SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 |_|
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|X| Preliminary Proxy Statement
|_| 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
HOMETOWN AUTO RETAILERS, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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2. Aggregate number of securities to which transaction applies:
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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):
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5. Total fee paid:
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|_| 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 number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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<PAGE>
HOMETOWN AUTO RETAILERS, INC.
Notice of Annual Meeting of Stockholders
To Be Held On August 29, 2000 at 10:00 A.M.
TO THE STOCKHOLDERS OF HOMETOWN AUTO RETAILERS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hometown
Auto Retailers, Inc. ("Hometown") will be held at the Sheraton Waterbury Hotel,
3580 East Main Street, Waterbury, Connecticut 06705, on Tuesday, August 29, 2000
at 10:00 A.M., Eastern Standard Time, for the following purposes:
1. To elect nine directors for one year terms.
2. To ratify the appointment of independent auditors for 2000.
3. To amend the certificate of incorporation to reduce the number of
authorized shares of Class A common stock, par value $.001 per
share, from 24,000,000 to 12,000,000.
4. To transact such other business as may properly be brought before
the meeting or any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on July 28, 2000 as
the record date for the determination of the stockholders entitled to notice of
and to vote at this meeting and at any adjournment or postponements thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Michael Shonborn, Secretary
Dated: Watertown, Connecticut
August 2, 2000
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IMPORTANT: Whether or not you expect to attend in person, please complete,
sign, date, and return the enclosed Proxy at your earliest
convenience. This will ensure the presence of a quorum at the
meeting. Promptly signing, dating, and returning the Proxy will save
Hometown the expense and extra work of additional solicitation. An
addressed envelope for which no postage is required has been
enclosed for that purpose. Sending in your Proxy will not prevent
you from voting your stock at the meeting if you desire to do so, as
your Proxy is revocable at your option.
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<PAGE>
HOMETOWN AUTO RETAILERS, INC.
---------------
PROXY STATEMENT
---------------
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 29, 2000
This Statement is furnished to the stockholders of Hometown Auto
Retailers, Inc., a Delaware corporation ("Hometown"), in connection with the
solicitation by the Board of Directors of proxies to be used at the 2000 Annual
Meeting of Stockholders of Hometown to be held at the Sheraton Waterbury Hotel,
3580 East Main Street, Waterbury Connecticut 06705, on Tuesday, August 29, 2000
at 10:00 A.M., Eastern Daylight Time, and at any adjournments thereof. The
approximate date on which this Statement and the accompanying proxy will be
mailed to stockholders is August 2, 2000.
THE VOTING & VOTE REQUIRED
On the record date for the meeting, the close of business on July 28, 2000
(the "Record Date"), there were outstanding 2,296,016 shares of Class A common
stock, par value $.001 per share, each of which will be entitled to one vote,
and there were outstanding 3,701,000 shares of Class B common stock, par value
$.001 per share, each of which will be entitled to ten votes. Shares represented
by each properly executed, unrevoked proxy received in time for the meeting will
be voted as specified.
Directors are elected by a plurality of the votes cast at the meeting.
Confirmation of the appointment of auditors is by the affirmative vote of a
majority of the votes cast at the meeting. In the case of election of directors,
shares represented by a proxy which are marked "WITHHOLD AUTHORITY" to vote for
all nine nominees will not be counted in determining whether a plurality vote
has been received for the election of directors. Approval of the proposed
amendment to the certificate of incorporation to reduce the number of authorized
shares of Class A common stock, par value $.001 per share, from 24,000,000 to
12,000,000 (the "Amendment") requires the affirmative vote of a majority of all
outstanding shares of common stock entitled to vote thereon.
All shares represented by valid proxies will be voted in accordance with
the instructions contained therein. A proxy may be revoked by the stockholder
giving the proxy at any time before it is voted by delivering oral or written
notice to the Secretary of Hometown at or prior to the meeting, and a prior
proxy is automatically revoked by a stockholder giving a subsequent proxy or
attending and voting at the meeting. Attendance at the meeting in and of itself
does not revoke a prior proxy. In the absence of instructions, proxies will be
voted for the Amendment. Shares voted by proxies which are marked "ABSTAIN" with
respect to the Amendment will have the effect of a vote against the amendment.
In instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned proxies (so called "broker
non-votes"), those shares will be disregarded and will have the effect of a vote
against the Amendment.
