SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement (Revised)
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HI-LO AUTOMOTIVE, 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)(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:
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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:
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3. Filing Party:
4. Date Filed:
<PAGE>
PRELIMINARY
PROXY MATERIALS
[HI-LO AUTOMOTIVE, INC. LOGO]
HI-LO AUTOMOTIVE, INC.
2575 West Bellfort
Houston, Texas 77054
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Hi-Lo Automotive, Inc. on Tuesday, May 20, 1997. The meeting will be held at
the Sheraton Astrodome Hotel, 8686 Kirby Drive, Houston, Texas 77054, 9:00 a.m.,
Houston time.
As set forth in the accompanying Proxy Statement, the meeting will be held
for the following purposes:
1. To elect six directors to hold office until the next Annual Meeting of
Stockholders of the Company, or until their successors have been elected and
qualified.
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on March 25, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting or any adjournment thereof. A list of stockholders
will be available for examination at the Annual Meeting and at the office of the
Company for the ten days prior to the Annual Meeting.
By Order of the Board of Directors
/s/ K. Grant Hutchins
K. Grant Hutchins
Vice President and Secretary
Houston, Texas
April __, 1997
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE
ENCLOSED WHITE PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY, WHETHER OR NOT YOU
INTEND TO BE PRESENT AT THE ANNUAL MEETING. THE PROXY IS REVOCABLE AT ANY TIME
PRIOR TO ITS USE.
<PAGE>
HI-LO AUTOMOTIVE, INC.
2575 WEST BELLFORT
HOUSTON, TEXAS 77054
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
This Proxy Statement and the accompanying WHITE proxy card are furnished to
the stockholders of Hi-Lo Automotive, Inc., a Delaware corporation (the
"Company" or "Hi/LO"), IN CONNECTION WITH THE SOLICITATION BY AND ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY OF PROXIES FOR USE AT THE 1997 ANNUAL
MEETING OF STOCKHOLDERS OF THE COMPANY to be held on Tuesday, May 20, 1997 (the
"Annual Meeting"), at 9:00 a.m., Houston time, at the Sheraton Astrodome Hotel,
8686 Kirby Drive, Houston, Texas, and at any adjournment thereof. This Proxy
Statement and the accompanying proxy card are being first mailed to stockholders
on or about April __, 1997.
The execution and return of the enclosed WHITE proxy will not in any way
affect a stockholder's right to attend the Annual Meeting. Furthermore, a
stockholder may revoke his or her proxy at any time before it is exercised (a)
by filing with the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date, or (b) by appearing and voting in person at
the Annual Meeting. Unless otherwise marked, properly executed proxies in the
form of the accompanying WHITE proxy card will be voted FOR the election of
Richard C. Adkerson, Richard Q. Armstrong, Charles P. Durkin, Jr., E. James
Lowrey, Edward T. Story, Jr. and T. Michael Young, to the Companies' Board of
Directors. Each of these nominees has been recommended by the Nominating
Committee of the Board of Directors.
On March 25, 1997, the record date for determination of stockholders entitled
to notice of and to vote at the Annual Meeting, the Company had outstanding
10,775,109 shares of Common Stock. The holders of Common Stock are entitled to
one vote per share. The Common Stock is the only class of voting securities
outstanding. The presence at the meeting in person or by proxy of the holders of
a majority of the outstanding shares entitled to vote is necessary to constitute
a quorum.
1
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Company's bylaws, the Board of Directors currently consists
of six members. Six directors will be elected at the Annual Meeting to serve
until the next annual meeting and until their successors are elected and
qualified. Directors will be elected by the vote of the holders of a majority of
the shares of Common Stock present or represented by proxy and entitled to vote
at the Annual Meeting. Accordingly, under Delaware law, the Company's
Certificate of Incorporation and bylaws, abstentions have the same legal effect
as a vote against a particular director, but broker non-votes (which occur if a
broker or other nominee does not have discretionary authority and has not
received instructions with respect to the particular item) have no effect on the
election of directors. Unless otherwise indicated on the proxy, the persons
named as proxies in the enclosed proxy will vote in favor of the persons listed
below. In the event that six nominees do not receive a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting or any adjournment thereof, current directors for the unfilled seats
will retain their positions until a successor has been duly elected.
Each of the Company's nominees, Richard C. Adkerson, Richard Q. Armstrong,
Charles P. Durkin, Jr., E. James Lowrey, Edward T. Story, Jr. and T. Michael
Young, is now a director of the Company and was nominated by the Nominating
Committee. Although the Board of Directors has no reason to believe that any of
the nominees will be unable to serve, should any of the nominees become unable
to serve prior to the Annual Meeting, the proxies will be voted for the election
of such other persons as may be nominated by the Nominating Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED BELOW.
Set forth below is the name and certain information regarding each of the
Nominating Committee's six nominees for election as a director:
RICHARD C. ADKERSON, 50, has been a director of the Company since July 1993.
