HILITE INDUSTRIES, INC.
1671 S. Broadway
Carrollton, Texas 75006
Notice of Annual Meeting of Stockholders
November 18, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
(the "Meeting") of HILITE INDUSTRIES, INC., a Delaware corporation
(the "Company"), will be held at the Courtyard by Marriott located
at 2930 Forest Lane, Dallas, Texas 75234, on November 18, 1998, 1:30
P.M., local time or any adjournment or any adjournments thereof, to
consider and act upon the following:
1. To elect six (6) directors of the Company to serve
as members of the Board of Directors until the next
Annual Meeting of Stockholders or until their
successors are elected and qualified; and
2. The transaction of such other business as may
properly come before the Meeting or any
adjournments thereof.
Only stockholders of record of the Common Stock, $.01 par value, of
the Company at the close of business on October 7, 1998 are entitled
to receive notice of and to attend the Meeting. Not less than 10
days prior to the Meeting, a complete list of the stockholders
entitled to vote will be available for inspection by any stockholder,
for any purpose germane to the Meeting, during ordinary business
hours, at the Courtyard by Marriott located at 2930 Forest Lane,
Dallas, Texas 75234. If you do not expect to be present, you are
requested to fill in, date and sign the enclosed Proxy, which is
solicited by the Board of Directors of the Company, and to mail it
promptly in the enclosed envelope. In the event you decide to attend
the Meeting in person, you may, if you desire, revoke your Proxy and
vote your shares in person.
Dated: October 9, 1998 By Order of the Board of Directors
Samuel M. Berry
President and Chief Operating Officer
IMPORTANT
The return of your signed Proxy as promptly as possible will greatly
facilitate arrangements for the Meeting. No postage is required if
the Proxy is returned in the envelope enclosed for your convenience
and mailed in the United States.
<PAGE>
HILITE INDUSTRIES, INC.
1671 South Broadway
Carrollton, Texas 75006
Proxy Statement
Annual Meeting of Stockholders
November 18, 1998
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Hilite Industries, Inc., a
Delaware corporation (the "Company"), to be voted at the Annual
Meeting of Stockholders of the Company (the "Meeting") which will be
held at the Courtyard by Marriott located at 2930 Forest Lane,
Dallas, Texas 75234 on November 18, 1998 at 1:30 P.M., local time,
and any adjournment or any adjournments thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders
and in this Proxy Statement.
The principal executive offices of the Company are located at 1671
South Broadway, Carrollton, Texas 75006. The approximate date on
which this Proxy Statement and accompanying Proxy will first be sent
or given to stockholders is October 16, 1998.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance
with the instructions contained therein and, in the absence of
specific instructions, will be voted in favor of all proposals and in
accordance with the judgment of the person or persons voting the
proxies on any other matter that may be brought before the Meeting.
Each such Proxy granted may be revoked at any time thereafter by
writing to the President of the Company prior to the Meeting, by
execution and delivery of a subsequent proxy or by attendance and
voting in person at the Meeting, except as to any matter or matters
upon which, prior to such revocation, a vote shall have been cast
pursuant to the authority conferred by such Proxy. The cost of
soliciting proxies will be borne by the Company. Following the
mailing of the proxy materials, solicitation of proxies may be made
by officers and employees of the Company, or anyone acting on their
behalf, by mail, telephone, telecopy, telegram or personal interview.
<PAGE>
VOTING SECURITIES
Stockholders of record as of the close of business on October 7, 1998
(the "Record Date") will be entitled to notice of, and to vote at,
the Meeting or any adjournments thereof. On the Record Date, there
were 4,900,000 outstanding shares of Common Stock, $.01 par value
("Common Stock"). Each holder of Common Stock is entitled to one
vote for each share held by such holder. By virtue of their holdings
of Common Stock, the officers and directors of the Company will be
able to pass the proposals being submitted at the Meeting. The
presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting. Proxies submitted which contain abstentions
or broker non-votes will be deemed present at the Meeting in
determining the presence of a quorum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 7, 1998, the ownership
of the Company's Common Stock by (i) each person who is known by the
Company to own of record or beneficially more than five percent (5%)
of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the executive officers named in the Summary
Compensation Table under "Executive Compensation" below and (iv) all
directors and officers as a group. Except as otherwise indicated, the
shareholders listed in the table have sole voting and investment
powers with respect to the shares indicated and their addresses are
the address of the Company.
