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:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BIG O TIRES, INC.
(Name of Registrant as Specified in its Charter)
Philip J. Teigen, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box:
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title to each class of securities to which
transaction applies:
___________________________________________
(2) Aggregate number of securities to which
transaction applies:
___________________________________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange
Act Rule 0-11:
___________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________
Set forth the amount of which the filing fee is calculated and
state how it was determined.
[ ] 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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(4) Date Filed: _________________
BIG O TIRES, INC.
11755 East Peakview Avenue
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 1995
To Our Shareholders:
The Annual Meeting of Shareholders of Big O Tires, Inc., a Nevada
corporation ("Company"), will be held at the Company's Sales and
Service Center located at 875 American Pacific Drive, Henderson,
Nevada 89014 on June 7, 1995, at 7:00 p.m., Pacific Daylight
Time, for the purpose of considering and acting upon the
following:
I. To elect three (3) Class II Directors to hold office for
terms that will expire on the third succeeding Annual
Meeting of Shareholders after such election, and one (1)
Class IV Director to hold office for a term that will
expire on the next succeeding Annual Meeting of
Shareholders after such election, or until their
successors are duly elected and qualified.
II. To increase the number of shares of the Company's $.10 par
value Common Stock that may be either available for grant
or issued upon the exercise of options granted under the
Company's Long Term Incentive Plan from 220,000 shares to
320,000 shares.
III. To consider such other matters as may properly come before
the Meeting or any adjournments thereof.
Only shareholders of record as of the close of business on April
10, 1995, are entitled to notice of and to vote at the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Philip J. Teigen,
Secretary
Englewood, Colorado
May 1, 1995
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL
BE VOTED AT THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PREPAID,
SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT
TO VOTE IN PERSON IF YOU ATTEND THE MEETING. IF YOU PLAN TO
ATTEND THE MEETING AND YOUR SHARES ARE HELD IN THE NAME OF A
BROKER OR OTHER NOMINEE, PLEASE BRING WITH YOU A PROXY FROM THE
BROKER OR NOMINEE TO CONFIRM YOUR OWNERSHIP OF SHARES.
BIG O TIRES, INC.
11755 East Peakview Avenue
Englewood, Colorado 80111
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
JUNE 7, 1995
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Big O Tires, Inc., a Nevada corporation ("Company"),
for use at the Company's Annual Meeting of Shareholders to be
held at the Company's Sales and Service Center located at 875
American Pacific Drive, Henderson, Nevada 89014, on June 7, 1995,
at 7:00 p.m., Pacific Daylight Time, and at any and all
adjournments thereof. This Proxy Statement and the accompanying
Proxy are being mailed to the Company's shareholders on or about
May 1, 1995.
Any Company shareholder giving a proxy may revoke it any time
prior to its use at the Annual Meeting by (i) giving written
notice of revocation to the Secretary of the Company; or (ii)
executing and delivering to the Company a later dated proxy.
Mere attendance at the Annual Meeting, without submitting such
written notice of revocation or without executing and delivering
a later dated proxy, will not revoke the proxy.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
All voting rights are vested exclusively in the holders of the
Company's $.10 par value common stock ("Common Stock") with each
share entitled to one vote. Cumulative voting for the election
of Directors is not permitted. Only shareholders of record as of
the close of business on April 10, 1995, are entitled to notice
of and to vote at the Annual Meeting of Shareholders, or any
adjournments thereof. On April 10, 1995, the Company had
3,312,143 shares of its Common Stock outstanding. The presence
in person or by proxy of the holders of a majority of the
outstanding shares of the Common Stock of the Company entitled to
vote will constitute a quorum for the transaction of such
business as may properly come before the meeting.
All properly executed proxies delivered pursuant to this
solicitation and not revoked will be voted at the Annual Meeting
in accordance with the directions given. With respect to the
election of Directors, in voting by proxy, shareholders may vote
in favor of all nominees, withhold their votes as to all nominees
or withhold their votes as to specific nominees. With respect to
the other proposal to be voted upon, shareholders may vote in
favor of the proposal, against the proposal or may abstain from
voting on the proposal. Shareholders should specify their
choices on the enclosed form of proxy. If no specific
instructions are given with respect to the matters to be acted
upon, the shares represented by a signed proxy will be voted FOR
the election of all nominees for Directors and FOR the proposal
to increase the number of shares of Common Stock available under
the Long Term Incentive Plan. The election of Directors will
require the affirmative vote of a plurality of the shares of
Common Stock voting in person or by proxy at the Annual Meeting.
The approval of the increase in the number of shares of Common
Stock available under the Long Term Incentive Plan will require
the affirmative vote of a majority of the shares of Common Stock
of the Company voting on the proposal in person or by proxy at
the Annual Meeting. Votes withheld in the election of Directors
will be excluded from the vote and will have no effect on the
outcome of the election of Directors. Abstentions will be
counted in the denominator in determining the fraction of votes
voted for approval of the increase in the number of shares of
Common Stock available under the Long Term Incentive Plan and
thus will have the effect of votes against such approval. Broker
non-votes will not be included in the vote total with respect to
the approval of the increase in the number of shares of Common
Stock available under the Long Term Incentive Plan. Broker
non-votes and abstentions will be treated as shares that are
present and entitled to vote for determining the presence of a
quorum.
The following persons are the only persons known to the Company
who, on April 10, 1995, owned beneficially more than 5% of the
outstanding shares of the Company's Common Stock:
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Big O Tires, Inc. 560,420<F1> 16.92%
Employee Stock Ownership Plan
("ESOP")
11755 East Peakview Avenue
Englewood, Colorado 80111
Balboa Investment Group, L.P., 320,500<F2> 9.68%
a California limited partnership
and Mr. Kenneth W. Pavia, Sr.,
the sole general partner of
this partnership
1101 East Balboa Boulevard
Newport Beach, California 92661-1313
Maurice D. Sabbah, et al. 190,265<F3> 5.74%
262 East Moorehead Street
P.O. Box 700
Burlington, North Carolina 27216
Big O Senior Management
and Dealer Group 209,278<F4> 6.32%
c/o William Spencer
IFC Limited
1099 18th Street
Denver, Colorado 80202
______________________________
<F1> Of the 560,420 shares of Common Stock in the ESOP,
approximately 107,175 shares of Common Stock will be allocated to
Participants' accounts as of December 31, 1994. Each Participant
has voting power over the shares of Common Stock allocated to his
or her account. The ESOP Administrator shall direct the Trustee
concerning the exercise of any voting rights of the Company's
Common Stock which are not passed through to Participants or are
not exercised by Participants, including shares of the Company's
Common Stock which are held in an unallocated ESOP suspense
account.
<F2> In a Schedule 13D, as amended, the Company was notified
that these persons held these shares of Common Stock. (See also
the "Certain Transactions" section of this proxy statement.)
<F3> In a Schedule 13D dated December 6, 1994, the Company was
notified that these persons held these shares of Common Stock.
<F4> In a Schedule 13D, as amended, the Company was notified
that these persons held these shares of Common Stock. These
persons consist of a group of Company officers led by Company
President, Steven P. Cloward, managers and Company franchisees
("Dealer-Management Group") that made an offer to acquire the
outstanding shares of the Company. The shares reported in this
Schedule 13D, as amended, include the shares for the
aforementioned officers disclosed in the "Security Ownership of
Management" section of this proxy statement. (See also the
"Certain Transactions" section of this proxy statement.)
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of April 10, 1995, the shares of
the Company's outstanding Common Stock beneficially owned by each
Director and nominee for Director of the Company and the shares
of the Company's outstanding Common Stock beneficially owned by
all Executive Officers and Directors of the Company as a group:
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership<1><9> of Class<9>
John B. Adams 39,394 <F2><F7><F8> 1.18%
Ronald D. Asher 16,109 <F3><F7> *
Frank L. Carney 754 <F7> *
Steven P. Cloward 100,569 <F4><F7><F8> 3.01%
Everett H. Johnston 904 <F7> *
Robert K. Lallatin 160 *
Horst K. Mehlfeldt 3,154 <F7> *
John E. Siipola 4,782 <F7> *
Ralph J. Weiger 3,003 <F7> *
C. Thomas Wernholm 20,914 <F5><F7> *
All Current Directors
and Executive Officers <F2><F3><F4>
as a Group (17 persons) 264,639 <F5><F6><F7><F8> 7.73%
* Percent of shares of Common Stock beneficially owned by this
Director does not exceed 1% of the Company's outstanding Common
Stock.
<F1> Unless otherwise indicated, the shares are held directly in
the names of the beneficial owners and each person has sole
voting and sole investment power with respect to the shares.
<F2> Includes 1,311 shares of Common Stock owned jointly by Mr.
Adams and his wife, over which shares Mr. Adams may be deemed to
have shared voting and investment power, and includes 14,555
shares of Common Stock that have been allocated or are expected
to be allocated to Mr. Adams in the ESOP, over which shares Mr.
Adams has and will have sole voting power.
<F3> Includes beneficial ownership by R & A Asher, Inc., a
California corporation ("R & A"), of 156 shares of Common Stock.
Mr. Asher and his wife each own 50% of the issued and outstanding
capital stock of R & A, and Mr. Asher may be deemed to have
shared voting and investment power over the 156 shares. Includes
approximately 470 shares owned by a retirement trust in which Mr.
Asher and his wife are co-trustees.
<F4> Includes 25,110 shares owned directly by Mr. Cloward's wife,
over which shares Mr. Cloward may be deemed to have shared voting
and investment power, and includes 34,850 shares that have been
allocated or are expected to be allocated to Mr. Cloward in the
ESOP, over which shares Mr. Cloward has and will have sole voting
power.
<F5> Includes 4,688 shares of Common Stock owned jointly by Mr.
Wernholm and his wife and over which shares Mr. Wernholm may be
deemed to have shared voting and investment power over such
shares.
<F6> Includes the following shares of Common Stock that have been
allocated or are to be allocated to the following Executive
Officers not named above who participate in the ESOP, over which
shares these Executive Officers will have sole voting power:
Name No. of Shares
Dennis J. Fryer 4,637
Allen E. Jones 4,067
Ronald H. Lautzenheiser 6,566
Kelley A. O'Reilly 1,707
Gregory L. Roquet 2,946
Thomas L. Staker 2,993
Philip J. Teigen 2,886
Bruce H. Ware 4,917
<F7> Included in the above share figures are shares of Common
Stock underlying presently exercisable options granted under the
Big O Tires, Inc. Director and Employee Stock Option Plan owned
by the following Directors and Executive Officers:
No. of Shares
Underlying Presently
Name Exercisable Options
John B. Adams 4,922
Ronald D. Asher 15,483
Frank L. Carney 754
Steven P. Cloward 12,284
Everett H. Johnston 904
Allen E. Jones 632
Horst K. Mehlfeldt 3,154
John E. Siipola 3,782
Philip J. Teigen 833
Bruce H. Ware 302
Ralph J. Weiger 1,356
C. Thomas Wernholm 16,226
<F8> Included in the above share figures are shares of restricted
Common Stock granted under the Big O Tires, Inc. Long Term
Incentive Plan, over which shares the following Executive
Officers have sole voting power and includes shares of Common
Stock underlying presently exercisable options granted under the
LTI Plan:
Name No. of Shares No. of Options
John B. Adams 7,552 11,054
Steven P. Cloward 11,370 16,955
Dennis J. Fryer 1,716 0
Allen E. Jones 1,716 4,684
Ronald H. Lautzenheiser 3,495 3,804
Kelley A. O'Reilly 2,065 0
Gregory L. Roquet 1,907 4,684
Thomas L. Staker 4,479 3,681
Philip J. Teigen 1,634 1,841
Bruce H. Ware 1,764 4,684
<F9> The beneficial ownership and percentages for each person and
the group have been reported and calculated as if the presently
exercisable options owned by each person or the group referred to
in the preceding footnotes had been exercised.