He is Executive Vice President, since August 1995, and Chief Financial Officer,
since December 1994, of Freeport-McMoRan Copper & Gold Inc., a publicly owned
company engaged in mineral exploration and mining, having previously served as
Senior Vice President since February 1994. Since August 1995, he has also served
in the positions of Vice Chairman and a member of the Board of Directors of
Freeport-McMoRan Inc. ("Freeport-McMoRan"), a publicly owned natural resource
company. Previously, he was Senior Vice President and Chief Financial Officer of
Freeport-McMoRan, having held this position since May 1993. He joined
Freeport-McMoRan as a Vice President in April 1989. In addition, since its
creation in May 1993, he has served as Chairman of the Board and since August
1995, Chief Executive Officer of FM Properties Inc., a publicly owned company
engaged in the development and operation of real estate properties in Texas.
Since its creation in April 1994, he has served as Co-Chairman of the Board and
Chief Executive Officer of McMoRan Oil & Gas Co., a publicly owned company
engaged in oil and gas exploration.
RICHARD Q. ARMSTRONG, 61, has been a director of the Company since July 1991.
He is the principal of RQA Enterprises, an independent marketing consulting
firm. From October 1993 to March 1995, Mr. Armstrong served as Chairman and
Chief Executive Officer of Adirondack Beverages, a leading independent soft
drink manufacturer and distributor in the northeastern United States. From
December 1992 to October 1993, he was a principal of The New England Consulting
Group, a management consulting firm. From April 1991 to December 1992, he was
principal of RQA Enterprises. Mr. Armstrong is also a director or trustee of six
investment companies for which PaineWebber Incorporated, or its wholly owned
subsidiary, Mitchell Hutchins Asset Management, Inc., serves as investment
advisor.
CHARLES P. DURKIN, JR., 58, has been a director of the Company since January
1988. Mr. Durkin is a Managing Director of Dillon, Read & Co. Inc., an
investment banking firm, where he has been employed since 1966. Mr. Durkin is a
director of Viking Office Products, Inc. and CapMAC Holdings Inc.
E. JAMES LOWREY, 69, has been a director of the Company since February 1995.
He retired as Executive Vice President-Finance and Administration and as a
director of SYSCO Corporation on December 31, 1993. He was an executive officer
of SYSCO Corporation, which is engaged in the marketing and distribution of food
and related products, for over 20 years and served as a director for over 12
years. Mr. Lowrey is a Distinguished Tenure Director of SYSCO, which is a
non-voting position. He is also a director of Riviana Foods Inc. and The Profit
Recovery Group International, Inc.
2
<PAGE>
EDWARD T. STORY, JR., 53, has been a director of the Company since January
1988. Mr. Story has been President and Chief Executive Officer, since its
formation in August 1991, of SOCO International, Inc., a majority-owned
subsidiary of Snyder Oil Corporation, which is engaged in international oil and
gas operations. Mr. Story is a director of Snyder Oil Corporation, First Banks
America, Inc., and Hallwood Realty Corporation, general partner of Hallwood
Realty MLP.
T. MICHAEL YOUNG, 52, has been a director and the President and Chief
Executive Officer since October 1987. In March 1992, he was elected to the
additional position of Chairman of the Board. Mr. Young is a director of
AllWaste, Inc.
Pursuant to the Company's bylaws, the Company was notified by a stockholder,
Michael A. Ward, that he intends to nominate Kwang-chou Hwang, a 64 year-old
retiree and former senior engineering specialist who most recently has managed
real estate and securities investments and is the managing partner of the Hwang
Family Ltd. Partnership of Irving, Texas (the "Hwang Partnership"), for a
director position at the Annual Meeting. The Company was notified by the Hwang
Partnership, also a stockholder of the Company, that it in turn intends to
nominate Mr. Ward, a 44 year-old partner in Coastal Securities Corp. of Houston,
Texas and Fred J. Hwang, the 32 year-old son of Mr. Kwang-chou Hwang, who is
currently a partner in North Hills Anesthesiology Associates of Hurst, Texas.
For a description of the beneficial ownership of the Hwang Partnership and Mr.
Ward, see "Security Ownership of Certain Beneficial Owners" below. The Company
expects the Hwang Partnership and Mr. Ward or their agents will solicit your
vote for their proposed nominees, in which event they will be required to
provide you with detailed information about their proposed nominees and related
matters. The Board of Directors of the Company recommends that stockholders
reject these nominees and vote for the nominees who have been selected by the
Nominating Committee by completing and returning the enclosed WHITE proxy card.
DIRECTORS AND COMMITTEES
ATTENDANCE AND FEES
The Company's Board of Directors held six meetings in 1996. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and the committees on which he served.
All non-employee directors of the Company are entitled to receive an annual
retainer of $12,000, paid quarterly in arrears, and are reimbursed for ordinary
and necessary expenses incurred in attending Board or committee meetings. Each
committee chairman also receives an additional annual retainer of $500, and each
director receives a $1,000 meeting fee for each Board meeting attended and a
$300 meeting fee for each committee meeting attended. Directors also receive a
$500 meeting fee for each Board meeting, and a $150 meeting fee for each
committee meeting, held by telephonic communication. In addition, each
non-employee director of the Company received a one-time initial grant of a
non-qualified option to purchase 5,000 shares of Common Stock pursuant to the
Company's 1990 Stock Option Plan and receives annual non-qualified options under
the 1990 Stock Option Plan. The annual options, granted on the date of each
annual meeting of stockholders, are for a number of shares of the Company's
Common Stock determined by dividing 1.5 times the director's annual retainer by
the fair market value of the Common Stock on the date of option grant, and
rounding upward to the nearest 50 shares, with the option exercise price being
equal to that fair market value.