Number of
Shares
Beneficially Percentage
Owned of Class
James E. Lineberger.................. 3,169,287 (1) 61.9%
James E. Lineberger, Jr. Trust....... 1,056,429 20.6
1120 Boston Post Road
Darien, Connecticut 06820
Geoffry S. Lineberger Trust.......... 1,056,429 20.6
1120 Boston Post Road
Darien, Connecticut 06820
Christopher Lineberger Trust......... 1,056,429 20.6
1120 Boston Post Road
Darien, Connecticut 06820
The Brady Family Limited Partnership. 358,143 7.0
Daniel. W. Brady..................... 358,143 (2) 7.0
Samuel M. Berry...................... 197,370 (3) 3.9
James D. Gerson...................... 57,000 (4) 1.1
Ronald G. Assaf...................... 45,000 *
Arthur D. Johnson.................... 26,200 (5) *
Donald M. Maher...................... 26,200 (5) *
Roy W. Wiegmann...................... 14,600 (6) *
John F. Creamer...................... 2,000 *
All officers and directors as a group 3,912,800 (7) 76.4
(9 persons)..........................
___________________
* Less than 1%
<PAGE>
1) Includes 1,056,429 shares of Common Stock owned by each of the
James E. Lineberger, Jr. Trust, the Geoffry S. Lineberger Trust
and the Christopher Lineberger Trust for which H.J. Lineberger,
Mr. Lineberger's wife, is a trustee and which may therefore be
deemed to be beneficially owned by Mr. Lineberger. Mr. Lineberger
disclaims beneficial ownership of these shares.
2) Held by The Brady Family Limited Partnership, of which Mr. Brady
is the sole general partner.
3) Includes 18,800 shares of Common Stock issuable upon the exercise
of options granted pursuant to the 1993 Stock Option Plan.
4) Includes 31,000 shares of Common Stock issuable upon the exercise
of warrants and 5,000 shares of Common Stock owned by Mr.
Gerson's wife, as custodian for their children, which may
therefore be deemed to be beneficially owned by Mr. Gerson. Mr.
Gerson disclaims beneficial ownership of these shares.
5) Includes 26,200 shares of Common Stock issuable upon the exercise
of options granted pursuant to the 1993 Stock Option Plan.
6) Includes 14,600 shares of Common Stock issuable upon the exercise
of options granted pursuant to the 1993 Stock Option Plan.
7) Includes 102,800 shares of Common Stock issuable upon the
exercise of options granted pursuant to the 1993 Stock Option
Plan.
<PAGE>
ACTION TO BE TAKEN AT THE MEETING
Proposal 1
ELECTION OF DIRECTORS
At the Meeting, six (6) directors are to be elected to serve until
the next Annual Meeting of Stockholders or until their successors
shall be duly elected and qualified. The number of nominees was
determined by the Board of Directors pursuant to the Company's By-
laws. The nominees are James E. Lineberger, Daniel W. Brady, Samuel
M. Berry, Ronald G. Assaf, James D. Gerson, and John F. Creamer.
Unless otherwise specified, all proxies will be voted in favor of
such nominees. All of the nominees were also elected at the 1997
Annual Meeting of Stockholders except for John F. Creamer who was
appointed to the Board of Directors in January 1998.
The Board of Directors has no reason to expect that any of the
nominees will be unable to stand for election at the date of the
Meeting. In the event that a vacancy among the original nominees
occurs prior to the Meeting, the proxies will be voted for a
substitute nominee or nominees named by the Board of Directors and
for the remaining nominees. Directors are elected by a plurality of
the votes cast.
The following table sets forth information about each executive
officer, director and nominee for director of the Company.
