<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TRAK AUTO CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
TRAK AUTO CORPORATION
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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 registrations statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
- - ---------------
(1)Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
[TRAK AUTO LOGO]
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 1994
The Annual Meeting of Stockholders of Trak Auto Corporation, a Delaware
corporation (the "Corporation"), will be held on June 24, 1994 at 1:45 p.m. at
the Marriott Courtyard, 8330 Corporate Drive, Landover, MD for the following
purposes:
1. To elect seven directors as set forth in the accompanying Proxy
Statement.
2. To ratify the selection of the firm Arthur Andersen & Co. as auditors
for the fiscal year ending January 28, 1995.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on May 12, 1994 will
be entitled to notice of and to vote at the meeting. The list of stockholders
entitled to vote at the meeting shall be open to the examination of any
stockholder during the ten days prior to the meeting at the Corporation's
offices, 3300 75th Avenue, Landover, Maryland, during normal business hours.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND MAIL YOUR PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF
YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors
Herbert H. Haft
Chairman of the Board
June 1, 1994
<PAGE> 3
TRAK AUTO CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1994
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Trak Auto Corporation, a Delaware
corporation (the "Corporation"), for use at the 1994 annual meeting of
stockholders to be held on June 24, 1994 at 1:45 p.m. at the Marriott Courtyard,
8330 Corporate Drive, Landover, MD and at any adjournments thereof (the
"Meeting").
Record holders of the Corporation's common stock, par value $.01 per share
(the "Shares"), at the close of business on May 12, 1994 are entitled to notice
of, and to vote at, the Meeting. On May 12, 1994, there were outstanding
6,053,818 Shares. Each stockholder will be entitled to one vote for each Share
held at the close of business on May 12, 1994.
The Shares represented by valid proxies received by the Corporation in time
for the Meeting will be voted as specified in such proxies. Any stockholder
giving a proxy has the right to revoke it at any time before it is exercised by
attending the Meeting and voting in person or by filing with the Secretary of
the Corporation an instrument of revocation or duly executed proxy bearing a
later date.
This Proxy Statement, and the accompanying notice of the Meeting and proxy
form, are first being sent or given to stockholders on or about June 1, 1994.
The mailing address of the Corporation's principal executive offices is
3300 75th Avenue, Landover, Maryland 20785, Attention: Elliot R. Arditti, Esq.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Corporation
concerning the ownership of 5% or more of the Shares as of the record date. The
voting and investment powers of the Shares are held solely by the reported owner
unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NAME AND ADDRESS NATURE CLASS (1)
- - -------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Dart Group Corporation (2).......................................... 3,962,245 65.5
3300 75th Avenue
Landover, MD 20785
Heartland Advisors, Inc. (3)........................................ 601,803 9.9
790 N. Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors Inc. (4).................................. 331,300 5.5
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- - ---------------
(1) Based on total shares outstanding at May 12, 1994.
<PAGE> 4
(2) Herbert H. Haft holds sole voting power with respect to 57.02% of the Class
B Common Stock of Dart Group Corporation ("Dart"), the only class of voting
stock of Dart, pursuant to an irrevocable proxy from Ronald S. Haft, the
record owner of such Dart Class B Common Stock. As such, Herbert H. Haft has
indirect voting and investment power with respect to the Shares of the
Corporation owned by Dart. The remaining shares of Dart Class B Common Stock
are owned by Ronald S. Haft, Gloria G. Haft, Linda G. Haft, and Robert M.
Haft. See "Certain Events" for a description of certain transactions between
Herbert H. Haft and Ronald S. Haft involving Dart Class B Common Stock.
(3) Based on the holdings reported on the most recent Schedule 13G filed by
Heartland Advisors, Inc., an investment advisor registered under the
Investment Advisors Act of 1940 ("Heartland"), on February 10, 1994. These
Shares include 300,000 Shares (representing 4.6% of the Shares outstanding)
as to which Heartland has sole voting power. Heartland has sole dispositive
power for 601,803 Shares.
(4) Based on holdings reported on Schedule 13G filed by Dimensional Fund
Advisors Inc., an investment advisor registered under the Investment
Advisors Act of 1940 ("DFA"), on February 9, 1994. DFA has sole voting power
with respect to 226,100 Shares (representing 3.7% of the Shares
outstanding). Persons who are officers of DFA also serve as officers of DFA
Investment Dimensions Group Inc. (the "Fund") and Investment Trust Company
(the "Trust"). In their capacities as officers of the Fund and Trust, these
persons vote 94,800 Shares (representing 1.6% of the Shares outstanding)
owned by the Fund and 10,400 Shares (representing .2% of the Shares
outstanding) owned by the Trust. DFA has sole dispositive power with respect
to 331,300 Shares.