The table below sets forth the compensation received by each non-employee
director for service as a director in 1996.
NON-EMPLOYEE DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
CASH COMPENSATION STOCK OPTION GRANTS
----------------------------- ------------------
ANNUAL AGGREGATE
NAME AND PRINCIPAL RETAINER MEETING CASH
POSITION FEE($) FEES($) COMPENSATION($) NUMBER OF SHARES(1)
------ ----- ------ -----
<S> <C> <C> <C> <C>
Richard C. Adkerson ...................... 12,500 5,150 17,650 3,350
Chairman, Audit Committee
Richard Q. Armstrong ..................... 12,000 6,350 18,350 3,350
Audit Committee
Compensation Committee
Charles P. Durkin, Jr. (2) ............... 6,250 3,300 9,550 0
Chairman, Compensation Committee
Nominating Committee
E. James Lowrey .......................... 12,000 6,050 18,050 3,350
Audit Committee
Nominating Committee
Edward T. Story, Jr ...................... 12,500 5,000 17,500 3,350
Chairman, Nominating Committee
Compensation Committee
</TABLE>
(1)Includes, with respect to Messrs. Adkerson, Armstrong, Lowrey and Story an
annual option grant on May 14, 1996, at an exercise price of $5.4375. See
Note (2) below for information regarding compensation to Mr. Durkin.
(2)In accordance with the policy of Dillon, Read & Co. Inc., until August 1996,
Mr. Durkin received no cash compensation or stock options from the Company
for his service as a director other than reimbursement of his expenses.
3
<PAGE>
COMMITTEES
The Board of Directors has established the following standing committees:
AUDIT COMMITTEE. The Audit Committee annually reviews and recommends to
the full Board of Directors the firm to be engaged to audit the accounts of
the Company and its subsidiaries. Additionally, the Audit Committee reviews
with such independent auditors the plan and results of the auditing
engagement and the scope and results of the Company's procedures for internal
auditing, inquires as to the adequacy of internal accounting controls, and
considers the independence of the auditors. During 1996, the Audit Committee
held two meetings. The Audit Committee is currently comprised of three
directors: Richard C. Adkerson (Chairman), Richard Q. Armstrong and E. James
Lowrey.
COMPENSATION COMMITTEE. The Compensation Committee's responsibility is to
approve the compensation arrangements for senior management of the Company,
including establishment of salaries and bonuses and other compensation for
executive officers of the Company; approve any compensation plans in which
officers and directors of the Company are eligible to participate, and
administer such plans, including the granting of stock options or other
benefits under any such plans; and review significant issues that relate to
changes in benefit plans. The Compensation Committee held four meetings
(including one by written consent) in 1996. The Compensation Committee is
currently comprised of three directors: Charles P. Durkin, Jr. (Chairman),
Richard Q. Armstrong, and Edward T. Story, Jr.
NOMINATING COMMITTEE. The Nominating Committee recommends to the full
Board of Directors nominees for election to the Board; makes recommendations
regarding responsibilities, memberships and coordination of the committees of
the Board; and recommends to the full Board a successor to the chief
executive officer when a vacancy occurs. The Nominating Committee held two
meetings in 1996. The Nominating Committee is currently comprised of three
directors: Edward T. Story, Jr. (Chairman), Charles P. Durkin, Jr., and E.
James Lowrey.
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth the ownership of the Company's Common Stock, as of
March 21, 1997, by (i) each of the Company's directors and nominees to become a
director, (ii) each executive officer named in the Summary Compensation Table
included under "Information About Executive Officers--Compensation of Executive
Officers," and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the persons listed below have sole voting
power and investment power over the shares beneficially held by them.
SHARES OWNED BENEFICIALLY
NAME NUMBER PERCENT
---- ------- -------
Richard C. Adkerson(1).......... 16,900 *
Richard Q. Armstrong(1)......... 8,600 *
Charles P. Durkin, Jr........... 15,782 *
E. James Lowrey(1).............. 18,500 *
Edward T. Story, Jr.(1)......... 15,100 *
T. Michael Young(1)(2).......... 387,029 3.6
Daniel T. Bucaro(1)............. 14,984 *
K. Grant Hutchins(1)............ 67,623 *
Conley P. Kyle(1)(3)............ 20,586 *
Gary D. Walther(1)(4)........... 66,327 *
All directors and executive
officers as a group
(11 persons)(1)............... 652,579 5.9
- -----------
* Less than 1%
(1)Includes shares issuable upon exercise of stock options exercisable within 60
days as follows: Mr. Adkerson-10,900; Mr. Armstrong-8,100; Mr. Lowrey-8,500;
Mr. Story-8,100; Mr. Young-76,320; Mr.Bucaro-13,080; Mr. Hutchins-59,593; Mr.
Kyle-17,220; Mr. Walther-64,553; and all directors and executive officers as
a group-287,026.
(2)Mr. Young disclaims ownership of 1,250 of these shares, which are owned by
his adult son.
(3)Mr. Kyle disclaims ownership of 25 of these shares, which are owned by his
adult son.
(4)Mr. Walther is custodian of 1,774 of these shares for his daughter and his
son under the Texas Uniform Gift to Minors Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person
known by the Company to own beneficially more than 5% of the outstanding shares
of the Company's Common Stock.
