receive insurance benefits.
All stock options which have been granted to the Named Executive Officers
will immediately vest in full on the date that any person or group of persons
(other than holders of Common Stock on July 1, 1993) acquires a majority of
the outstanding shares of Common Stock.
COMPENSATION OF DIRECTORS
In Fiscal 1997, the Company's directors who were not receiving compensation
as officers or employees of the Company were paid an annual retainer of
$20,000, payable quarterly, and a fee of $1,500 per day for attending each
meeting of the Board of Directors and each meeting of any committee of which
they were a member. For Fiscal 1998, the annual retainer will be $20,000 and
the per day fee for meeting attendance will be $1,500. All directors are
reimbursed for expenses incurred in connection with their attendance at Board
of Directors and committee meetings.
8
<PAGE>
On the date of the first regular meeting of the Board of Directors following
the annual meeting of the Company's stockholders in each year, each member of
the Board of Directors who is not an employee of the Company or a subsidiary
or an affiliate of the Company (each, an "Eligible Director") is automatically
granted a non-qualified option under the Director Plan to purchase 5,000
shares of Common Stock at an exercise price per share equal to the fair market
value of a share of Common Stock on such date ("Director Option"). For
purposes of the Director Plan, "fair market value" is the arithmetic mean of
the highest and lowest sale prices of the shares of Common Stock as reported
on Nasdaq on the date a Director Option is granted or, if there were no sales
on such date, on the most recent preceding date on which sales occurred.
During Fiscal 1997, Messrs. Ergas, Gant, Johnson, Martin and Peck each
received a Director Option with an exercise price of $15.75 per share.
Director Options become exercisable to the extent of 100% of the shares
covered thereby commencing six months after the date of grant. Notwithstanding
the foregoing, if an optionee dies or becomes disabled, all Director Options
held by such optionee will become exercisable in full. To the extent
exercisable, each Director Option will be exercisable in whole or in part from
time to time. Director Options terminate five years after the date of grant of
such option. Notwithstanding the foregoing, if an optionee ceases to be a
director for any reason other than such optionee's death or disability, the
Director Options granted with respect to such year will terminate upon the
later of six months from the date of grant of such Director Options or 90 days
following the date such Optionee ceases to be a Director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gant, Johnson, Martin and Peck served as members of the Compensation
Committee during Fiscal 1997. No executive officer of the Company served as a
member of the compensation committee or as a director of any other entity that
has an executive officer who serves on the Compensation Committee or is a
director of the Company.
REPORT ON EXECUTIVE COMPENSATION
Committee
During Fiscal 1997, the Compensation Committee of the Board of Directors was
comprised of Mr. Johnson, Mr. Martin and Mr. Gant until January 17, 1997 and
Mr. Peck beginning January 17, 1997, each a non-employee director. The
Committee is responsible for reviewing and approving annual salaries and
bonuses for all officers and administering the Company's existing stock option
plans (other than the Director Plan).
Compensation Policy and Objectives
The primary goal of the Compensation Committee is to assure that the
compensation provided to the Company's executive officers is linked to the
Company's business strategies and objectives, thereby aligning the financial
interests of senior management with those of the stockholders. Beyond that,
the priorities of the Compensation Committee are to assure that the Company's
executive compensation programs enable the Company to attract, retain and
motivate the high caliber of executives required for the success of the
Company's business. These objectives are achieved through a variety of
compensation programs, summarized below, which support both the current and
long-term performance of the Company's business.
Commencing in September 1994, the Committee began evaluating the
competitiveness of its executive compensation programs using information drawn
from a variety of sources, including published survey data, information
supplied by consultants and the Company's own experience in recruiting and
retaining executives. While some of the companies in the peer group chosen for
comparison of stockholder returns in the graph appearing under "Executive
Compensation--Performance Graph" may be included in the surveys and
information considered by the Committee in setting executive compensation,
there is no set peer group against which compensation has been or will be
measured. Instead, the Committee reviews broad-based industry salary data for
manufacturing companies with sales in the Company's range, and when available,
examines industry specific data relative to a particular position.
9
<PAGE>
The Committee is cognizant of provisions under Section 162(m) of the
Internal Revenue Code which limit the deductibility of certain compensation
expense. The Company believes that Section 162(m) will not limit the
deductibility of any compensation paid by the Company in Fiscal 1997.
The following are the criteria considered by the Committee and the Board of
Directors in establishing the Company's compensation programs for its
executive officers and the factors considered in determining the compensation
of the Company's chief executive officer during Fiscal 1997.
