HANDY HARDWARE WHOLESALE, INC.
8300 Tewantin Drive
Houston, Texas 77061
Dear Shareholder:
You are cordially invited to attend the annual meeting of the
shareholders of Handy Hardware Wholesale, Inc. (the "Company") which will be
held at 7:00 p.m. on Wednesday, May 14, 1997, in the Grand Ballroom Salon B of
the Hobby Airport Hilton Hotel, 8181 Airport Blvd., Houston, Texas. Information
about the business of the meeting is set forth in the formal meeting notice and
Proxy Statement on the following pages.
It is important that your shares be represented at the meeting. Whether
or not you plan to attend the meeting in person, we hope that you will vote on
the matters to be considered and sign, date and return your proxy in the
enclosed envelope by April 30, 1997. You may revoke your proxy at any time prior
to its use in the ways explained in the enclosed Proxy Statement, including by
attending the meeting and voting in person.
It is always a pleasure to meet with our shareholders, and we look
forward to seeing as many of you as possible at the annual meeting.
Sincerely,
/s/ James D. Tipton
-------------------------------------
James D. Tipton
President and Chief Executive Officer
March 31, 1997
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
8300 Tewantin Drive
Houston, Texas 77061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
Handy Hardware Wholesale, Inc.:
The annual meeting of shareholders of Handy Hardware Wholesale, Inc.
(the "Company") will be held on Wednesday, May 14, 1997, at 7:00 p.m., in the
Grand Ballroom Salon B of the Hobby Airport Hilton Hotel, 8181 Airport Blvd.,
Houston, Texas, for the purpose of considering and acting upon the following:
1. The election of four directors of the Company;
2. The transaction of such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 25,
1997, as the record date for determination of shareholders entitled to notice of
and to vote at the meeting or any adjournment thereof.
All shareholders are cordially invited to attend the meeting. However,
in the event you are unable to attend the meeting in person, please sign, date
and return the enclosed proxy by March 31, 1997. For your convenience, there is
enclosed a return envelope, requiring no postage, for use in returning your
proxy. You may revoke your proxy at any time prior to its use in the ways
explained in the attached Proxy Statement, including by attending the meeting
and voting in person.
By Order of the Board of Directors
/s/ Tina S. Kirbie
----------------------------------
Tina S. Kirbie
Secretary
Houston, Texas
March 31, 1997
<PAGE>
HANDY HARDWARE WHOLESALE, INC.
Proxy Statement
for
May 14, 1997 Annual Meeting of Shareholders
General Information
This Proxy Statement, with the enclosed proxy card, is first being
mailed to the shareholders of Handy Hardware Wholesale, Inc. (the "Company" or
"Handy Hardware") on or about March 31, 1997, in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the annual meeting of shareholders, which will be held in the Grand Ballroom
Salon B of the Hobby Airport Hilton Hotel, 8181 Airport Blvd., Houston, Texas at
7:00 p.m. on Wednesday, May 14, 1997, or, at any adjournment thereof. The
accompanying Notice of Annual Meeting of Shareholders sets forth the purposes of
the annual meeting. A shareholder may revoke a proxy at any time before its
exercise by executing a subsequent proxy, personally appearing at the meeting
and casting a contrary vote or giving notice of revocation to the Secretary of
the Company; provided, however, no such revocation shall be effective until
notice of revocation has been received by the Company at or prior to the annual
meeting. The shares represented by proxies in the form solicited by the Board of
Directors will be voted at the meeting. Where a choice is specified with respect
to a matter to be voted upon, the shares represented by the proxy will be voted
in accordance with such specification. If no choice is specified, such shares
will be voted as stated on the enclosed proxy card.
The principal executive offices of the Company are located at 8300
Tewantin Drive, Houston, Texas 77061, and its telephone number is (713)
644-1495.
Holders of record of the Company's Class A Common Stock, $100.00 par
value, are entitled to receive notice of and to vote at the meeting. At the
close of business on March 25, 1997 (the "Record Date") the Company had 8,330
shares of Class A Common Stock issued and outstanding, the holders of which are
entitled to one vote per share.