SHARES OWNED
BENEFICIALLY
----------------
NAME NUMBER PERCENT(1)
---- -------- -------
Dimensional Fund Advisors Inc.(2)...... 702,156 6.5
Franklin Advisory Services, Inc.(3).... 1,067,700 9.9
Hwang Family Ltd. Partnership group(4). 1,437,350 13.3
- ---------------
(1)Based on the 10,775,109 shares outstanding on the record date for the Annual
Meeting.
(2)The information is based on a Schedule 13G, dated February 12, 1997, filed
with the Securities and Exchange Commission by Franklin Resources, Inc.
("Franklin"), Franklin Advisory Services, Inc. ("Franklin Advisory"), and two
principal shareholders of Franklin. The shares are beneficially owned by one
or more open or closed-end investment companies or managed accounts that are
advised by direct and indirect investment advisory subsidiaries of Franklin.
Franklin Advisory has sole voting and dispositive power with respect to all
such shares. The address of Franklin is 777 Mariners Island Blvd., San Mateo,
CA 94404.
(3)The information is based on a Schedule 13G dated February 5, 1997, filed with
the Securities and Exchange Commission by Dimensional Fund Advisors Inc.
("Dimensional"), a registered investment advisor, which is deemed to have
beneficial ownership of all of such shares as of December 31, 1996. All of
such 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 serves as investment manager. Dimensional,
which has sole voting power with respect to 478,200 of such shares and sole
dispositive power with respect to all of such shares, disclaims beneficial
ownership of all such shares. The address of Dimensional is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401.
(4)The information is based on Amendment No. 5 to a Schedule 13D, dated April 1,
1997, filed with the Securities and Exchange Commission by Hwang Family Ltd.
Partnership whose address is 2432 Keyhole Dr., Irving, TX 75062. According to
such filing, the Hwang Family Ltd. Partnership group consists of the Hwang
Partnership (1,051,950 shares), Larry D. Smith (331,600 shares), Fred J.
Hwang (48,000 shares) and Michael A. Ward (5,000 shares), each of whom
reports to have sole voting and dispositive power with respect to its own
shares.
4
<PAGE>
INFORMATION ABOUT EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following table sets forth certain information about the executive
officers of the Company:
NAME AGE POSITION
T. Michael Young.............. 52 Director, Chairman of the Board,
President and Chief Executive
Officer
Daniel T. Bucaro.............. 36 Vice President--Merchandising
Edward P. Fabritiis........... 52 Vice President--Human Resources
K. Grant Hutchins............. 54 Vice President, General Counsel and
Secretary
Conley P. Kyle................ 46 Vice President--Store Operations
Gary D. Walther............... 41 Vice President--Finance, Chief
Financial Officer and Treasurer
T. MICHAEL YOUNG--see "ELECTION OF DIRECTORS" above.
DANIEL T. BUCARO was elected Vice President--Merchandising in May 1996. He
joined Hi/LO in August 1994 as Commercial Sales and Marketing Manager. Before
joining Hi/LO he had over ten years of service with Goodyear Tire and Rubber
Company, most recently as Manager of Associate Brands.
EDWARD P. FABRITIIS joined Hi/LO in July 1991 as Manager--Human Resources and
was elected Vice President--Human Resources in May 1993.
K. GRANT HUTCHINS joined the Company in September 1990 as Vice President,
General Counsel and Secretary.
CONLEY P. KYLE joined Hi/LO in May 1991 as Retail Sales Manager. He was
promoted to Division Manager in January 1993 and was elected Vice
President--Store Operations in August 1995.
GARY D. WALTHER joined the Company in October 1990 as Vice
President--Finance, Chief Financial Officer and Treasurer.
The Company's executive officers are elected annually and serve at the
discretion of the Board of Directors.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The table below sets forth the compensation paid or accrued for services
rendered in all capacities to the Company during the last three fiscal years to
the Company's Chief Executive Officer and each of the Company's other most
highly compensated executive officers (the "Named Executives") who earned more
than $100,000 in salary and bonus compensation in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ ------------------------------
AWARDS PAYOUT
------------------- --------
RESTRICTED ALL OTHER
STOCK OPTIONS LTP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) AWARDS($) (#) PAYOUTS($) ($)(2)
- ------------------------------------------- ---- ------- ------- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
T. Michael Young, Chairman of ............. 1996 316,300 0 -- -- -- 1,750
the Board, President and Chief ........ 1995 316,300 0 -- 55,400 -- 3,855
Executive Officer ..................... 1994 295,342 147,671 -- 39,200 -- 4,657
Daniel T. Bucaro, Vice .................... 1996 102,788 10,944(4) -- 10,000 -- 1,497
President--Merchandising(3)
K. Grant Hutchins, Vice President, ........ 1996 148,500 0 -- -- -- 2,264
General Counsel and Secretary ......... 1995 148,500 0 -- 22,300 -- 3,813
1994 138,708 69,354 -- 15,800 -- 3,792
Conley P. Kyle, Vice President- ........... 1996 120,000 3,885(6) -- -- -- 1,265
Store Operations(5)
Gary D. Walther, Vice President-- ......... 1996 146,000 0 -- -- -- 2,228
Finance, Chief Financial Officer ...... 1995 146,000 0 -- 21,900 -- 3,741
and Treasurer ......................... 1994 134,125 67,063 -- 15,200 -- 3,656
</TABLE>
(1) Includes portion of salary deferred under the Company's Profit Sharing Plan.