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1. ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
At this meeting nine directors are to be elected to serve for one-year
terms, each to hold office until his successor is duly elected and qualified. It
is not contemplated that any nominee will be unable to serve as a director, but
if such contingency should occur prior to the meeting, the persons named as
proxies in the enclosed proxy or their substitutes (the "Proxies") will have the
right to vote for substitute nominees. The Proxies were selected by the Board of
Directors of Hometown and with the exception of C. Michael Jacobi, are directors
and officers of Hometown. Certain information with respect to each nominee, as
well as directors continuing in office, is stated below.
Directors Nominated for One-Year Terms:
Salvatore A. Vergopia, age 60, has been Chairman of the Board since
October 1997 and was Chief Executive Officer from October 1997 to June 2000. In
addition, from 1992 to date, he has been President and for over 20 years prior
thereto, Vice President of Westwood Lincoln Mercury Sales Inc. Under his
management, Westwood has been a winner of numerous awards. In addition to his
responsibilities as a dealer, he has served on the Customer Dispute Settlement
Board for New Jersey and Connecticut and is a member and past Chairman of the
Ford Lincoln-Mercury NADA 20 Group. He holds a B.S. degree from Northern Arizona
University.
Corey Shaker, age 43, has been a Director since October 1997, President
since February 2000 and Chief Executive Officer since June 2000. Mr. Shaker had
been Vice President/Connecticut Operations from October 1997 to February 2000
and is in charge of Hometown's Company-wide sales training efforts. In addition,
from 1989 to February 2000, he was General Manager of Family Ford Inc. where he
was responsible for all aspects of its operations. He is a member of NADA Ford
F01 20 group. He was awarded the Lincoln Mercury Salesperson of the Nation award
in 1980 and is a three time winner of the Lincoln Mercury Inner Circle award. He
holds a B.S. in Business Administration from Providence College.
William C. Muller, Jr., age 48, has been a Director since October 1997 and
Regional Vice President since March 2000. Mr. Muller was Vice President/New
Jersey Operations from October 1997 until March 2000. In addition, from 1980 to
date, he has been the President of Muller Toyota, Inc. and of Muller Chevrolet,
Oldsmobile, Isuzu, Inc. Under his management, Muller Toyota has been a multiple
winner of various awards, including Toyota's Prestigious President's Award,
given to those dealers with superior levels of customer satisfaction who also
exceed capital standards and have high market penetration and facilities that
meet or exceed Toyota standards, Toyota's Parts Excellence Award, Toyota's
Service Excellence Award, and Toyota's Sales Excellence Award. He holds a B.A.
degree from Farleigh Dickinson University.
Edward A. Vergopia, age 30, has been a Director and Vice President/Fleet
Operations since October 1997. In addition, from 1988 to date, he has been
Executive Vice President of Westwood where, among other responsibilities, he
managed the Lincoln Mercury Division of Spoilers Plus (custom cars) and Westwood
Lincoln Mercury Limousine Department. During those periods, he also worked in
the Leasing, Financing and Parts and Service Departments of Westwood Lincoln
Mercury. He holds a B.B.A. from the University of Miami.
Joseph Shaker, age 32, a consultant of Hometown, has been a Director since
October 1997. Mr. Shaker served as President and Chief Operating Officer from
October 1997 until February 2000 and was in charge of Hometown's dealer
acquisition program. From February 2000 to present, Mr. Shaker has served as a
Consultant to Hometown and as the President and Chief Executive Officer of
CarDay Inc. In addition, from 1991 until 1998, he served as the Chief Operating
Officer of Shaker's Lincoln Mercury, Shaker's Jeep Eagle and Lincoln Mercury
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Autocare in Connecticut. He is a Member of the Executive Committee of the NADA
20 Group. He holds a B.S. degree in Management from Bentley College.
James Christ, age 44, has been a Director since October 1997 and has been
General Manager of Muller Toyota since February 1995 and Good Day Chevrolet
Oldsmobile Isuzu since November 1998. From March 1986 to November 1994, he was
Vice President and General Manager of Liberty Toyota, Inc. in Burlington, New
Jersey and from August 1989 to November 1994, he was Vice President of
Richardson Imports, Inc. a Lexus dealership, in Cherry Hill, New Jersey. Prior
thereto he had more than 5 years experience in managerial capacities at Toyota.
He holds a B.S. in Business Administration from West Chester University.
