<PAGE> 1
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) 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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Information Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Rankin Automotive 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
RANKIN AUTOMOTIVE GROUP, INC.
3709 S. MACARTHUR DRIVE
ALEXANDRIA, LA 71302
-------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 30, 1999
TO THE SHAREHOLDERS OF RANKIN AUTOMOTIVE GROUP, INC.
The Annual Meeting of Shareholders of Rankin Automotive Group, Inc.
will be held at the Hotel Sofitel in Houston, Texas at 10:00 a.m., Central
Daylight Time, for the following purposes:
1. To elect five directors to hold office until the next annual
meeting of shareholders and until their successors have been
duly elected and qualified.
2. To consider and act upon a proposal to amend the Company's
1996 Incentive and Non-Statutory Stock Option Plan to increase
the number of shares issuable pursuant to the exercise of
options granted under said plan from 250,000 shares to 500,000
shares of the Common Stock of the Company.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed June 25, 1999, at the close of
business, as the record date for the determination of the shareholders entitled
to notice of and to vote at the annual meeting or any adjournment thereof.
By order of the Board of Directors
/s/ NANCY J. GRANT
----------------------------------
Nancy J. Grant, Secretary
Dated: June 28, 1999
<PAGE> 3
RANKIN AUTOMOTIVE GROUP, INC.
Alexandria, Louisiana
-----------------------
INFORMATION STATEMENT
-----------------------
This Information Statement is being furnished by the Board of Directors
of Rankin Automotive Group, Inc. (the "Company") in connection with the Annual
Meeting of Shareholders, and any adjournments thereof, to be held on July 30,
1999, Central Daylight Time, at 10:00 a.m. at the Hotel Sofitel in Houston,
Texas for the purposes set forth in the foregoing Notice of Annual Meeting of
Shareholders. The Company will bear the costs of preparing, assembling and
mailing the Information Statement and the 1999 Annual Report in connection with
the Annual Meeting.
This Information Statement is first being sent to Shareholders together
with the Notice of Annual Meeting and Annual Report for the fiscal year ended
February 25, 1999, on or about June 28, 1999.
SHAREHOLDERS ENTITLED TO VOTE AND PRINCIPAL SHAREHOLDERS
As of the close of business on June 25, 1999, the record date for
determining the shareholders entitled to vote at the annual meeting, there were
issued and outstanding and entitled to vote a total of 5,186,613 shares of the
Company's Common Stock (the only class of securities outstanding), each of which
is entitled to one vote.
The persons who owned of record or was known by the Company to own
beneficially on June 25, 1999 more than 5% of the outstanding shares of Common
Stock of the Company were the following:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS SHARES OWNED OF CLASS
----------------- ------------ --------
<S> <C> <C>
Randall B. Rankin 2,802,258 54.0%
3709 S. MacArthur Drive
Alexandria, LA 71032
Ali A. Attayi 610,000 11.8%
2 Lakeview Place
Houston, TX 77070
</TABLE>
Mr. Randall B. Rankin and Mr. Ali A. Attayi, the owners of 65.8% of the
outstanding shares of Common Stock of the Company, have indicated their intent
to vote in favor of the election of the proposed slate of directors and the
amendment to the Company's 1996 Incentive and Non-Statutory Stock Option Plan.
The vote represented by shares owned by Messrs. Rankin and Attayi is sufficient
for approval of such proposals. THEREFORE, WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY. Shareholders are invited to attend the
Annual Meeting and can vote in person at that time.
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors has nominated five persons (each, a "Nominee")
to stand for election as a Director to serve until the 2000 Annual Meeting of
Shareholders and until his successor has been duly elected and qualified.
NOMINEES FOR DIRECTOR
Each Director of the Company serves as a Director for a term of one (1)
year and until his successor is duly elected and qualified. The following sets
forth for each Nominee, his name and age, positions and/or offices held with the
Company, the period during which each Nominee served in such positions and/or
offices, a description of his business experience during the past five (5) years
or more, and other biographical information.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
SERVED OWNED AS OF
AS JUNE 25, 1999
DIRECTOR -------------
NAME AGE SINCE NO. SHS.(1) % SHS.