CERTAIN EVENTS
On July 28, 1993, Herbert H. Haft sold 172,730 shares of Dart Class B
Common Stock to Ronald S. Haft for the purchase price of $80.00 per share, and
Ronald S. Haft granted to Herbert H. Haft an irrevocable proxy to vote those
shares until his death or incapacity. Such shares represent 57.0% of the
outstanding Dart Class B Common Stock, which is the only class of voting stock
of Dart; Dart, in turn, owns 65.5% of the Shares of the Corporation. The total
acquisition price for these shares was $13,818,400, of which $2,763,680 was paid
at closing from personal savings; the remaining $11,054,720 was paid for with a
promissory note bearing interest at 6.6%, the applicable federal rate, as
announced in the Federal Register on July 28, 1993, with the principal amount
and any accrued and unpaid interest due and payable on August 1, 2013.
Pursuant to an employment agreement dated August 1, 1993, between Dart and
Ronald S. Haft, Ronald S. Haft acquired for $5.00 per share options (the
"Options") to purchase 197,048 shares of Dart's Class B Common Stock. The total
acquisition price for the Options was $985,240. The source of funds for the
acquisition was personal savings.
The exercise price of the Options is $89.65 per share. The Options were
immediately exercisable as of the date of the Agreement, and expire August 1,
2008. The Options may be exercised by notice to Dart, with payment in cash
following within 30 days of the notice. Further, if Ronald S. Haft's employment
is terminated other than for conviction of an offense involving moral turpitude
or for conviction of a felony, he will have the right to exercise all of the
Options prior to or at such time; in the event of his death, his personal
representative shall have the right to exercise the Options within 60 days
thereof.
Under the Agreement, Dart also agreed to loan to Ronald S. Haft the full
amount of the exercise price of any Options which he may exercise. Any such loan
is to bear interest at the prime rate charges
2
<PAGE> 5
as of the date of the loan by NationsBank or its successor. Principal and
interest on any such loan is to be due separately upon the earlier of (i) the
sale of shares of Dart Class B Common Stock purchased with the loan proceeds,
(ii) the fifth anniversary of the loan, or (iii) 90 days from the termination of
Ronald S. Haft's employment under the Agreement.
Accordingly, there are 302,952 issued and outstanding shares of Dart Class
B Common Stock, of which Ronald S. Haft owns 25,246 shares (or 8.3%), and of
which Ronald S. Haft owns another 172,730 shares (or 57.0%) with voting power
held by Herbert H. Haft. If all the shares of Dart Class B Common Stock covered
by the Options were issued, there would be 500,000 issued and outstanding shares
of Dart Class B Common Stock, of which Ronald S. Haft would then own 395,024
shares (or 79.0%), with voting power over 222,294 shares (or 44.5%), and Herbert
H. Haft would have voting power over 172,730 shares or (34.5%).
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting. Unless otherwise
specifically directed, the persons named in the accompanying proxy will vote
such proxy for the election of the nominees listed below as directors of the
Corporation to serve until the next annual meeting of stockholders and until
their successors are elected and qualified. Although it is not contemplated that
any nominee will decline or be unable to serve as a director, in either such
event the proxies will be voted by the proxy holders for such other person as
may be designated by the pursuant Board of Directors.
The following information is furnished with respect to the nominees:
HERBERT H. HAFT, age 73, the founder of Dart, which is in the business of
operating retail discount auto parts stores through the Corporation, retail
discount book stores through Crown Books Corporation ("Crown Books"), retail
discount grocery stores through Shoppers Food Warehouse ("Shoppers Food") and is
engaged in other retail, real estate and financial operations through other
subsidiaries, has been Chief Executive Officer and Chairman of the Board of Dart
since 1960. He has been Chairman of the Board of Directors and Chief Executive
Officer of the Corporation since its organization, and was Chairman or
Co-Chairman of the Board of Directors of Crown Books from its organization in
1983 until December 1991 when he became Chairman of the Executive Committee. Mr.