Name Age Position with the Company
James E. Lineberger. 61 Chairman of the Board of
Directors
Daniel W. Brady..... 59 Vice Chairman of the Board of
Directors and Chief Executive
Officer
Samuel M. Berry..... 61 President, Chief Operating
Officer and Director
Ronald G. Assaf..... 63 Director
James D. Gerson..... 55 Director
John F. Creamer..... 68 Director
Arthur D. Johnson... 57 Vice President-Operations
Donald M. Maher..... 51 Vice President-Sales and
Marketing
Ronald E. Reinke.... 55 Vice President-Engineering
Roy W. Wiegmann..... 37 Vice President and Chief
Financial Officer
Mr. Lineberger has been Chairman of the Board of Directors of the
Company since it was formed in 1986. He has been a partner of
Lineberger & Co., LLC and its predecessors, private investment firms,
since 1969. He has served as a director of Sensormatic Electronics
Corporation since 1968, Chairman of its Executive Committee since
1974 and as Co-Chief Executive Officer from January to July 1988.
<PAGE>
Mr. Brady has been an officer and/or director of the Company since it
was formed in 1986. He became Chief Executive Officer in 1992 and
currently devotes more than 50% of his time to the Company. In
addition, Mr. Brady has been affiliated with Lineberger & Co., LLC
since 1986 and acts as a consultant to and director of several
privately-held companies in which affiliates of Lineberger & Co., LLC
are controlling shareholders. During the last twenty years Mr. Brady
has been continuously associated with the automotive parts industry.
From 1986 to 1991 he served first as Chief Financial Officer and then
President of B&M Industries, Inc., an affiliate of Lineberger & Co.,
LLC. Prior thereto, he was Chief Financial Officer of D.A.B.
Industries from 1978 to 1985 when it was merged with J.P. Industries,
Inc. He then became Treasurer of J.P. Industries, Inc. from 1985 to
1986.
Mr. Berry has been with the Company and its predecessor operations
since 1974. He has served as director, President and Chief Operating
Officer of the Company since December 1986. He has served as
President since 1981 and previously as Vice President-Manufacturing
of the Company's predecessor operations. From 1959 through 1964, he
worked part-time for Pitts Industries, currently a division of the
Company.
Mr. Assaf has been a director of the Company since November 1993. He
is a founder of Sensormatic Electronics Corporation, has been its
Chairman of the Board of Directors since October 1971 and served as
its President and Chief Executive Officer since 1974 until his
retirement in August 1996. In August 1994, Mr. Assaf was appointed to
the Board of Directors of Computer Integration Corporation. On March
25, 1998, Mr. Assaf, without admitting or denying any wrongdoing,
consented to the entry of a civil order enjoining him from future
violations of certain record-keeping and periodic reporting
provisions of the federal securities laws and pursuant to which he
paid a civil money penalty of $50,000. In its complaint in this
civil action, the United States Securities and Exchange Commission
(SEC) alleged that Mr. Assaf knew of certain improper revenue
recognition practices by Sensormatic Electronics Corporation and knew
or generally was aware that quarterly earnings statements contained
in certain Sensormatic periodic reports and registration statements
filed with the SEC during the period from at least July 1, 1993
through July 10, 1995 were false and misleading.
Mr. Gerson has been a director of the Company since February 1994.
Mr. Gerson is currently the portfolio manager for Hudson Capital
Appreciation Fund, an affiliate of Fahnestock & Co. Inc. Mr. Gerson
also serves as a director of the following public companies: Ag
Services of America, Inc., a distributor of farm inputs; American
Power Conversion Corp., a manufacturer of uninterruptible power
supplies; Arguss Holdings Inc., a fiber and cable construction firm;
and Energy Research Corp., a developer of advanced power generation
systems.
<PAGE>
Mr. Creamer has been a director of the Company since January 1998.