I. ELECTION OF DIRECTORS
At the April 13, 1995, meeting of the Board of Directors, the
Company's Bylaws were amended to add a fourth class of director.
Prior thereto, the Bylaws provided for three (3) classes of
directors. The Class I, II and III Directors are to remain as
nearly equal in number as possible and all of the classes
of directors are to have such number of directors so that at
least one-fourth of the total number of directors is elected for
a three year term at each Annual Meeting of Shareholders. The
Class IV Director, when elected at the Annual Meeting of
Shareholders, will serve for a one year term. The terms of Class
II Directors expire at this Annual Meeting of Shareholders.
Accordingly, three (3) Class II Directors are to be elected for
three year terms, and one Class IV Director is to be elected for
a one year term, or until their successors are duly elected and
qualified.
The persons named in the enclosed Proxy will vote the shares
represented by such Proxy for the election of the three (3)
nominees for Class II Directors and one (1) Class IV Director,
all of which are named below, unless authority to do so is
withheld. If, at the time of the Annual Meeting, any of these
nominees shall not be available for any reason for election as a
Director, which event is not expected to occur, the proxies will
be voted for such substitute(s) as shall be designated by the
Board of Directors.
The persons who have been nominated for Class II and Class IV
Directors are listed below . Each nominee has agreed to his
nomination and has agreed to serve if elected.
Principal Occupation During
Name of Director the Last Five Years and Other
Nominee Since Age Position, if any, In the Company
Nominees for Class II Director to serve until the Company's 1998
Annual Meeting of Shareholders:
Steven P. Cloward<F1> Dec. 86 47 Member of the Office of the
Chief Executive since
February 1995 and President
of the Company since 1986;
Chief Executive Officer of
the Company from 1986 to
February 1995; also a part
owner of OK Tires, Inc., a
Utah corporation, that has
owned a franchised Big O
Tires retail store in Utah
since October 1994.
Ralph J. Weiger<F2><F4> June 92 70 Chairman and owner of the
Moneco Group, an advisor to
franchise business clients,
international marketing
companies and investment and
commercial banking clients,
since 1982; Chairman of the
Board of America's Carpet
Gallery since October 1991.
Chairman, President and
Chief Executive Officer of
Midas International Corp.
from 1971 until 1978 and
Vice Chairman and President
of Jiffy Lube International,
Inc. from 1983 until 1985.
A director of the
International Franchise
Association from 1976 until
1979 and President in 1979.
C. Thomas Wernholm
<F3><F4><F5> Dec. 86 64 President and Chief
Executive Officer for D.
Wernholm & Sons, Industrial
Contractors, an industrial
painting contractor;
Chairman of the Board of
Loomis Industries, a
company owned primarily by
the Wernholm family that
manufactures paraline
instruments.
Nominee for Class IV Director to serve until the Company's 1996
Annual Meeting of Shareholders:
Robert K. Lallatin N/A 46 Member of the Dealer
Planning Board representing
franchisees of the Company
in Idaho, Montana, western
Wyoming and northern Nevada
since March 1990; Chairman
of the Personnel Training
Committee of the Dealer
Planning Board since July
1993; part owner of B & G
Tire, Inc., an Idaho
corporation, that currently
owns a franchised Big O
Tires retail store in Idaho
since November 1981 and
acquired a second franchised
Big O Tires retail store in
Idaho in August 1989; B & G
Tire, Inc. also owned two
Big O Tires retail stores in
Montana, one of which was
sold in March 1990 and the
other was closed in December
1993; also a part owner of B
& G Jackson Partnership, an
Idaho general partnership,
that has owned a franchised
Big O Tires retail store in
Wyoming since February 1992
as a partner with one of the
Company's subsidiaries.
This store was purchased by
B & G Jackson Partnership
effective December 31, 1994.
The following Directors are not subject to reelection until
either 1996 or 1997, as provided in the Company's Bylaws.
Class I Directors to serve until the Company's 1997 Annual
Meeting of Shareholders:
John B. Adams<F1> Apr. 90 40 Executive Vice President of
the Company since April
1990; also a part owner of
CAPS Tire Limited Liability
Company, a limited
liability company that has
owned a franchised Big O
Tires retail store in
Colorado, since November
1993; Chief Financial
Officer of the Company since
November 1988; Vice
President - Finance of the
Company from November
1988 until April 1990;
Secretary of the Company
from November 1989 until
December 1990, and from
April 1987 until June 1989;
Treasurer of the Company
since April 1987; Assistant
Secretary of the Company
since December 1990 and from
June 1989 until November
1989.
Horst K. Mehlfeldt
<F1><F4> Dec. 89 55 Vice Chairman and Member of
the Office of the Chief
Executive of the Company
since February 1995;
Consultant to the Company
providing investment
advisory services from
September 1994 to February
1995; Senior Vice President
and Chief Financial Officer
of General Tire, Inc., a
tire manufacturer and
marketer, from January 1992
to February 1994; Vice
President and Treasurer of
General Tire, Inc. from
January 1989 until December
1991.
Everett H. Johnston
<F2><F4> Feb. 93 56 Real estate investor since
1989; Chief Financial
Officer, Secretary,
Treasurer and a Director of
Simpson Manufacturing Co.,
Inc., a manufacturer of
structural building
products, from 1983 to 1989,
at which time Mr. Johnston
retired.
Class III Directors to serve until the Company's 1996 Annual
Meeting of Shareholders:
Ronald D. Asher<F7> Dec. 86 58 Owner of interests in 30
franchised Big O Tires
retail stores in California
and Arizona that are owned
by C.S.B. Partnership
("CSB") and by a joint
venture consisting of the
Company and S.A.N.D.S.
Partnership.
Frank L. Carney
<F3><F4><F5><F6> Dec. 93 57 President of Papa Johns, a
limited liability company,
since February 1994; Vice
Chairman, Secretary and
Director of TurboChef, Inc.,
a company engaged in the
design, development,
assembly and marketing of
commercial ovens, since
January 1994; Chairman of
the Board of WesterN SizzliN
from November 1988 to
December 1993 and served as
its President and Chief
Executive Officer from
November 1990 to December
1993; Director of Intrust
Bank, N.A. since December
1973, and Intrust Financial
Corporation since August
1982; from 1980 until 1992,
the sole shareholder,
officer and director of
Carney Enterprises, Inc., an
investor in diversified
business; co-founded Pizza
Hut in 1958, President from
1969 to 1980 and Chairman of
the Board from 1973 until
Pizza Hut was purchased by
PepsiCo, Inc. in 1977.
John E. Siipola<F1><F4> Mar. 88 51 Member of the Office of the
Chief Executive of the
Company since February 1995;
Chairman of the Board of
the Company since December
1991; President and owner of
Barrett Publishing, Inc.
since January 1993;
Consultant and investor
since May 1991; President of
the Barrett Group, a
personnel consulting firm,
from November 1988 until May
1991.
<F1> Member of the Executive Committee. The Executive Committee
is responsible for meeting on issues that arise between the
regular meetings of the Board of Directors to: monitor business
operations of the Company; plan and budget future operations of
the Company; provide authorization for major expenditures and
contract commitments in accordance with approved business plans
and budgets; and consider other actions on behalf of the Board of
Directors when expedience dictates and a matter falls within the
scope of plans, principles or authorities approved by the Board
of Directors. All decisions of the Executive Committee must be
unanimous to be implemented. Mr. Adams is a non-voting member of
this Committee.
<F2> Member of the Audit Committee. The Audit Committee is
responsible for evaluating and recommending the appointment of
the independent auditors; reviewing and approving the audit plans
of the independent and internal auditors; reviewing the results
of audits and management's response; reviewing annual and interim
reports to the Company's shareholders and the Securities and
Exchange Commission; reviewing the Company's accounting
principles as well as the impact of changes in accounting rules;
reviewing activities, organization structure and qualification of
the internal audit function; reviewing the Company's system of
internal controls; monitoring the Company's compliance with laws,
regulations and internal policiesprohibiting fraud and illegal
acts as well as its code of ethics; conducting special
investigations and directing independent and/or internal auditors
to perform special internal reviews; reviewing the results of
examinations conducted by regulatory agencies; and reviewing long
range financial plans of the Company.
<F3> Member of the Human Resources Committee. The Human
Resources Committee reviews management's organizational
structure; compensation plans for officers and directors;
retirement programs and personnel policies; interviews
prospective officers; monitors the administration of the employee
benefit programs; monitors the effectiveness of the Company's
Human Resources Officer; serves as nominating committee for
candidates for Director positions; prepares compensation
disclosure required by the Securities and Exchange Commission;
and counsels the Members of the Office of Chief Executive in all
areas related to human resources.
<4> Member of the Investment Committee. At the Annual Meeting
of Shareholders held in June 1994, the shareholders adopted a
resolution calling for the Company to engage an investment banker
to explore all alternatives for enhancing the value of the
Company. In implementing this resolution, the Company's Board of
Directors established the Investment Committee of the Board which
retained PaineWebber Incorporated to fulfill this shareholder
proposal. The Investment Committee is comprised of the four (4)
independent members of the Board of Directors and of the two (2)
Board members serving as the Company's Chairman and Vice
Chairman. Mr. Asher participated in a limited number of the
Investment Committee meetings as a non-voting member. In
September 1994, the proponent of the June 1994 shareholder
proposal, upon invitation by the Board, began assisting the
Investment Committee in this process. (See also the "Certain
Transactions" section of this proxy statement.)
<F5> Member of the Director and Employee Stock Option Plan and
Long Term Incentive Plan Administrative Committees.
<F6> In October 1992, WesterN SizzliN, Inc. filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court, Northern District of Texas,
Dallas Division, and its plan of reorganization was confirmed by
the Bankruptcy Court in December 1993. Mr. Frank L. Carney was
the Chairman of the Board of WesterN SizzliN, Inc. from November
1988 to December 1993 and also served as its President and Chief
Executive Officer from November 1990 until December 1993.
<F7> In November 1993, the Company entered into a Stipulation
for Entry of Final Judgment and a Permanent Injunction against
the Company and two (2) franchised Big O Tires retail stores
owned by CSB and two (2) franchised Big O Tires retail stores
owned by a joint venture consisting of CSB and a wholly-owned
subsidiary of the Company. Although the Stipulation in the
action does not constitute an admission or adjudication of any of
the allegations made against the defendants, it does permanently
enjoin all defendants from directly or indirectly advertising the
purchase or lease of a product or service, or any combination
thereof, that requires as a condition of the sale, the purchase
or lease of a different product or service, or any combination
thereof, without conspicuously disclosing in the advertisement
the price of all such products and services. The defendants are
also required to inform any prospective purchaser of one of the
Big O Tires retail stores which was the subject of the
investigation of the injunction. As part of the Stipulation, the
defendants agreed to pay certain costs and penalties totalling
$35,000, the Company's portion of which was $25,000.
