<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BRAD RAGAN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BRAD RAGAN, INC.
EXECUTIVE OFFICES: 4404-G STUART ANDREW BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 1996
The Annual Meeting of Shareholders of Brad Ragan, Inc., will be held
Thursday, May 23, 1996, at 11:30 A.M., in the Wyndham Garden Hotel, 2600
Yorkmont Road, Charlotte, North Carolina, for the following purposes:
1. To elect a board of six Directors of the Company.
2. To transact such other business as may be brought before the meeting.
Shareholders of record at the close of business on March 29, 1996, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Ronald J. Carr
Secretary
Charlotte, North Carolina
April 15, 1996
If you do not intend to be present at the meeting, please sign, date and return
the accompanying proxy promptly, so that your shares of Common Stock may be
represented and voted at the meeting. A return envelope is enclosed for your
convenience.
<PAGE> 3
BRAD RAGAN, INC.
EXECUTIVE OFFICES: 4404-G STUART ANDREW BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
PROXY STATEMENT
This Proxy Statement and the accompanying Proxy Card are first being sent
to shareholders on April 15, 1996, in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of Brad Ragan, Inc. (the
"Company"), to be held on Thursday, May 23, 1996, and at any adjournment
thereof.
A copy of the Company's Annual Report to Shareholders (the "Annual
Report") for the year ended December 31, 1995, is enclosed with this Proxy
Statement. The Annual Report is not considered part of the proxy solicitation
materials.
GENERAL INFORMATION
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be
borne by the Company. In addition to solicitation by mail, arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy materials to their principals, and the Company will reimburse them
for their reasonable expenses in so doing.
The Board of Directors has fixed March 29, 1996, as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. On March 29, 1996, there were 2,190,619 outstanding shares of
Common Stock of the Company, each entitled to one vote.
According to the laws of North Carolina under which the Company is
incorporated, shareholders do not have cumulative voting rights in connection
with the election of directors as long as the Company has securities
registered under the Securities Exchange Act of 1934 at the record date for
determining shareholders eligible to vote at the meeting. Directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. With regard to the
election of directors, votes may be cast in favor or withheld. Votes that are
withheld will be excluded entirely from the vote and will have no effect,
although they will be counted for purposes of establishing the presence of a
quorum. Under the rules of the American Stock Exchange, Inc., brokers who
hold shares in street name for customers have authority to vote on certain
items when they have not received instructions from beneficial owners. Brokers
that do not receive instructions are entitled to vote on the election of
directors.
Where a choice is specified on any Proxy as to the vote on any matter to
come before the meeting, the Proxy will be voted in accordance with such
specification. If no specification is made but the Proxy is properly signed,
the shares represented thereby will be voted in favor of each proposal. Such
Proxies, whether submitted by shareholders of record or by brokers holding
shares in street name for their customers ("broker non-votes"), will be voted
in favor of nominees for directors. Broker non-votes will not be counted
either way in voting on other matters (where direction of beneficial owners is
required) and, therefore, will have the effect of negative votes.
1
<PAGE> 4
Any shareholder submitting the accompanying Proxy has the right to revoke
it by notifying the Secretary of the Company in writing at any time prior to
the voting of the Proxy. A Proxy is suspended if the person giving the Proxy
attends the meeting and elects to vote in person.
Management is not aware that any matters, other than the election of
directors, will be presented for action at the meeting, but, if any other
matters do properly come before the meeting, the persons named as agents in the
Proxy will vote such matters in accordance with their best judgment.
ELECTION OF DIRECTORS
The Bylaws provide that the number of Directors shall be not less than
five nor more than fifteen. The Board of Directors has determined that the
Board should be comprised of six members.