The cost of soliciting proxies will be borne by the Company.
Solicitation of proxies will be primarily by mail. Following the original
mailing of the proxy soliciting material, regular employees, officers or
directors of the Company may also solicit proxies by telephone, telegraph or in
person.
1
<PAGE>
Election of Directors
The following four persons have been nominated for election at the 1997
annual meeting as members of the Board of Directors:
<TABLE>
<CAPTION>
If Elected, Term as
Nominee Director Will Expire
--------------- --------------------
<S> <C>
Virgil Cox 2000
Robert Eilers 2000
Leroy Welborn 2000
James D. Tipton 1998
</TABLE>
Each of these nominees is currently a director of the Company. For
further information on the nominees, see "Directors and Executive Officers"
herein.
The Board of Directors has ten members. The Bylaws of the Company
provide that each year the shareholders of the Company shall elect three of the
ten members of the Board of Directors for three-year terms. One member of the
Board of Directors, who shall serve as the President of the Company, is elected
for a one-year term, and need not be a shareholder of the Company. The other
directors must be shareholders. To be elected, a nominee must receive a majority
of the votes cast for his position. Unless a shareholder otherwise specifies
therein, each proxy will be voted for the nominees for directors listed. In case
any nominee shall for any reason become unavailable for election as a director,
unless a contrary choice is indicated, all proxies will be voted for the
election of such person as the individuals named in the enclosed proxy deem
appropriate. Management is not aware of any circumstances likely to cause any of
the nominees to become unavailable for election as a director.
The Board of Directors recommends that the shareholders vote FOR the
election as directors of Virgil Cox, Robert Eilers, Leroy Welborn and James D.
Tipton.
Directors and Executive Officers
Directors and Director Nominees
The following table sets forth certain information relating to the
current directors of the Company, the director nominees and their periods of
service. Messrs. Tipton, Cox, Eilers and Welborn, who are currently directors,
are nominees for director.
2
<PAGE>
<TABLE>
<CAPTION>
Term as
Director Director
Name Age Position Since Will Expire
- --------------------- --- ---------- -------- -----------
<S> <C> <C> <C> <C>
Weldon D. Bailey 48 Chairman 1974 1998
Norman J. Bering, II 47 Director 1976 1999
Susie Bracht-Black 41 Director 1993 1999
Virgil H. Cox 39 Director 1991 1997
Samuel J. Dyson 41 Director 1995 1998
Robert L. Eilers 69 Director 1982 1997
Phil M. Grothues 55 Director 1995 1999
James D. Tipton 72 Director 1980 1997
Larry Ward 53 Director 1996 1998
Leroy Welborn 61 Director 1994 1997
</TABLE>
Each of the director nominees and the current directors whose terms of
office will continue after the annual meeting of shareholders, other than Mr.