<PAGE>
DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors held five (5) formal meetings and nine (9)
meetings by way of telephone conference call during the fiscal
year-ended December 31, 1994. The Committees of the Board of
Directors held the following number of meetings during the
year-ended December 31, 1994:
No. of
Committee Meetings
Audit 12
Executive 7
Human Resources 6
Business Development 5
Investment 10
All of the Directors attended at least seventy-five percent (75%)
of the aggregate of the Board of Directors meetings and the
various Committee meetings.
During 1994, the Board of Directors established an Ad Hoc
Committee consisting of John B. Adams, Frank L. Carney, Steven P.
Cloward, Horst K. Mehlfeldt and John E. Siipola. This Committee
was established to consider the shareholder proposal which was
submitted to the Company in order to be included in the Company's
1994 proxy materials. This Committee met by telephone conference
and in person approximately five (5) times. This Ad Hoc
Committee was discontinued in June 1994. On February 24, 1995,
the Board discontinued the Business Development Committee.
EXECUTIVE OFFICERS
The Executive Officers of the Company are elected annually at the
first meeting of the Company's Board of Directors held after the
Annual Meeting of Shareholders or at such time as the Board of
Directors establishes a new position. Each Executive Officer
holds office until his/her successor is duly elected and
qualified or until his/her resignation or until he/she is removed
in the manner provided in the Company's Bylaws. The current
Executive Officers of the Company are John B. Adams, Steven P.
Cloward, Dennis J. Fryer, Allen E. Jones, Ronald H.
Lautzenheiser, Horst K. Mehlfeldt, Kelley A. O'Reilly, Gregory L.
Roquet, John E. Siipola, Thomas L. Staker, Philip J. Teigen, and
Bruce H. Ware. Messrs. Fryer, Jones, Roquet and Ware and Ms.
O'Reilly were appointed by the President pursuant to authority
delegated to him by the Board of Directors. Information
pertaining to Messrs. Adams, Cloward, Mehlfeldt and Siipola is
set forth earlier in this Proxy Statement.
The following table provides information relating to the other
Officers of the Company:
Principal Occupation
Officer During the Last Five Years
Officer Since Age and Position Within the Company
Dennis J. Fryer Jan. 93 42 Regional Vice President -
Central Region of the Company
since October 1992; New Store
Opening Specialist of the
Company from January 1990 to
October 1992; Area Manager of
the Company from March 1986 to
January 1990.
Allen E. Jones Dec. 90 44 Regional Vice President -
Southeast Region of the Company
since December 1990; Regional
Director for the Company from
1988 to 1990.
Ronald H.
Lautzenheiser Mar. 90 53 Vice President - Business
Development of the Company
since November 1993; Vice
President - Marketing of the
Company from March 1990 to
November 1993, and employee of
the Company since December
1989.
Kelley A. O'Reilly Nov. 93 33 Vice President - Marketing of
the Company since November 1993;
Director, President and
Treasurer of Impact Advertising,
Inc. since August 1994;
Marketing Director of the
Company from July 1991 to
October 1993; Advertising
Director for Big O
Dealers-Seattle from March 1990
to June 1991; Market Analyst for
the Small Business Development
Center in Bellingham, Washington
from June 1988 to March 1990.
Gregory L. Roquet Dec. 90 38 Regional Vice President - West
Central Region since May 1993
and Regional Vice President -
Southwest Region of the Company
since July 1991; Regional
Director of Operations -
Southwest Region from December
1990 to July 1991; Warehouse
Manager of the Company's Western
RSC from April 1990 to December
1990; prior thereto, owner and
operator of two franchised Big O
Tires retail stores in Richmond,
California.
Thomas L. Staker Dec. 91 46 Senior Vice President -
Operations of the Company since
January 1993; also a part owner
in OK Tires, Inc., a Utah
corporation, that owns a
franchised Big O Tires retail
store in Utah since October
1994; Vice President -
Operations of the Company from
December 1991 to December 1992;
President and Director of Staker
Management, Inc., a provider of
consulting services to the
Company's franchisees, from
March 1991 to December 1991;
President and Director of Willow
Investments, Inc., a wholesaler
and manufacturer of clothing,
from October 1988 to November
1991; 25% stockholder, Secretary
and Director of Tad Tire, Inc.,
a franchisee of the Company,
from August 1982 to the present.
Philip J. Teigen Dec. 90 55 Secretary of the Company since
December 1990; General Counsel
of the Company since August
1990; engaged in the private
practice of law from May 1987 to
August 1990.
Bruce H. Ware Dec. 90 37 Regional Vice President -
Northwest Region of the Company
since December 1990; Director of
Operations - Northwest Region of
the Company from January 1990 to
November 1990; Employee of the
Company since January 1989.
____________________________
REPORT OF THE HUMAN RESOURCES COMMITTEE ON EXECUTIVE COMPENSATION
The executive compensation program, administered by the Human
Resources Committee of the Board of Directors ("Committee"), has
been designed and is administered to support the Company's
mission which is to become the largest network of successful
franchised tire and automotive related retail outlets in North
America providing top quality Big O brand tires and products at
competitive prices while operating within the Company's corporate
creed. The Committee members consist entirely of non-employee
directors. In furtherance of the Company's mission, the
Committee is responsible for administering total compensation
programs which will enable the Company to:
- Attract, develop and retain high-quality executives;
- Emphasize the relationship between pay and performance
by placing a significant portion of compensation at risk
and subject to the achievement of financial goals and
objectives;
- Maximize real growth-driven financial performance,
balancing short and long term goals of the Company; and
- Maximize shareholder value by aligning the interests of
its executive officers with those of its shareholders
through the use of stock, stock derivatives and stock
appreciation rights to link a significant portion of
compensation to increases in shareholder value.
Components of Compensation
Executive officers compensation is based on a wide range of
quantitative and qualitative measures which permit comparisons
with competitors' performances and internal targets set before
the beginning of each fiscal year. The Committee believes that
executive officers should be accountable for their areas of
responsibility (their individual performance) as well as overall
corporate performance, and that the executive officers
compensation program should reflect both Company progress and
achievement within an executive officer's business unit.
Examples of quantitative measures for 1994 were net franchisee
growth, earnings per share, reduction in non-current accounts
receivable and reduction in selling and general administrative
expenses. Examples of 1994 qualitative assessments were reduction
in warranty adjustment expense, the measured progress in
marketing (Cost-U-LessTM program), and improvement in product
quality.
Executive officer compensation is comprised of three elements:
base salary, annual incentive bonus and long term incentives.
Base Salaries
Executive officers receive base salaries that are modest by
industry standards. The Committee commissioned a compensation
study by Hay Management Consultants/The Hay Group in 1990 and has
targeted base salaries at the 40th percentile of comparable
positions as defined by that study.
Annual Incentive Bonus
The Committee believes that executive officer reward should
appropriately be based more on achievement of quantifiable
business goals which are negotiated each year in concert with the
Company's short and long term business plans. The annual
incentive bonus is an annual cash bonus that is distributed based
upon the Company's achievement of certain objective financial
goals and achievement of each executive officer's individual
goals defined by minimally acceptable thresholds, business
targets, and maximum levels.
Long-Term Incentives
The third component of the executive officer compensation program
are the long term incentives which use stock options and/or
restricted stock grants under the Company's Long Term Incentive
Plan (the "LTI Plan") and, for selected key employees, stock
appreciation rights under the Company's Supplemental Executive
Retirement Plan. And, as of February 1995, stock appreciation
rights for members of the Office of the Chief Executive. The
Committee uses a model developed for the Company by The Hay
Group. By awarding stock, stock derivatives and stock
appreciation rights, a significant portion of the total
executive officer compensation program is tied to the Company's
future stock price performance. The Committee's objective is to
align the interests of the executive officers with the long-term
interests of the Company's shareholders. Using The Hay Group
model as a baseline as it is applied to the Company's LTI Plan,
the Committee increases or decreases such option or restricted
stock grants by factors based upon the Company's overall
performance and each individual executive officer's performance.
A determination of unsatisfactory performance could equate to no
award. During 1994, the Committee recommended and the Board
approved a number of options to be granted to the Company's
Executive Officers, subject to the shareholders approving an
increase in the number of shares of the Company's Common Stock
that may be either available for grant or issued upon the
exercise of options granted under the Company's LTI Plan.
Because such an increase was not approved by the Company's
shareholders, the Company's Executive Officers were granted
restricted shares under such Plan.
Section 162(m) of the Internal Revenue Code ("Code") limits
federal income tax deductions for compensation paid after 1993 to
the Company's Chief Executive Officer and each of its four other
most highly compensated officers to $1 million per year, but
includes an exception for performance-based compensation that
satisfies certain conditions. The Company is below this $1
million deduction limit. Options granted under the shareholder
approved performance based LTI Plan are exempt from Section
162(m) of the Code because the awards under the plan are
determined by a committee consisting only of those committee
members whose only remuneration from the Company is paid in their
capacity as directors, and because the option price is the market
price at the time of grant. Therefore, the Committee believes
that compensation arising from the exercise of outstanding stock
options as well as options to be granted under the LTI Plan will
be deductible for federal income tax purposes. It is the current
policy of the Committee to only make restricted stock grants
which allow the Company to have federal income tax deductions
under Section 162(m).
During 1994, the Company adopted a Supplemental Executive
Retirement Plan ("SERP") in order to provide certain key
employees ("Participants") a deferred compensation benefit in the
form of stock appreciation rights based upon compensation which
each such Participant receives in excess of the limitation on
compensation that can be counted for the Company's ESOP for the
purpose of qualified retirement plans. It is the Company's
intention that the SERP qualify as a plan which is unfunded and
maintained primarily for the purpose of providing deferred
compensation. The Company maintains for each Participant an
account reflecting the number of units of deferred compensation
awarded to the Participant. Each year the Company's Board of
Directors determines the contribution that is made to the ESOP
(see Summary Compensation Table footnote 2, page 15). The
contribution is expressed as a percentage of the compensation of
all of the employees in the ESOP (the "ESOP Percentage
Contribution Rate"). The SERP provides that each SERP
Participant shall receive deferred compensation units for each
year as follows: (i) the Participant's taxable compensation for
such year in excess of $150,000 (or such higher amount as is
permitted to be counted for the purposes of the ESOP) shall be
multiplied by the ESOP Percentage Contribution Rate; (ii) the
resulting amount is divided by the value of a share of the
Company's Common Stock as of December 31 of such year; and (iii)
the resulting number is the number of units awarded to the
Participant. A unit is equal to the value of one share of the
Company's Common Stock. To date the Committee and
the Board of Directors have only approved 1994 contributions to
the SERP on behalf of two of the Company's executive officers
Under the SERP, upon termination of the employment of the
Participant with the Company for any reason other than death, the
Participant will be entitled to receive all amounts credited to
the Participant's account as of the date of termination of
employment. Such distribution will be in installments over a
designated period of months. If termination of a Participant's
employment occurs by reason of a Participant's death, the
participant's designated beneficiary will be entitled to receive
all amounts credited to the account of the Participant as of the
date of his death.
Following a change of control of the Company (as defined in the
SERP), the Participant will be entitled to receive all amounts
credited to the Participant's account. Upon a change of control,
distribution of the amounts credited to a Participant's account
will begin in thirty (30) days following such change of control
and shall be paid in one hundred twenty (120) equal monthly
installments unless the Participant elects within a specified
time period to receive the distribution in a lump sum or in sixty
(60) equal monthly payments.