(2) Represents the aggregate value of the Company's contributions during each
year under the Company's Profit Sharing Plan.
(3) Mr. Bucaro was elected Vice President-Merchandising on May 14, 1996.
(4) Performance bonus paid to Mr. Bucaro in March 1996.
(5) Mr. Kyle was elected Vice President-Store Operations on August 16, 1995.
(6) Cash bonus for winning special achievement award.
The following table contains information concerning the grant of a stock
option under the Company's 1990 Stock Option Plan to Mr. Daniel T. Bucaro, who
is the only Named Executive to receive a stock option grant in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------ VALUE AT ASSUMED
% OF TOTAL OPTIONS EXERCISE ANNUAL RATE OF STOCK
GRANTED TO EMPLOYEES PRICE PRICE APPRECIATION FOR
OPTIONS IN FISCAL PER EXPIRATION OPTION TERM(2)
NAME GRANTED(1) YEAR SHARE DATE 5% 10%
- ----------------- ---------- ------------------------- --------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel T. Bucaro 10,000 16.0% $5.4375 11/14/01 $16,758 $37,575
</TABLE>
(1) The options were granted on May 14, 1996, and expire 5 1/2 years from the
date of grant.
(2) The potential realizable value reflects price appreciation above the stock
option exercise price of $5.4375 per share. On March 21, 1997, the closing
per share price of the Company's stock on the New York Stock Exchange was
$3.375.
6
<PAGE>
The table below sets forth the aggregate option exercises during the last
fiscal year and the value of outstanding options at year end held by the Named
Executives.
AGGREGATED OPTION EXERCISES DURING 1996
AND OPTION VALUES AT YEAR END
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
YEAR END(#) YEAR END($)(*)
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
----------------- ----------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
T. Michael Young -- -- 63,920 / 53,480 0 / 0
Daniel T. Bucaro -- -- 11,080 / 16,620 0 / 0
K. Grant Hutchins -- -- 54,293 / 21,840 0 / 0
Conley P. Kyle -- -- 15,720 / 13,280 0 / 0
Gary D. Walther -- -- 59,453 / 21,280 0 / 0
</TABLE>
* Based on the difference between the closing sale price of the Common Stock
of $2.50 on December 31, 1996 (the last trading day of 1996), and the
exercise price.
The Company's 1990 Stock Option Plan provides that, upon a change of control,
the Compensation Committee may accelerate the vesting of options, cancel options
and make payments in respect thereof in cash in accordance with the Stock Option
Plan, adjust the outstanding options as appropriate to reflect such change of
control, or provide that each option shall thereafter be exercisable for the
number and class of securities or property that the optionee would have been
entitled to had the option already been exercised. The Stock Option Plan
provides that a change of control occurs if any person, entity or group acquires
or gains ownership or control of more than 50% of the outstanding Common Stock
or, if after certain enumerated transactions, the persons who were directors
before such transaction cease to constitute a majority of the Board of
Directors.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
In 1995 the Company entered into Change of Control Employment Agreements with
each of its executive officers, including Messrs. Young, Bucaro, Hutchins, Kyle
and Walther, which provide that from and after a "Change of Control" (as defined
therein) until the second anniversary of the effective date of the Change of
Control, if (i) Hi/LO terminates employment of the executive officer for any
reason other than for "Cause" (as defined therein), death or disability, (ii)
the executive officer terminates employment for "Good Reason" (as defined
therein), or (iii) the executive officer terminates employment after the first
anniversary for any reason or no reason, such executive officer will be entitled
to a payment equal to two years' base salary (two and one-half years' base
salary, in the case of Mr. Young), continued health coverage for one year from
the date of termination or through the end of the second anniversary of the
Effective Date of the Change of Control, whichever is longer, and the extension
of certain rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"). The Change of Control Employment Agreements also
provide that for a two-year period following termination of employment of the
executive officer, the executive officer (x) will not act in any manner or
capacity in or for any business entity that competes with the Company, (y) will
not divulge any confidential information of the Company to a third party, and
(z) will not solicit or hire away any person who was an employee of the Company
on the Effective Date of the Change of Control. For purposes of the Change of
Control Employeement Agreements, a Change of Control occurs if (i) Hi/LO is not
the surviving entity in any merger or consolidation (or survives only as a
subsidiary of an entity other than a previously wholly-owned subsidiary of
Hi/LO), (ii) Hi/LO sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets to any other person or entity
(other than a wholly-owned subsidiary of Hi/LO), (iii) Hi/LO is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (other than Saratoga Partners, L.P., Dillon, Read & Co. Inc.,
or any of their respective affiliates) acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of capital stock of Hi/LO, or (v) as a result of or in
connection with any cash tender or exchange offer, merger or other business
combination, sales of assets or a contested election for the Board of Directors,
or any combination
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of the foregoing transactions (a "Transaction"), the persons who were directors
of Hi/LO before such Transaction cease to constitute a majority of the Board.
Election of the proposed director nominees of the Hwang Partnership and Mr. Ward
would constitute a Change of Control for purposes of these agreements.