The Board of Directors has nominated the following six individuals to
serve as Directors until the next Annual Meeting and until their successors
shall have been elected and shall qualify. Unless authority is withheld, it is
intended that Proxies received in response to this solicitation will be voted
in favor of the following six nominees:
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER POSITIONS AND OFFICES WITH THE COMPANY SINCE
- --------------------------------------------------------------------------
<S> <C>
Eugene R. Culler, Jr. 57 (1) (3) (4) 1995
Chairman of the Board of the Company;
Executive Vice President of The
Goodyear Tire & Rubber Company ("Goodyear")
Akron, Ohio
Michael R. Thomann, 48 1996
General Manager, Farm, Terra and
Off-the-Road Tires, Goodyear
Ronald J. Carr, 51 (3) (5)
Vice President - Finance, Chief Financial 1992
Officer, Secretary and Treasurer
of the Company
Charles A. Bethel, Jr., 75 (1) (2) (4) (5) 1983
Retired (former Vice President,
Original Equipment Tire Sales of
Goodyear), Advance, North Carolina
Richard E. Sorensen, 53 (2) (3) (5) 1977
Dean of the College of Business,
Virginia Polytechnic Institute and
State University, Blacksburg, Virginia
</TABLE>
2
<PAGE> 5
<TABLE>
(Caption>
NAME, AGE, PRINCIPAL OCCUPATION DIRECTOR
AND OTHER POSITIONS AND OFFICES WITH THE COMPANY SINCE
- -----------------------------------------------------------------------------
<S> <C>
Richard D. Pearson, 61 (1) (2) (4) 1978
Owner and manager of companies
involved in selling and leasing
heavy duty trucks and other heavy
equipment, Franklin Lakes, New Jersey
- -----------------------------------------------------------------------------
(1) Member of Executive Committee. (4) Member of Compensation Committee.
(2) Member of Audit Committee. (5) Member of Litigation Committee.
(3) Member of Nominating Committee.
</TABLE>
Mr. Eugene R. Culler, Jr. has been employed by Goodyear for 35 years. He
has been Executive Vice President responsible for North American Tires since
April, 1995. Prior to that he was President and CEO of Goodyear's Canadian
subsidiary. He previously served as Chairman of the Board of Directors of the
Company from August, 1988 to October, 1991. He was most recently elected a
Director and Chairman of the Board of the Company on July 27, 1995.
Michael R. Thomann has 23 years service with Goodyear and currently is
General Manager, Farm, Terra, and Off-the-Road Tires. From 1987 to 1993 he was
Vice President and General Manager - Commercial Division for the Company. He
was elected President and CEO of the Company effective April 16, 1996.
Mr. Ronald J. Carr was elected Vice President - Finance and Chief
Financial Officer, Secretary and Treasurer effective May 1, 1992. He has over
25 years of service with Goodyear and has held various financial positions in
Goodyear's General Products and Tire Divisions and at Motor Wheel Corporation,
a former Goodyear subsidiary. Most recently he was Manager, Financial
Information, for Goodyear's North American Tire Division.
Mr. Richard D. Pearson is the owner and manager of a number of companies
that are involved in the sale and leasing of heavy duty trucks and other heavy
equipment, a business in which he has been engaged for more than 25 years.
Dr. Richard E. Sorensen has been Dean of the College of Business, Virginia
Polytechnic Institute and State University, since 1982. Prior to that, he was
employed in a teaching capacity and as Dean of the College of Business at
Appalachian State University.
Mr. Charles A. Bethel, Jr., was employed by Goodyear from 1946 until his
retirement on August 31, 1983. At that date he was Vice President, Original
Equipment Tire Sales, a position held since 1977.
It is not contemplated that any of the nominees will be unable or
unwilling for good cause to serve; but, if that should occur, it is the
intention of the agents named in the Proxy to vote for such other person or
persons to the office of Director as the Nominating Committee of the Board of
Directors may recommend.
As has been previously announced, Mr. William P. Brophey, President and
CEO of the Company, was named Vice President, Original Equipment Sales
Worldwide at Goodyear. He resigned as a director and Vice Chairman of the
Board of the Company on April 1, 1996 and as an officer of the Company
effective April 16, 1996.
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 1, 1996, to the knowledge of management, the only persons
owning beneficially more than five percent (5%) of the Company's Common Stock,
its only class of voting security, and the shares of Common Stock owned by
Executive Officers and Directors are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS
- -------------------------------------------------------------------------------
<S> <C> <C>
The Goodyear Tire & Rubber Company 1,633,695 (1) 74.58%
1144 East Market Street
Akron, OH
Dimensional Fund Advisors, Inc. 127,300 (2) 5.81%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Gabelli & Company, Inc. 330,900 (3) 15.11%
GAMCO Investors, Inc.
Gabelli Funds, Inc.
Gabelli Performance Partnership
GLI, Inc.