Compensation of the Chief Executive Officer
Using the quantitative and qualitative measures described for
executive officers as a group, the Committee exercised its
judgment in determining Mr. Cloward's 1994 compensation, which
was endorsed by the full Board.
The Committee believes that Mr. Cloward's 1994 compensation as
Chief Executive Officer appropriately reflects the performance of
the Company and his personal contributions in the short and long
term. During 1994, under Mr. Cloward's leadership, the Company
moved forward on strategic actions to implement the Company's
long-term business plan. The three most notable strategic
actions were (i) continued implementation of the warehouse
consolidation to a super, regional distribution facility near Las
Vegas, Nevada; (ii) implementation of a new marketing program
involving product price rollbacks otherwise known as the
Cost-U-LessTM program; and (iii) restructuring of the intensive
five-week franchisee training program.
By design, one-half of Mr. Cloward's 1994 compensation is
comprised of a base salary which is determined by an evaluation
of a variety of factors including the level of responsibility,
time in position, prior experience, individual performance and a
comparison of salaries paid within The Hay Group study discussed
previously.
The other one-half of Mr. Cloward's annual compensation is at
risk and subject to the achievements of financial goals and
objectives. Accordingly, one-half of this at-risk compensation
is in the form of annual incentive bonus and one-half is
comprised of long-term incentives. Mr. Cloward receives a
delayed annual incentive bonus payment which is payable in the
year following performance. Mr. Cloward's 1994 incentive bonus
award of $88,209 was 18% less than the target award established
by the Committee.
In granting restricted stock and stock options for 31,739 shares
to Mr. Cloward in 1994, the Committee considered Mr. Cloward's
individual performance, the Company's performance and the
compensation practices of a peer group. As noted above, the
Committee, using The Hay Group model as a baseline, increases or
decreases such option grant based upon the Company's overall, and
Mr. Cloward's individual, performance, as well as the actual
number of options and restricted stock available for grant under
the Plan. In 1994, a one-time contribution under the SERP of 502
units was made by the Company on behalf of Mr. Cloward, which as
of April 10, 1995 had a total value of $6,902.
Frank L. Carney C. Thomas Wernholm
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for services in all capacities
to the Company for the fiscal years ended December 31, 1994, 1993
and 1992, of those persons who were, at December 31, 1994 (i) the
chief executive officer and (ii) the other four (4) most highly
compensated executive officers of the Company whose annual salary
and bonus from the Company exceeded $100,000 (See next page for
footnotes.):
<TABLE>
<CAPTION>
I. SUMMARY COMPENSATION TABLE
Annual Compensation
Other
Annual
Name and Principal Salary Bonus Compensation
Position Year ($) ($) ($)
<S> <C> <C> <C> <C>
Steven P. Cloward, 1994 $215,000 $88,209 ---
President and
Chief Executive
Officer
1993 $195,000 $17,218 $8,700<F5>
1992 $149,000 $100,380 $8,700<F5>
John B. Adams, 1994 $145,000 $69,634 $8,580<F5>
Executive Vice
President, Chief
Financial Officer
Treasurer and
Assistant Secretary
1993 $129,000 $39,946 $7,800<F5>
1992 $114,000 $61,638 $7,800<F5>
Thomas L. Staker, 1994 $125,000 $32,855 ---
Senior Vice
President -
Operations
1993 $110,000 $10,792 ---
1992 $90,000 $21,306 $3,396<F4>
Ronald H.
Lautzenheiser, 1994 $110,000 $27,187 $7,920<F5>
Vice President -
Business Development
1993 $104,000 $15,936 $7,200<F5>
1992 $94,000 $31,206 $7,200<F5>
David W. Dwyer, 1994 $100,000 $32,062 ---
Former Vice
President -
Purchasing
1993 $96,000 $22,912 ---
1992 $88,000 $28,122 ---
Long Term Compensation Awards
Restricted
Stock Options/ All Other
Name and Principal Awards SARs Compensation
Position Year ($) (#)<F1> ($)
<S> <C> <C> <C> <C>
Steven P. Cloward, 1994 $103,277 LTIP 25,049 $15,156<F2>
President and D&EP 1,184
Chief Executive SERP 502
Officer
1993 --- LTIP 17,700 $21,298<F2>
1992 --- D&EP 5,829 $22,886<F2>
LTIP 10,675
John B. Adams, 1994 $69,654 LTIP 16,893 $10,596<F2>
Executive Vice D&EP 377
President, Chief SERP 203
Financial Officer,
Treasurer and
Assistant Secretary
1993 --- LTIP 12,197 $16,944<F2>
1992 --- LTIP 6,994 $18,122<F2>
Thomas L. Staker, 1994 $45,988 --- $7,500<F2>
Senior Vice
President -
Operations
1993 $24,195(3) LTIP 1,354 $12,121<F2>
1992 --- LTIP 3,681 $30,826<F2>
<F4>
Ronald H. 1994 $53,954 $6,874<F2>
Lautzenheiser,
Vice President -
Business
Development
1993 --- LTIP 5,245 $12,044<F2>
1992 --- LTIP 3,804 $12,863<F2>
David W. Dwyer, 1994 $49,060 $6,628<F2>
Former Vice
President -
Purchasing
1993 --- LTIP 4,841 $11,958<F2>
1992 --- LTIP 3,559 $11,880<F2>
<F1> "D&EP" reflects options granted under the Big O Tires, Inc.
Director and Employee Stock Option Plan (also referred to as "D&E
Option Plan" and "D&E Options"). "LTIP" reflects options granted
under the Big O Tires, Inc. Long Term Incentive Plan. Under the
D&E Option Plan, Mr. Cloward elected to forego $25,000 in salary
1992 for the purchase of D&E Options.
<F2> Includes contributions under the Company's Employee Stock
Ownership Plan ("ESOP"), that is a stock bonus type of retirement
benefit plan meeting the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and is
designed as a defined contribution plan. The ESOP invests
primarily in "employer securities" (i.e., the Company's Common
Stock) for the exclusive benefit of its participating employees
("Participants"). The ESOP prohibits Participants from making
any contributions to the Plan. Employees of the Company and its
wholly-owned subsidiaries ("Employees") who complete more than
1,000 hours of service within 12 consecutive months, who are 18
years of age or older during the calendar year, and who are not
covered by a collective bargaining agreement (of which there is
none) are eligible to participate in the ESOP. Neither the
Directors of the Company (nor its subsidiaries) who are not
otherwise employees of the Company (or its subsidiaries) nor the
employees of the Company-owned Big O Tires retail stores are
eligible to participate in the ESOP.
Includes the value of units granted under the Company's
Supplemental Executive Retirement Plan ("SERP"). The SERP is a
deferred compensation benefit based upon compensation which each
participant receives in excess of the limitation on compensation
that can be counted for the Company's ESOP. It is the Company's
intention that the SERP qualify as a plan which is unfunded and
maintained primarily for the purpose of providing deferred
compensation. The value of units granted on behalf of Messrs.
Cloward and Adams totaled a vested share value of $7,656 and
$3,096, respectively at December 31, 1994. (See the "Report of
the Human Resources Committee on Executive Compensation" for a
more complete description of the SERP.)
<F3> At December 31, 1994, Messrs. Cloward, Adams, Lautzenheiser
and Staker held 11,370 shares, 7,552 shares, 3,495 and 4,479
shares, respectively, of Common Stock that had been granted to
them pursuant to the LTIP. Based on the closing sale price of
the Company's Common Stock on December 31, 1994, Mr. Cloward's
unvested shares had a value of $130,571, Mr. Adams' unvested
shares had a value of $87,352, Mr. Lautzenheiser's unvested
shares had a value of $53,299 and Mr. Staker's unvested shares
had a value of $63,730. Twenty percent of the shares of Common
Stock that have been granted to Messrs. Cloward, Adams and Staker
vest each year after the grant date. The grant date for Mr.
Staker's shares under the LTIP was August 2, 1993. Therefore,
936 shares of Mr. Cloward's grant vested on each of August 2,
1992, 1993 and 1994, and 936 shares of Mr. Cloward's grant will
become vested on each of August 2, 1995 and 1996. Also, 608
shares of Mr. Adams' grant became vested on each of August 2,
1992, 1993, 1994, and 608 shares of Mr. Adams' grant will become
vested on each of August 2, 1995 and 1996. And, 300 shares of
Mr. Staker's grant vested on August 2, 1994 and 300 shares of Mr.
Staker's grant will become vested on each of August 2, 1995,
1996, 1997 and 1998. The vesting dates can be accelerated if
certain earnings per share of Common Stock are realized by the
Company. Messrs. Cloward, Adams and Staker will be entitled to
any dividends paid on the shares of Common Stock.
<F4> Includes payment of relocation expenses of $22,968, of
which $3,396 constituted tax reimbursement.
<F5> Includes payment of an automobile allowance.
</TABLE>
<TABLE>
<CAPTION>
II. OPTION GRANTS TABLE: Option/SAR Grants in Last Fiscal Year
Individual Grants
% of Total
Options/ Options/SARs Exercise
SARs Granted to or Base
Granted Employees in Price
Name<F3> Plan<F2> (#) Fiscal Year ($/SH)
<S> <C> <C> <C> <C>
Steven P. Cloward, D&EP 1,884 3.90% $1.475
President and LTIP 25,049 51.84% $15.4375
Chief Executive SERP 502 71.2% $15.25
Officer
John B. Adams. D&EP 377 .78% $1.475
Executive Vice LTIP 16,893 34.96% $15.4375
President, Chief SERP 203 28.8% $15.25
Financial Officer,
Treasurer and
Assistant
Secretary
Thomas L. Staker, LTIP --- ---
Senior Vice
President -
Operations
Ronald H.
Lautzenheiser, LTIP --- ---
Vice President -
Marketing
David W. Dwyer, LTIP --- ---
Former Vice
President -
Purchasing
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term<F1>
Expiration 5% 10%
Name<F3> Plan<F2> Date<F2> ($) ($)
<S> <C> <C> <C> <C>
Steven P. Cloward, D&EP 12-31-03 $ 40,946 $66,837
President and LTIP 08-04-04 $243,190 $616,291
Chief Executive SERP NA $7,248 $7,593
Officer
John B. Adams, D&EP 12-31-03 $ 8,194 $13,375
Executive Vice LTIP 08-04-04 $164,007 $415,625
President, Chief SERP NA $2,931 $3,070
Financial Officer,
Treasurer and
Assistant Secretary
Thomas L. Staker, LTIP
Senior Vice
President -
Operations
Ronald H.
Lautzenheiser, LTIP
Vice President -
Marketing
David W. Dwyer, LTIP
Former Vice
President -
Purchasing
<F1> Based on a grant date Common Stock price of $13.75 on April
10, 1995, and a total of 3,312,143 shares of Common Stock
outstanding. The total potential stock appreciation from 1994 to
2004 for all shareholders at an assumed stock price appreciation
of 5% and 10% is $47,819,064 and $50,096,162, respectively.