---- --- ----- ----------- ------
<S> <C> <C> <C> <C>
Randall B. Rankin 49 1978 2,802,258 54.0%
Ali A. Attayi 53 1999 610,000 11.8%
Ricky L. Sooter, Esq.(2) 46 1996 6,000 *
Gary D. Walther(3) 43 New 300 *
Thomas M. Hargrove 49 New 3,000 *
</TABLE>
- ---------------
* Less than 1%
(1) Includes shares underlying options currently exercisable or exercisable
within sixty days
(2) Member of the Audit Committee
(3) To be appointed a member of the Audit Committee
RANDALL B. RANKIN has been President of the Company since its inception
in 1978. Prior thereto, he operated the business as a sole proprietorship since
its founding in 1968. He has essentially spent his entire adult life in various
sales, marketing, and administrative capacities with the Company. Mr. Rankin has
served on numerous warehouse associations and councils, advising aftermarket
manufacturers on the needs of the auto parts industry. He is Chairman of the
Board of the Louisiana Auto Parts Association.
ALI A. ATTAYI is President and Chief Operating Officer of the Company.
Mr. Attayi graduated from Lamar University in 1976 with a degree in Mechanical
Engineering. Upon earning his degree he worked abroad and returned to own a
chain of auto repair shops from 1981 until 1986. While owning the auto repair
shops, he established US Parts Corporation in 1984, a wholesale distribution
warehouse located in Houston, Texas. He became President and a director of the
Company on March 10, 1999 when the Company acquired US Parts Corporation.
RICKY L. SOOTER, ESQ. is a practicing attorney and member of the law
firm of Daniels & Sooter in Alexandria, Louisiana. Prior to that, from January
1986 to August 1998, Mr. Sooter was a shareholder at the law firm of Provosty,
Sadler & DeLaunay. His concentrations are in the areas of real estate, banking,
collection and creditors' rights, business transactions and workers'
compensation. Mr. Sooter received his J. D. Degree in 1977 from Louisiana State
University.
2
<PAGE> 5
GARY D. WALTHER is Managing Director and Chief Executive Officer of
Walther Holdings, Inc. an independent financial consulting and business advisory
firm. From April to August 1998, he was the Interim Chief Financial Officer of
EZ Serve Corporation (AMEX: E2S); From October 1990 to February 1998 he was Vice
President Finance and Chief Financial Officer of Hi-Lo Automotive, Inc. (NYSE:
HLO); From October 1989 to October 1990 he was Vice President and Chief
Financial Officer of WBC Holdings, Inc., a turnaround affiliate of GE Capital
Corporation. During the period of July 1985 through October 1989 he was First
Internal Audit Director and from March 1986 Controller and Principal Accounting
Officer of Gordan Jewelry Corporation (NYSE: GJC). Mr. Walther was with the
International Public Accounting firm of Arthur Andersen and Co. from September
1976 through July 1985.
THOMAS M. HARGROVE was a founder of and has been Managing Director of
GulfStar Group, Inc., a Houston-based investment banking firm since 1990. He
served as a Senior Vice President in the Corporate Finance Department of Rotan
Mosle, Inc., a subsidiary of PaineWebber Incorporated, from 1986 to 1990. He is
a director of Entrix, Inc., Spec Consultants, Inc., Pilgrim Cleaners, Inc. and
Stellar Event & Presentation Resources, Inc.
During the fiscal year ended February 25, 1999, the Board of Directors
held five meetings and the Audit Committee met twice. All of the incumbent
directors attended at least seventy-five percent (75%) of the meetings held.