Domenic Colasacco, age 50, has been a Director since October 1997 and is
Chairman of the Board and President of United States Trust Company (USTC), a
Boston based firm specializing in trust and investment management services for
institutional and personal clients. Mr. Colasacco has been serving as the Chief
Investment Officer of USTC since 1980. From 1990 to March 1998, he was also a
director of UST Corp., the holding company for USTC and USTrust, a commercial
and retail bank in Greater Boston. He holds both a bachelors degree and an
M.B.A. from Babson College and is a Chartered Financial Analyst.
Louis I. Margolis, age 54, has been a Director since October 1997 and has
been a General Partner of Pine Street Associates, L.P., a private investment
partnership that invests in other private limited partnerships since January
1994. In January 1997, Mr. Margolis formed Chapel Hill Capital Corp., a
financial services company. He was the President and is sole shareholder of
Chapel Hill Capital Corp. From 1991 through 1993, he was a Member of the
Management Committee of Nomura Securities International. From 1993 through 1995,
he was Chairman of Classic Capital Inc., a registered investment advisor. Mr.
Margolis has been a member of the Financial Products Advisory Committee of the
Commodity Futures Trading Commission since its formation in 1986, a Trustee of
the Futures Industry Institute since 1991 and a Trustee of Saint Barnabas
Hospital in Livingston, New Jersey since 1994.
C. Michael Jacobi, age 58, a Director Nominee has been a business
consultant since August 1999. He has served on corporate boards in the U.S. and
in Europe and Asia. Currently, Mr. Jacobi is a member of the Board of Directors
and Chairman of the Audit Committee for Webster Financial Corporation, a $10
billion Connecticut based financial institution. He is also a member of the
Board of Directors of Century Electronics Manufacturing, a privately held
manufacturing company. From December 1993 through July 1999 he was the President
and Chief Executive Officer and a Director of Timex Corporation, a manufacturer
and marketer of watches. Prior to assuming those roles, Mr. Jacobi held
leadership positions in finance, operations and marketing at Timex. Before
joining Timex, he worked for KPMG. Mr. Jacobi is a Certified Public Accountant
and holds a B.S. degree in Accounting from the University of Connecticut.
Committees of the Board of Directors
During the last fiscal year Hometown's Board of Directors held 4 meetings.
Hometown's Board of Directors has established compensation and audit committees,
whose members are composed of two non-employee directors: Messrs. Colasacco and
Margolis. It is the intention of Hometown to appoint only independent directors
to the Audit and Compensation Committees
The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of Hometown, reviews
general policy matters relating to compensation and benefits of employees of
Hometown and administers the issuance of stock options and discretionary cash
bonuses to Hometown's officers, employees, directors and
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consultants. The Compensation Committee met one time in fiscal year 1999. The
report of the compensation committee appears below.
The Audit Committee meets with management and Hometown's independent
public accountants to determine the adequacy of internal controls and other
financial reporting matters. The Audit Committee met four times in fiscal year
1999. The Audit Committee approved the selection of Arthur Andersen LLP as
Hometown's independent auditors and met with the auditors to review the planned
scope and the results of the audit.
All directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of all committees of the Board on
which that director served.
The Board unanimously recommends a vote FOR the election of each of the
nominees.
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS,
OFFICERS AND PRINCIPAL HOLDERS
The following Summary Compensation Table sets forth all compensation
earned in all capacities, during the fiscal year ended December 31, 1999, 1998
and 1997 by (i) Hometown's Chief Executive Officer and (ii) the four most highly
compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the 1999 fiscal year and whose salary, exceeded
$100,000 (collectively, the "Name Executive Officers").
COMPENSATION TABLE
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<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------
Fiscal
Annual Year
Name and Principal Position Compensation Salary Bonus Other
--------------------------- ------------ ------ ----- -----
<S> <C> <C> <C> <C>
Salvatore A. Vergopia (6) 1999 $250,000
Chairman and Chief 1998 318,000(3) $380,000(1) $11,000 (2)
Executive Officer 1997 175,000
Corey Shaker (7)
Vice President of 1999 $200,000
Connecticut Operations 1998 163,000(3) $336,000(4)
1997 114,400 100,000(1)
William C. Muller, Jr. 1999 $200,000
Regional Vice President 1998 259,000(3) $52,000(2)
1997 259,000
Joseph Shaker (8) 1999 $200,000
President and Chief 1998 259,000(3) $336,000(4)
Operating Officer 1997 81,000 100,000(1) $1,000(2)
John Rudy (5) 1999 $208,000
Chief Financial Officer 1998 --0-- --0-- --0--
1997 --0-- --0-- --0--
</TABLE>
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(1) The amount shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.