655 Third Avenue
New York, NY
All Executive Officers and Directors
of the Company as a Group (9 persons) 100 Less than 1%
Eugene R. Culler, Jr. (0)
William P. Brophey (0)
Michael R. Thomann (0)
Ronald J. Carr (0)
Charles A. Bethel, Jr. (100)
Richard D. Pearson (0)
Richard E. Sorensen (0)
James E. Owens (0)
Ronald P. Rumble (0)
- ------------------------------------------------------------------------------
</TABLE>
(1) Based upon information provided by Goodyear.
(2) Based upon information provided by Dimensional Fund Advisors, Inc.,
("Dimensional"), and as reflected in a Schedule 13-G dated February 7, 1996
and filed with the Securities and Exchange Commission. Dimensional, a
registered investment advisor, is deemed to have beneficial ownership of
127,300 shares of BRAD RAGAN, INC. stock as of December 31, 1995, all of
which shares are held in portfolios of DFA Investment Dimensions Group Inc.,
a registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(3) As reflected in a Schedule 13-D, dated March 11, 1996 (Amendment #11),
filed with the Securities and Exchange Commission, and other information
supplied by the beneficial owner.
4
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides a three-year summary of earned compensation
for the Named Executive Officers of the Company:
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------
Awards Payouts
------------------- -----------------
Annual Compensation Long
------------------------ Securities Term
Other Under- Incen- All
Annual Restricted lying tive Other
Compen- Stock Options/ Plan Compen-
Salary Bonus sation Awards SAR's Payouts sation
Name and Principal Position Year ($) ($) (1) ($) (2) ($) (#) (3) ($) ($) (4)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William P. Brophey 1995 171,733 31,175 0 0 3,300 0 4,620
Vice Chairman, President, 1994 162,955 40,638 0 0 3,300 0 4,500
and Chief Executive Officer 1993 152,718 41,700 0 0 3,500 0 4,497
Ronald J. Carr 1995 138,079 17,737 0 0 1,900 0 3,673
Vice President - Finance, 1994 130,115 21,020 0 0 1,750 0 3,880
Secretary, Treasurer and 1993 121,500 21,600 0 0 2,300 0 3,985
Chief Financial Officer
James E. Owens 1995 108,910 14,038 0 0 1,600 0 2,938
Vice President and 1994 104,003 15,274 0 0 1,350 0 3,023
General Manager - 1993 98,266 15,750 0 0 1,650 0 3,173
Retail Division
Ronald P. Rumble (5) 1995 136,572 14,038 0 0 1,600 0 3,782
Vice President and 1994 129,970 15,274 0 0 1,500 0 3,748
General Manager - 1993 104,740 18,110 0 0 2,600 0 4,248
Commercial Division
</TABLE>
(1) The Company's Board of Directors has approved an Executive Bonus Plan in
which the Named Executive Officers participated in 1995. The 1995 plan
provides incentive cash bonuses based on the attainment of operating
profit and cash flow objectives established at the beginning of the year
for the Company and Goodyear. Prior to 1994, bonuses were paid by
Goodyear. In 1994 and 1995 bonuses were paid by the Company, and the
Company was reimbursed by Goodyear. No cost was incurred by the Company
relating to the bonuses in years 1993, 1994 or 1995. Payments related to
the 1995 Bonus Plan were made in February, 1996.
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
is not required to be reported if the amount constituted less than the
lesser of $50,000 or 10% of the total annual salary and bonus for the
Named Executive Officers.
(3) Options were granted by Goodyear to purchase shares of Common Stock of
Goodyear.
(4) Amounts paid on behalf of the Named Executive Officers for matching
401(k) Savings Plan Contributions.
(5) Mr. Rumble was elected to his position effective March 1, 1993, and the
salary amounts shown reflect compensation earned since that date.
5
<PAGE> 8
On November 1, 1994 (the "Transfer Date"), the Named Executive Officers
(the "Officers") became full-time employees of the Company. Prior to that
date, Messrs. Brophey, Carr, Owens and Rumble were employees of Goodyear on
loan to the Company, and the Company reimbursed Goodyear for the cost of the
base salary and fringe benefits for those Officers. Effective November 1,
1994, salaries for the Officers are paid directly to the Officers as employees
of the Company. The amounts shown in the compensation categories of the
Summary Compensation Table for 1994 include compensation paid to the Officers
both before and after the Transfer Date.
