<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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 22, 1997
The Annual Meeting of Shareholders of Brad Ragan, Inc., will be held
Thursday, May 22, 1997, at 11:30 A.M., in the Holiday Inn Woodlawn, 212 Woodlawn
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 28, 1997, 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 14, 1997
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
================================================================================
1
<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 14, 1997, 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 22, 1997, and at any adjournment
thereof.
A copy of the Company's Annual Report to Shareholders (the "Annual
Report") for the year ended December 31, 1996, 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 28, 1997, as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. On March 28, 1997, 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.
2
<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. 58(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(3)(5) 1996
Vice Chairman of the Board, President and Chief Executive Officer
of the Company
Ronald J. Carr, 52(3)(5) 1992
Vice President - Finance, Chief Financial Officer, Secretary and
Treasurer of the Company
Richard E. Sorensen, 54(2)(3)(5) 1977
Dean of the College of Business, Virginia Polytechnic Institute and
State University, Blacksburg, Virginia
Richard D. Pearson, 62(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
James W. Barnett, 66 Nominee
Executive in Residence, Interim Director, Institute for Global
Business, University of Akron, Akron, Ohio: Formerly Vice President,
Original Equipment Tire Sales Worldwide for Goodyear, Akron, Ohio
- ----------------------------------------------------------------------------------------
</TABLE>
(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.
3
<PAGE> 5
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.
Mr. Michael R. Thomann was elected President and Chief Executive
Officer of the Company effective April 16, 1996 and Vice Chairman of the Board
on May 23, 1996. He has 24 years of service with the Company and Goodyear.
Previously he was General Manager, Farm, Terra, and Off-the-Road Tires for
Goodyear. In addition he has held positions with Goodyear's Retail Stores,
Commercial Tire Centers and Credit Administration. From 1987 to 1993 he was Vice
President and General Manager - Commercial Division for the Company.
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. James W. Barnett was employed by Goodyear from 1950 until his
retirement in 1996. Most recently he was Vice President for Goodyear's Original
Equipment Tire Sales Worldwide, a position he held since July, 1988. He has held
a wide range of positions in Goodyear's sales organization including Executive
Vice President of Sales and Marketing for Kelly-Springfield Tire Company in
Cumberland, Maryland. He was Chairman of the Board of the Company from March 26,
1986 to August 3, 1988. Mr. Barnett is currently employed by the University of
Akron as Executive in Residence, Interim Director, Institute for Global
Business.
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.
4
<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of March 28, 1997, 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. 281,400(3) 12.85%
GAMCO Investors, Inc.
Gabelli Funds, Inc.
Gabelli Performance Partnership
GLI, Inc.
655 Third Avenue
New York, NY
All Executive Officers, Directors and Nominees
of the Company as a Group (9 persons) 100 Less than 1%
Eugene R. Culler, Jr. (0)
Michael R. Thomann (0)
Ronald J. Carr (0)
Charles A. Bethel, Jr. (100)
Richard D. Pearson (0)
Richard E. Sorensen (0)
James W. Barnett (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 13G 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, 1996, 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 13D, dated December 16, 1996 (Amendment
#13), filed with the Securities and Exchange Commission, and other
information supplied by the beneficial owner.
5
<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
------------------- ------------------
Long
Annual Compensation 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>
Michael R. Thomann(5) 1996 113,948 20,563 0 0 7,000 0 2,035
Vice Chairman, President, 1995 - - - - - - -
and Chief Executive Officer 1994 - - - - - - -
William P. Brophey(6) 1996 60,080 8,972 0 0 7,000 0 0
Formerly Vice Chairman, 1995 171,733 31,175 0 0 3,300 0 3,750
President and CEO 1994 162,955 40,638 0 0 3,300 0 4,500
Ronald J. Carr 1996 141,586 16,192 0 0 4,200 0 3,750
Vice President - Finance, 1995 138,079 17,737 0 0 1,900 0 3,673
Secretary, Treasurer and 1994 130,115 21,020 0 0 1,750 0 3,880
Chief Financial Officer
James E. Owens 1996 120,547 16,218 0 0 4,100 0 3,303
Vice President and 1995 108,910 14,038 0 0 1,600 0 2,938
GM - Retail Division 1994 104,003 15,274 0 0 1,350 0 3,023
Ronald P. Rumble 1996 143,039 16,218 0 0 4,100 0 3,750
Vice President and 1995 136,572 14,038 0 0 1,600 0 3,750
GM - Commercial Division 1994 129,970 15,274 0 0 1,500 0 3,748
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company's Board of Directors has approved an Executive Bonus Plan in
which the Named Executive Officers participated in 1996. The 1996 plan
provides incentive cash bonuses based on the attainment of objectives
established at the beginning of the year for the Company and Goodyear. The
bonuses were paid by the Company, and the Company was reimbursed by
Goodyear. Payments related to the 1996 Bonus Plan were made in February,
1997.