(2) Perquisites - Consists of excess life insurance for Salvatore Vergopia
extra disability insurance on Joseph Shaker and life insurance on co-owner
for William C. Muller, Jr.
(3) Includes compensation paid by predecessor companies with respect to 1998.
(4) Reflects bonuses paid by predecessor companies for services rendered prior
to Hometown's initial public offering.
(5) In April 2000, resigned as Hometown's Chief Financial Officer and
terminated his employment agreement with Hometown.
(6) In June 2000, resigned from his position a Chief Executive Officer.
(7) In February 2000, promoted to the position of President and Chief
Operating Officer of Hometown. Subsequently, in June 2000, promoted from
Chief Operating Officer to Chief Executive Officer while continuing as
President.
(8) In February 2000, resigned from his position as President and Chief
Operating Officer of Hometown to assume the role of President and Chief
Executive Officer of CarDay.com. However, he continues to be of service to
Hometown as a consultant, and director on the Board of Directors of
Hometown.
Employment Agreements
In April 1998, Hometown entered into five-year employment agreements,
effective as of the closing of Hometown's initial public offering in July, 1998,
for the following Named Executive Officers: Chairman and Chief Executive
Officer; President and Chief Operating Officer; Vice President/New Jersey
Operations; Vice President/Connecticut Operations; and Chief Financial Officer.
Each agreement provides for an annual base salary of $200,000, except that the
agreement for the Chairman and Chief Executive Officer provides for an annual
base salary of $250,000. In February 2000, the Vice President Connecticut
Operations resigned his position and became President and Chief Operating
Officer, with the former President and Chief Operating Officer resigning. The
new President and Chief Operating Officer is compensated at an annual base
salary rate of $200,000 per year. Each agreement also provides for participation
by the employee in all executive benefit plans and, if employment is terminated
without cause (as defined in each agreement), payment of an amount equal to the
salary which would have been payable over the unexpired term of his employment
agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leases
Hometown has leased from various affiliates the premises occupied by
certain of its dealerships. Each of the governing leases became effective as of
the closing of the initial public offering, has a term expiring in 2013, is on a
triple net basis and provides for a consumer price index ("CPI") increase to the
base rent for the five-year periods commencing January 1, 2004 and 2009.
Hometown leases, for an initial annual base rental of $240,000, the
premises occupied by its Lincoln/Mercury dealership in Watertown, Connecticut
from Shaker Enterprises, a Connecticut general partnership whose seven partners
include Joseph Shaker, Corey Shaker, Steven Shaker and Janet Shaker. Corey
Shaker is President and Chief Executive Officer and a principal stockholder of
Hometown. Steven Shaker is Vice President-Parts and Service and a principal
stockholder of Hometown. Joseph Shaker is a Consultant, Director, and principal
stockholder to Hometown, and the President and Chief Executive Officer of CarDay
Inc. Janet Shaker is a principal stockholder of Hometown.
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Hometown leases, for an initial annual base rental of $360,000 and
$396,000 respectively the premises occupied by its Toyota dealership in Clinton,
New Jersey and its Chevrolet/Oldsmobile/Isuzu dealership in Stewartsville, New
Jersey from Rellum Realty Company, a New Jersey general partnership, one of
whose two partners is William C. Muller Jr. Mr. Muller is a Regional Vice
President, Director, and a principal stockholder of Hometown.
Hometown leases, for an initial annual base rental of $360,000 the
premises occupied by its Lincoln Mercury dealership in Emerson, New Jersey from
Salvatore A. Vergopia and his wife. Mr. Vergopia is Chairman of the Board of
Hometown.
Loans
All loans and advances from Hometown, in 1998 to the following
individuals, in the following amounts were paid off in March 1999. During 1998
Hometown: (a) lent $234,000 to Salvatore A. Vergopia, erasing the previous
amount due by that company to Salvatore A. Vergopia and increasing the amount
owed by Salvatore A. Vergopia to that company to $168,000; (b) advanced $21,000
to Salvatore A. Vergopia; and (c) received $66,000 from Edward A. Vergopia in
settlement of his loan. The loan due from Worldwide Financing Co. Ltd. ("WFC"),
$90,000, remained unchanged. The loans and advances due from Salvatore A.