Haft became Chairman of the Board of Directors of Crown Books again in June
1993. Mr. Haft is a director of Dart, Crown Books and Shoppers Food.
R. KEITH GREEN, age 43, was named director of the Corporation in September
1991. He has been the President of the Corporation since July 1990. Mr. Green
was president and chief executive officer of The Whitlock Corporation, Inc. from
1987 until he joined the Corporation.
RONALD S. HAFT, age 35, was named a director of the Corporation in July
1993. Mr. Haft was named President and Chief Operating Officer of Dart in August
1993. Prior to that, Mr. Haft was President of Combined Properties, Inc., a real
estate management company, from 1984 and continues to hold that position. Mr.
Haft is a director of Dart, Crown Books and Shoppers Food.
DOUGLAS M. BREGMAN, age 44, is a partner in the law firm of Bregman,
Berbert & Schwartz, specializing in commercial real estate law. Mr. Bregman is
also an Adjunct Professor of Law at the Georgetown University Law Center. Mr.
Bregman was elected to serve as a director of the Corporation, Dart and Crown
Books in June 1993.
3
<PAGE> 6
H. RIDGELY BULLOCK, age 60, is president of Montchanin Management
Corporation, a management and financial consulting firm, and president and
director of Michel Vineyards. Mr. Bullock is an attorney in New York. Mr.
Bullock previously served as chairman and chief executive officer of Bank of New
England Corporation and UniDynamics Corporation. Mr. Bullock was elected a
director of the Corporation, Dart and Crown Books on December 20, 1993.
LARRY G. SCHAFRAN, age 55, is managing general partner of L.G. Schafran and
Associates, a New York based investment advisory firm, and is a director of
Publicker Industries, Inc., Capsure Holdings, Corp. and OXIGENE, Inc. Mr.
Schafran has previously held the positions of vice president and director of
Webb & Knapp, Inc. and its successor General Property Corp. Mr. Schafran was
elected a director of the Corporation, Dart and Crown Books on December 20,
1993.
BONITA A. WILSON, age 52, has been a retailing executive with Saks Jandel
since February 1994. Prior to that she was a retailing executive with the May
Company. Ms. Wilson serves on the board of directors of Wedgewood Financial
Management, Inc. Ms. Wilson was elected to serve as a director of the
Corporation, Dart, and Crown Books in June 1993.
Herbert H. Haft is the father of Ronald S. Haft. There is no family
relationship between any of the other directors or officers of the Corporation.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Corporation's officers and directors, and any persons who
beneficially own more than ten percent of a registered class of the
Corporation's equity securities, to file reports of ownership of the
Corporation's securities and changes in such ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and ten percent
shareholders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file.
Based solely upon its review of such forms received by it, the Corporation
believes that during the fiscal year ended January 29, 1994, all filing
requirements applicable to its officers, directors and ten percent shareholders
were complied with, except that each of Herbert H. Haft, Gloria G. Haft, Robert
M. Haft, Claudine B. Malone, Warren Tydings, James G. Leonard, Ron Marshall and
R. Keith Green did not file one Form 5 on a timely basis, reporting the granting
of options on July 31, 1992 pursuant to the Corporation's stock option plan. The
granting of such options was reported by each such person, except Robert M. Haft
and Warren Tydings (who is deceased), on Forms 5 filed on March 15, 1994, or,
for Claudine B. Malone, on or about March 23, 1994.
4
<PAGE> 7
OWNERSHIP OF CAPITAL STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table summarizes the ownership of Shares and common stock of
Dart by each of the Corporation's directors, named executive officers and its
directors and officers as a group as of May 12, 1994:
<TABLE>
<CAPTION>
APPROXIMATE
TITLE OF NO. OF PERCENTAGE
NAME CLASS SHARES OF CLASS
- - -------------------------------------------------- ------------ ------- -----------
<S> <C> <C> <C>
Herbert H. Haft................................... Class A (1) 262,496(2) 16.48
Class B (1) 172,730(3) 57.02
Trak Auto 50,498(4) .83
Ronald S. Haft.................................... Class A 62,347 4.29
Class B 395,024(3) 79.00
R. Keith Green.................................... Trak Auto 10,498(5) .17
Bonita A. Wilson.................................. Class A 375(6) .03
Trak Auto 1,500(7) .02
Douglas M. Bregman................................ Class A 375(6) .03
Trak Auto 1,500(7) .02
H. Ridgely Bullock................................ -- None --
Larry G. Schafran................................. -- None --
Robert E. Brann................................... Trak Auto 2,000(8) .03
Thomas V. Reilly.................................. Trak Auto 2,000(8) .03
Dennis N. Weiss................................... Class A 2,250(9) .15
Trak Auto 1,000(10) .02
All directors and officers as a group (13 Class A 617,110(11) 33.95
persons)........................................