STOCK OPTIONS, SAR GRANTS IN 1995
The Company does not provide its executive officers any type of financial
compensation based on the appreciated market value of the Company's Common
Stock. On January 4, 1995, the Named Executive Officers were granted options by
Goodyear to purchase shares of Common Stock of Goodyear at an exercise price
equal to the market price on the grant date. The Company does not incur any
cost related to the grant or the exercise of Goodyear stock options. No SARs
have been granted to any Named Executive Officer. All options in the following
tables relate to shares of Common Stock of Goodyear.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1995
% of Total Potential
Securities Options/SARs Realizable value at
Options/SARs Granted to Exercise or Assumed Annual Rates of
Granted (#) Employees in Base Price Expiration Stock Price Appreciation
Name (1) 1995 (2) ($/sh) Date for Option Term (3)
- ------------------------------------------------------------------------------------------------------
5% 10%
------- --------
<S> <C> <C> <C> <C> <C> <C>
William P. Brophey 3,300 32.4% $34.75 01/04/05 $72,118 $182,762
Ronald J. Carr 1,900 18.6% $34.75 01/04/05 $41,523 $105,227
James E. Owens 1,600 15.7% $34.75 01/04/05 $34,967 $88,612
Ronald P. Rumble 1,600 15.7% $34.75 01/04/05 $34,967 $88,612
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options vest 50% in year one, and 50% in year two. The option exercise
price is 100% of the fair market value of Goodyear Common Stock on the
date of grant.
(2) Percent of total options granted by Goodyear to all employees of the
Company. In the aggregate, these options were less than 1% of the total
options granted by Goodyear in 1995.
(3) Amounts represent hypothetical gains that could be achieved if options were
exercised at end of the option term. The dollar amounts under this
column assume 5% and 10% compounded annual appreciation in the Common Stock
of Goodyear from the date the respective options were granted. These
calculations and assumed realizable values are required to be disclosed
under Securities and Exchange Commission rules, and therefore, are not
intended to forecast future appreciation of Common Stock of Goodyear or
amounts that may be ultimately realized upon exercise.
6
<PAGE> 9
OPTION EXERCISES IN 1995 AND YEAR-END VALUES
The following table sets forth certain information regarding the exercise
of Goodyear stock options during 1995 and the value of unexercised options held
as of December 31, 1995. The Company does not incur any cost related to the
grant or exercise of Goodyear stock options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Unexercised Options/SARs In-the-Money Options/SARs
Acquired Realized at Dec. 31, 1995 (#) (2) at Dec. 31, 1995 ($) (2) (3)
on (#) Value --------------------------- -----------------------------
Name Exercisable ($) (1) Excercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William P. Brophey 2,000 $54,375 25,250 4,950 $399,231 $36,919
Ronald J. Carr 0 $ 0 10,975 2,775 $197,584 $21,172
James E. Owens 0 $ 0 3,975 2,275 $ 49,434 $17,759
Ronald P. Rumble 0 $ 0 11,750 2,350 $263,769 $17,844
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the difference between the exercise price and the price of the
Goodyear Common Stock on the date of exercise.
(2) Shares include options granted to the named officer while employed by
Goodyear but not associated with the Company.
(3) Represents the difference between the exercise price of the outstanding
options and the closing price of Goodyear Common Stock on the New York Stock
Exchange on December 29,1995, which was $45.375 per share. Options that
have an exercise price greater than the year-end NYSE closing price are
excluded from the value calculation.
LONG TERM INCENTIVE AWARDS
The Company does not provide its executive officers any other form of
compensation based upon any long-term incentive plan or any other type of
employment arrangement.
EMPLOYMENT AGREEMENTS
Neither the Company nor Goodyear provides the Company's executive officers
with any type of employment agreement or contract.
DIRECTOR COMPENSATION
Director's fees for outside Directors are paid at the rate of $2,500 per
Board Meeting attended, $1,000 per telephonic Board Meeting, $1,000 per
committee meeting attended not in conjunction with a Board Meeting and $500 per
telephonic committee meeting, all subject to an annual maximum amount of
$20,000 plus reimbursement of expenses incurred as a Director. Directors may
at their option defer the payment of Director's compensation. Directors who
are also officers or employees of the Company or employees of Goodyear receive
no such fees.