(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 on January 9, 1996 and December 3, 1996 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. Thomann was elected to his position effective April 16, 1996, and the
salary and bonus amounts shown reflect compensation earned since that date.
(6) Mr. Brophey resigned as Vice Chairman of the Board effective April 1, 1996
and as President and CEO effective April 16, 1996 when he was named Vice
President at Goodyear. He was paid by the Company thru April 30, 1996, and
the salary and bonus amounts shown reflect compensation earned prior to
that date.
6
<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 1996
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 9, 1996 and December 3, 1996, 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.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
% 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) 1996(2) ($/sh) Date for Option Term(3)
- -------------------------------------------------------------------------------------------------------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Thomann 3,000 23.0% $44.00 01/09/06 $ 83,010 $210,360
4,000 $50.00 12/03/06 $125,760 $318,760
Ronald J. Carr 2,000 13.8% $44.00 01/09/06 $ 55,340 $140,240
2,200 $50.00 12/03/06 $ 69,168 $175,318
James E. Owens 1,900 13.5% $44.00 01/09/06 $ 52,573 $133,228
2,200 $50.00 12/03/06 $ 69,168 $175,318
Ronald P. Rumble 1,900 13.5% $44.00 01/09/06 $ 52,573 $133,228
2,200 $50.00 12/03/06 $ 69,168 $175,318
William P. Brophey 3,300 23.0% $44.00 01/09/06 $ 91,311 $231,396
3,700 $50.00 12/03/06 $116,328 $294,853
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Grants were made on January 9, 1996 and December 3, 1996. The option
exercise price is 100% of the fair market value of Goodyear Common Stock
on the date of grant. The options vest 25% on each anniversary date of
the grant.
(2) Percent of total options granted by Goodyear to all employees of the
Company. In the aggregate, these options were less than 1% of the total
options granted by Goodyear in 1996.
(3) Amounts represent hypothetical gains that could be achieved if options
were exercised at end of the option term. The dollar amounts under this
column assume 5% and 10% compounded annual appreciation in the Common
Stock of Goodyear from the date the respective options were granted.
These calculations and assumed realizable values are required to be
disclosed under Securities and Exchange Commission rules, therefore, are
not intended to forecast future appreciation of Common Stock of Goodyear
or amounts that may be ultimately realized upon exercise.
7
<PAGE> 9
OPTION EXERCISES IN 1996 AND YEAR-END VALUES
The following table sets forth certain information regarding the
exercise of Goodyear stock options during 1996 and the value of unexercised
options held as of December 31, 1996. The Company does not incur any cost
related to the grant or exercise of Goodyear stock options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Unexercised Options/SARs In-the-Money Options/SARs
Acquired Realized at Dec. 31, 1996(#)(2) at Dec. 31, 1996($)(2)(3)
on Value ---------------------------- --------------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Thomann 3,000 $60,125 2,750 8,000 $ 29,094 $44,250
William P. Brophey 5,000 $90,937 22,725 9,475 $488,078 $70,572
Ronald J. Carr 0 $ 0 12,325 5,625 $277,566 $41,466
James E. Owens 0 $ 0 5,050 5,300 $ 84,744 $36,988
Ronald P. Rumble 0 $ 0 12,900 5,300 $346,263 $36,988
- -----------------------------------------------------------------------------------------------------------------------------------
</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 31, 1996, which was $51.375 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 Named 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 Named 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.
8
<PAGE> 10
RETIREMENT BENEFITS
Prior to November 1, 1994, the Named Executive Officers, except Mr.
Thomann, 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. Mr. Thomann participated
in the Salaried Plan prior to April 16, 1996 as a former employee of Goodyear.
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 for years 1994 thru 1996 and up to $160,000 for 1997) 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, 1996, under the Salaried
Plan for each Named Executive Officer are: Mr. Thomann, 24 years; Mr. Brophey,
37 years; Mr. Carr, 29 years; Mr. Owens, 44 years; and Mr. Rumble, 28 years.
On November 1, 1994, the Named Executive Officers (except on April 16,
1996 for Mr. Thomann) 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 the 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, 1996, 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) upon retirement at age 65 were as
follows: Mr. Thomann, $74,209; Mr. Brophey, $86,214; Mr. Carr, $81,350; Mr.
Owens, $63,165; and Mr. Rumble, $84,514. These estimates were based on 1996
earnings and estimated annual Social Security Covered Compensation projected to
each individual's 65th birthday.
9
<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 specific adjustments to individual compensation levels as
it determines appropriate.
In its annual review, the Committee seeks to determine whether (1) the
Company is competitive and can attract and retain qualified and experienced
personnel in leadership positions 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 recommendations 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 bonus 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 the CEO's performance evaluation of
each officer and are not linked to specific performance criteria. In 1996, the
CEO 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 participated in the Goodyear Performance
Recognition Plan (the "Performance Plan") and as a result had the opportunity to
earn bonus compensation in 1996. 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 17.1% of
the midpoint of the salary range of such persons. Bonuses paid pursuant to the
Performance Plan were based 25% on the earnings before interest and taxes
("EBIT") and cash flow results of the Company, 25% on the EBIT and cash flow
results of Goodyear's North American Tire Division and 50% on the EBIT and cash
flow results of total Goodyear. Payouts under the Performance Plan could 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, bonuses were paid at 90.46% of target levels for 1996. The Company was
reimbursed by Goodyear for the Performance Plan payouts to Named Executive
Officers for 1996.