Tipton, is an executive officer, director and/or shareholder of a Member-Dealer
firm engaged in the retail hardware business, as summarized in the following
table:
<TABLE>
<CAPTION>
Employed
Name Member-Dealer Location Since
- --------------------- -------------------------------------- ---------------- -----
<S> <C> <C> <C>
Weldon D. Bailey Jot-Em-Down Store (J.E.D.S.), Inc. Houston, Texas 1969
Norman J. Bering, II Bering Home Center, Inc. Houston, Texas 1972
Susie Bracht-Black Bracht Lumber Company, Inc. Rockport, Texas 1971
Virgil H. Cox Cox Hardware, Inc. Houston, Texas 1985
Samuel J. Dyson M&D Supply, Inc. Beaumont, Texas 1979
Robert L. Eilers Borderland Hardware of Mercedes, Inc. Mercedes, Texas 1969
Phil M. Grothues Lumbermart, Inc. Kerrville, Texas 1970
Larry Ward Ward's True Value Hardware, Inc. Dallas, Texas 1980
Leroy Welborn Leroy Welborn Inc. Tulsa, Oklahoma 1977
</TABLE>
3
<PAGE>
Executive Officers
The following table sets forth certain information relating to the
executive officers of the Company and their periods of service:
<TABLE>
<CAPTION>
Executive
Officer
Name Age Office Since
- ------------------------- ----- ---------------------------------- ---------
<S> <C> <C> <C>
James D. Tipton 72 President, Chief Executive Officer 1980
Charles D. Hearne 61 Senior Vice President of 1984
Membership and Dealer Services,
Director of Marketing
Tina S. Kirbie 49 Senior Vice President of Finance 1981
Secretary and Treasurer
Daniel H. King 42 Vice President of Merchandising 1991
Dwayne R. Mauer 48 Vice President of Management 1995
Information Systems Operations
David W. Washburn 55 Vice President of Warehouse 1995
Delivery Operations
</TABLE>
Meetings, Committees, and Compensation of the Board of Directors
Meetings. During the Company's fiscal year ended December 31, 1996, the
board of directors of the Company held five meetings. Each director attended at
least 80 percent of the board meetings and meetings of committees of which he is
a member.
Committees. The Company has a standing Nominating Committee, consisting
both of directors and non-director Member-Dealer representatives, charged with
the responsibility of selecting four nominees for director each year, as well as
any additional nominees for vacancies that have occurred during the year, to be
presented at the annual shareholders' meeting of the Company. The 1997
Nominating Committee is composed of Samuel Jeff Dyson (Chairman), Weldon Bailey
(nonvoting ex-officio member), Kevin Fontenot, Larry Gerald and Clayton Travis.
The Nominating Committee generally meets in February of each year, and held one
meeting during the year ended December 31, 1996. The Nominating Committee will
consider the names of potential nominees for director submitted in writing by a
shareholder of the Company. See "Shareholder Proposals for 1998 Annual Meeting."
In May 1993 the board of directors created a standing Compensation
Committee consisting only of directors, charged with the responsibility of
setting the criteria used to determine Mr. Tipton's compensation and making a
recommendation to the board of directors as a whole for its approval. The
Compensation Committee is composed of Weldon Bailey, Norman Bering and Samuel
Jeff Dyson. The Compensation Committee held one meeting during the year ended
December 31, 1996.
4
<PAGE>
The Company has no standing audit committee, such functions being
performed by the board of directors as a whole.
Compensation. Directors' compensation is currently $600 per meeting
attended.
Summary Compensation Table
The following table sets forth certain summary information regarding
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer for the fiscal years ended December 31, 1994, 1995 and
1996. No other executive officer of the Company earned more than $100,000 for
fiscal year 1996.
<TABLE>
<CAPTION>
All Other
Annual Compensation Compensation2
------------------------------------ -------------
Name and Principal Position Year Salary1 Bonus
- -------------------------------- ---- -------- -------
<S> <C> <C> <C> <C>
James D. Tipton, Chief Executive 1996 $240,000 $110,00 $25,624
1995 230,000 95,000 21,809
1994 218,000 82,500 20,361
</TABLE>
- ------------------------
1 Includes $3,000 per year as compensation paid for services as
a director.
2 Includes contributions by the Company on behalf of Mr. Tipton
to the Company's Employees Profit Sharing and Savings Plan,
which was $19,851 for the year ended December 31, 1996. The
total also includes cash investments by the Company in public
mutual funds for Mr. Tipton's benefit upon retirement, which
was $5,773 for the years ended December 31, 1996 and December
31, 1995 and December 31, 1994.
Employment Contract With Chief Executive Officer
The Company entered into an employment contract with Mr. Tipton in 1980
when he joined the Company. Under the most recent amendment thereto, effective
September 1996, Mr. Tipton will serve in an executive capacity with the Company
through December 31, 1998. The employment contract provides for an annual base
compensation of $225,000 for 1995 and $250,012 for 1996, 1997 and 1998.