<F2> In 1991, the Company adopted the Big O Tires, Inc. Long
Term Incentive Plan (the "LTIP"). The stock option provisions of
the LTIP provide non-qualified stock options (the "LTI Options")
which do not meet the requirements of "Incentive Stock Options"
under the Internal Revenue Code of 1986, as amended. The LTIP's
Administrative Committee may grant LTI Options at an option price
that may be higher than or equal to, but not less than, 100% of
fair market value and not less than the par value of the
Company's Common Stock at the date of grant. The term of LTI
Options may be up to ten (10) years, but will terminate earlier
upon occurrence of certain specified events, such as death,
disability, retirement or termination, in which case the LTI
Options expire as specified in the LTIP. The options are
non-transferable, except by will or through the laws of descent
and distribution. The LTI Options granted in 1992, 1993 and 1994
prohibit exercise for the first three (3) years, unless the LTI
Option term is to terminate earlier upon occurrence of certain
specified events.
In 1994, the Company adopted a Supplemental Executive Retirement
Plan ("SERP") which is maintained for the purpose of providing
deferred compensation in the form of stock appreciation rights
for a select group of highly compensated employees. The 1994
contribution to the SERP totalled $11,000 and was determined by
multiplying the Board approved ESOP contribution rate by the SERP
qualified compensation exceeding $150,000. The SERP is unfunded
and the contribution was made for 1994 only. The expiration date
of the SERP occurs (i) upon Board of Director's decision to
terminate the plan; or (ii) upon a participant's termination of
employment with the Company.
<F3> No gain to the optionees is possible without an increase in
stock price, which will benefit all shareholders.
</TABLE>
<TABLE>
<CAPTION>
III. VALUE OF OPTIONS AT DECEMBER 31, 1994
Aggregate Fiscal Year End Option Values
Number of Unexercised
Options/SARs at Fiscal Year End
Shares Acquired Value
Name on Exercise Realized ($)<F1>
<S> <C> <C>
Steven P. Cloward, 0 0
President and
Chief Executive Officer
John B. Adams, 0 0
Executive Vice President,
Chief Financial Officer,
Treasurer and Assistant
Secretary
Thomas L. Staker, 0 0
Senior Vice President-
Operations
Ronald H. Lautzenheiser, 4,200 $48,825
Vice President - Business
Development
David W. Dwyer, Former 4,680 $47,385
Vice President - Purchasing
Value of Unexercised In-The-Money
Options/SARs at Fiscal Year End
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options/SARs In-The-Money Options/
at FY-End (#) SARs at FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
<S> <C> <C>
Steven P. Cloward, D&EP 10,400/ $154,358/
President and 1,884 $25,952
Chief Executive Officer
LTIP 6,280/ $64,370/
53,424 $160,851
SERP 502/ $7,656/
NA NA
John B. Adams, D&EP 4,545/ $66,953/
Vice President, 377 $5,193
Chief Financial Officer,
Treasurer and LTIP 4,060/ $41,615/
Assistant Secretary 36,084 $107,187
SERP 203/ $3,096/
NA NA
Thomas L. Staker, LTIP 0/ $0/
Senior Vice President- 5,035 $41,217
Operations
Ronald H.
Lautzenheiser, LTIP 0/ $0/
Vice President - 9,049 $54,132
Business Development
David W. Dwyer, LTIP 0/ $0/
Former Vice President - 8,400 $50,447
Purchasing
<F1> The Value Realized is based on the sale price.
</TABLE>
IV. FIVE YEAR SHAREHOLDER RETURN COMPARISON
The regulations of the United States Securities and Exchange
Commission require that the Company include in this Proxy
Statement a line-graph presentation comparing cumulative,
five-year shareholder returns on an indexed basis with the NASDAQ
Market Index and either a nationally recognized industry standard
or an index of peer companies selected by the Company. The Board
of Directors has approved a group of five (5) other franchisors
and/or tire and other auto aftermarket wholesale distributors
which have been used for purposes of this performance comparison
which appears below. These companies were selected based on
similar business segments and/or market capitalization to that of
the Company. A list of these companies follows the graph below:
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Big O Tires, Inc. NASDAQ Market Peer
(Fiscal Year Covered) Index Group
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 $48.00 $81.12 $64.67
FYE 12/31/91 $60.00 $104.14 $138.21
FYE 12/31/92 $168.00 $105.16 $163.60
FYE 12/31/93 $182.40 $126.14 $202.35
FYE 12/31/94 $195.20 $132.44 $169.03
Assumes $100.00 invested on January 1, 1990.
Assumes Dividend reinvested.
Fiscal Year ending December 31, 1994
Selected Peer Group:
Bandag, Inc.
Goodyear Tire & Rubber Co.
Grease Monkey Holding Co.
Republic Automotive Parts
Trak Auto Co.
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company who are not otherwise employees receive
annual compensation of $12,000 plus $1,000 for each meeting that
they attend, $400 for the first two hours of each telephone
conference call in which they participate and an additional $200
each hour or part thereof exceeding two hours. Of the annual
compensation, each such Director must elect to purchase $6,000 in
options under the D&E Option Plan or such compensation is
forfeited. In addition, the Chairman of the Board of Directors
receives a $5,000 annual retainer, which in the case of Mr.
Siipola will be paid pro rata as to the portion of 1995 he was
not an employee of the Company. Each non-employee Director who
is a member of the Executive Committee of the Board (currently
all Executive Committee members are employees) receives an
additional $6,000 as annual compensation for serving on this
Committee plus $1,000 for each meeting attended which is not
scheduled in conjunction with regularly scheduled meetings of the
Board of Directors. Each non-employee Director who serves on any
other Committee of the Board receives $2,000 as an annual
retainer for service on each such Committee, plus $1,000 for each
meeting that is specially approved by the entire Board when such
Committee meeting is not held in conjunction with regularly
scheduled Board meetings. In addition to the Executive
Committee, the Board has three standing committees, as follows -
Audit Committee, Human Resources Committee, Investment Committee.
On September 22, 1994, Horst K. Mehlfeldt entered into a
Consulting Agreement with the Company. Mr. Mehlfeldt was
retained by the Company to serve as a full time representative to
assist the Company in fulfilling the directives of the June 1994
shareholder proposal. Pursuant to the terms of the Consulting
Agreement, during 1994, Mr. Mehlfeldt received $36,167 in
remuneration for his services. Concurrent with Mr. Mehlfeldt's
employment with the Company on February 15, 1995, the Consulting
Agreement was terminated. (See also the "Certain Transactions"
section in this proxy statement.)
All reasonable, ordinary, and necessary travel, lodging, meals,
and other out-of-pocket expenses incurred by members of the Board
of Directors in fulfilling their responsibilities are paid for or
are reimbursed by the Company.
COMPENSATORY ARRANGEMENTS WITH CERTAIN EXECUTIVE OFFICERS
In February 1995, management of the Company was restructured,
creating the Office of the Chief Executive. Members of the
Office of the Chief Executive consist of the Company's Chairman,
John E. Siipola; Vice-Chairman, Horst K. Mehlfeldt; and
President, Steven P. Cloward. Concurrent with the creation of
the Office of the Chief Executive, the Committee and the
Company's Board of Directors approved a grant of
Stock Appreciation Rights ("SAR") to the members of the Office of
the Chief Executive ("Members"), which was subsequently granted
effective this same date. The SAR agreement provides that
each Member received a grant of 100,000 share equivalent
units (the "Units"), each of which represents an equal, undivided
interest in the future appreciation in the value of a share of
the Company's Common Stock. The SAR agreement provides, subject
to a certain vesting schedule stipulated in the agreement, that
each Unit shall entitle each Member to receive, in cash only, the
difference between the base value (defined in the agreement as
$13.875 per share , which was the price of the Company's Common
Stock on the date of grant) of a share of Common Stock and the
market value of a share of Common Stock on the exercise date.
(See also the "Certain Transactions" section in this proxy
statement.)
In March 1995, the Board of Directors agreed to an arrangement
regarding severance payments that will be made to Messrs.
Mehlfeldt and Siipola in the event that a change of control of
the Company takes place between February 15, 1995 and August 16,
1995, inclusive. The severance package will consist solely of a
lump sum payment of $150,000 in the event that such change of
control occurs and their respective positions within the Company
terminates as a result of such change of control. (See also the
"Certain Transactions" section in this proxy statement.)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS DURING 1993
During the Company's fiscal year ended December 31, 1994, John E.
Siipola and C. Thomas Wernholm served as members of the Human
Resources Committee (the "Compensation Committee") of the
Company's Board of Directors from January to August 1994 and John
E. Siipola, Frank L. Carney and Horst K. Mehlfeldt served as
members of the Compensation Committee from August 1994 to
December 31, 1994. During such fiscal year and prior thereto,
John E. Siipola was the Chairman of the Board of the Company.
Mr. Mehlfeldt was not an employee or officer of the Company or
its subsidiaries prior to 1995. Messrs. Siipola and Mehlfeldt
became employees of the Company in February 1995. Messrs. Carney
and Wernholm are not now, and never have been an officer or
employee of the Company or its subsidiaries. No member of the
Compensation Committee has served as a member of the compensation
committee of any other entity or as a director of another entity,
the executive officers of which have served on the Human
Resources Committee of the Company. Mr. Mehlfeldt was retained
by the Company as a consultant for a period of time in 1994 and
in 1995, his compensation was determined by a vote of the Board
of Directors with Mr. Mehlfeldt abstaining. (See also the
"Certain Transactions" section in this proxy statement.)
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Officers and Directors, and persons who own more than
ten percent (10%) of the Company's Common Stock, to file reports
of ownership and changes in ownership with the Securities and
Exchange Commission. During the Company's fiscal year ended
December 31, 1994, Mr. Gregory L. Roquet filed a late Form 4 to
report a same-day-sale of options.
CERTAIN TRANSACTIONS
1. Ronald D. Asher owns various interests in thirty (30)
franchised Big O Tires retail stores. During the fiscal year
ended December 31, 1994, these stores purchased approximately
$8,141,000 in tires and other products from the Company on
the same basis as other franchisees of the Company and paid
subrents of approximately $196,000 to the Company pursuant to
certain real estate subleases for such stores.
In 1987, 1988 and 1989, Mr. Asher and other persons not
affiliated with the Company (other than as franchisees,
customers, and shareholders) acquired, through CSB,
consisting of Subchapter "S" corporations, nine (9)
franchised Big O Tires retail stores from the Company for
$1,807,600. One of the Subchapter "S" corporations is
wholly-owned by a retirement trust in which Mr. Asher and his
wife are co-trustees and which has a 20% interest in CSB.
CSB purchased these stores in accordance with down payments
and promissory notes. During 1993, the Company and CSB
consolidated the outstanding promissory notes in connection
with the 1987, 1988 and 1989 acquisition of these Big O Tires
retail stores. The Company also included $150,000 to be used
for working capital and $18,544 of accrued and unpaid
interest into the consolidated balance. See Note #1 in the
table below.