Vergopia and WFC are each non-interest bearing. Salvatore A. Vergopia is
Chairman of the Board and a principal stockholder of Hometown. Edward A.
Vergopia is Vice President-Fleet Operations and a director and principal
stockholder of Hometown.
Guarantees
A Hometown is the guarantor of a $2,000,000 credit facility from SEC
Funding Corp. ("SFC") pursuant to which loans are made to third party purchasers
of limousines. As of December 31, 1999 loans outstanding under this credit line
were $37,000. SFC is a privately held corporation with all its shares owned by
Salvatore A. Vergopia and Edward A. Vergopia.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options/SARs
granted during fiscal 1999 to the named executives:
Individual Grants
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs Grant
Underlying Granted to Exercise or Date
Options/SARs Employees in Base Price Expiration Present
Name Granted Fiscal Year (S/Share) Date Value (1)
----------------------- ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Corey Shaker........ 30,000 75% $3.00 12/7/04 $0
Vice President of
Connecticut Operations
</TABLE>
----------
(1) The options vest with respect to one-third of the shares of Common Stock
covered by the options on December 8, 2000 (the "Initial Vesting Date")
and one-third will vest on each of the first and second anniversaries of
the Initial Vesting Date.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR END OPTION/SAR VALUES
The following table summarizes options and SARs exercised during fiscal
1998 and presents the value of unexercised options and SARs held by the named
executives at fiscal year end:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End
Acquired Value Exercisable (E) Exercisable (E)
Name on Exercise Realized Unexercisable (U) Unexercisable (U)
--------------------- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Corey Shaker 0 0 12,167 E
Vice President of 54,333 U
Connecticut Operations $16,875 U
William C. Muller, Jr. 0 0 6,666 E
Regional Vice President 13,334 U
Edward Vergopia 0 0 12,333 E
Vice President of Fleet 24,667 U
Operations
Salvatore A. Vergopia 0 0 1,000 E
Chairman and Chief 2,000 U
Executive Officer
James Christ 0 0 6,667 E
General Manager 13,333 U
Joseph Shaker 0 0 12,167 E
President and Chief 24,333 U
Operating Officer
</TABLE>
All shares, except for 30,000 options of Corey Shaker which vest ratably
through 2002, vest ratably through 2001. In general, the option agreements shall
be exercisable only so long as the optionee shall continue to be an employee of
Hometown and within the thirty day period after the date of termination of his
employment to the extent it was exercisable on the day prior to the date of
termination. In the event the Optionee is unable to continue his employment with
Hometown as a result of his total and permanent disability, he may, but only
within three (3) months from the date of disability, exercise the option to the
extent he was entitled to exercise it at the date of such disability. In the
event of death of the Optionee, the option may be exercised, at any time within
twelve (12) months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise this option by bequest or inheritance,
but only to the extent of the right that would have accrued had the Optionee
continued living one (1) month after the date of death, provided that at the
time of his death the Optionee is an employee of Hometown and shall have been in
Continuous Status (as defined in Hometown's Stock Option Plan) as an employee
from the date hereof; or within thirty (30) days after the termination of
Continuous Status as an employee, the option may be exercised, at any time
within three (3) months following the date of death, by the Optionee's estate or
by a person who acquired the right to exercise the
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Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
Each non-employee Director receives a fee of $1,000, for each meeting
attended in person and $250 for each meeting attended telephonically and
reimbursement for travel costs and other out-of-pocket expenses incurred in
attending each Directors' meeting. In addition, committee members receive $500
for each committee meeting attended in person, other than meeting directly
following or preceding Board meetings and $125 for each committee meeting
attended telephonically. Additionally, pursuant to the Plan, each non-employee
Director, receives options to purchase 5,000 shares of Common Stock exercisable
at the fair market value on the date of grant. These options will vest one-third
on the date of grant and one-third at the end of each subsequent year of service
on the Board. In addition, each non-employee Director receives options to
purchase an additional 2,500 shares of Common Stock on the date of Hometown's
annual stockholders' meeting. Such options will have an exercise price equal to
the fair market value of the Common Stock on the date of grant and will vest
one-third upon grant and one-third on each of the first and second anniversary
of the date of grant.