7
<PAGE> 10
RETIREMENT BENEFITS
Prior to November 1, 1994, the Named Executive Officers were on loan from
Goodyear and participated in the Retirement Plan for Salaried Employees of The
Goodyear Tire & Rubber Company (the "Salaried Plan"). The Company was billed
by Goodyear for the cost incurred to maintain each Named Executive Officer's
participation in the Salaried Plan.
The Salaried Plan is a qualified, defined benefit plan which provides a
basic non-contributory pension benefit and a voluntary contributory pension
benefit based on various factors including years of service, compensation and
plan maximums. The annual non-contributory benefit equals $318 for each year
of service prior to 1994. The annual non-contributory benefit for 1994 and
each year thereafter equals 1.1% of annual Social Security Covered Compensation
for such year.
The Salaried Plan permits an eligible employee to make monthly optional
contributions at an annual rate of 2% of his or her earnings in excess of
Social Security Covered Compensation. For service prior to 1994, the annual
contributory benefit equals the years of service during which contributions
were made multiplied by 1.4% of average annual earnings in excess of $22,716
during the five-year period ended December 31, 1993. The annual contributory
benefit for 1994 and each year thereafter equals 1.58% of annual earnings (up
to $150,000 in 1994 and 1995) in excess of annual Social Security Covered
Compensation.
The Salaried Plan provides pension benefits to participants who have at
least 30 years of service or have at least 10 years of service and have
attained the age of 55. Benefits payable to a participant who retires between
ages 55 and 62 are subject to a reduction of 4.8% for each full year of
retirement before age 62. The years of credited service at December 31, 1995,
under the Salaried Plan for each Named Executive Officer are: Mr. Brophey, 36
years; Mr. Carr, 28 years; Mr. Owens, 43 years; and Mr. Rumble, 27 years.
On November 1, 1994, the Named Executive Officers became participants in
The Goodyear Tire & Rubber Company Retirement Benefit Plan for Employees with
Service with Designated Subsidiaries (the "Subsidiary Plan"), a non-qualified,
defined benefit plan. Benefits payable to a participant or beneficiary under
the Subsidiary Plan shall be in such amount as is required, when added to the
benefits payable to the participant or beneficiary under the Salaried Plan, to
produce an aggregate benefit equal to the benefit that would have been payable
to the participant or beneficiary if the employment of the participant with
Company were treated as employment with an employer under the Salaried Plan,
and if the limitations on compensation pursuant to Section 401 (a) (17) of the
Internal Revenue Code of 1986, as amended, were not in effect.
As of December 31, 1995, the estimated annual benefits payable on a
five-year certain and life annuity basis (and not under any of the various
survivor options or the lump sum option) under retirement at age 65 were as
follows: Mr. Brophey, $86,464; Mr. Carr, $81,877; Mr. Owens, $62,422; and Mr.
Rumble, $78,518. These estimates were based on 1995 earnings and estimated
annual Social Security Covered Compensation projections to each individual's
65th birthday.
8
<PAGE> 11
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE POLICIES AND PRACTICES
The Compensation Committee (the "Committee") annually reviews the
compensation program for the Company's executive officers, all of whom are
Named Executive Officers in the compensation disclosures included in this proxy
statement, and recommends to the Board of Directors changes to the compensation
program in general and adjustments to individual compensation levels.
In its annual review, the Committee seeks to determine whether (1) the
Company is competitive and can attract and retain qualified and experienced
personnel and (2) the executive officers are appropriately motivated by the
compensation program to seek to attain performance goals approved by the
Committee, as well as sustained earnings growth for the benefit of all
shareholders of the Company.
The Committee meets early each year to review the compensation package and
make a recommendation regarding compensation for the Chief Executive Officer
and the other Named Executive Officers for approval by the Board of Directors.
The Chief Executive Officer provides the Committee information regarding
annual salary and annual incentive based compensation targets. The Committee
also receives information regarding compensation paid by Goodyear, including
information regarding options to purchase shares of Goodyear Common Stock for
each executive officer.
The Revenue Reconciliation Act of 1993 added Section 162 (m) to the
Internal Revenue Code (the "Code") which eliminated tax deductions for
compensation paid to an executive officer in excess of $1,000,000, unless
certain requirements are met. No executive officer receives compensation in
excess of the allowed deductions. The Committee will consider the
applicability of this section of the Code in the formalization of all executive
compensation plans.