Class B 420,270 84.05
Trak Auto 111,495(12) 1.82
</TABLE>
- - ---------------
(1) Refers to Dart Class A Common Stock ("Class A") or Dart Class B Common
Stock ("Class B").
(2) Includes exercisable options for 139,749 Class A shares.
(3) Represents 172,730 Class B Shares owned by Ronald S. Haft with sole voting
power retained by Herbert H. Haft.
(4) Includes exercisable options for 49,998 Shares. Does not include 3,962,245
Shares owned by Dart, as to which Herbert H. Haft may also be deemed to
have beneficial ownership.
(5) Exercisable options for 10,498 Shares.
(6) Exercisable options for 375 Class A shares.
(7) Exercisable options for 1,500 Shares.
(8) Exercisable options for 2,000 Shares.
(9) Exercisable options for 2,250 Class A shares.
(10) Exercisable options for 1,000 Shares.
(11) Includes exercisable options for 364,081 Class A shares.
(12) Includes exercisable options for 69,495 Shares. Does not include 3,962,245
Shares owned by Dart, as to which Herbert H. Haft may also be deemed to
have beneficial ownership.
Except as otherwise indicated, each and director and executive officer has
sole voting and investment power over his Dart common stock and Shares.
5
<PAGE> 8
BOARD COMMITTEES AND MEETINGS
The Board of Directors held eleven meetings during the fiscal year ended
January 29, 1994 and took action by written consent on two other occasions.
The Board of Directors' audit committee is responsible for monitoring the
Corporation's accounting procedures, insuring the adequacy of internal policies
and controls and reviewing potential conflict of interest situations. The
members of the audit committee are Bonita A. Wilson and Douglas M. Bregman. The
audit committee met two times in fiscal 1994. The Corporation does not have a
nominating or compensation committee.
Two independent directors, H. Ridgely Bullock and Larry G. Schafran, have
been appointed by the Board of Directors to the Special Litigation Committee.
The members of the Special Litigation Committee assess, on behalf of the
Corporation, whether to pursue, settle or abandon certain derivative litigation.
See "Litigation".
EXECUTIVE COMPENSATION
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
This report describes the Corporation's compensation policies applicable to
its executive officers, including its Chief Executive Officer, during the fiscal
year ended January 29, 1994. The Corporation has no special compensation
committee, and executive compensation policies are formulated by the entire
Board of Directors.
Executive compensation during the fiscal year consisted principally of
salary and stock options granted under the Trak Auto Corporation 1993 Stock
Option Plan (the "Trak 1993 Plan"). The annual salary of the Corporation's CEO,
Mr. Herbert H. Haft, has been $250,900 since 1986 and was not reviewed by the
Board during the last fiscal year. For other executive officers, annual salary
is determined by the person to whom such officer reports (in the case of
officers other than the President, in consultation with the CEO), based on the
officer's previous year's salary and his superior's subjective assessment of the
responsibilities of the position held, the competitive market for retail
executives with comparable levels of responsibility, the executive's performance
on the job and other factors that the superior deems relevant or appropriate.
The Corporation's President is eligible to receive a bonus based on the
Corporation's operating results as compared to budget for the fiscal year. No
bonus was awarded pursuant to this formula in fiscal 1994. No bonuses were
awarded to any other executive officers.
Executive officers also received grants of stock options under the Trak
1993 Plan. The Board feels that annual awards of stock options are an effective
means of aligning an executive's compensation with the interests of
shareholders, since the value of such options are tied directly to increases in
the market value of the Corporation's common stock. The exercise price for all
options granted in 1994 was the market value of the Corporation's common stock
on the date of grant. Options become exercisable over time. One-third will
become exercisable one year from the date of grant, an additional one-third will
become exercisable two years from the date of grant and the last third will
become exercisable three years from the date of grant. There is no set number of
options that can be awarded in any year or any formula for allocating options
among the officers. The amount of options awarded to each executive officer was
based on the Board's subjective evaluation of the relative contributions of the
executives to the Corporation. The Board also continued its practice of previous
years of awarding
6
<PAGE> 9
options to the President and Chief Operating Officer of Dart, in recognition
that this executive, while receiving no other compensation from the Corporation,
performs an important role in the management of the Corporation.