Report of the Compensation Committee on Executive Compensation
The primary purposes of the Compensation Committee are to establish and
maintain competitive, fair and equitable compensation practices designed to
attract and retain key management employees throughout the Corporation and to
establish appropriate incentives to motivate and reward key management employees
for achieving or exceeding established performance goals; and to oversee the
competency and qualifications of senior management personnel and the provisions
of senior management succession planning. The Compensation Committee is
responsible for a broad range of activities which include (i) recommending to
the full Board of Directors the salary(ies) of the Chairman of the Board, Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer after an
evaluation of market data, internal salary relationships as provided by the
Corporation's executive compensation professionals, and such other factors as
the Committee deems appropriate; (ii) recommending to the full Board of
Directors the salaries for other elected Corporate Officers and selected key
management employees after reviewing the recommendations made by the Chief
Executive Officer and the Chief Operating Officer; (iii) recommending to the
full Board of Directors the type of incentive plans, if any, which will be
offered to management employees; and (iv) administering the Corporation's 1998
Incentive Stock Option Plan, to include, after reviewing the recommendations of
the Chief Executive Officer and the Chief Operating Officer, determining the
employees to be eligible for plan participation.
Due to the existence of five year employment agreements between Hometown
and its key officers, which do not expire until July 2003, the scope of the
Compensation Committee's duties has been limited.
COMPENSATION COMMITTEE
Domenic Colasacco
Louis I. Margolis
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COMPANY PERFORMANCE
AND COMPARISON OF 2 YEAR CUMULATIVE TOTAL RETURN AMONG
HOMETOWN AUTO RETAILERS, INC., THE S&P 500 INDEX,
AND A PEER GROUP
The following graph shows a two year comparison of cumulative total
returns for Hometown, the S&P 500 composite index, and a Peer Group.
[PERFORMANCE GRAPH APPEARS HERE AND IS SUMMARIZED BELOW]
Company/ Index/ Market 07/29/1998 12/31/1998 12/31/1999
--------------------------------------------------------------------------------
Hometown Auto Retailers, Inc. 100 49.29 40.71
--------------------------------------------------------------------------------
New & Used Car Dealers(1) 100 102.76 65.26
--------------------------------------------------------------------------------
S&P Composite 100 110.41 113.64
(1) The Peer Group includes the following companies: AutoNation Inc.,
Circuit City CarMax, Inc., Group 1 Automotive, Inc., Lithia Motors Inc., Rush
Enterprises, Inc. Sonic Automotive Inc., and United Auto Group, Inc
PENSION PLAN
In October 1999, Hometown amended and restated the E.R.R. Enterprises,
Inc. Profit Sharing/401(k) Plan, (the "Amended Plan") into the HOMETOWN AUTO
RETAILERS, INC. 401K Plan (the "Plan") effective October 1, 1999, for the
benefit of eligible employees, as defined. Participants may make voluntary
contributions of up to 15% of their compensation, subject to certain IRS
limitations. Hometown may make annual matching contributions to the Plan at its
discretion. Contributions to be made by Hometown to the Plan are $48,000 for the
year ended December 31, 1999 and is included in accounts payable and accrued
expenses on Hometown's balance sheet as of December 31, 1999. Contributions
under the Amended Plan were $40,000, $33,000 and $24,000 in 1999, 1998 and 1997,
respectively. Corey Shaker and Joseph Shaker are the Trustees of the Plan.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2000, the shares of
Hometown's Common Stock owned beneficially by the present directors and nominees
of Hometown individually and by all present directors, nominees and executive
officers of Hometown as a group and by persons known to Hometown to own more
than five percent of the outstanding shares of the Common Stock of Hometown:
<TABLE>
<CAPTION>
% of
Common Stock % of Aggregate
Beneficially Owned(2) Outstanding voting
--------------------- Equity Power of all
Name of Beneficial Owner(1) Class A Class B Owned(3) Classes
--------------------------- ------- ------- ----------- ------------
<S> <C> <C> <C> <C>
Salvatore Vergopia (4) 2000 705,000 11.79 17.94
Corey Shaker (5) 37,333 265,080 5.04 6.83
William C. Muller, Jr. (6) 17,083 458,034 7.92 11.69
Edward Vergopia(11) 24,667 235,000 4.33 6.04
James Christ (7) 13,333 90,248 1.73 2.32
William C. Muller, Sr. (8) 0 315,786 5.26 8.03
Steven Shaker (10) 9,167 206,424 3.59 5.27
Joseph Shaker (9) 28,517 262,592 4.85 6.75
All Directors, Executive Officers,
and 5% Stockholder as a group
(8 persons) 132,100 2,538,164 44.51 64.87
</TABLE>
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(1) The respective addresses of the beneficial owners are: Salvatore A.