COMPENSATION OF EXECUTIVE OFFICERS
Salaries for the executive officers are established using Goodyear's
compensation guidelines within a salary range that is fixed annually based on
market data derived from salary surveys of hundreds of companies made available
to compensation professionals by various associations and consultants.
Salaries are established within these ranges based on Mr. Brophey's performance
evaluation and are not linked to specific performance criteria. In 1995, the
Chief Executive Officer was authorized by the Committee to adjust the base
salaries of the other executive officers within their ranges without action by
the Committee.
The Named Executive Officers obtain the opportunity for bonus compensation
by participating in the Goodyear Performance Recognition Plan (the "Performance
Plan"). For the Named Executive Officers (other than the Chief Executive
Officer), the target payout (assuming 100% payout) under the Performance Plan
was established at an average amount of approximately 11.9% of the midpoint of
the salary range of such persons. Bonuses paid pursuant to the Performance
Plan were based 50% on the earnings before interest and taxes ("EBIT") and cash
flow results of the Company and 50% on the EBIT and cash flow results of
Goodyear. The EBIT component included specified reductions in SAG expense.
Payouts under the Performance Plan could
9
<PAGE> 12
have ranged from zero to 150% of the participant's target amount
depending on the extent to which applicable EBIT and cash flow goals were
achieved. Based on the results of the Company and Goodyear, bonuses were paid
at 107.5% of target levels. The Company was reimbursed by Goodyear for the
Performance Plan payouts to Named Executive Officers for 1995.
The target levels of participation and the Company EBIT and cash flow
goals for 1996 were reviewed and approved by the Committee.
The Committee received a report regarding stock options granted by
Goodyear for the purchase of Goodyear Common Stock to the Named Executive
Officers and other key employees of the Company pursuant to the 1989 Goodyear
Performance and Equity Incentive Plan (the "Option Plan"). The size of
individual option grants was determined primarily on the basis of the
responsibilities and relative position of each executive officer within
guideline ranges established by Goodyear based on surveys of the option
granting practices of other companies. The Company does not incur any cost in
connection with the options granted to the Named Executive Officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The salary of Mr. Brophey was established using Goodyear's compensation
guidelines within a salary range that is fixed annually based on market data
derived from salary surveys of hundreds of companies made available to
compensation professionals by various associations and consultants and was
approved by the Committee. In August of 1995, Mr. Brophey was granted a 4.4%
salary increase within those guidelines in recognition of his effective
leadership of the Company.
Mr. Brophey's participation in the Performance Plan was established at a
level that is intended to result in a payout (assuming 100% payout under the
Performance Plan) equal to 21.0% of the midpoint of his salary range. His
bonus was based 50% on the EBIT and cash flow results of the Company and 50% on
the EBIT and cash flow results of Goodyear. The EBIT component included
specified reductions in SAG expense. Payouts under the Performance Plan could
have ranged from zero to 150% of Mr. Brophey's target amount depending on the
extent to which applicable EBIT and cash flow goals were achieved. Based on
the results of the Company and Goodyear, his payout was 107.5% of his target
level, resulting in his performance based compensation being equal to 18.4% of
his salary. This bonus was reimbursed to the Company by Goodyear.
On January 4, 1995, Mr. Brophey was granted an option to purchase 3,300
shares of Goodyear Common Stock at a per share exercise price equal to the
market price of Goodyear Common Stock on the date of grant. The size of the
grant was determined on the basis of guidelines established by Goodyear based
on surveys of the option granting practices of other companies. The Committee
does not participate in the granting of such stock options, and the Company
does not incur any cost relating to such options, however stock options are
considered to be a part of Mr. Brophey's total compensation package.
February 14, 1996 The Compensation Committee:
Eugene R. Culler, Jr. (Chairman)
Charles A. Bethel, Jr.
Richard D. Pearson
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<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Goodyear is the Company's majority shareholder and its principal supplier
of new tires. Eugene R. Culler, Jr., Chairman of the Board of the Company, is
an Executive Vice President of Goodyear and has been employed by Goodyear for
35 years. Until November 1, 1994, William P. Brophey, Vice Chairman of the
Board, President and Chief Executive Officer of the Company, had been employed
by Goodyear for more than 35 years; Ronald J. Carr, Vice President - Finance,
Secretary and Treasurer had been employed by Goodyear for more than 25 years;
James E. Owens, Vice President and General Manager - Retail Division, had been
employed by Goodyear for more than 40 years; and Ronald P. Rumble, Vice
President and General Manager - Commercial Division, had been employed by
Goodyear for more than 25 years. Michael R. Thomann, General Manager, Farm,
Terra and Off-the-Road Tires for Goodyear became a director of the Comapny on
April 1, 1996 and has been employed by Goodyear for more than 20 years.