The Company and Dirk A. Hoyt entered into a Consulting and Severance
Agreement on February 28, 1996, when Mr. Hoyt resigned as an executive officer
of the Company, which provides that Mr. Hoyt would render consultant services to
the Company, at such times as are mutually agreeable, in consideration for (a)
an initial payment to Mr. Hoyt of $15,000, (b) the payment to Mr. Hoyt of a
semi-monthly consulting fee of $7,558 during the Consultation Period (as defined
in the agreement), (c) continued participation in the Company's group insurance
plans during the Consultation Period, and (d) continuation of the stock options
previously granted to Mr. Hoyt until 90 days after expiration of the
Consultation Period. The Consultation Period expired on February 28, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing the Company's compensation philosophy for executive officers,
approving and administering the Company's incentive and benefit plans,
monitoring the performance and compensation of executive officers and other key
employees, and setting compensation and making awards under the Company's
incentive plans that are consistent with the Company's compensation philosophy
and the performance of the Company and its executive officers. Total
compensation for the Company's Chief Executive Officer is based upon the same
factors and determined in the same manner as the Company's other executive
officers.
The Company's executive compensation program consists of three principal
elements: (1) base salary, (2) the Company's Incentive Cash Bonus Plan, which
provides for cash bonuses based on overall Company performance, as well as
individual performance, and (3) the Company's Stock Option Plan, which provides
long-term incentives that are intended to align the interests of executive
officers with those of stockholders. The Incentive Cash Bonus Plan and the Stock
Option Plan constitute the performance-based portion of total compensation.
BASE SALARY: Historically, the Compensation Committee has established base
salary levels of the Chief Executive Officer and other executive officers after
review of published executive compensation salary survey data of other companies
having annual sales or revenues similar in size to the Company, with particular
emphasis given to those engaged in retail or headquartered in the same
geographic area as the Company. By reviewing such salary survey data, the
Compensation Committee has tried to ensure that the base salaries established by
the Compensation Committee are generally within the middle range of base
salaries paid by those companies included in the salary survey for equivalent
executive positions. The base salary established for each executive officer also
takes into account the executive's particular experience and level of
responsibility. Base salaries of the executive officers are reviewed annually,
with adjustments made based on the salary data reviewed, increases in the cost
of living, job performance of the executive officer, the expansion of duties and
responsibilities, if any, of the executive officer, and the Company's financial
performance. In view of the Company's financial results in 1995 and anticipated
results in 1996, no salary increases were awarded to the Chief Executive Officer
and the other Named Executives in 1996, except with respect to Mr. Bucaro, who
received a salary increase at the time he was elected Vice
President-Merchandising in May 1996.
INCENTIVE CASH BONUSES: The Incentive Cash Bonus Plan was established in 1989
by the Board of Directors to enable executive officers and other key employees
of the Company to earn annual cash bonuses, based upon the Company attaining
earnings targets for the particular year as established by the Compensation
Committee. Both a minimum target necessary to be achieved before any bonus is
paid, and a maximum target necessary to be achieved for a maximum bonus award,
are established after review and consideration of the Company's Business Plan
for the particular year.
Prior to 1996, each year the Compensation Committee established a performance
target, with earnings per share used as the basis of measurement for the
performance target. If the performance target was met, there was an incentive
opportunity at the executive officer level of 50% of base salary. A maximum
bonus at the executive officer level of up to 80% of base salary was available
if earnings performance exceeded the performance target by a certain percentage,
and the potential for a lesser bonus if earnings performance did not meet the
performance target but came within a certain percentage of that target. Those
percentage levels were established each year by the Compensation Committee. Due
to anticipated financial results of the Company for 1996, no performance targets
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were established under the Incentive Cash Bonus Plan for 1996 for executive
officers, and no incentive cash bonuses were paid under the Incentive Cash Bonus
Plan to executive officers for 1996.
STOCK OPTIONS: The long-term incentive portion of the Company's executive
compensation program is administered through the Company's Stock Option Plan,
established in 1990 by the Board of Directors to provide a means by which
certain employees of the Company, including executive officers, could develop an
economic interest in the financial success of the Company through ownership in
the Company's Common Stock. The exercise price of each option granted under the
Stock Option Plan is equal to the fair market value of the shares subject to the
option on the date of the option grant. Appreciation in value of the stock
option is entirely dependent on the market performance of the Company's Common
Stock. In December 1992, the Compensation Committee made the determination that,
commencing in 1993, stock option grants would be awarded annually to the Chief
Executive Officer, other executive officers, and other key employees, in order
to ensure that the Company's long-term incentives better matched the Company's
long-term results and to enhance recipients' desire to remain with the Company
and devote their best efforts to its business. The Compensation Committee has
adopted option grant guidelines, which provide that the number of option shares
to be awarded each year are to be determined by dividing the market price of the
Company's Common Stock at the time of grant into a percentage of the optionee's
annualized base salary, as adjusted for the job performance of the optionee. The
guidelines, which were adopted in 1993, are based on the recommendations of the
compensation and employee benefits consulting firm of William M. Mercer,
Incorporated, which was engaged by the Compensation Committee in 1993 to review
the Company's executive compensation program and to advise the Compensation
Committee on whether any changes were needed to ensure that the Company's
executive compensation program remained competitive and appropriately related
executive compensation to the Company's performance.