Report of Compensation Committee on Executive Compensation
Chief Executive Officer
The compensation of the Company's Chief Executive Officer, Mr. Tipton,
is established by the Company's board of directors as a whole, following
recommendations from the Compensation Committee. Mr. Tipton's compensation
consists principally of salary and an annual bonus. Because of the nature of the
Company's securities and the absence of any public market for the securities,
the Company has no stock option or other stock incentive plans.
5
<PAGE>
Currently, Mr. Tipton's salary is established in advance at
approximately a one-year interval, and is reflected in periodic amendments to
his employment agreement with the Company (in place since he joined the Company
in 1980). See "Employment Contract With Chief Executive Officer" above. In 1995,
the Compensation Committee recommended, and the Board approved, an extension to
Mr. Tipton's employment agreement providing for increases in his previously
approved salary level of $225,000 in 1995 to $250,012 for 1996 and 1997. In
September, 1996, the Compensation Committee recommended, and the Board approved,
an extension to Mr. Tipton's employment agreement to 1998 at his current salary
level. Mr. Tipton's bonus is paid in December each year, based on a
recommendation from the Compensation Committee.
The Compensation Committee believes that the best measure of the
Company's success and of Mr. Tipton's performance is the growth in its sales and
Member-Dealers, since these are direct indicators of the degree to which the
Company is fulfilling its Member-Dealers' expectations of providing goods to
them at the lowest possible price. Accordingly, in making its recommendations as
to Mr. Tipton's salary and bonus, the Compensation Committee principally
considers the growth in the Company's sales and in the number of its
Member-Dealers. The Committee's consideration of these factors is subjective in
character, without utilization of a formula or strict numerical criteria.
Performance factors considered in the typical public company, such as growth in
earnings and earnings per share, stock price performance and return on equity,
are not relevant to a hardware cooperative such as the Company. The Company's
shareholders invest in the Company to obtain access to the services it provides,
not in expectation of a return on their investment.
The Committee may also recommend increases in Mr. Tipton's compensation
if it believes his compensation is less than that paid to chief executive
officers of companies with comparable sales revenues. The Committee has not
created any particular group of companies for comparison purposes, or otherwise
engaged in a systematic review of executive compensation at comparable
companies. Instead, the Committee derives information on executive compensation
at other companies in an unstructured manner, principally from trade journals
and business publications.
The Compensation Committee's recommendations regarding Mr. Tipton's
salary in 1996, 1997 and 1998 and to pay him a bonus of $110,000 for 1996, were
based principally on the following factors:
o The Company's sales have increased substantially in recent years, from
$108,766,000 in 1994 to $114,885,634 in 1995 and to $120,698,632 in
1996.
o The number of Member-Dealers of the Company has also increased, from
858 in 1994 and 894 in 1995 to 920 in 1996.
o The Committee determined that Mr. Tipton's compensation may be somewhat
less than compensation of chief executive officers of companies with
comparable sales revenues.
Other Executive Officers
Compensation for other executive officers of the Company is normally
determined by the board of directors based upon recommendations made by the
Chief Executive Officer. These recommendations are generally based upon Mr.
Tipton's subjective assessment of individual job performance and an attempt to
achieve longevity among the Company's executives. Unlike the Chief Executive
Officer's compensation, compensation to other executive officers is
6
<PAGE>
not based upon the Company's performance in increasing sales and Member-Dealers.
The compensation of the other executive officers has increased steadily but
moderately in recent years. None of the other executive officers received salary
and bonus in 1996 in excess of $100,000.
NORMAN J. BERING, II WELDON D. BAILEY SAMUEL JEFF DYSON
Security Ownership of Certain Beneficial Owners and Management
No shareholder is the beneficial owner of more than five percent of any
class of the Company's voting securities.