The obligations in Notes #2 and 3, below, were incurred by
the following described retail joint ventures with CSB. In
1991 and 1992, the Company, through a wholly-owned
subsidiary, entered into joint ventures with CSB and
S.A.N.D.S. Partnership, a California partnership ("SANDS"),
for the purpose of opening new and purchasing existing
Company franchised Big O Tires retail stores (the "Retail
JVs"). A corporation owned by a retirement trust in which
Mr. Asher and his wife are co-trustees is a partner in both
CSB and SANDS. The Retail JVs opened one (1) Company
franchised Big O Tires retail store in 1991 and five (5)
Company franchised Big O Tires retail stores in 1992 and,
also in 1992, purchased three (3) Company franchised Big O
Tires retail stores from persons not affiliated with the
Company; all such stores are located in Southern California
and Arizona. Under the Retail JV agreements with CSB and
SANDS, the Company contributes $55,000 of inventories and
also provides joint and several agreements for debt financing
and/or leasing for each new Retail JV store. CSB and SANDS
provide working capital of $30,000 and receive a $25,000
"equity credit" for opening each new Retail JV store and also
provide joint and several agreements for debt financing
and/or leasing for each new Retail JV store. The Company
also agreed to advance on a short-term basis up to $250,000
in loans to the Retail JV with CSB. Interest on such
advances is the Company's cost of borrowing plus two percent
(2%).
In 1993, CSB, the Big O/CSB Joint Venture and the Big
O/S.A.N.D.S. Joint Venture each entered into a loan agreement
and promissory note pertaining to receivables due and payable
pursuant to inventory purchases. See Notes #4, 5, 6 and 7,
below.
In October and November 1994, the Company sold to an investor
certain notes receivable which included the Notes #1 through
#5 and Notes #6 and #7 below, respectively. At the time of
the Note sales, the Notes #1 through #5 had a combined
remaining principal balance, plus accrued interest, of
$842,297 and Notes #6 and #7 had a combined remaining
principal balance, plus accrued interest, of $215,822. In
connection with the sale of these Notes, the Company entered
into an Ultimate Net Loss Agreement which limits the
Company's guarantee for payment of these Notes to fifty
percent (50%) of the aggregate unpaid balance of the
purchased Notes at the end of each year. Prior to the
Company being able to include the Notes in the October and
November 1994 Note sales, the Company needed to acquire a
first secured position on CSB assets. In October 1994, the
Company accomplished this by paying off various loans and
lines of credit established by CSB with a third party
lender. Concurrent with the Company paying certain of CSB's
obligations, CSB entered into a promissory note with the
Company to cover the amounts paid. See Note #8. Note #8 was
sold to an investor on October 26, 1994.
Also in October 1994, CSB entered into a promissory note for
the purchase of certain equipment and opening inventory for a
Big O/CSB Joint Venture retail store. See Note #9. Note #9
was sold to an investor on November 30, 1994.
NOTE# MAKER DATE OF AMOUNT OF TERM OF
NOTE NOTE NOTE
The Principal and Interest Balances on the following Notes are as
of 10/26/94, the date these Notes were sold.
1 CSB Partnership 05/15/93 $471,499 5 years
2 Big O/CSB Joint Venture 04/01/92 $190,470 7 years
3 Big O/CSB Joint Venture 11/19/92 $213,023 10 years
4 Big O/SANDS Joint Venture 12/31/93 $ 75,000 7 years
5 Big O/SANDS Joint Venture 03/15/94 $ 75,927 5 years
8 CSB Partnership 10/01/94 $313,135 10 years
PRINCIPAL &
INTEREST INTEREST
Note# MAKER RATE BALANCE
1 CSB Partnerhsip 9.00%* $393,773
2 Big O/CSB Joint Venture 9.00%* $118,635
3 Big O/CSB Joint Venture 9.50%* $188,655
4 Big O/SANDS Joint Venture 9.00%* $ 72,205
5 Big O/SANDS Joint Venture 9.00%* $ 69,029
8 CSB Partnership 9.75%* $315,255
The Principal and Interest Balances on the following Notes are as
of 11/30/94, the date these Notes were sold.
NOTE# MAKER DATE OF AMOUNT OF TERM OF
NOTE NOTE NOTE
6 CSB Partnership 12/31/93 $155,000 7 years
7 Big O/CSB Joint Venture 12/31/93 $ 70,000 7 years
9 Big O/CSB Joint Venture 10/01/94 $ 37,949 5 years
PRINCIPAL &
INTEREST INTEREST
Note# MAKER RATE BALANCE
6 CSB Partnership 9.00%* $148,688
7 Big O/CSB Joint Venture 9.00%* $ 67,134
9 Big O/CSB Joint Venture 10.25%* $ 36,971
* Variable based on the lending rate charged by the Company's
primary lender plus two percent (2%); as of October 26, 1994, ten
and one quarter percent (10.25%).
The Big O/CSB Joint Venture partners have negotiated an
agreement for the purchase and sale of a joint venture interest
whereby the Company, through its wholly-owned subsidiary, sold
to CSB its interest in the joint venture effective October
1, 1994. Upon the completion of the documentation, CSB will have
assumed the Company's portion of any liabilities in the joint
venture as represented by the Company's 50% interest in the joint
venture, and as additional consideration, CSB will pay the sum of
Five Hundred Fifty Thousand Dollars ($550,000) by execution and
delivery of a promissory note to be amortized over a ten (10)
year term and an interest rate charged by the Company's primary
commercial lender (currently The First National Bank of Chicago),
plus 2%.
2. At the Annual Meeting of Shareholders held in June 1994, the
shareholders adopted a resolution calling for the Company to
engage an investment banker to explore all alternatives for
enhancing the value of the Company. In implementing this
resolution, the Company's Board of Directors established the
Investment Committee of the Board which retained PaineWebber
Incorporated to fulfill this shareholder proposal. In
September 1994, the proponent of the June 1994 shareholder
proposal, Mr. Kenneth W. Pavia, Sr., the sole general partner of
Balboa Investment Group, L.P., a California limited partnership
(the "Balboa Group"), upon invitation by the Board, entered into
a confidentiality agreement with the Company and began assisting
the Investment Committee in this process. In an amended Schedule
13D filing prepared by the Dealer-Management Group (See Paragraph
4 of this Section), the Company was notified that the proponent
of the 1994 shareholder proposal has entered into a
confidentiality agreement with certain Company franchisees who
have expressed an interest in acquiring the Company. The amended
filing indicates that certain of the Company's franchisees intend
to discuss with the Balboa Group the possibility of acquiring the
Company's Common Stock owned or controlled by Mr. Pavia,
contingent upon, among other things, the completion of the
acquisition of the Company. These talks would cover the
possibility of selling the Balboa Group's common stock in the
Company to certain of the Company's franchisees.
3. On September 22, 1994, Horst K. Mehlfeldt entered into a
Consulting Agreement with the Company. Mr. Mehlfeldt was
retained by the Company to serve as a full time representative to
assist the Company in fulfilling the directives of the June 1994
shareholder proposal. Pursuant to the terms of the Consulting
Agreement, Mr. Mehlfeldt received $36,167 in 1994 remuneration
for his services. By Board of Director action and a confirmation
letter agreement dated January 10, 1995, the Consulting Agreement
was amended to adjust Mr. Mehlfeldt's monthly compensation from
$17,500 to $2,500, effective January 1, 1995. On February 15,
1995, the Consulting Agreement was terminated.
4. On December 2, 1994, a group of senior Company managers and
franchised dealers ("Dealer-Management Group") submitted an offer
to the Company to acquire all of the outstanding shares of common
stock of the Company not owned by them for $18.50 per share in a
cash merger (the "Acquisition Proposal") reflecting a total
purchase price of approximately $83 million. The Acquisition
Proposal was subject to a number of conditions, including the
Dealer-Management Group's ability to obtain the necessary
financing and the Company's agreement to deal exclusively with
the Dealer-Management Group for a period of 120 days. On
December 23, 1994, the Company announced that the Investment
Committee had agreed to enter into a period of exclusive
negotiations with, and agreed to pay certain expenses of, the
Dealer-Management Group and on January 20, 1995, the Company
agreed to extend until February 8, 1995, the period of exclusive
negotiations. The Acquisition Proposal, which would have taken
the Company private, was led by one of the Company's Chief
Executives and President, Steven P. Cloward. On February 7,
1995, the Company was notified that the Dealer-Management Group
elected not to continue negotiations to acquire the Company due
to the difficulties in obtaining commitments for the elements of
financing necessary to consummate the acquisition and the
resulting inability of the representatives of the dealers and
management to reach mutual understandings on certain fundamental
issues relating to the acquisition. The Dealer-Management Group
expenses the Investment Committee agreed to pay totalled
$203,152. At the time the Dealer-Management Group withdrew the
offer to acquire the Company, the Company was also informed by
representatives of management and similarly by the Dealers that
they continue to be interested in completing a purchase of the
Company on mutually agreeable terms between shareholders,
management and the Board. The Company has advised the management
representatives and similarly, the Dealers, that it will
carefully consider credible proposals but the Board of Directors
will continue to review all alternatives to enhance the value of
the Company. In the meantime, management of the Company has been
restructured, creating the Office of the Chief Executive.
Members of the Office of the Chief Executive consist of the
Company's Chairman, Vice-Chairman and President. The Board of
Directors is permitting the Company's President to devote a
portion of his time to efforts to acquire the Company until such
time as the Board of Directors advise otherwise.
On April 6, 1995, the Company announced that a group
substantially similar to the Dealer-Management Group (the
"Acquisition Group") made a proposal to acquire the outstanding
shares of the Company for a cash price of $16.00 per share (the
"Second Acquisition Proposal"). The Second Acquisition Proposal
is subject to a number of conditions, including the ability to
obtain the necessary financing, participation in the Acquisition
Group of not less than 80% of the shares held by the Company's
Employee Stock Ownership Plan ("ESOP"), the ability of the ESOP
to obtain an acceptable fairness opinion, approval by and
participation in the Acquisition Group of not less than 85% of
the Company franchisees and the negotiation of a definitive
merger agreement. In consideration of the efforts to consummate
the Second Acquisition Proposal, the Acquisition Group is
requesting the Company agree to advance or reimburse certain
expenses incurred by the Acquisition Group. This Second
Acquisition Proposal expired by its terms at 5:00 p.m. on April
13, 1995. On April 13, 1995, the Company announced that it had
requested further negotiations with the Acquisition Group. On
April 13, 1995, the Investment Committee also declined to
reimburse the Acquisition Group for certain expenses incurred by
the Acquisition Group in pursuing the proposal. The following
officers of the Company are included in the Acquisition Group:
Steven P. Cloward, John B. Adams, Ronald H. Lautzenheiser, Dennis
Fryer, Allen E. Jones, Kelley A. O'Reilly, Gregory L. Roquet,
Thomas L. Staker, Philip J. Teigen, Bruce H. Ware and Bradley R.
Findlay.
5. In October 1994, a member of the Office of the Chief
Executive and President, Steven P. Cloward, together
with a Senior Vice President - Operations of the Company, Thomas
L. Staker, became part owners in a corporation that owns a
franchised Big O Tires retail store. During the fiscal year
ended December 31, 1994, this store purchased approximately
$91,000 in tires and other products from the Company on the same
basis as other franchisees of the Company. Mr. Staker is also a
25% stockholder, Secretary, and Director in a corporation that
has owned a franchised Big O Tires retail store since August
1982. During the fiscal year ended December 31, 1994, this store
purchased approximately $423,000 in tires and other products from
the Company on the same basis as other franchisees of the
Company. In November 1993, the Company's Executive Vice
President, Chief Financial Officer, Treasurer and Assistant
Secretary, John B. Adams, became a part-owner of a limited
liability company that owns a franchised Big O Tires retail
store. During the fiscal year ended December 31, 1994, this
store purchased approximately $437,000 in tires and other
products from the Company on the same basis as other franchisees
of the Company.