Mr. Creamer was a director and vice chairman of the Board of
Directors of Echlin, Inc., an aftermarket and OE supplier in the
automotive industry from 1986 to 1998. Mr. Creamer also serves as a
director to R&B, Inc., a supplier of fasteners for the automotive
industry, since 1993 and Bonded Motors, a remanufacturer of car and
light truck engines, since 1996. He currently is the President and
owner of Distribution Marketing Services, Inc., a consulting firm to
the automotive aftermarket and President of the Automotive Warehouse
Distributors Association, a trade association for the automotive
aftermarket.
Mr. Johnson has been with the Company and its predecessor operations
since June 1968. He has been Vice President-Operations since January
1983. Previously, he served as an industrial engineer and then Plant
Manager of Pitts Industries, currently a division of the Company.
Mr. Maher has been with the Company and its predecessor operations
since June 1985. He has served as Vice President-Sales and Marketing
since July 1987. Between 1985 and 1987 he served in various
manufacturing capacities including Vice President-Operations.
Mr. Reinke has been employed by the Company since August 1988 in the
capacity of Vice President-Engineering. From October 1972 through
July 1988 he was employed by the Control Systems Division of
Borg-Warner in Decatur, Illinois where he served in various staff
positions including Engineering Manager.
Mr. Wiegmann has been employed by the Company since November 1992 as
Vice President and Chief Financial Officer. From August 1982 through
May 1988 he was a public accountant with the Dallas office of the
accounting firm of Deloitte Haskins and Sells (now known as Deloitte
and Touche). He served as Vice President and Chief Accounting Officer
of TM Communications, Inc. from June 1988 to January 1990. From
February 1990 through November 1992, he worked with Professional
Service Industries, a national engineering, inspection and testing
company, where he served as Assistant Corporate Controller.
Directors who are not employees of the Company are compensated at a
rate of $1,875 per quarter plus $1,000 per meeting and are reimbursed
for their expenses for attending meetings of the Board of Directors
and its committees.
Certain Information About the Board of Directors and Committees of
the Board
The Board of Directors is responsible for the management of the
Company. During the fiscal year ended June 30, 1998 the Board of
Directors of the Company held five meetings. No director attended
less than 80% of the meetings of the Board of Directors. The Board
has established an Audit Committee and a Compensation and Stock
Option Committee. There is no standing nominating committee.
<PAGE>
The functions of the Audit Committee include the nomination of
independent auditors for appointment by the Board; meeting with the
independent auditors to review and approve the scope of their audit
engagement; meeting with the Company's financial management and the
independent auditors to review matters relating to internal
accounting controls, the Company's accounting practices and
procedures and other matters relating to the financial condition of
the Company; and to report to the Board periodically with respect to
such matters. The Audit Committee currently consists of Messrs.
Gerson and Assaf. The Audit Committee held two formal meeting,
attended by all committee members, and had informal discussions from
time to time during the fiscal year ended June 30, 1998.
The function of the Compensation and Stock Option Committee is to
review and approve compensation for the five executive officers of
the Company and to administer the 1993 Stock Option Plan.
Compensation includes base salary, annual bonuses, life and
disability insurance, stock options in accordance with the Company's
stock option plan and participation in medical, dental and retirement
plans made available to all employees. The Compensation and Stock
Option Committee currently consists of Messrs. Gerson and Assaf. The
Compensation and Stock Option Committee held two formal meetings,
attended by all committee members, and met informally from time to
time during the fiscal year ended June 30, 1998.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation for the 1998
fiscal year, including bonuses, paid by the Company to the Chief
Executive Officer and the most highly compensated executive officers
with aggregate compensation which exceeds $100,000.