Executive officers may also participate in the Corporation's tax-qualified
profit sharing retirement plan (the "Profit Sharing Plan") on the same basis as
other employees of the Corporation. Amounts contributed to the Profit Sharing
Plan by the Corporation may not exceed 5% of its consolidated pre-tax income for
each fiscal year subject to certain adjustments, and are proportionately
allocated among participants based on their respective compensation levels
subject to statutory limitations. The Corporation maintains the Profit Sharing
Plan for the benefit of all employees, and does not maintain any special or
additional retirement arrangements for its executive officers.
The 20,000 options granted to the Corporation's CEO, Herbert H. Haft,
reflects the Board's view that a greater proportion of his compensation than
that of other executives should be linked directly to the performance of the
Corporation's common stock. Thus, while the CEO's salary is not significantly
higher than that of other executive officers, his compensation will be increased
significantly if the Corporation's stock performs well. The number of options
granted is the same number as have been awarded to Mr. Haft in each of the
previous ten years.
Herbert H. Haft
R. Keith Green
Ronald S. Haft
Douglas M. Bregman
H. Ridgely Bullock
Larry G. Schafran
Bonita A. Wilson
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
The Summary Compensation Table is intended to provide an overview of both
annual and long-term compensation for each of Herbert H. Haft, R. Keith Green,
Robert E. Brann, Thomas V. Reilly and Dennis N. Weiss (the "Executive Group").
It requires separate, line-by-line entries for compensation paid to each member
of the Executive Group for the last three years.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ---------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) (#) ($)(2)
- - ------------------------ ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Haft......... 1994 250,000 -- 12,500 20,000 1,000
CEO 1993 250,000 -- 10,000 20,000 3,200
1992 250,000 -- 10,000 20,000 1,500
R. Keith Green.......... 1994 263,000 -- 12,500 10,000 1,000
President 1993 236,700 115,000 (3) 15,200 6,500 3,200
1992 225,000 50,000 10,000 5,000 1,500
Robert E. Brann......... 1994 211,100 -- -- 1,600 500
Executive Vice 1993 196,200 -- -- 1,500 3,100
President 1992 190,000 -- -- 1,500 1,400
Thomas V. Reilly........ 1994 187,100 -- -- 1,600 500
Executive Vice 1993 170,400 -- 1,700 1,500 2,700
President 1992 165,000 -- 1,600 1,500 1,200
Dennis N. Weiss......... 1994 197,100 -- -- 1,250 --
Vice President-- 1993 206,400 -- -- 750 --
Real Estate 1992 169,800 -- -- 750 --
</TABLE>
- - ---------------
(1) Other annual compensation for Mr. Haft and Mr. Green for fiscal 1994 was
board fees.
(2) Represents allocations to the accounts of certain members of the Executive
Group pursuant to the Corporation's Profit Sharing Plan.
(3) Includes $65,100 payment of estimated annual bonus on December 31, 1992.
8
<PAGE> 11
OPTION GRANTS IN THE LAST FISCAL YEAR
This table provides information with respect to grants of options to the
Executive Group and Ronald S. Haft during the prior fiscal year and the exercise
or base price, expiration date and estimates of the potential realizable values
of such options.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME (#)(1) YEAR ($/SH) DATE 5%($) 10%($)
- - ---------------------------- --------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Haft............. 20,000 16.6 12.50 7/31/98 127,000 280,800
R. Keith Green.............. 10,000 8.3 12.50 7/31/98 63,500 140,400
Robert E. Brann............. 1,600 1.3 12.50 7/31/98 10,200 22,500
Thomas V. Reilly............ 1,600 1.3 12.50 7/31/98 10,200 22,500
Dennis N. Weiss............. 1,250 1.0 12.50 7/31/98 7,900 17,600
Ronald S. Haft.............. 10,000 8.3 12.50 7/31/98 63,500 140,400
</TABLE>
- - ---------------
(1) Options become exercisable over time. One-third will become exercisable one
year from the date of grant, an additional one-third will become exercisable
two years from the date of grant and the last third will become exercisable
three years from the date of grant. Options expire five years after the date
of grant. Options are granted at market price on the date of grant. All
options granted to executive officers are "incentive stock options" under
the Internal Revenue Code except those options granted to Mr. Herbert Haft
and Mr. Ronald S. Haft in fiscal 1994, which are non-qualified options.