COMMITTEES
The Board of Directors has established an Audit Committee. The members
of the Audit Committee will be Messrs. Sooter and Walther. The Audit Committee
represents the Board in discharging its responsibilities relating to the
accounting, reporting and financial control practices of the Company. The Audit
Committee has general responsibility for surveillance of financial controls, as
well as for accounting and audit activities of the Company. The Audit Committee
annually reviews the qualifications of the independent certified public
accountants, makes recommendations to the Board as to their selection, reviews
the scope, fees and results of their audit and approves their non-audit services
and related fees. The Audit Committee meets periodically with management and
with the Company's independent auditors to determine the adequacy of internal
controls and other financial reporting matters.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
all executive officers, directors, and each person who is the beneficial owner
of more than 10% of the common shares of a company that files reports pursuant
to Section 12 of the Exchange Act, are required to report the ownership of such
commons shares, options, and stock appreciation rights (other than certain
cash-only rights), and any changes in that ownership, with the Securities and
Exchange Commission (the "SEC"). Specific due dates for these reports have been
established, and the Company is required to report, in this Information
Statement, any failure to comply therewith during the last year. The Company
believes that all of these filing requirements were satisfied.
3
<PAGE> 6
REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth certain information relating to the
compensation earned by the Chief Executive Officer of the Company. No other
executive officer of the Company received total cash compensation for the past
year in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
NAME AND PRINCIPAL POSITION YEAR COMPENSATION
--------------------------- ---- ------------
<S> <C> <C>
Randall B. Rankin
Chairman of the Board and Chief Executive Officer 1999 $ 120,000
1998 $ 120,000
1997 $ 120,000
</TABLE>
On March 10, 1999 the Company entered into a five year employment
agreement with Mr. Ali Attayi of Houston, Texas whereby Mr. Attayi agreed to
serve as President and Chief Operating Officer of the Company. The agreement
provides for an annual compensation of $295,000, subject to adjustment during
the fourth and fifth years based on a recommendation from an independent
compensation consulting firm. Mr. Attayi will also be entitled to such other
benefits as may be provided from time to time to other management employees. Mr.
Attayi also received an option to purchase 300,000 shares of the Company's
Common Stock. The term of this option terminates on March 9, 2009, vests
one-third each year ending March 10, 2000, 2001 and 2002, and is exercisable at
$3.1996 per share. The options immediately vest upon a change in control of the
Company or the effectiveness of a registration statement filed with the
Securities and Exchange Commission, excluding a registration statement filed in
connection with any benefit plan or merger or acquisition.
On April 27, 1999 the Company entered into a three year employment
agreement with David L. Epstein, Senior Vice President of the Company. The
agreement provides for annual compensation of $124,800 plus a year end bonus of
not less than $5,000 and an annual car allowance of $8,400. Mr. Epstein will
also be entitled to such other benefits as may be provided from time to time to
other management employees. Mr. Epstein was granted a five year option to
purchase 30,000 shares of the Company's Common Stock at $5.00 per share, vesting
one-third on July 26, 1999, one-third on April 27, 2000 and one-third on April
27, 2001. The agreement also contains certain non-compete and non-solicitation
provisions terminating two years from the termination of employment.
On March 11, 1999 the Company entered into a five year employment
agreement with Otis Al Cannon, Jr., Senior Vice President of the Company. The
agreement provides for annual compensation of $120,000 plus the use of an
automobile. Mr. Cannon will also be entitled to such other benefits as may be
provided from time to time to other management employees. Mr. Cannon was granted
a five year option to purchase 51,613 shares of the Company's Common Stock at
$3.875 per share, vesting one-half on March 11, 2000 and the balance on March
11, 2001. The agreement also contains certain non-compete and non-solicitation
provisions terminating two years from the termination of employment.
DIRECTOR COMPENSATION
Non-employee directors received $500.00 per meeting attended. In
addition, in 1998, the Company granted options to purchase 3,000 shares of
Common stock to each of the non-employee directors. The options are exercisable
in full one year from the date of grant and expire five years from the date of
the grant. The options are exercisable at $3.1875 per share. Also in 1998, the
Company granted options to purchase 10,000
4
<PAGE> 7
shares each to the Company's three officer/directors (other than Mr. Rankin);
10,000 of which were subsequently canceled as a result of a resignation by one
of the officer/directors. The options are exercisable 20% per year and expire
ten (10) years from the date of grant. The options are exercisable at $3.1875
per share. The exercise price for each of the options granted was equal to the
fair market value of the Company's Common Stock on the date of grant.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Under rules of the Commission, the Company is required to provide
certain information concerning compensation provided to the Company's President
and Chief Executive Officer and the other executive officers of the Company. The
disclosure requirements for the executive officers include the use of tables and
a report of the Board of Directors (the "Board") responsible for compensation
decisions for the named executive officers, explaining the rationale and
considerations that led to those compensation decisions. Therefore, the Board
has prepared the following report for inclusion in this Information Statement.