Vergopia and Edward A. Vergopia, c/o Westwood Lincoln Mercury, 55
Kinderkamack Road, Emerson, New Jersey 07630; Corey Shaker, 774 Straits
Turnpike, Watertown Connecticut 06795; William C. Muller, Jr., James
Christ and William C. Muller, Sr. c/o Muller Toyota, Inc., Route 31, PO
Box J, Clinton, New Jersey, 08809; Steven Shaker, c/o Family Ford, Inc.,
1200 Wolcott Street, Waterbury, Connecticut 06705 and Joseph Shaker, c/o
CarDay Inc., 245 Fifth Avenue, New York, New York.
(2) A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this proxy
statement upon the exercise of options and warrants or conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants and convertible securities
that are held by such person (but not held by any other person) and that
are exercisable or convertible within 60 days from the filing of this
proxy statement have been exercise or converted. Except as otherwise
indicated, and subject to applicable community property and similar laws,
each of the persons named has sole voting and investment power with
respect to the shares shown as beneficially owned. All percentages of
beneficial ownership are calculated based the number of shares outstanding
as of June 30, 2000, which includes 2,296,016 shares of Class A Common
Stock and 3,701,000 shares of Class B common stock.
(3) Percentages based on number of shares of all classes.
(4) Includes 225,600 shares owned by his wife Janet and an option to purchase
2,000 shares of Class A common stock, exercisable within 60 days from the
filing of this proxy statement at $9.00 per share.
(5) Includes (i) 15,980 shares held by the Edward Shaker Family Trust of which
he is the Trustee and a beneficiary, (ii) 13,000 shares of Class A common
stock, and (iii) and an option to purchase 24,333 shares of Class A common
stock, exercisable within 60 days from the filing of this proxy statement
at $9.00 per share.
(6) Includes 3,750 shares of Class A common stock and an option to purchase
13,333 shares of Class A common stock, exercisable within 60 days from the
filing of this proxy statement at $9.00 per share.
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(7) Includes an option to purchase 13,333 shares of Class A common stock,
exercisable within 60 days from the filing of this proxy statement at
$9.00 per share.
(8) All shares are owned by The William C. Muller Revocable Living Trust of
which the William C. Muller, Sr. is Trustee. William C. Muller, Sr. is
neither an officer nor director.
(9) Includes (i) 15,980 shares held by the Richard Shaker Family Trust of
which Mr. Shaker is the Trustee and a beneficiary, (ii) 40,000 share held
by the Sadie Shaker Irrevocable Trust of which Mr. Shaker is Trustee,
(iii) 4,184 shares of Class A common stock, and (iv) an option to purchase
24,333 shares of Class A common stock, exercisable within 60 days from the
filing of this proxy statement at $9.00 per share.
(10) Includes 2,500 shares of Class A common stock and an option to purchase
6,667 shares of Class A common stock, exercisable within 60 days from the
filing of this proxy statement at $9.00 per share.
(11) Includes an option to purchase 24,667 shares of Class A common stock,
exercisable within 60 days from the filing of this proxy statement at
$9.00 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Hometown's
officers and directors, and persons who own more than ten percent of a
registered class of Hometown's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish Hometown with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such forms furnished to Hometown,
or written representations that no Forms 5 were required, Hometown believes that
all Section 16(a) filing requirements applicable to its officers and directors
were complied with.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Directors propose that the stockholders ratify the appointment of
Arthur Andersen LLP as Hometown's independent auditors for 2000. Arthur Andersen
LLP has been Hometown's independent auditors since 1998. The report of Arthur
Andersen LLP with respect to Hometown's financial statements appears in
Hometown's annual report for the fiscal year ended December 31, 1999. A
representative of Arthur Andersen LLP will be at the annual meeting and will
have an opportunity to make a statement if she desires to do so and will be
available to respond to appropriate questions. In the event the stockholders
fail to ratify the appointment, the Directors will consider it a directive to
consider other auditors for a subsequent year.
The Board unanimously recommends a vote FOR the ratification of the appointment
of the Independent Auditors.