Incentive stock options entitle the option holder to special tax treatment
provided that the option holder satisfies certain holding periods with
respect to Shares acquired on the exercise of options. In general, if the
holding periods are satisfied, the option holder will incur no taxable
income by reason of exercise of the option, and the Corporation will not
receive an income tax deduction by reason of the exercise. The option holder
will recognize gain or loss upon a subsequent sale of the Shares, based on
the difference between the amount for which the Shares are sold, and the
option price paid.
(2) Potential realizable value is based on an assumption that the price of the
Shares appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the five year option term. These numbers are
calculated based on the rules and regulations promulgated by the SEC and do
not reflect the Corporation's estimate of future stock price growth.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
This table provides information regarding the exercise of options during
the fiscal year and the number and value of unexercised options held at year
end.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END($)
------------- -------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- - -------------------------------- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Herbert H. Haft................. -- -- 49,998 115,500
40,002 38,000
R. Keith Green.................. -- -- 10,498 31,900
16,002 10,600
Robert E. Brann................. -- -- 2,000 7,400
3,100 3,200
Thomas V. Reilly................ -- -- 2,000 7,400
3,100 3,200
Dennis N. Weiss................. -- -- 1,000 3,700
2,000 1,600
Ronald S. Haft.................. -- -- -- --
10,000 --
</TABLE>
COMPENSATION OF DIRECTORS
Compensation. Each director is compensated by the Corporation at the rate
of $15,000 per year and each outside director is compensated an additional
$1,000 per meeting. Those directors who are members of the Corporation's audit
committee and profit sharing committee receive an annual fee of $5,000 for each
committee. The members of the Special Litigation Committee are compensated at
the rate of $250 per hour.
Trak Auto Corporation 1993 Stock Option Plan. The Trak 1993 Plan specifies
that 1,500 Non-Qualified Stock Options shall be granted to each director who is
not an employee each calendar year, such options to be effective as of July 31
each year and to expire five years from the date of grant.
Deferred Compensation Plan. The Corporation adopted the 1988 Trak Auto
Corporation Deferred Compensation Plan for Directors, effective January 1, 1988
(the "Compensation Plan"). The Compensation Plan permits the Corporation's
directors to defer the payment of all or a specified part of future compensation
payable for services as director, including fees for serving on or attending
meetings of committees of the Board of Directors. Each director may elect, on or
before January 31 of any year, to defer payment of compensation, payable on or
after the February 1st following such election, for services to be performed
during the twelve-month period commencing on such February 1 and ending on
January 31 of the following calendar year (the "Plan Year"). After such an
election, all subsequent compensation will be deferred until the director
notifies the Corporation, prior to the commencement of any Plan Year, that
compensation for future Plan Years is to be paid on a current basis.
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<PAGE> 13
Deferred compensation will not be paid to the director as earned, but will
be held in the Corporation's general funds and credited to a bookkeeping account
maintained by the Corporation in the name of the director. Each participating
director will be treated as a creditor of the Corporation with respect to such
funds. Deferred compensation will be paid to directors in a lump sum on the
February 15th of the Plan Year after retirement, unless the director elects, at
the time he exercises the deferral option, to be paid in up to ten annual
installments.
Payments to Former Directors. During the year ended January 29, 1994, the
Corporation purchased the outstanding in-the-money stock options held by former
directors Claudine B. Malone ($10,300) and James G. Leonard ($19,100). Mr.
Leonard also received, at his election, the first two of three payments under
the Compensation Plan. The Corporation agreed to provide Mr. Leonard certain
retirement benefits (approximately $18,000) and to continue for Mr. Leonard and
Ms. Malone full rights to indemnification as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Corporation does not have a compensation
committee, and policies regarding executive compensation are formulated by the
Board. This section sets forth certain relationships among the members of the
Board of Directors.
Certain members of the Board are directors, officers or employees of the
Corporation, Dart and its subsidiaries, as follows: Herbert H. Haft is Chairman
of the Board and Chief Executive Officer of Dart, Chairman of the Board and
Chief Executive Officer of the Corporation and Chairman of the Board of Crown
Books. Ronald S. Haft is President and Chief Operating Officer and a Director of
Dart, and a Director of the Corporation and Crown Books.