10
<PAGE> 12
The target amounts for each officer and the Company EBIT and cash flow
goals for 1997 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
Effective April 16, 1996, Michael R. Thomann was elected President and
CEO. The salary of Mr. Thomann 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.
Mr. Thomann's participation in the Performance Plan was established at
a level intended to result in a payout (assuming 100% payout under the
Performance Plan) equal to 19.4% of the midpoint of his salary range. His bonus
beginning on April 16, 1996 was based 25% on the EBIT and cash flow results of
the Company, 25% on the EBIT and cash flow results of Goodyear's North American
Tire Division and 50% on the EBIT and cash flow results of total Goodyear.
Payouts under the Performance Plan could have ranged from zero to 150% of Mr.
Thomann'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 90.46% of his target level for the period April 16, 1996 through
December 31, 1996, resulting in his performance based compensation being equal
to 18.4% of his salary. This bonus was reimbursed to the Company by Goodyear.
Mr. Thomann was granted an option to purchase 3,000 shares of Goodyear
Common Stock on January 9, 1996 and 4,000 shares on December 3, 1996 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.
Stock options, however, are considered to be a part of Mr. Thomann's total
compensation package.
Effective April 16, 1996, William P. Brophey resigned his position as
President and CEO to accept a position with Goodyear as Vice President. Mr.
Brophey did not receive any salary adjustments in 1996 prior to his resignation.
His target bonus for 1996 was set at $9,918 of which 90.46% was earned. Mr.
Brophey was paid by the Company through April 30, 1996. On January 9, 1996 and
December 3, 1996, Mr. Brophey was granted options to purchase 3,000 shares and
4,000 shares, respectively, of Goodyear Common stock.
February 13, 1997 The Compensation Committee:
Eugene R. Culler, Jr. (Chairman)
Charles A. Bethel, Jr.
Richard D. Pearson
11
<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. Michael R. Thomann, Vice Chairman of the Board, President
and CEO, was formerly General Manager, Farm, Terra, and Off-the-Road Tires for
Goodyear and was employed by Goodyear for more than 20 years. Until November 1,
1994, William P. Brophey, former 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.
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 $59,078,000 of products and services, and the Company
sold to Goodyear approximately $7,713,000 of products and services during 1996.
The Company paid Goodyear $1,346,000 for rent on equipment and 46 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
1996, the Company paid approximately $437,000 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 1996 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, 1996, to Goodyear that may be renewable on December 31, 1997,
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
1996, the ratio exceeded 2.5:1, and the interest was fully waived.
12
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns of the
Company's Common Stock, The American Stock Exchange Market Value Index and the
Dow Jones Auto Parts Index at each December 31 for the five-year period
beginning December 31, 1991, and ended December 31, 1996.
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, 1991, with all dividends reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
BRAD RAGAN, INC., AMEX MARKET VALUE INDEX AND DJ AUTO PARTS INDEX
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Brad Ragan, Inc. 100 108 133 150 164 145
AMEX Market Value 100 101 121 110 139 148
DJ Auto Parts 100 129 160 136 170 192
</TABLE>
13
<PAGE> 15
CORPORATE GOVERNANCE
The Company's Board of Directors held six meetings during 1996. 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 1996.
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 1996.
The Nominating Committee consists of Messrs. Culler (Chairman),
Thomann, 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 1996.
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 1996.
The Litigation Committee consists of Messrs. Bethel (Chairman),
Thomann, Carr and Sorensen. This committee is responsible for monitoring any
matters of significant litigation that involve the Company. The committee did
not meet during 1996.
14
<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 respond any
questions related to 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 1996 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 1998 Annual Meeting must deliver the proposal to the Company at its
principal executive offices no later than November 30, 1997.
By Order of the Board of Directors
Ronald J. Carr
Secretary
Charlotte, North Carolina
April 14, 1997
15
<PAGE> 17
Exhibit "A"
BRAD RAGAN, INC.
PROXY
The undersigned shareholder of Brad Ragan, Inc., designates Eugene R. Culler,
Jr. and Michael R. Thomann, and either of them, agents to vote the shares of the
undersigned at the Annual Meeting of Shareholders, Thursday, May 22, 1997, at
11:30 A.M. and at any adjournment thereof, as follows:
(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, Jr., Michael R. Thomann, Ronald J. Carr,
James W. Barnett, 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:________________________________, 1997
(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
16
<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 22, 1997 at 11:30 A.M. in
the Holiday Inn Woodlawn, 212 Woodlawn 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.