3. AMENDMENT TO THE CERTIFICATE OF INCORPORATION REDUCING THE NUMBER OF SHARES
OF HOMETOWN'S CLASS A COMMON STOCK AUTHORIZED
Hometown's certificate of incorporation, as amended, authorizes the
issuance of 24,000,000 shares of Class A common stock, par value $.001 per
share. As of June 30, 2000, only 2,296,016 shares of Class A common stock, par
value $.001 per share, were issued and outstanding. While Hometown intends to
use its equity securities in future financing and acquisition transactions,
Hometown believes that it can reduce the number of Class A authorized shares by
fifty percent and still be in a position to use its equity for these purposes
while significantly reducing Hometown's annual franchise tax due to the state of
Delaware.
The Board unanimously recommends a vote FOR the this proposal.
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MISCELLANEOUS
Stockholder Proposals
Stockholder proposals intended to be presented at Hometown's 2001 Annual
Meeting must be received by Hometown for inclusion in Hometown's proxy statement
relating to that meeting not later than December 31, 2000. Such proposals should
be addressed to Michael Shonborn, Secretary, Hometown Auto Retailers, Inc., 774
Straits Turnpike, Watertown, Connecticut, 06795.
Other Matters
The management knows of no other business which will be presented for
consideration at the Annual Meeting other than that stated in the notice of
meeting.
Solicitation Of Proxies
The cost of this proxy solicitation and any additional material relating
to the meeting which may be furnished to the stockholders will be borne by
Hometown. In addition, solicitation by telephone, telegraph or other means may
be made personally, without additional compensation, by officers, directors and
regular employees of Hometown. Hometown also will request brokers, dealers,
banks and voting trustees and their nominees holding shares of record but not
beneficially to forward proxy soliciting material to beneficial owners of such
shares, and Hometown, upon request, will reimburse them for their expenses in so
doing.
Reports And Financial Statements
Hometown's Annual Report for the year ended 1999, including Audited
Financial Statements is included with this proxy material. The Financial
Statements contained in the Annual Report are incorporated by reference and are
part of this soliciting material.
A copy of Hometown's Annual Report to the Securities and Exchange
Commission on Form 10-K, without exhibits, will be provided without charge to
any stockholder submitting a written request. Such request should be addressed
to Michael Shonborn, Secretary, Hometown Auto Retailers, Inc., 774 Straits
Turnpike, Watertown, Connecticut, 06795.
EVERY STOCKHOLDER, WHETHER OR NOT HE OR SHE EXPECTS TO ATTEND THE ANNUAL
MEETING IN PERSON, IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Michael Shonborn, Secretary
Dated: Watertown, Connecticut
August 2, 2000
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APPENDIX (FORM OF PROXY)
HOMETOWN AUTO RETAILERS, INC.
P R O X Y
FOR ANNUAL MEETING OF THE STOCKHOLDERS OF HOMETOWN AUTO RETAILERS,
INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Corey Shaker and Michael Shonborn, and
each of them, with full power of substitution, as proxies to vote the shares
which the undersigned is entitled to vote at the Annual Meeting of the
Stockholders of Hometown Auto Retailers, Inc. ("Hometown") to be held at the
Sheraton Waterbury Hotel, 3580 East Main Street, Waterbury, Connecticut 06705,
on Tuesday, August 29, 2000 at 10:00 A.M., Eastern Daylight Time and at any
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of Hometown held or owned by the undersigned as indicated
on the proposals as more fully set forth in the Proxy Statement, and in their
discretion upon such other matters as may come before the meeting. (Continued,
and to be signed, on the Reverse Side)
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FOLD HERE
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This proxy when properly signed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
--------------------------------------------------------------------------------
Please mark "X" your votes as indicated :
1. ELECTION OF DIRECTORS: Salvatore A. Vergopia, Corey Shaker, William C.
Muller, Jr., Edward A. Vergopia, Joseph Shaker, James Christ, Domenic Colasacco,
Louis I. Margolis and C. Michael Jacobi
FOR election of all nominees |_|
WITHHOLD vote from all nominees |_|
FOR all nominees, EXCEPT for nominee(s) listed below
from whom Vote is withheld. |_|
2. Confirmation of the appointment of Arthur Anderson LLP as auditors for the
Company for the year ending December 31, 2000.
FOR |_| AGAINST |_| ABSTAIN |_|
3. Amend the certificate of incorporation of the Company to reduce the number of
authorized shares of Class A common stock, par value $.001 per share, from
24,000,000 to 12,000,000.
FOR |_| AGAINST |_| ABSTAIN |_|
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
Dated: , 2000
______________________________________
Signature of Stockholder
______________________________________
Signature of Stockholder
IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
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