SUMMARY COMPENSATION TABLE
Name of Individual Annual Compensation
And Principal All Other
Position Year Salary Bonus Total Comp.(2)
Daniel W. Brady
Chief Executive 1996 $ 129,333 $ 95,000 $ 224,333 $ 26,001
Officer 1997 130,000 85,500 215,500 24,962
1998 139,464 90,000 (1) 229,464 21,672
Samuel M. Berry
President and 1996 156,000 115,000 265,000 27,441
Chief Operating 1997 157,200 103,500 260,700 24,408
Officer 1998 163,119 143,200 (1) 306,319 29,167
Arthur D. Johnson
Vice President 1996 104,217 35,000 139,217 8,566
Operations 1997 109,167 31,500 140,667 10,966
1998 110,750 40,900 (1) 151,650 16,008
Donald M. Maher
Vice President 1996 104,217 35,000 139,217 8,566
Sales and 1997 111,250 31,500 142,750 8,635
Marketing 1998 114,616 58,400 (1) 173,016 14,829
Roy Wiegmann
Chief Financial 1996 80,500 22,500 103,000 5,303
Officer 1997 87,412 22,500 109,912 5,699
1998 92,646 30,300 (1) 122,946 6,003
1) Bonuses for each year represent amounts paid in each fiscal year
that were earned in the prior fiscal year. These amounts do not
include bonuses earned and not yet paid during the year ended
June 30, 1998 of $135,000, $150,000, $36,050, $58,400, and
$25,750 for Messrs. Brady, Berry, Johnson, Maher and Wiegmann
respectively.
2) Amounts represent contributions made by the Company pursuant to
the Company's 401(k) plan during the fiscal year ended June 30,
1998 which were earned in 1996 and premium payments on life and
long-term disability insurance. These amounts do not include
contributions earned in 1997 and the first six months of 1998 and
not yet paid during the year ended June 30, 1998 of $15,267,
$22,097, $10,079, $11,621, and $7,326 for Messrs. Brady, Berry,
Johnson, Maher and Wiegmann, respectively. Also, included in this
category for Mr. Brady is a car expense reimbursement of $6,780
in 1998. See "Compensation Pursuant to Plans."
<PAGE>
Stock Option Plan
On November 15, 1993, the stockholders of the Company approved the
1993 Stock Option Plan (the "1993 Plan"), which was adopted by the
Board of Directors on November 15, 1993. An aggregate of 100,000
shares of Common Stock are reserved for issuance under the 1993 Plan
and an additional 25,000 shares were made available to the 1993 Plan
upon shareholder approval in November 1997. The 1993 Plan is
administered by a Compensation and Stock Option Committee (the
"Compensation and Stock Option Committee"), consisting of two members
of the Board of Directors, each of whom is a "non-employee director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended. Participation in the 1993 Plan is limited to
employees, officers and directors of the Company. Options granted
under the 1993 Plan may be either incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of 1996, as
amended ("the Code"), or non-qualified options.
There is no limitation on the aggregate number of shares as to which
a non-qualified option may be granted under the 1993 Plan. However,
the aggregate fair market value (determined as of the date of grant)
of shares of Common Stock for which any optionee may be granted
incentive stock options under the 1993 Plan which are exercisable for
the first time during any calendar year may not exceed $100,000 and
the maximum number of shares subject to options that may be granted
to any employer in a fiscal year may not exceed 100,000.
The 1993 Plan provides that the exercise price per share will be
determined by the Compensation and Stock Option Committee, but may
not be less than the fair market value of the Common Stock on the
date of grant. However, with respect to incentive stock options, if
an optionee owns (or is deemed to own under the Code and the
regulations thereunder) more than 10% of the total combined voting
power of all classes of stock of the Company, the exercise price may
not be less than 110% of the fair market value on the date of grant.
The exercise price of each option is payable in full upon exercise
or, if the applicable stock option contract evidencing the option
permits, in installments. Payment of the exercise price of an option
may be made in cash, or, if the applicable stock option contract
permits, in shares of Common Stock or any combination thereof.
<PAGE>
Subject to the foregoing and the other provisions of the 1993 Plan,
the Compensation and Stock Option Committee has the authority to
determine, among other things, the employees, officers and directors
who shall receive options, the terms of the options (provided,
however, that the term of an incentive stock option may not exceed
ten years or five years if the option holder owns, or is deemed to
own under the Code and the regulations thereunder, more than 10% of
the voting power of the Company), the exercise price of the shares of
Common Stock covered by each option, whether an incentive stock
option or non-qualified stock option will be granted, the time or
times at which options may be exercised, the number of shares to be
covered by each option, and, with respect to all options, to
prescribe, amend and rescind rules and regulations relating to the
1993 Plan, to construe the respective stock option contracts
evidencing options granted under the 1993 Plan and to make all other
determinations necessary or desirable for administering the 1993
Plan.