Base Salary
Base salaries for executive officers were determined by evaluating the
responsibilities of the position, historical salary increases, market levels
for similar positions and Company performance. Individual salaries varied
somewhat below or above the prevailing market rates based upon the
individual's performance and contribution to Company success and tenure on the
job. Salaries are reviewed on an annual basis and adjusted as necessary, based
primarily upon individual performance with consideration given to each
executive's total compensation package. Base salaries for Fiscal 1997 were
determined using principally subjective criteria. Base salary levels for the
Named Executive Officers who were Named Executive Officers in Fiscal 1996
(excluding Mr. Yorks and Mr. Ziemba) increased an average of approximately
7.7% in Fiscal 1997.
Annual Incentives
In Fiscal 1997, executive officers had an opportunity to earn annual bonuses
of up to 60% of base salary ("Annual Bonuses") based on internal operating
performance goals which exceeded budgeted financial targets established by the
Board of Directors. The goals were established early in Fiscal 1997 and Annual
Bonuses were evaluated by the Committee after the end of Fiscal 1997. In
Fiscal 1997, the Company used sales, operating profit, return on net assets
and cash flow as its primary measures of divisional and/or corporate
performance for the Company's executive officers. At the divisional level,
bonuses are linked to a combination of both divisional and Company internal
operating performance goals. Over time, the Company has found that linking
executive pay principally to these factors ties the executive's interests and
rewards to those of the stockholder. No Annual Bonuses are paid to executive
officers unless the Company achieves 90% of the amounts targeted for the
internal operating performance measures. The Company paid Mr. Kleeschulte an
Annual Bonus of $100,000 for Fiscal 1997 because the China Investment
Corporation exceeded its internal operating performance goals. Since no other
budgeted financial targets of the Company were met for Fiscal 1997, senior
management recommended, and the Committee accepted, that no other Annual
Bonuses be paid to Named Executive Officers for Fiscal 1997.
Long-Term Incentives
To further align the interests of stockholders and management, the Company
grants stock options periodically to its executive officers. The number of
shares awarded is established and reviewed from time to time by the
Compensation Committee on the basis of subjective factors. The exercise price
has thus far been equal to the fair market value of the stock on the date of
the grant. The options are exercisable between one year and ten years from the
grant date. Such stock options provide incentive for the creation of
stockholder value since the full benefit of the compensation package cannot be
realized unless the price of the Common Stock appreciates. The Company granted
Mr. Turner 12,000 stock options in Fiscal 1997 in connection with his
appointment as Vice President and General Manager of the Wheel Services
Division. No other stock options were granted to any of the Named Executive
Officers during Fiscal 1997. See "Executive Compensation--Options Granted and
Value of Options."
CEO Compensation
Mr. Grinter has served as Chairman of the Board and Chief Executive Officer
since December 1993, and served as President and Chief Executive Officer from
August 1991 to December 1993. The graph appearing under "Executive
Compensation--Performance Graph" partially illustrates the Company's
accomplishments
10
<PAGE>
since the Company's initial public offering in December of 1993. Mr. Grinter's
Fiscal 1997 compensation of $284,084 (see "Executive Compensation Summary
Compensation Table") included a base salary of $274,992, an increase of
approximately 7.3% over Fiscal 1996. Mr. Grinter's base salary for Fiscal 1997
was determined based on the vital importance of the Chief Executive Officer
position, achievement of long-term goals and overall performance. Mr. Grinter
also participates in the Annual Bonus program described above and is subject
to its standards. Since the Company did not achieve its financial targets for
Fiscal 1997, the Committee did not award an Annual Bonus to Mr. Grinter. No
stock options were granted by the Board of Directors to Mr. Grinter in Fiscal
1997. See "Executive Compensation--Options Granted and Value of Options."
Summary
The Committee believes that a high caliber, motivated management team is
critical to sustained business success. Placing a significant portion of the
total potential compensation for the Named Executive Officers "at risk" and
payable based on performance-based variables motivates and focuses management
on those issues that drive the success of the Company. The Committee intends
to continue its pay for performance policy which links executive rewards to
stockholder returns.