COMPENSATION PHILOSOPHY
The compensation philosophy for executive officers conforms to the
compensation philosophy of the Company generally for all employees. The
Company's compensation is designed to:
o provide compensation comparable to that offered by companies with
similar businesses, allowing the Company to successfully attract
and retain the employees necessary to its long-term success;
o provide compensation which relates to performance of the
individual and is based upon individual performance;
o provide incentive compensation that varies directly with both
Company performance and individual contribution to that
performance; and
o provide an appropriate linkage between compensation and the
creation of shareholder value through awards tied to the
Company's performance and through facilitating employee stock
ownership.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of
base salary, cash bonuses based upon individual performance and long-term
incentive compensation in the form of stock options under the Stock Option Plan.
In addition, the Company's executive officers receive various other benefits,
including medical benefits, which are generally available to the employees of
the Company.
BASE SALARY AND BONUS AWARDS
The Board reviews the salaries of the executive officers of the Company
annually. The Board made salary decisions about the executive officers based
upon a variety of considerations in conformance with the
5
<PAGE> 8
compensation philosophy stated above. First, salaries are competitively set
relative to companies with similar businesses to that of the Company. Second,
the Board considered the performance of the individual executive officer with
respect to the areas under his or her responsibility, including an assessment of
the value of each to the Company. Third, internal equity among employees was
factored into the decision. Finally, the Board considered the Company's
financial performance and its ability to absorb any increases in salaries.
Mr. Rankin, the founder of the Company, has been the Company's Chief
Executive Officer since its inception in 1978. Mr. Rankin's salary has remained
at $120,000 for the past three years and was established at the time of the
Company's initial public offering. At Mr. Rankin's request, his compensation has
not been reevaluated. The Board believes that his salary is more than fair based
on the Company's size and Mr. Rankin's prior experience and knowledge of the
Company's operations and the industry in which it operates.
In connection with the acquisition of US. Parts Corporation, the
Company, on March 10, 1999, entered into a five year employment agreement with
Mr. Ali Attayi of Houston, Texas whereby Mr. Attayi agreed to serve as President
and Chief Operating Officer of the Company. The agreement provides for an annual
compensation of $295,000, subject to adjustment during the fourth and fifth
years based on a recommendation from an independent compensation consulting
firm. Mr. Attayi will also be entitled to such other benefits as may be provided
from time to time to other management employees. Mr. Attayi also received an
option to purchase 300,000 shares of the Company's Common Stock. The term of
this option terminates on March 9, 2009, vests one-third each year ending March
10, 2000, 2001 and 2002, and is exercisable at $3.1996 per share. The options
immediately vest upon a change in control of the Company or the effectiveness of
a registration statement filed with the Securities and Exchange Commission,
excluding a registration statement filed in connection with any benefit plan or
merger or acquisition.
In connection with the acquisition of Allied Distributing Company of
Houston, Inc., the Company, on April 27, 1999, entered into a three year
employment agreement with David L. Epstein, Senior Vice President of the
Company. The agreement provides for annual compensation of $124,800 plus a year
end bonus of not less than $5,000 and an annual car allowance of $8,400. Mr.
Epstein will also be entitled to such other benefits as may be provided from
time to time to other management employees. Mr. Epstein was granted a five year
option to purchase 30,000 shares of the Company's Common Stock at $5.00 per
share, vesting one-third on July 26, 1999, one-third on April 27, 2000 and
one-third on April 27, 2001. The agreement also contains certain non-compete and
non-solicitation provisions terminating two years from the termination of
employment.