The percent of salary guidelines adopted by the Compensation Committee are
140% of base salary for the Chief Executive Officer, 120% of base salary for
other executive officers, 70% of base salary for non-officer senior management,
and 40% of base salary for other key employees. The Compensation Committee has
retained the flexibility to make adjustments upward by as much as one-half of
the guideline and downward to zero, depending on individual job performance.
In 1996, no stock options were granted to executive officers of the Company
other than options for 10,000 shares granted to Mr. Bucaro, at the time he was
elected Vice President-Merchandising. See "Compensation of Executive
Officers-Option Grants in Last Fiscal Year." On April 1, 1997, stock options
were granted at an exercise price of $3.4375 per share to each of the Named
Executives as follows: Mr. Young-50,000; Mr. Bucaro-40,000; Mr. Hutchins-30,000;
Mr. Kyle-40,000; and Mr. Walther-30,000.
OTHER MATTERS: The Omnibus Budget Reconciliation Act of 1993 (the "Act")
imposes a limit of $1 million, with certain exceptions, on the amount that a
publicly held corporation may deduct in any year for the compensation paid or
accrued with respect to each of its five most highly compensated officers. None
of the Company's executive officers currently receives compensation exceeding
the limits imposed by the Act. While the Compensation Committee cannot predict
with certainty how the Company's executive compensation might be affected in the
future by the Act or applicable tax regulations issued thereunder, the
Compensation Committee intends to try to preserve the tax deductibility of all
executive compensation, while maintaining the Company's executive compensation
program as described in this report.
COMPENSATION COMMITTEE
Charles P. Durkin, Jr. (Chairman)
Richard Q. Armstrong
Edward T. Story, Jr.
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COMPARATIVE STOCK PERFORMANCE
The Performance Graph shown below compares the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of the Standard & Poor's 500 Index and
the Dow Jones OTS-Other Specialty Retailers Industry Group. The comparison of
total return (change in year end stock price plus reinvested dividends) for each
of the periods shown in the Performance Graph assumes that $100 was invested on
January 1, 1992, in each of Hi/LO, the Standard & Poor's 500 Index and the Dow
Jones OTS-Other Specialty Retailers Industry Group.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1992 1993 1994 1995 1996
--- --- --- --- ---
HILO AUTOMOTIVE .............. 149 72 72 38 18
S & P 500 INDEX .............. 108 119 120 165 203
PEER GROUP INDEX ............. 128 141 131 132 149
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
STOCKHOLDERS MAY PROPOSE MATTERS TO BE PRESENTED AT STOCKHOLDERS' MEETINGS
AND MAY ALSO NOMINATE PERSONS TO BE DIRECTORS, SUBJECT TO THE FORMAL PROCEDURES
THAT HAVE BEEN ESTABLISHED.
PROPOSALS FOR 1998 ANNUAL MEETING
Pursuant to rules promulgated by the Securities and Exchange Commission, any
proposals of holders of Common Stock of the Company intended to be presented at
the Annual Meeting of Stockholders of the Company to be held in 1998 and
included in the Company's proxy statement and form of proxy relating to that
meeting, must be received by the Company, addressed to K. Grant Hutchins, Vice
President and Secretary, 2575 West Bellfort, Houston, Texas 77054, no later than
December __, 1997. Such proposals must be in conformity with all applicable
legal provisions, including Rule 14a-8 of the General Rules and Regulations
under the Securities and Exchange Act of 1934, as amended.
In addition to the Securities and Exchange Commission rules described in the
preceding paragraph, the Company's bylaws provide that for business to be
properly brought before any annual meeting of stockholders, it must be either
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a stockholder of the Company who is a
stockholder of record
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at the time of giving of the required notice described below, who shall be
entitled to vote at such meeting, and who complies with the following notice
procedures. For business to be brought before an annual meeting by a stockholder
of the Company, the stockholder must have given timely notice in writing of the
business to be brought before such annual meeting to the Secretary of the
Company. TO BE TIMELY FOR THE 1998 ANNUAL MEETING, A STOCKHOLDER'S NOTICE MUST
BE DELIVERED TO OR MAILED AND RECEIVED AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICES, 2575 WEST BELLFORT, HOUSTON, TEXAS 77054, ON OR BEFORE FEBRUARY 18,
1998. A stockholder's notice to the Secretary must set forth as to each matter
the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business, (c) the class and the number of shares of voting stock of the
Company which are owned beneficially by the stockholder, (d) a representation
that the stockholder intends to appear in person or by proxy at the annual
meeting to bring the proposed business before the meeting, and (e) a description
of any material interest of the stockholder in such business. A stockholder must
also comply with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with respect to the
matters set forth in the foregoing bylaw provisions.
NOMINATIONS FOR 1998 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Pursuant to the Company's bylaws, only persons who are nominated in
accordance with the following procedures are eligible for election as directors.