Eugene R. Culler, Jr., Chairman of the Board of the Company and Chairman
of the Company's compensation committee, is an Executive Vice President of
Goodyear. Mr. Culler is not an employee of the Company and does not receive
any compensation or director's fees from the Company, nor is he a member of
Goodyear's Board of Directors or its compensation committee.
The Company is a member of Goodyear's dealer network. Goodyear sold to
the Company approximately $63,811,000 of products and services, and the Company
sold to Goodyear approximately $9,167,000 of products and services during 1995.
The Company paid Goodyear $1,439,000 for rent on equipment and 51 facilities
used by the Company.
The Company has determined that Goodyear is a cost-effective source for
various administrative services and support activities. These services and
activities include but are not limited to internal auditing, payroll
processing, communication services, data processing services, training,
certain legal assistance and other miscellaneous administrative support
functions. During 1995, the Company paid approximately $728,000 to Goodyear
for these and other services.
The Company has agreed to provide various credit related administrative
services to Goodyear's company-owned outlets beginning in the second quarter of
1996.
The Company believes that prices paid by the Company to Goodyear and the
products and services received by the Company from Goodyear during 1995 were
fair and reasonable and on terms and at prices no less favorable than could
have been obtained elsewhere.
The Company maintains an open unsecured line of credit with Goodyear to
fund working capital requirements. The borrowing rate on the line of credit is
based on the 30-day LIBOR plus 1.5% effective the first day of each calendar
month as reported on the Reuter Money Service Monitor System.
The Company issued a one-year $5.5 million promissory note dated December
31, 1995, to Goodyear that may be renewable on December 31, 1996, depending on
business conditions. The note represented an extension of a previous inventory
ledger balance financing arrangement dated November 30, 1989, with an
outstanding balance due on December 31, 1995, of $5.5 million. The note is
interest-bearing at 120% of the prime rate as announced by Citibank, N.A., New
York, New York, on the first day of each quarter during the term of the note.
Interest due under the note will be fully waived provided that the ratio of the
Company's annual shipments of off-the-road tires from Goodyear to the average
daily outstanding balance of the note equals or exceeds two and one half to
one (2.5:1). Interest will be prorated if the ratio is less than that.
In 1995, the ratio exceeded 2.5:1, and the interest was fully waived.
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<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns of the
Company's Common Stock, The American Stock Exchange Composite Index and the Dow
Jones Auto Parts Index at each December 31 for the five-year period beginning
December 31, 1990, and ended December 31, 1995.
The graph shows the total shareholder return that would have been achieved
had $100 been invested in each of these investment alternatives on December 31,
1990, with all dividends reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BRAD RAGAN, INC., AMEX COMPOSIT INDEX AND DJ AUTO PARTS INDEX
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Brad Ragan, Inc. 100 102 107 132 149 163
AMEX Composite 100 128 130 155 141 178
DJ Auto Parts 100 148 192 238 203 252
</TABLE>
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<PAGE> 15
CORPORATE GOVERNANCE
The Company's Board of Directors held five meetings during 1995. All
present Directors attended at least 75% of the total number of meetings of the
Board of Directors and committees on which they serve.
The Board of Directors has five standing committees: Executive Committee,
Audit Committee, Nominating Committee, Compensation Committee and Litigation
Committee.
The Executive Committee consists of Messrs. Culler (Chairman), Bethel and
Pearson. The Executive Committee is empowered to act between meetings of the
Board of Directors with powers of the full Board, except with respect to
certain matters. The Executive Committee did not meet during 1995.
The Audit Committee consists of Dr. Sorensen (Chairman), and Messrs.
Bethel and Pearson. The Audit Committee reviews the scope of the Company's
annual audit, the functions performed by the Company's independent accountants,
the functions of and procedures followed by the Company's internal accounting
and auditing staff and other matters relating to accounting policies and
controls. The Audit Committee held three meetings during 1995.