On November 15, 1993, the Compensation and Stock Option Committee
granted options to purchase 57,800 shares to thirteen employees, all
of which are currently exercisable and none of which have been
exercised. Of this grant, 9,400, 11,600, 11,600 and 5,800 options
were granted to Messrs. Berry, Johnson, Maher and Wiegmann,
respectively, as of January 24, 1994. The exercise price of each of
these options is $9.00.
On November 18, 1994, the Compensation and Stock Option Committee
granted options to purchase 12,000 shares to four employees. The
options became exercisable as to 4,000 shares on November 18, 1995,
4,000 shares on November 18, 1996 and 4,000 shares on November 18,
1997. Of this grant, 3,000 options were issued to each of Messrs.
Johnson, Maher and Wiegmann. The exercise price of these options is
$9.00.
On January 29, 1997, the Compensation and Stock Option Committee
granted options to purchase 50,400 shares to six employees. Of the
options granted, 30,200 shares became exercisable at the date of the
grant and 20,200 shares became exercisable upon shareholder approval
in November 1997. Of this grant, 9,400, 11,600, 11,600 and 5,800
options were granted to Messrs. Berry, Johnson, Maher and Wiegmann,
respectively. The exercise price of each of these options is $5.13.
Option Grants in Last Fiscal Year
No options were granted in the fiscal year ended June 30, 1998.
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
<PAGE>
No options were exercised by any directors or officers during the
fiscal year ended June 30, 1998. The following table contains
information concerning the number and value, at June 30, 1998, of
unexercised options held by Messrs. Berry, Johnson, Maher and
Wiegmann.
Number of Value of
Unexercised Unexercised In-
Options Held at the-Money Options
Fiscal Year-End Held at Fiscal
(Exercisable/ Year End
Name Unexercisable)
Samuel M. Berry 18,800/ 0 $ 65,800/$0
Arthur D. Johnson 26,200/ 0 $ 91,700/$0
Donald D. Maher 26,200/ 0 $ 91,700/$0
Roy Wiegmann 14,600/ 0 $ 51,100/$0
Long-Term Incentive Plan Awards in Last Fiscal Year
There were no long-term incentive plan awards by the Company during
the fiscal year ended June 30, 1998.
Compensation Pursuant to Plans
On January 1, 1987, the Company adopted a 401(k) retirement plan and
trust (the "401(k) Plan"), a tax qualified profit-sharing and salary
deferral plan covering all of its employees employed as of December
31, 1986, and all employees subsequently hired who have met certain
age and service requirements.
In accordance with the 401(k) Plan, individual accounts are
maintained for the cash contributions made on behalf of each 401(k)
Plan participant, and each such participant may choose from among
several options the manner in which contributions to his or her
account will be invested. There are two methods by which
contributions may be made to the 401(k) Plan. Under the first method,
each 401(k) Plan participant may elect to reduce his or her current
gross salary by up to the maximum amount allowable in accordance with
legal limitations restricting the voluntary contribution that may be
made by an employee during any given year. All amounts deferred under
the 401(k) Plan's salary reduction feature by a participant are fully
vested in the participant.
<PAGE>
The second method by which contributions may be made to the 401(k)
Plan is a "contribution" feature, pursuant to which the Company
contributes, on behalf of each 401(k) Plan participant, (i) 3% of the
participant's compensation for the Plan year up to but not exceeding
the participant's taxable wage base in effect at the beginning of the
401(k) Plan year plus, (ii) 6% of the participant's compensation in
excess of the taxable wage base in effect at the beginning of the
401(k) Plan year, with taxable wage base being defined as the maximum
amount of earnings which may be considered wages for social security
withholding purposes under the Internal Revenue Code of 1986, as
amended, for the full 401(k) Plan year. The maximum contribution
which may be made by the Company is also limited by applicable law.