Nominations of persons for election to the Company's Board of Directors may be
made at a meeting of stockholders only (a) by or at the direction of the Board
of Directors or (b) by any stockholder of the Company who is a stockholder of
record at the time of giving of the required notice described below, who shall
be entitled to vote for the election of directors at the meeting, and who
complies with the following notice procedures. All nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Company. TO BE TIMELY, A
STOCKHOLDER'S NOTICE SHALL BE DELIVERED TO OR MAILED AND RECEIVED AT THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES, 2575 WEST BELLFORT, HOUSTON, TEXAS 77054,
(I) WITH RESPECT TO AN ELECTION TO BE HELD AT THE 1998 ANNUAL MEETING OF
STOCKHOLDERS ON OR BEFORE FEBRUARY 18, 1998, AND (II) WITH RESPECT TO ANY
ELECTION TO BE HELD AT A SPECIAL MEETING OF STOCKHOLDERS, NOT LATER THAN THE
CLOSE OF BUSINESS ON THE 10TH DAY FOLLOWING THE DAY ON WHICH NOTICE OF THE DATE
OF THE SPECIAL MEETING WAS MAILED OR PUBLIC DISCLOSURE OF THE DATE OF THE
MEETING WAS MADE, WHICHEVER FIRST OCCURS. A stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, all information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors, or is otherwise required, pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including the written
consent of such person to be named in the proxy statement as a nominee and to
serve as a director if elected); and (b) as to the stockholder giving the notice
(i) the name and address, as they appear on the Company's books, of such
stockholder, and (ii) the class and number of shares of capital stock of the
Company which are beneficially owned by the stockholder. In the event a person
who is validly designated as a nominee to the Board shall thereafter become
unable or unwilling to stand for election to the Board of Directors, the Board
of Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee. A stockholder must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
the foregoing bylaw provisions.
COMPLIANCE
The Company believes that, during 1996, its directors and officers complied
with all filing requirements under Section 16(a) of the Securities Exchange Act
of 1934.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have been the principal
independent auditors for the Company since October 1987. The Company expects
that they will continue as the Company's principal independent auditors.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, with the opportunity to make a statement if they desire to do so and to
respond to appropriate questions from stockholders.
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GENERAL
The Board of Directors does not know of any other business expected to be
presented for consideration at the Annual Meeting. The Hwang Partnership
submitted a proposal pursuant to the Company's bylaws but has since informed
the Company that it was withdrawing its proposal. Should any matters not
described in this Proxy Statement properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote such proxy
in accordance with their judgment on such matters.
The cost of soliciting proxies on behalf of the Board of Directors will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by the directors, officers and employees of the Company, without
additional compensation, by personal interview, special letter, telephone,
telegram or otherwise. Brokerage firms and other custodians, nominees and
fiduciaries who hold the voting securities of record will be requested to
forward solicitation materials to the beneficial owners thereof and will be
reimbursed by the Company for their expenses. The Company has retained the
services of Corporate Investor Communications, Inc. to assist in the
solicitation of proxies either in person or by mail, telephone or telegram, at
an estimated cost of $10,000, plus expenses.
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended December 31, 1996, is being mailed herewith.
A copy of the 1996 Annual Report on Form 10-K as filed with the Securities
and Exchange Commission may be obtained, without charge, by writing the Company,
Hi-Lo Automotive, Inc., 2575 West Bellfort, Houston, Texas 77054, Attention:
Investor Relations.
By order of the Board of Directors
/s/ K. Grant Hutchins
K. Grant Hutchins, Secretary
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HI-LO AUTOMOTIVE, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD TUESDAY, MAY 20, 1997 THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints T. Michael Young, K. Grant
Hutchins, Gary D. Walther, and each of them, attorneys and proxies, with full
power of substitution, to vote as proxy all the shares of Common Stock standing
in the name of the undersigned at the Annual Meeting of Stockholders of Hi-Lo
Automotive, Inc. (the "Company") to be held at the Sheraton Astrodome Hotel,
8686 Kirby Drive, Houston, Texas, at 9:00 A.M., Houston time, on Tuesday, May
20, 1997, and at any adjournment(s) thereof, in accordance with the instructions
below, and with discretionary authority with respect to such other matters as
may properly come before said meeting or any adjournment(s) thereof. Receipt of
the Company's notice of the meeting and proxy statement related to the 1997
Annual Meeting, is hereby acknowledged.
The undersigned hereby revokes any proxies heretofore given and directs said
attorneys to act or vote as follows:
(PLEASE DATE AND SIGN ON REVERSE SIDE)
<PAGE>
1. ELECTION OF DIRECTORS NOMINEES: RICHARD C. ADKERSON, RICHARD Q. ARMSTRONG,
CHARLES P. DURKIN, JR., E. JAMES LOWREY,
EDWARD T. STORY, JR., T. MICHAEL YOUNG
[ ]FOR all nominees listed
to the right (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
(except as marked to FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
contrary) NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
---------------------------------------------
[ ]WITHHOLD
AUTHORITY
to vote for all nominees
listed to the right
This proxy is solicited by the Board of Directors and will be voted in
accordance with the stockholder's specifications hereon. In the absence of such
specifications, the proxy will be voted FOR each nominee for director listed.
Dated ______________ , 1997 ______________________________
Signature of Stockholders(s)*
*Please sign exactly as name appears on this proxy. Joint owners each should
sign. If held by a corporation or partnership, please sign in the full corporate
or partnership name, by an authorized corporate officer or, if a partnership, by
an authorized person. When signing as an authorized officer or person, attorney,
trustee, administrator, executor, etc., please indicate your full title as such.
PLEASE MARK, DATE, SIGN AND RETURN YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS PROXY.