The following table shows as of February 28, 1997, the number of shares
of Class A Common Stock, Class B Common Stock and Preferred Stock beneficially
owned by each of the directors, nominees for director, and all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership1
------------------------------------------------------------------------------
Class A Class B Preferred
Common Stock Common Stock Stock
---------------------- ---------------------- ----------------------
Number Percent Number Percent Number Percent
Name of of of of of of of
Beneficial Owner Shares Class Shares Class Shares Class
- -------------------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Norman J. Bering, II 10 0.1% 929 1.9% 992 1.9%
Weldon D. Bailey 10 0.1% 479 1.0% 497 1.0%
Susie Bracht-Black 10 0.1% 538 1.1% 553 1.1%
Virgil H. Cox 10 0.1% 330 0.7% 330 0.6%
Robert L. Eilers 10 0.1% 230 0.5% 230 0.5%
Leroy Welborn 10 0.1% 80 0.2% 80 0.2%
Samuel J. Dyson 10 0.1% 316 0.7% 316 0.6%
Phil M. Grothues 10 0.1% 190 0.4% 200 0.4%
Larry Ward 10 0.1% 689 1.4% 729 1.4%
James D. Tipton -- --- --- --- --- ---
All directors, nominees
and executive officers as
a group (15 persons) 90 0.9% 3,781 7.8% 3,927 7.7%
</TABLE>
- ------------------------
1 All share figures are rounded up to the nearest whole share. All
percentages are rounded to the nearest tenth of a percent. Columns may not total
due to rounding. Shares shown as beneficially owned by the directors are owned
of record by Member-Dealer corporations affiliated with the director. In some
cases, the directors share voting and investment powers with other members of
management of such corporations.
The Company is not aware of any contractual arrangements, the operation
of which may at a subsequent date result in a change in control of the Company.
7
<PAGE>
Performance Graph
Under rules adopted by the Securities and Exchange Commission in 1992,
each publicly owned company is required to provide in its proxy statement a line
graph comparing, for the previous five years, the cumulative total return on its
common stock with the cumulative total return of a broad equity market index and
an industry index or peer group. The Company cannot provide this graph because
there is no meaningful information with respect to cumulative return on any
class of the Company's common stock. The Company's shareholders invest in the
Company to obtain access to the services provided by the Company, not with any
expectation of return on their investment in the Company's capital stock. The
Company's Class A Common Stock, Class B Common Stock and Preferred Stock are
issued only to Member-Dealers, and to the Company's knowledge are currently
owned only by Member-Dealers and former Member-Dealers. Each share of the
Company's capital stock is issued for a price of $100, and, if repurchased by
the Company, is repurchased at a price of $100. No class of the Company's
capital stock is listed on an exchange or traded in any other public trading
market. The Company is not aware of any sales or other trades of any shares of
the Company's capital stock, other than the repurchases by the Company for the
same $100 originally paid.
Certain Relationships and Related Transactions
Each of the directors whose term of office will continue after the
annual meeting of the shareholders and each nominee for director of the Company
(other than Mr. Tipton) is affiliated with at least one company that is a
Member-Dealer and a shareholder of the Company. Those Member-Dealers made
purchases from the Company of merchandise in 1996. Purchases made by such
companies have been and will continue to be made in the ordinary course of
business and treated by the Company in exactly the same manner as purchases by
other parties. The chart below lists the name of each director whose term of
office will continue after the annual meeting of the shareholders and each
nominee for director and the purchases from the Company during 1996 by the
Member-Dealer(s) with which the director is affiliated. For information
regarding the relationship between each director and the Member-Dealer(s) as
well as the name(s) of the Member-Dealer(s), see "Directors and Executive
Officers" above.
<TABLE>
<CAPTION>
Name of Director Purchases During 1996
---------------- ---------------------
<S> <C>
Weldon D. Bailey $1,014,311
Norman J. Bering, II 1,885,099
Susie Bracht-Black 1,879,494
Virgil H. Cox 698,956
Samuel J. Dyson 617,189
Robert L. Eilers 408,144
Phil M. Grothues 755,919
Larry Ward 1,134,102
Leroy Welborn 382,087
</TABLE>
8
<PAGE>
Independent Public Accountants
The Board of Directors appointed Clyde D. Thomas & Co., as independent
public accountants of the Company for the fiscal year ended December 31, 1996.