COMPENSATION COMMITTEE DURING FISCAL 1997
Donald R. Gant (until January 17, 1997)
Clarence E. Johnson
James E. Martin
George W. Peck IV (beginning January 17, 1997)
PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative return
on its Common Stock with that of the Standard & Poor's 500 Stock Index ("S&P
500") and that of the Standard & Poor's Railroads Index ("S&P Railroads") at
December 14, 1993 (the first day the Common Stock was listed on Nasdaq) and at
July 31, 1994, 1995, 1996 and 1997. The graph assumes a $100 investment and
reinvestment of dividends.
LOGO
<TABLE>
<CAPTION>
12/14/93 07/31/94 07/31/95 07/31/96 07/31/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ABC Rail Products Corporation...... $100.00 $152.08 $215.62 $179.18 $153.14
S&P 500............................ $100.00 $100.52 $126.76 $147.75 $216.91
S&P Railroads...................... $100.00 $ 92.19 $115.80 $130.46 $184.96
</TABLE>
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
owners of 10% or more of the Common Stock to file with the Commission initial
reports of ownership and reports of changes of ownership of the Common Stock.
Such persons are required to furnish the Company with copies of all such
reports. Based upon a review of these filings and written representations from
such persons that no other reports were required, the Company notes that,
except for Mr. Raymond M. Scanlon, Vice President and General Manager, who
filed a late Form 3, all required filings related to Fiscal 1997 were timely
made.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Arthur Andersen as the Company's independent
accountants for Fiscal 1998. Arthur Andersen has served as the Company's
independent accountants since 1992. Services provided to the Company and its
subsidiaries by Arthur Andersen with respect to Fiscal 1997 included the
examination of the Company's consolidated financial statements and
consultations on various tax and information services matters. Representatives
of Arthur Andersen are expected to be present at the Annual Meeting to respond
to appropriate questions and to make such statements as they may desire.
Ratification of the appointment of Arthur Andersen as the Company's
independent accountants for Fiscal 1998 will require the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting. In the event stockholders do not
ratify the appointment of Arthur Andersen as the Company's independent
accountants for Fiscal 1998, such appointment will be reconsidered by the
Audit Committee and the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 1998.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items referred to above. Proxies in the enclosed form will be voted in respect
of any other business that is properly brought before the Annual Meeting in
accordance with the recommendation of the Board of Directors or, if no such
recommendation is given, in the discretion of the person or persons voting the
proxies.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's 1998
annual meeting of stockholders (the "1998 Annual Meeting") must be received by
the Secretary of the Company by June 17, 1998, for inclusion in the Company's
proxy, notice of meeting and proxy statement relating to the 1998 Annual
Meeting.
By order of the Board of Directors,
LOGO
D. Chisholm MacDonald
Secretary
October 15, 1997
12
<PAGE>
PROXY
ABC RAIL PRODUCTS CORPORATION
200 SOUTH MICHIGAN AVENUE
SUITE 1300
CHICAGO, ILLINOIS 60604
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the accompanying notice of annual
meeting and 1997 proxy statement and hereby appoints Donald W. Grinter and
D. Chisholm MacDonald and each of them, attorneys and proxies, with full power
of substitution and resubstitution, to vote all shares of the common stock of
ABC RAIL PRODUCTS CORPORATION (the "Company") held of record by the undersigned
at the close of business on September 30, 1997 at the annual meeting of
stockholders of the Company to be held at The Art Institute of Chicago, Chicago,
Illinois, on November 21, 1997 at 9:00 a.m., and at any postponement or
adjournment thereof, as follows:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
WITHHOLD
FOR ALL AUTHORITY
NOMINEES TO VOTE FOR
LISTED AT ALL NOMINEES
1. Election of RIGHT LISTED AT RIGHT
Directors [_] [_] NOMINEES: Donald W. Grinter, Norman
M. Doerr, Jean-Pierre M.
Ergas, Donald R. Gant,
Clarence E. Johnson,
James E. Martin, George W.
Peck IV
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending July 31, 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. As recommended by the Board of Directors, or in the absence of such
recommendation in their own discretion, to vote upon such other business as
may properly come before said meeting or any postponement or adjournment
thereof.
All of the foregoing is as set forth in the Notice and Proxy Statement
relating to the meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE
VOTED IN THE MANNER DIRECTED AND, IN THE ABSENCE OF DIRECTION AS TO THE MANNER
OF VOTING, WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE SLATE OF NOMINEES
SET FORTH AND FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS.
Please date this proxy and sign exactly as name(s) appears below and return
the signed proxy in the enclosed envelope. 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 DO NOT FOLD
DATED: _______________________, 1997 ____________________________________
Signature
____________________________________
Signature if held jointly