6. Robert K. Lallatin, who is a nominee for election as a
director of the Company, is a part-owner of B & G Tire, Inc., an
Idaho corporation, that has owned a franchised Big O Tires retail
store in Idaho since November 1981. B & G Tire, Inc. acquired
its second Idaho franchised Big O Tire retail store in August
1989. During the fiscal year ended December 31, 1994, these
stores purchased approximately $1,146,000 in tires and other
products from the Company on the same basis as other franchisees
of the Company. Mr. Lallatin is also a part-owner of B & G
Jackson Partnership, an Idaho general partnership that together
with a subsidiary of the Company formed the B & G Teton
Partnership that owned a franchised Big O Tires retail store in
Wyoming from February 1992 to December 31, 1994. During the
fiscal year ended December 31, 1994, this store purchased
approximately $418,000 in tires and other products from the
Company on the same basis as other franchisees of the Company.
Effective December 31, 1994, B & G Jackson Partnership acquired
its partner's interest in this Wyoming store for $123,568.
7. In February 1995, management of the Company was restructured,
creating the Office of the Chief Executive. Members of the
Office of the Chief Executive consist of the Company's Chairman,
John E. Siipola, Vice-Chairman, Horst K. Mehlfeldt, and
President, Steven P. Cloward. The Board of Directors is
permitting the Company's President to devote a portion of his
time to efforts to acquire the Company until such time as the
Board of Directors advise otherwise. (See also Paragraph 4 of
this section.) Concurrent with the restructuring of the
Company's management, the Board of Directors approved a grant of
stock appreciation rights ("SARs") on behalf of Messrs. Cloward,
Mehlfeldt and Siipola. The Board of Directors believe that SARs
provide strong incentives for its top executive officers for
superior longer-term future performance. The SAR awards will
increase or decrease in value based upon the future price of the
Company's Common Stock. Subject to vesting requirements
stipulated in the SAR agreements, each member of the Office of
the Chief Executive received a grant of 100,000 share equivalent
units (the "Units") each of which shall represent an equal,
undivided interest in the future appreciation in the value of a
share of the Company's Common Stock. Subject to vesting, each
Unit entitles the recipient to receive, in cash only, the
difference between the Base Value (or $13.875 per share) of a
share of Common Stock and the Market Value of a share of Common
Stock on the Exercise Date. The right to exercise any Units
granted will not vest until August 16, 1995. Thereafter, the
recipient's rights to exercise any Units granted shall vest at a
rate of 16,662 Units on August 16, 1995 and at a rate of 2,777
Units on the 16th day of each month thereafter until January 16,
1998, at which time 2,805 unvested Units will vest.
II. PROPOSAL TO INCREASE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE UNDER LONG TERM INCENTIVE PLAN
The Board of Directors recommends that the Shareholders approve
an increase in the number of shares of the Company's $.10 par
value Common Stock that may be either available for restricted
stock grants or issued upon the exercise of options granted under
the Company's Long Term Incentive Plan (the "LTI Plan") from
220,000 shares to 320,000 shares. The purpose of the LTI Plan is
to advance the interests of the Company and its shareholders by
affording selected Officers, employees and Directors of the
Company long-term awards of stock options and selected officers
and employees, who may also be Directors, restricted stock
grants. By thus encouraging such selected Officers, employees
and Directors to become owners of Company Common Stock, the
Company seeks to motivate, retain and attract those highly
competent individuals upon whose judgment, initiative, leadership
and continued efforts the growth and profitability of the Company
may depend.
At the Company's 1991 Annual Meeting of Shareholders, the LTI
Plan was approved by the Company's shareholders. In conjunction
with the approval of the LTI Plan, up to 220,000 shares of the
Company's authorized but unissued $.10 par value Common Stock
were reserved for the grant of stock and options pursuant to the
LTI Plan. As of April 10, 1995, the LTI Plan had 148,141 shares
reserved for issuance upon the exercise of options granted under
the LTI Plan and 38,206 restricted shares granted under the LTI
Plan leaving a balance of 4,681 shares available for grant.
Although the Company is requesting the shareholders to approve an
increase in the number of shares of the Company's Common Stock
that may be either available for restricted stock grants or
issued upon the exercise of options granted under the Company's
LTI Plan, the Company has not authorized any grants of restricted
stock or options under the LTI Plan for 1995. Furthermore, there
is no assurance that the Company will authorize grants under the
LTI Plan in 1995 or thereafter. (See the "Long Term Incentive
Plan" table.)
Stock Option Grants
The stock option provisions of the LTI Plan provide for the grant
of non-qualified stock options which do not meet the requirements
of "Incentive Stock Options" of the Internal Revenue Code of
1986, as amended ("Code"). Further, the stock options are not
subject to the Employment Retirement Income Security Act of 1974.
The Committee (defined below) may grant stock options at an
option price that may be higher, but not less, than 100% of fair
market value and not less than the par value of the Company's
Common Stock at the date of grant. The term of the stock options
may be up to ten (10) years, but will terminate immediately if
the participant's employment is terminated for any reason (other
than involuntary termination without cause or termination due to
disability or retirement) within six (6) months of the date of
grant, or if the participant's employment is terminated
voluntarily or for cause after six (6) months of the date of
grant. Otherwise, the stock option will terminate three (3)
months (or such date as the Committee may determine up to twelve
(12) months) after involuntary termination of employment, and in
the case of disability or retirement, three (3) years after
termination of employment as a result of such disability or
retirement. In the event of the participant's death, the
participant's estate or distributee will have fifteen (15) months
after the date of the death of the participant or nine (9) months
after the date the executor or administrator qualifies, whichever
is longer, to exercise the options. A stock option will not be
exercisable for at least three (3) years after its grant date, or
such later time as the Committee determines to be appropriate.
However, earlier exercise will be permitted in the event of
termination of employment, disability, retirement or death, and
in the event and upon the occurrence of a merger or consolidation
of the Company with or into another corporation, a sale or
transfer of all or substantially all of the assets of the Company
to another corporation or to any other person or entity or a
tender or exchange offer for shares of Common Stock made by any
corporation, person or entity which the Company and a majority of
the shareholders accept.
Restricted Stock Grants
The Committee may also grant to selected Officers and employees,
who may also be Directors, shares of the Company's Common Stock,
free of any purchase price or for such purchase price established
by the Committee, but the Company's Common Stock so granted will
be restricted against transfer and will be subject to forfeiture,
vesting and to such other terms and conditions of the Committee
intended to further the purpose of the LTI Plan. Upon grant of
the restricted stock, the participant will have beneficial
interest in, and rights and privileges of a stockholder,
including the right to receive dividends and the right to vote
such restricted stock. However, the restricted stock will
actually be held by the Company for the account of the
participant and the participant will not be permitted to receive
a certificate for the restricted stock until he or she is vested.
Vesting for participants that have provided five (5) or more
years of service on or before the grant date is as follows:
Year(s) of Percentage
Vesting Service of Vesting
1 20%
2 40%
3 60%
4 80%
5 100%
Vesting for participants that have provided less than five (5)
years of service on or before the grant date is as follows:
Year(s) of Percentage
Vesting Service of Vesting
1 0%
2 0%
3 60%
4 80%
5 100%
However, the Committee may, in its sole discretion, determine
performance criteria, which, if achieved, will cause all of the
shares of restricted stock to vest in no less than three (3)
years.
In the event of a merger or consolidation of the Company with or
into another corporation, a sale or transfer of all or
substantially all of the assets of the Company to another
corporation or to any other person or entity, or a tender or
exchange offer for shares of Common Stock made by any
corporation, person or entity which the Company and a majority of
its shareholders accept, vesting will immediately accelerate so
that all restricted stock awards not then vested will be fully
and completely vested in the participants. However, such
acceleration will not apply and take effect: (a) as to all
participants in the event of a merger or consolidation in which
the Company is the surviving corporation and no shares of the
Company's Common Stock are converted into or exchanged for
securities, cash or any other thing of value, and (b) as to any
participant participating in the purchase of substantially all of
the assets of the Company or participating in the making of the
tender or exchange offer for shares of the Company's Common Stock
whether personally or through a corporation or other entity as a
stockholder, owner, officer and/or director.
The shares of restricted stock may not be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of prior to
being vested. Restricted stock not fully vested will be
forfeited if the participant does not remain in the employment
with the Company for the applicable vesting period. In the event
of death or disability, the unvested portion of the restricted
stock will immediately vest and a certificate for shares of such
restricted stock will be delivered to the participant,
participant's beneficiary or participant's estate. All other
terminations of employment prior to vesting of all restricted
stock awards will cause the participant to immediately forfeit
all unvested restricted stock. An exception is made in the case
of retirement in that the Committee may, in its discretion, allow
the participant to retain some or all of the shares of restricted
stock.
Administration of LTI Plan
The LTI Plan is to be administered by the Human Resources
Committee of the Board of Directors or such other committee of
the Board of Directors consisting of at least two (2) outside
Directors (the "Committee"). No person who is an employee of the
Company, or who, within one (1) year prior to appointment, was an
employee of the Company is eligible to be a member of the
Committee. Each person must also be a "disinterested person,"
under Rule 16b-3 of the Securities Exchange Act of 1934. The
Committee will administer and interpret the LTI Plan and may
establish and amend rules and regulations pertaining to the LTI
Plan. The Committee will also select the participants and
determine the amounts, times and forms of awards. The Committee
may cancel any awards if the participant acts in a manner which
the Committee determines to not be in the best interests of the
Company. Any decision or action taken by the Committee will be
final and conclusive.
Common Stock Subject to LTI Plan
Subject to shareholder approval, the Board has approved 320,000
shares of the Company's authorized but unissued $.10 par value
Common Stock and/or treasury shares of such stock to be available
for awards of stock options and restricted stock grants under the
LTI Plan. If any stock option or portion thereof granted under
the LTI Plan expires, is canceled or terminates for any reason
without having been exercised in full, the remaining shares of
the Company's Common Stock covered by such option will again be
available for award under the LTI Plan. If a restricted stock
grant is canceled or is forfeited for any reason, the remaining
shares of Common Stock shall again be available for award under
the LTI Plan.
Amendments
The Board of Directors may make such amendments to the LTI Plan
as it deems advisable, except that the approval of the
stockholders of the Company is required for any amendment which
would (a) change the requirements as to eligibility for
participants, (b) increase the number of shares subject to the
LTI Plan, (c) change any of the provisions relating to vesting,
stock options or restricted stock grants, or (d) extend the
period during which stock options may be exercised.
In addition, the Board of Directors may not take any action
without shareholder approval if such approval is required to
maintain the stock options and restricted stock grants as exempt
under Rule 16b-3 of the Securities Exchange Act of 1934.
Any modification, amendment or termination of the LTI Plan will
not affect any stock options awarded or restricted stock granted
pursuant to the LTI Plan.