Clyde D. Thomas & Co. (formerly Longenecker, Thomas & Co.) has served as
independent public accountants of the Company for a number of years. It is
anticipated that this firm will be reappointed for the fiscal year ended
December 31, 1997 at the annual meeting of directors following the annual
meeting of shareholders. Such appointment does not require ratification or other
action by the Company's shareholders. Representatives of Clyde D. Thomas & Co.
are not expected to be present at the meeting.
Other Business
The Board of Directors does not know of any other business to be
presented at the annual meeting of shareholders. If any other matter properly
comes before the meeting, however, the enclosed proxy card confers upon the
persons entitled to vote the shares represented by such proxy discretionary
authority to vote the same on behalf of the shareholders they represent in
accordance with their best judgment.
Shareholder Proposals for 1998 Annual Meeting
It is anticipated that the 1998 annual meeting of shareholders of the
Company will be held on May 13, 1998. Any proposal to be presented by a
shareholder at the Company's 1998 annual meeting of shareholders must be
received in writing by the Company at its principal executive offices (8300
Tewantin Drive, Houston, Texas 77061) not later than December 12, 1997, so that
it may be considered by the Company for inclusion in its proxy statement and
form of proxy relating to that meeting.
By Order of the Board of Directors
/s/ Tina S. Kirbie
----------------------------------
Tina S. Kirbie
Secretary
Houston, Texas
March 31, 1997
9
<PAGE>
PROXY
HANDY HARDWARE WHOLESALE, INC.
This Proxy is Solicited by the Board of Directors
for the Annual Meeting of Shareholders to be held
on May 14, 1997
The undersigned hereby appoints Weldon D. Bailey and James D. Tipton or
either of them, each with full power of substitution, attorneys and proxies of
the undersigned to vote as designated below all shares of Class A Common Stock,
$100.00 par value, of Handy Hardware Wholesale, Inc. (the "Company"), which the
undersigned is entitled to vote at the annual meeting of shareholders to be held
Wednesday, May 14, 1997 in the Grand Ballroom Salon B of the Hobby Airport
Hilton Hotel, Houston, Texas at 7:00 p.m., Houston time, and at any adjournment:
(1) ELECTION OF DIRECTORS - The undersigned hereby directs said
proxies to vote:
[ ] FOR the election (except as indicated below) as
directors of Virgil Cox, Robert Eilers, Leroy Welborn
and James D. Tipton for the respective terms set
forth in the Proxy Statement.
Instruction: to withhold authority to vote for any
individual nominee, write that nominee's name on the
line provided below:
-----------------------------------------------------
[ ] WITHHOLD authority to vote for all nominees listed
above.
(2) OTHER MATTERS - The undersigned hereby directs the proxies to
vote in their discretion on such other matters as may come
before the meeting.
[ ] YES [ ] NO
This proxy will be voted in accordance with the specifications made
hereon. If no contrary specification is made, it will be voted FOR the election
of the four named director nominees and the proxies will vote in their
discretion on such other matters as may come before the meeting.
Receipt of the Company's Notice of Annual Meeting and Proxy Statement
dated March 31, 1997 is acknowledged.
NAME OF SHAREHOLDER PLEASE SIGN BELOW EXACTLY AS YOUR NAME
APPEARS ON THE ATTACHED LABEL
--------------------------------------
By:-----------------------------------
(Signature of Officer, Owner)
Title:-----------------------------
Dated:-----------------------------
Please return the proxy in the enclosed envelope, which requires no postage if
mailed in the United States, by April 30, 1997.
NUMBER OF PEOPLE WHO PLAN TO ATTEND THE MEETING AND HOSPITALITY [-----]
CANNOT ATTEND MEETING [-----]
<PAGE>