In connection with the acquisition of Automotive & Industrial Supply
Co., Inc., the Company, on March 11, 1999, entered into a five year employment
agreement with Otis Al Cannon, Jr., Senior Vice President of the Company. The
agreement provides for annual compensation of $120,000 plus the use of an
automobile. Mr. Cannon will also be entitled to such other benefits as may be
provided from time to time to other management employees. Mr. Cannon was granted
a five year option to purchase 51,613 shares of the Company's Common Stock at
$3.875 per share, vesting one-half on March 11, 2000 and the balance on March
11, 2001. The agreement also contains certain non-compete and non-solicitation
provisions terminating two years from the termination of employment.
The employment agreements with Messrs, Attayi, Epstein and Cannon were
entered into as a result of arms-length negotiations carried on in connection
with the acquisitions referred to above. The Board believes that the aggregate
compensation for each of Messrs. Rankin, Attayi, Epstein and Cannon is
reasonable based upon each of their responsibilities, the revenue size of the
Company, the potential growth as a result of the recent acquisitions and other
factors when compared to executive officers of similar companies having
comparable positions.
6
<PAGE> 9
STOCK OPTION AWARDS
The Company maintains the Stock Option Plan, which is designed to align
executive officers' and shareholders' interests in the enhancement of
shareholder value. Stock options are granted upon the recommendation of the
Board with the approval of the disinterested members of the Board. Executive
officers and others are eligible to receive options under the Stock Option Plan.
The Board strongly believes that the interests of shareholders and executives
become more closely aligned when such executives are provided an opportunity to
acquire a proprietary interest in the Company through ownership of the Company's
Common Stock. Accordingly, key employees of the Company, including executive
officers, as part of their overall compensation package, are eligible for
participation in the Stock Option Plan, whereby they are granted options
generally exercisable at no less than fair market value on the date of grant.
Because no benefit is generally received unless the Company's stock price
performs favorably, awards under the Stock Option Plan are intended to provide
incentives for executive officers to enhance long-term Company performance, as
reflected in stock price appreciation, thereby increasing shareholder value.
The stock option grants are principally based on overall consolidated
results of the Company, achievement of Company objectives, individual
performance, including managerial effectiveness, initiative and team work, and
are in such amounts that reflect what the Board believes are necessary to
attract, retain and motivate senior management and other key employees. Stock
option awards are considered in the package of the key employees. The Board
believes that stock option awards are rewards for past growth and the incentive
for continued growth.
BOARD OF DIRECTORS
Randall B. Rankin Ricky D. Gunn
Ricky L. Sooter Harris Lake Smith
Otis A. Cannon, Jr.
The report of the Board shall not be deemed incorporated by reference
by any general statement incorporating by reference this information statement
into any filing under the Securities Act of 1933 or under the Securities Act of
1934 (together, the "Acts"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
STOCK PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative total
shareholder return on the Company's Common Stock with the Standard & Poors 500
Index and a Market Cap-Weighted Comparables Composite Index. This graph assumes
that $100 was invested as of the close of markets on November 18, 1996, the date
of the Company's initial public offering, in the Company's Common Stock and in
the indices, and that all dividends were reinvested. The stock price performance
shown below is not necessarily indicative of future price performance.
ADJUSTED TO BASE = 100
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RAVE DJ-AUT TR S&P 500 TR
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
11/19/96 100.0000 100.0000 100.0000
2/25/97 145.6140 107.9620 109.9764
2/25/98 22.3684 152.4816 143.7284
2/25/99 27.1930 224.9323 174.1168
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
The stock price performance graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this information
statement into any filing under the Acts except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the Acts.
CERTAIN TRANSACTIONS
The Company leases three of its stores, a machine shop, a storage
facility and its Alexandria administrative offices, from Mr. Randall B. Rankin.