Furthermore, the total annual contribution to the 401(k) Plan account
of any participant may not exceed 25% of the participant's
compensation for such year.
Benefits under the 401(k) Plan are payable at age 65 (normal
retirement), total disability, death, or upon early employment
termination. A participant's interest in his or her 401(k) account or
accounts are vested 20% per year over the first five years of
employment. Payments made under the 401(k) Plan are made, at the
election of the participant, in a lump sum, a fixed or variable
annuity, or by any other method as determined by the 401(k) Plan
administrator.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Stock Option Committee,
consisting of Messrs. Assaf and Gerson, deliberate on issues
concerning executive compensation. Mr. Lineberger, the Company's
Chairman of the Board, serves on the Board of Directors of
Sensormatic Electronics Corporation. Mr. Assaf is the Chairman of
the Board of Directors of Sensormatic Electronics Corporation and was
its President and CEO from 1994 through April 1996.
Employment Agreement
The Company is a party to an employment agreement (the "Agreement")
with Mr. Berry. The term of the Agreement commenced on January 30,
1998 and renews automatically each year unless terminated by either
the Company or Mr. Berry. The Agreement is terminable at will by Mr.
Berry. The Agreement provides that Mr. Berry shall serve as President
of the Company and that he will devote his full business time and
services to the performance of duties and responsibilities as are
consistent with his position.
As compensation for the services rendered by Mr. Berry as an
employee, he is entitled to receive a minimum base salary of $162,200
per annum. In addition, Mr. Berry is entitled to receive a bonus
based upon the success of the Company's operations and pre-tax
profits, as well as upon his performance as determined by the
Company's Board of Directors. Mr. Berry is eligible to participate
in executive bonus and/or incentive compensation arrangements as the
Company's Compensation Committee may establish from time to time.
<PAGE>
Performance Graph
The following graph compares the cumulative return to holders of the
Company's Common Stock for each month during the period between the
initial public offering, January 24, 1994, and the end of the fiscal
year, June 30, 1998, with the Standard & Poor's 400 Midcap Index and
the Standard & Poor's Midcap Autoparts Index for the same period.
The comparison assumes $100 was invested on January 1, 1994 in the
Company's Common Stock and in each of the comparison groups, and
assumes reinvestment of dividends. The Company paid quarterly
dividends of 2 / cents per share or $122,500 in November 1997,
February 1998, and May 1998.
January June June June June June
94 94 95 96 97 98
Hilite
Industries, Inc. 100 88 85.33 104 45.33 92.91
S&P Midcap 400
Index 100 90.59 110.83 134.75 166.18 211.31
S&P Midcap
Autoparts Index 100 78.22 69.33 60.60 72.94 86.52
<PAGE>
REPORT OF BOARD OF DIRECTORS CONCERNING EXECUTIVE COMPENSATION
Overview
Compensation determinations are made by the Compensation and Stock
Option Committee. The Company seeks to provide executive
compensation that will support the achievement of the Company's
financial goals while attracting and retaining talented executives
and rewarding superior performance.
The Company seeks to provide an overall level of compensation to the
Company's executives that is competitive within the Company's
industry and other companies of comparable size and complexity.
Compensation in any particular case may vary from any industry
average on the basis of annual and long-term Company performance as
well as individual performance. The Compensation and Stock Option
Committee will exercise its discretion to set compensation where in
its judgment external, internal or individual circumstances warrant
it.
In general, the Company compensates its executive officers through a
combination of base salary, annual incentive compensation, long-term
incentive compensation and life and long-term disability insurance
coverage not made available to all classes of employees. In
addition, executive officers participate in benefit plans, including
medical, dental, and retirement plans, that are available generally
to the Company's employees.
Elements of Compensation
The three principal components of the Company's executive
compensation program are salary, bonuses and stock options, each of
which is discussed in detail below.