Certain former directors of the Board were directors, officers or employees
of the Corporation and Dart and its other subsidiaries during the last fiscal
year, as follows: Robert M. Haft was until June 1993 President and Chief
Operating Officer and Director of Dart, Chairman of the Board of Crown Books,
and Vice Chairman of the Board of Directors of the Corporation. Gloria G. Haft
is a Vice President of Dart and, until June 1993, was also Secretary and
Director of Dart, Secretary and Director of Crown Books, and Vice President and
Secretary and Director of the Corporation.
Ronald S. Haft, Robert M. Haft, and Gloria G. Haft are all beneficial
owners of more than 5% of Dart Class B Common Stock. Herbert H. Haft holds an
irrevocable proxy to vote certain Class B Common Stock owned by Ronald S. Haft.
Herbert H. Haft and Gloria G. Haft are husband and wife. Ronald S. Haft and
Robert M. Haft are their sons.
CERTAIN TRANSACTIONS
Dart provides the Corporation with certain general and administrative
services. Some of these services include executive management, accounting,
personnel administration, legal and real estate. In addition, the Corporation
provides similar services to Dart and its other subsidiaries. Some of these
services were advertising administration, data processing and loss prevention.
In management's opinion, the intercompany charges for these services were equal
to the incremental costs incurred by Dart or the Corporation to provide these
functions. The incremental costs were the variable costs in excess of what Dart
or the Corporation needed to service their own operations. During the year ended
January 29, 1994, such services resulted in a charge to the Corporation of
$929,000 and a charge from the Corporation of $490,000. It is not practicable
for the Corporation to estimate the cost it would have incurred for these
services if it had operated as an unaffiliated entity. In addition, Dart charges
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<PAGE> 14
the Corporation for actual expenses which relate directly to the Corporation's
operations. Substantially all such charges are supported by invoices from
unrelated parties designating the Corporation as recipient of the related goods
and services. These direct charges were $1,586,000 in the year ended January 29,
1994.
Of the Corporation's 314 stores as of January 29, 1994, 23 stores are held
under lease or sublease agreements from entities in which members of the Haft
family own substantially all the beneficial interests. Two stores are leased
from partnerships in which Dart owns the majority interest and the remaining
interests are owned by partnerships in which Haft family members own all the
partnership interests. In addition, two stores are subleased from Crown Books.
During the year ended January 29, 1994, the fees and rentals paid by the
Corporation under these agreements were $5,182,000. Subsequent to January 29,
1994, the Corporation signed a lease modification agreement with a partnership
in which Haft family members own all the partnership interest. This modification
replaces existing space with a larger space for a larger store.
Prior to January 29, 1994 the outside members of the Board of Directors of
the Corporation approved each related party lease. After January 29, 1994, the
Real Estate Committee (composed of one independent director of the Board of
Directors) approves these transactions. The Board of Directors is provided with
a fairness opinion attesting that the proposed lease is representative of market
rent for the subject property. The Haft family members do not vote on these
leases.
The Corporation leases a 176,000 square foot warehouse located in
Bridgeview, Illinois from a private partnership in which Haft family members own
all of the partnership interests. The lease (which commenced April 27, 1984) is
for thirty years and six months and provides for rental payments increasing
approximately 15% every five years over the term of the lease. The current
annual rental is $588,000. The lease also requires the payment of maintenance,
utilities, insurance and taxes on the warehouse. Under the terms of the lease
agreement, Dart is jointly and severally liable for the lease obligations. The
partnership purchased the warehouse on March 12, 1984 for approximately
$3,100,000.
The Corporation subleases from Dart 210,000 square feet of a warehouse and
office facility located in Landover, Maryland which it shares with Dart and
Crown Books. The sublease is for 30 years and six months, provides for rental
payments increasing approximately 15% every five years over the term of the
sublease and commenced October 1985. The current annual rental is $1,284,000.
The sublease also requires the payment of maintenance, utilities, insurance and
taxes allocable to the space subleased. Dart leases the entire 271,000 square
foot warehouse and office facility from a private partnership in which Haft
family members own all of the partnership interests. The Corporation's lease is
on the same terms as Dart's lease from the Haft family partnership.
Dart has a lease agreement with a private partnership in which Haft family
members own all of the partnership interests, for land adjacent to the
Corporation's warehouse in Landover, Maryland. The lease is for the same period
as the warehouse and office facility lease described above and the current
annual rental is $33,000 with increases of three percent per year. Such rent
will be renegotiated upon commencement of construction of any improvements. The
Corporation has agreed to bear the annual carrying cost for such land until such
time it becomes desirable to use the land in order to expand the Corporation's
warehousing facilities.