With the exception of one lease, which expires in 2006, each of the leases
expire in 2001 and require monthly rentals ranging from $1,200 to $2,300. The
lease which expires in 2006 covers a 38,000 sq. ft. building and requires a
monthly rental of $15,000 per month. The Company utilizes approximately 6,600
square feet of the building as a traditional store, 20,000 sq. ft. as a
wholesale store and redistribution facility and 3,000 sq. ft. as corporate
offices. The Company subleases the remaining 8,400 sq. ft. to an unaffiliated
third party. The aggregate rent paid to Mr. Rankin for each of the years ended
February 25, 1997, 1998 and 1999 was $244,000, $262,000 and $266,000,
respectively, and the Company realized rental income of approximately $15,000,
$31,000 and $43,000, respectively, from its subleases. The Company believes that
the current lease terms are at least as comparable to those that could be
obtained from unaffiliated third parties.
All transactions between the Company and its officers, directors and 5%
shareholders must be on terms no less favorable than could be obtained from
unaffiliated third parties approved by a majority of the independent,
disinterested directors of the Company.
PROPOSAL TO AMEND THE
1996 INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
The Company maintains a 1996 Incentive and Non-Statutory Stock Option
Plan (the "Plan") under which incentive and non-qualified options may be granted
to employees, directors and certain key affiliates. The Company has in the past
utilized and wishes in the future to utilize the Plan to attract, maintain and
develop management by encouraging ownership of the Company's Common Stock by key
employees, directors and others. Options under the Plan are either "incentive
options" ("ISOs") under Section 422A of the Internal Revenue Code of 1986, as
amended, or "non-qualified stock options" ("NQOs") which are not intended to so
qualify. The 1996 Plan originally provided for the granting of options to
purchase 250,000 shares of the Company's Common Stock. However, on February 18,
1999, the Board approved an amendment to the Plan increasing the number of
shares of Common Stock available for issuance under the Plan to 500,000 and
granted options for substantially all of such shares in connection with the
acquisitions of Allied Distributing Company of Houston, Inc., US Parts
Corporation and Automotive & Industrial Supply Co.
The Board of Directors recommends to the shareholders that they approve
a proposal to amend the Company's Plan to increase the number of shares of
Common Stock available for grant under the Plan from 250,000 to 500,000. The
proposed amendment will cause Section 3.1 of the Plan to be replaced with the
following revised Section 3.1:
3.1 Shares Subject to Plan. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but unissued
common stock, par value $.01 per share ("Common Stock"). The total
number of shares that may be issued pursuant to options granted under
the Plan shall not exceed 500,000 shares of Common Stock.
8
<PAGE> 11
The proposed amendment to the Plan will be adopted upon receiving the
affirmative vote of holders of a majority of the shares present at the Meeting.
Messrs. Randall B. Rankin and Ali A. Attayi, owners of a majority of the shares
outstanding and entitled to vote, have indicated that they intend to vote in
favor of the amendment to the Plan.
Except for such amendment, the Plan will remain unchanged. The
following is a summary of the provisions of the Plan. This summary is qualified
in its entirety by reference to the Plan, a copy of which may be obtained from
the Company.
SUMMARY DESCRIPTION OF THE STOCK OPTION PLAN
The Plan is administered by the Board of Directors of the Company. The
Board is authorized to grant incentive stock options to officers and other key
executive and management employees of the Company and non-statutory stock
options to employees, directors and other non-employees rendering services to
the Company. Non-employee directors are entitled to receive options to purchase
3,000 shares of the Company's Common Stock upon their initial election to the
Board.
The option price for an ISO cannot be less than the fair market value
of a share of the Company's Common Stock on the date of grant, whereas the
option price for an NQO may be more or less than the fair market value on the
date of grant. The grantee can pay the option price in cash, or if permitted, by
delivering to the Company shares of Common Stock owned by the grantee that have
a fair market value equal to the option price. Shares cannot be issued or
transferred upon the exercise of an option until the option price is paid in
full. Each option is exercisable after the period or periods specified in the
option agreement, but no option may be exercisable after the expiration of ten
years from the date of grant and cannot exceed five (5) years in the case of a
greater then 10% shareholder. Options granted under the Plan are not
transferable other than by will or by the laws of descent and distribution.
If there is a stock split, stock dividend, or other relevant change
affecting the Company's shares, appropriate adjustments would be made in the
number of shares that could be issued in the future and in the number of shares
and price under all outstanding grants made before the event. Future options may
also cover such shares as may cease to be under option by reason of total or
partial expiration, termination or voluntary surrender of an option.