Adjustments for Certain Events
In the event of a reduction or increase in the number of shares
of the Company's Common Stock outstanding by means of
recapitalization, mergers, combinations, exchanges of shares,
spin offs, liquidations or reclassification or other similar
changes in capitalization of the Company, without receipt or
payment of consideration therefor in money, services or property,
the number of shares of Common Stock then subject to outstanding
stock option and restricted stock grants and the number of shares
available for award under the LTI Plan will be adjusted
proportionately, with any fractional shares eliminated by
rounding up to the next share. If the Company is acquiring
another corporation or other business entity and is assuming
outstanding employee option grants and/or obligations to make
future or potential grants under a prior existing plan of such
acquired entity, or unusual economic conditions or major
unforeseen events occur, similar adjustments to outstanding stock
options and restricted stock awards are permitted at the
discretion of the Committee. In the event of any other change
affecting the Company's Common Stock, the Committee may make such
adjustments as it should deem equitable to outstanding stock
options and restricted stock awards to give proper effect to such
events. The issue by the Company of shares of its Common Stock
or stock of any other class or series, or securities convertible
into shares of Common Stock of any class, for cash or property,
or for labor or services, will not require adjustments with
respect to stock options and restricted stock grants.
Federal Income Tax Consequences
Stock options granted pursuant to the LTI Plan are considered
"non-qualified" under the Code and as such the granting of the
options will not result in taxable income to the recipient nor in
a deduction in computing the income tax liability of the Company.
Generally, in the case of non-qualified stock options, upon
exercise, the excess of the fair market value of the shares
acquired pursuant to the stock option as determined on the
exercise date over the exercise price will be, (a) taxable to the
recipient as ordinary income, and (b) deductible in computing the
Company's federal income tax liability, subject to general rules
relating to reasonableness of compensation.
As for restricted stock grants, the inclusion of the value of the
Company's Common Stock in the officer's or key employee's income
is required when rights in the stock become substantially vested,
are transferable and not subject to a substantial risk of
forfeiture. To the extent on the sale of the Company's Common
Stock by an officer or employee, the officer or employee could be
subject to suit under Section 16(b) of the Securities Exchange
Act of 1934, such officer's or employee's rights in the Company's
Common Stock will be subject to a substantial risk of forfeiture
and will be considered as not transferable. As vesting occurs
and restrictions lapse under the terms and conditions of such
grants, the officer or key employee receiving such restricted
stock grants will realize income in an amount equal to the then
fair market value of the Company's Common Stock, as determined on
the date such grant vests and is no longer subject to a
substantial risk of forfeiture, less any amount paid for such
stock. Any appreciation from the time the restrictions lapse
will be taxable to the officer or key employee upon the eventual
sale of the stock. Additionally, dividends paid during the
restricted period are treated as compensation. As for the
Company, subject to the limitations as to the deductibility of
payments of employee remuneration and excess parachute payments,
ordinarily it will be entitled to a tax deduction at the time and
in the same amount as taxable income is realized by the officer
or key employee, provided the withholding requirements are
satisfied. Thus, the Company will be entitled to a tax deduction
for the full appreciable value of the shares of the Company's
Common Stock at the time the restrictions lapse (less any amount
paid for the stock by the officer or key employee).
Upon the sale of shares which are acquired by exercise of the
stock options or through restricted stock grants, any gain or
loss realized by the recipient will constitute short-term or
long-term capital gain or loss depending on the holding period
that such shares have been held since their issuance. Currently,
the Code provides that these shares must be held more than one
year in order to constitute a long-term capital gain or loss. In
the case of an officer or a key employee who is subject to
Section 16(b) of the Securities Exchange Act of 1934 and who does
not make the election to recognize income upon exercise of the
stock option, the holding period for capital gains purposes will
not commence until the officer or key employee recognizes such
income.
In the event that the stock options become exercisable and/or the
restricted stock grants are released in connection with a change
in control of the Company, the income received may be deemed to
have been received as an "excess parachute payment." Generally,
an "excess parachute payment" results if the present value (i.e.
based on a discount rate equal to 120% of the applicable Federal
rate compounded semiannually) of the compensation received is
contingent upon the change of control of a corporation or the
ownership of a substantial portion of a corporation's assets
(collectively "Change of Control") and exceeds an amount equal to
three times the recipient's prior average base annual
compensation for the five most recent taxable years ending prior
to the date of such change in control, but only to the extent
that the recipient is not able to establish by clear and
convincing evidence that the amount received is reasonable
compensation for services actually rendered prior to the Change
of Control or to be rendered thereafter. In the event that the
exercise of the stock options or the release of restricted stock
grants is deemed an "excess parachute payment," such excess would
not be deductible by the Company for Federal income tax purposes.
The recipient, in addition to ordinary income taxes or such
"excess parachute payment," would also be subject to a special
20% excise tax.
Under the "excess remuneration" provisions of the Federal income
tax law, the Company, as a publicly held corporation whose equity
securities are required to be registered under Section 12 of the
Securities Exchange Act of 1934, will be precluded from deducting
employee remuneration which exceeds in any taxable year
$1,000,000 paid to a "covered employee" [i.e. the Company's chief
executive officer or an employee who is among the four highest
compensated officers for the taxable year (other than the chief
executive officer)].
The following table provides information as to the restricted
stock grants and options that have been granted to the following
persons as of April 10, 1995.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN<F1>
Dollar Number of
Value of Market Value Shares
Restricted Restricted of Shares Underlying
Stock Stock Underlying Options
Name and Position Grants Grants Options $ Granted
<S> <C> <C> <C> <C>
Steven P. Cloward $156,338 11,370 $820,930 59,704
President and
Chief Executive
Officer
John B. Adams, $103,840 7,552 $551,980 40,144
Executive Vice
President, Chief
Financial Officer,
Treasurer and
Assistant
Secretary
Thomas L. Staker, $61,586 4,479 $69,231 5,035
Senior Vice
President -
Operations
Ronald H. $48,056 3,495 $124,424 9,049
Lautzenheiser,
Vice President -
Business
Development
All Current $518,347 37,698 $1,989,598 144,698
Executive Officers
as a Group
(Total of 10
persons)
All Current Non- $6,985 508 $31,529 2,293
Executive Officers
as a Group
(Total of 3
persons)
All Employees, $6,985 508 $47,479 3,453
Including All
Current Officers
Who Are Not
Executive Officers,
and 1 Non-Employee
Director as a
Group (Total of 4
persons)
<F1> The market value is based on the Common Stock price of
$13.75 as of April 10, 1995.
</TABLE>
The Board of Directors recommend a vote FOR approval of the
amendment to the LTI Plan.
1994 ANNUAL REPORT ON FORM 10-K
PERSONS WHO BENEFICIALLY OWN SHARES OF THE COMPANY'S COMMON
STOCK ON APRIL 10, 1995, WHO WISH TO OBTAIN, WITHOUT CHARGE, A
COPY OF THE COMPANY'S 1994 ANNUAL REPORT ON FORM 10-K AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, SHOULD ADDRESS A
WRITTEN REQUEST TO THE ATTENTION OF INVESTOR RELATIONS AT THE
COMPANY'S ADDRESS AT 11755 EAST PEAKVIEW AVENUE, ENGLEWOOD,
COLORADO 80111.
1996 ANNUAL MEETING
Shareholder proposals for inclusion in the Company's Proxy
materials relevant to the next Annual Meeting of Shareholders
must be received by the Company on or before December 31, 1995.
COMPANY ACCOUNTANTS
At the recommendation of the Audit Committee, the Board of
Directors approved Deloitte & Touche, Certified Public
Accountants, to serve as the Company's independent accountants
for the fiscal year ending December 31, 1995.
A representative of Deloitte & Touche is not expected to be
present at the Annual Meeting of Shareholders.
SOLICITATION OF PROXIES
The solicitation of proxies in the form enclosed is made on
behalf of the Board of Directors of the Company. The expenses of
proxies, including preparing, handling, printing and mailing the
proxy solicitation material, will be borne by the Company.
Solicitation will be made only by use of the mails and, if
necessary, to obtain a quorum for the Annual Meeting of
Shareholders, officers and regular employees of the Company, or
in addition, at the discretion of such officers, a professional
proxy solicitor may make solicitations of proxies by telephone,
by air courier, electronic telecommunications and personal
interview. Management may use the services of its Directors,
Officers and employees, in soliciting proxies, who will receive
no compensation therefor in addition to their regular
compensation, but who will be reimbursed for their out-of-pocket
expenses incurred. The Company will reimburse banks, brokers,
nominees, custodians and fiduciaries for their expenses in
forwarding copies of the proxy solicitation material to the
beneficial owners of the stock held by such persons and in
requesting authority for the execution of proxies.
OTHER BUSINESS
The Company's Board of Directors does not know of any matters to
be presented at the Annual Meeting of Shareholders other than the
matters set forth herein. If any other business is properly
presented to the meeting for action, the persons named in the
enclosed form of Proxy will vote such Proxy according to their
judgment on such matters.
This Proxy Statement is being sent to all shareholders of record
as of April 10, 1995, pursuant to the direction of the Board of
Directors of the Company.
Philip J. Teigen, Secretary
Englewood, Colorado
May 1, 1995
PROXY
BIG O TIRES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 1995
The undersigned hereby appoint(s) John E. Siipola, Horst K.
Mehlfeldt, Steven P. Cloward, and each of them, as the true
and lawful attorneys and proxies of the undersigned, with full
power of substitution and appointment, for and in the name,
place and stead of the undersigned, to act for and to vote all of
the undersigned's shares of common stock of Big O Tires,
Inc. ("Company") at the Annual Meeting of Shareholders to be held
at the Company's Sales and Service Center located at
875 American Pacific Drive, Henderson, Nevada 89014 on June 7,
1995, at 7:00 p.m., Pacific Daylight Time, and at any and
all adjournments thereof, for the following purposes:
The Board of Directors recommends a vote FOR the election of
nominees and FOR Proposal 2.
(1) ELECTION OF DIRECTORS:
[_] FOR all nominees listed below (except as marked to the
contrary below).
[_] WITHHOLD AUTHORITY to vote for all nominees listed
below.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE LIST BELOW.
Class II Directors: Steven P. Cloward, Ralph J.
Weiger, C. Thomas Wernholm
Class IV Director: Robert K. Lallatin
(2) PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S
$.10 PAR VALUE COMMON STOCK THAT MAY BE AVAILABLE FOR
GRANT OR ISSUED UPON THE EXERCISE OF OPTIONS GRANTED UNDER
THE COMPANY'S LONG TERM INCENTIVE PLAN:
[_] FOR [_] AGAINST [_] ABSTAIN
(3) IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY LAWFULLY COME BEFORE THE MEETING.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be SIGNED, on the reverse side)
<PAGE>
(Continued from other side)
The undersigned hereby revokes any Proxies as to said shares
heretofore given by the undersigned and ratify(ies) and
confirm(s) all that said attorneys and Proxies may lawfully do by
virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2
ABOVE.
It is understood that this Proxy confers discretionary authority
in respect to matters not known or determined at the time of the
mailing of the Notice of Annual Meeting of Shareholders to the
undersigned.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders, the Proxy Statement and the Big O
Tires, Inc. Annual Report for the fiscal year ended December 31,
1994.
Dated and Signed:
_____________________________, 1995
_____________________________________________
_____________________________________________
Signature of Shareholder(s)
Signature(s) must agree with the name(s) as
indicated on the label affixed hereto. When
shares are held by joint tenants, both should
sign. If a partnership, please sign in
partnership name by authorized person.
Executors, administrators, trustees,
guardians and attorneys should indicate when
signing. Attorneys should submit powers of
attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE SIGN AND RETURN THE PROXY TO ATTENTION: CORPORATE
SECRETARY, BIG O TIRES, INC., 11755 E. PEAKVIEW AVE., ENGLEWOOD,
COLORADO 80111-6819. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