Salary
Of the three primary elements of executive compensation at the
Company, salary is the least affected by the Company's performance;
although it is very much dependent on individual performance. The
Company believes that certain executive base levels of compensation
are low compared to industry norms; however, bonuses provide
supplemental amounts to achieve total compensation which is
considered competitive. The salary levels and annual increases of
all executive officers of the Company must be approved by the
Compensation and Stock Option Committee.
Salaries are reviewed every 12 months. The timing and amount of any
increase to salaried employees are both dependent upon (i) the
performance of the individual and, to a lesser extent, (ii) the
financial performance of the Company.
<PAGE>
In reviewing the performance of the Chief Executive Officer, the
Committee considers the scope and complexity of his job during the
past year, progress made in planning for the future development and
growth and return on assets of the Company. Mr. Brady's salary was
increased by 5.0% effective July 16, 1997. The performance of the
other executives is determined by progress made in the operational
and functional areas for which they are responsible as well as the
overall profitability of the Company.
Bonuses
The executive officers of the Company all participate in a bonus
program under which cash bonuses are paid annually, based upon the
overall performance of the Company and the Committee's evaluation of
each participant's contribution to such profitability. Due to the
success of the Company, total bonus pool payments to all
participating officers and executives have been between $400,000 and
$600,000 in each of the past three years. Approximately 35 employees
have participated in the bonus pool, including all of the executive
officers, in each of the past three years.
Stock Options
Stock options are designed to provide long-term incentives and
rewards tied to the price of the Company's common stock. Given the
vagaries of the stock market, stock price performance and financial
performance are not always consistent. The Compensation and Stock
Option Committee believes that stock options, which provide value to
the participants only when the Company's shareholders benefit from
stock price appreciation, are an appropriate complement to the
Company's performance-oriented bonus program. Amounts awarded under
the Company's stock option plan are based upon the participant's
organizational level and are designed to be competitive for
individuals at that level. The Compensation and Stock Option
Committee administers the 1993 Stock Option Plan and determines the
employees who participate and the number of options awarded.
Fourteen employees, including all of the executive officers,
participate in the 1993 Stock Option Plan. Stock options are issued
at an exercise price equal to 100% of the fair market value of the
Company's common stock at the date of grant. The options expire
after the earlier of ten years (five years for 10% holders) from the
date of grant or three months after termination of employment.
Compensation and Stock Option
Committee
Ronald G. Assaf, Chairman
James D. Gerson
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended June 30, 1998 and 1997, the Company
paid management fees of $283,750 and $235,000 to Lineberger & Co.,
LLC. Effective October 1, 1997 the Company and Lineberger & Co., LLC
entered into a one-year management agreement with an additional three
year renewal option upon mutual consent, which provides for annual
management fees of $300,000. The renewal agreement allows for the
management fee to be increased upon mutual agreement of the Company
and Lineberger & Co., LLC. Under the agreement, Lineberger & Co.,
LLC is to perform various management and consulting services for the
Company, including without limitation, preparation of an annual
business plan and projections, recruitment of senior management,
establishment and maintenance of various auditing, inventory and
production controls, assisting with the Company's financial
relationships and acquisitions and rendering general business and
administrative advice. See _Election of Directors._
<PAGE>
ACCOUNTANTS
PricewaterhouseCoopers LLP served as the Company's independent
accountants for the fiscal year ended June 30, 1998, and it is
expected that PricewaterhouseCoopers LLP will act in that capacity
for the fiscal year ending June 30, 1999. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Meeting
with the opportunity to make a statement if he desires to do so and
to be available to respond to appropriate questions from
shareholders.
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes cast at the Meeting
(Proposal 1). Abstentions and broker non-votes with respect to any
matter are not considered as votes cast with respect to that matter.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual
Meeting must be received by the Company for inclusion in its proxy
materials by July 15, 1999.
OTHER MATTERS
Management does not intend to bring before the Meeting any matters
other than those specifically described above and knows of no matters
other than the foregoing to come before the 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 or motions,
including any matters dealing with the conduct of the Meeting.
By Order of the Board of Directors
Samuel M. Berry
President and Chief Operating Officer
October 9, 1998