The aggregate fair market value (determined at the time an option is
granted) of the Common Stock with respect to which ISOs are exercisable for the
first time by any person during any calendar year under the Plan shall not
exceed $100,000.
The vesting period for options granted under the Plan are set forth in
an option agreement entered into with the optionee. ISOs granted to an optionee
terminate 90 days after retirement termination of employment for reasons other
than death or disability. In the event of death or disability, all vested
options expire 180 days from the date of death or disability.
Unless otherwise provided in any option, each outstanding option shall
become immediately fully exercisable in the event of (i) a change of control
of the Company, (ii) a merger, consolidation, reorganization or dissolution in
which the Company does not survive, or (iii) the sale, release, exchange or
disposition of substantially all the property and assets of the Company.
9
<PAGE> 12
FEDERAL INCOME TAX CONSEQUENCES
The holder of an ISO does not realize taxable income upon the grant or
upon the exercise of the option (although the option spread is an item of tax
preference income potentially subject to the alternative minimum tax). If the
stock acquired upon exercise of the option is sold or otherwise disposed of
within two years from the option grant date or within one year from the exercise
date then, in general, gain realized on the sale is treated as ordinary income
to the extent of the option spread at the at the exercise date, and the Company
receives a corresponding deduction. Any remaining gain is treated as capital
gain. If the stock is held for at least two years from the grant date and one
year from the exercise date, then gain or loss realized upon the sale will be
capital gain or loss and the Company will not be entitled to a deduction. A
special basis adjustment applies to reduce the gain for alternative minimum tax
purposes.
An optionee does not realize taxable income upon the grant of an NQO if
the exercise price is equal to the fair market value. If the exercise price is
less than the fair market value, the optionee will realize income equal to the
difference between the exercise of the NQO in an amount equal to the difference
between the exercise price and the market value on the date of exercise. The
Company is entitled to a deduction at the same time and in a corresponding
amount.
In general, if an optionee delivers previously-owned shares in payment
of the exercise price of an option, no gain or loss will be recognized on the
exchange of the previously-owned shares for an equivalent number of newly issued
shares. However, if the previously-owned shares delivered in payment of the
exercise price were acquired pursuant to the exercise of an ISO and if the
requisite option holding periods are not satisfied (see above), then the
optionee will realize ordinary income on the delivery of the previously-owned
shares as in the case of any other "early" disposition of option-acquired
shares.
Since February 25, 1998, the Company granted options to purchase 30,000
shares to three officers, 358,420 shares of Common Stock to 12 employees of the
Company and 6,000 shares to its two non-employee directors. As a result, all of
the options available for issuance under the Plan, as previously approved by
shareholders, have been granted. Upon adoption of the amendment to the Plan
there will be issued and outstanding, under the Plan, options to purchase
400,420 shares of Common Stock. Neither the number nor value of future option
awards to be received by or allocated to particular participants or groups of
participants is presently determinable.
At the close of business on June 16, 1999 the market value per share of
Common Stock was $2.625.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends a vote "FOR" the proposal to amend
the Company's Stock Option Plan to increase the number of shares of Common Stock
available for grant from 250,000 to 500,000.
VOTE REQUIRED
A majority of the outstanding shares of stock will be necessary to
constitute a quorum for the transaction of business at the meeting. The election
of directors and the approval of the amendment to the Company's 1996 Stock
Option Plan will require a vote of a majority of the shares present at the
meeting.
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OTHER MATTERS
At the time of the preparation of this Information Statement, the Board
of Directors of the Company had not been informed of any matters which would be
presented for action at the Annual Meeting, other than the proposals
specifically set forth in the Notice of Annual Meeting of Shareholders and
referred to herein.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order to be included in the proxy materials for the 2000 Annual
Meeting of Shareholders of the Company, shareholder proposals must be received
by the Company not later than February 25, 2000.
RANKIN AUTOMOTIVE GROUP, INC.
/s/ NANCY J. GRANT
------------------------------------
Nancy J. Grant, Secretary
Date: June 28, 1999
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