During 1995, the Nominating Committee consisted of Messrs. Culler
(Chairman), Brophey, Carr and Sorensen. This committee's function is to study
the composition of the Board of Directors and the qualifications of its members
and to nominate for election to the Board persons whose background and
expertise will, in their judgment, complement the needs of the Company. This
committee will consider nominees recommended by shareholders. Such
recommendations should be submitted to the Secretary of the Company by December
31 in order to be considered by the committee for the Annual Meeting to follow
the fiscal year-end. This committee met once during 1995.
The Compensation Committee consists of Messrs. Culler (Chairman), Bethel
and Pearson. Its principal functions are to review the Company's compensation
and benefit programs for executive officers and to recommend annual
compensation levels for the executive officers for approval by the Board of
Directors. This committee met once during 1995.
During 1995, the Litigation Committee consisted of Messrs. Bethel
(Chairman), Brophey, Carr and Sorensen. This committee is responsible for
monitoring any matters of significant litigation that involve the Company. The
committee did not meet during 1995.
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<PAGE> 16
INDEPENDENT ACCOUNTANTS
Price Waterhouse, LLP ("Price Waterhouse") has served the Company as
independent accountants since 1986. A representative from Price Waterhouse is
expected to be present at the Annual Meeting of Shareholders with the
opportunity to make a statement if he desires to do so and to answer any
questions that concern the firm's work for the Company. Price Waterhouse also
serves as independent accountants for Goodyear. The Audit Committee and the
Board of Directors must approve any nonaudit services performed for the Company
by Price Waterhouse.
ANNUAL REPORT ON FORM 10-K
Shareholders may obtain a copy of the Company's Annual Report on Form 10-K
for 1995 as filed with the Securities and Exchange Commission, including all
financial statements and schedules without charge by writing to:
Investor Relations
Brad Ragan, Inc.
4404-G Stuart Andrew Blvd.
Charlotte, NC 28217
Exhibits to the Annual Report on Form 10-K may be obtained for a nominal
charge for copying.
DEADLINE FOR SHAREHOLDERS' PROPOSALS
Any shareholder desiring to present a proposal for action at the Company's
1997 Annual Meeting must deliver the proposal to the Company at its principal
executive offices no later than November 30, 1996.
By Order of the Board of Directors
Ronald J. Carr
Secretary
Charlotte, North Carolina
April 15, 1996
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<PAGE> 17
Exhibit "A"
BRAD RAGAN, INC.
PROXY
The undersigned shareholder of Brad Ragan, Inc., designates Eugene R. Culler
and Michael R. Thomann, and either of them, agents to vote the shares of the
undersigned at the Annual Meeting of Shareholders, Thursday, May 23, 1996 , at
11:30 A.M. and at any adjournment thereof, as follows:
<TABLE>
<S> <C>
(1) ELECTION OF DIRECTORS
/ / VOTE FOR all nominees (except as marked to the contrary) / / WITHHOLD AUTHORITY TO vote for all nominees listed below
Nominees: Eugene R. Culler, Michael R. Thomann, Ronald J. Carr, Charles A. Bethel, Jr., Richard D. Pearson, Richard E. Sorensen
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME.)
(2) To transact such other business as may be brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE VOTED AS SPECIFIED BY THE SHAREHOLDER.
IF NO SPECIFICATION IS MADE WITH RESPECT TO A MATTER WHERE A BALLOT IS PROVIDED, THIS PROXY WILL BE VOTED FOR SUCH MATTER.
DATE: , 1996
------------------------------------------------------------------- ---------------------------------------------
(When signing as attorney, executor, administrator, trustee guardian, et cetera, ---------------------------------------------
give title as such. For joint accounts, each joint owner should sign.) ---------------------------------------------
Please sign above as name(s) appear(s) on the
other side
</TABLE>
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<PAGE> 18
BRAD RAGAN, INC.
PLEASE SIGN AND SEND IN YOUR PROXY
Your shares should be represented at the meeting
by your proxy. The meeting will be held Thursday,
May 23, 1996 at 11:30 A.M. in the Wyndham Garden
Hotel, 2600 Yorkmont Road, Charlotte, North Carolina.
Please sign the proxy printed on the other side
and return it at once unless you expect to attend
the meeting in person.
16