On April 20, 1992, the Corporation entered into an agreement with Dart to
sublease 6,500 square feet in a warehouse facility adjacent to the above
warehouse and office facility. Dart leases the property from a partnership in
which Haft family members own all of the partnership interests. The
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<PAGE> 15
term of the sublease is one year (with nine one year option periods). The
current annual rental is $21,000 and will increase to $24,000 for each of the
last five option periods. The sublease also requires the Corporation to pay
approximately $6,000 annually for its full share of any common area charges,
real estate taxes and insurance premiums.
The Corporation has a lease agreement with a private partnership in which
Haft family members own all of the partnership interests, for a 317,000 square
foot distribution center in Ontario, California. The lease is for 20 years,
commenced in December 1989, and provides for increasing rental payments, based
upon the Consumer Price Index for the Los Angeles area, over the term of the
lease. Annual rental for the first five years is $1,130,000. The lease requires
the payment of maintenance, utilities, insurance and taxes. The partnership
purchased the distribution center for approximately $10,800,000.
The Board of Directors of the Corporation has authorized certain officers
and directors of the Corporation to apply for loans from the Corporation to
exercise their vested stock options. Under the plan approved by the board, the
loans must bear interest at the prime rate, adjusted annually, must be secured
by all of the stock acquired by exercise of the options, must be repaid out of
the first proceeds of sale of the stock or at the end of three years, whichever
is earlier, and the borrower must demonstrate to the Corporation's chief
financial officer both that it would be difficult to dispose of the number of
shares on the open market and that he or she presents a reasonable credit risk
to the Corporation. Under this plan, the Corporation lent $124,000 to Robert M.
Haft on December 31, 1992, to exercise options to purchase 10,000 Shares. This
loan was repaid in September 1993.
CERTAIN LITIGATION
In September 1993, Alan R. Kahn and Tudor Trust, shareholders of Dart,
filed a lawsuit in the Delaware Court of Chancery for New Castle County naming
as defendants Herbert H. Haft, Ronald S. Haft, Douglas M. Bregman, Bonita A.
Wilson, Combined Properties, Inc., Combined Properties Limited Partnerships, and
Capital Resources Limited Partnership. The suit is brought derivatively and
names as nominal defendants Dart and five of its subsidiaries, the Corporation,
Crown Books, Shoppers Food, Total Beverage Corporation, and Cabot-Morgan Real
Estate Company. The complaint alleges waste, breach of fiduciary duty, and
entrenchment in connection with various lease agreements between the Combined
Properties defendants and Dart and its subsidiaries, the compensation paid
Ronald S. Haft and Herbert H. Haft, Dart's Agreement with Ronald S. Haft, and
the sale of Dart Class B Stock by Herbert H. Haft to Ronald S. Haft. Plaintiffs
seek an accounting of unspecified damages incurred by Dart, voiding of the
options sold to Ronald S. Haft, and costs and attorneys' fees.
In November 1993, Robert M. Haft filed another lawsuit in the Delaware
Court of Chancery for New Castle County. The lawsuit names as defendants Herbert
H. Haft, Ronald S. Haft, Douglas M. Bregman, and Bonita A. Wilson, and also
names Dart as a nominal defendant. The complaint derivatively alleges interested
director transactions, breach of fiduciary duty and waste in connection with
Dart's Agreement with Ronald S. Haft. Robert M. Haft also brings individual
claims for breach of contract and dilution of voting rights in connection with
the sale of Dart Class B Stock by Herbert H. Haft and Dart's Agreement with
Ronald S. Haft. The complaint seeks rescission of the sale of Dart Class B Stock
and the options Agreement, unspecified damages from the individual directors,
and costs and attorneys' fees. On May 17, 1994, Mr. Haft settled his individual
claims in this lawsuit and agreed to seek dismissal of the derivative claims.
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PERFORMANCE GRAPH
The following graph tracks an assumed investment of $100 on the start dates
indicated below in the Corporation's Common Stock, the S&P 500 Index and the S&P
Retail Store Specialty Index, assuming full reinvestment of dividends and no
payment of brokerage or other commissions or fees. Past performance is not
necessarily indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED JANUARY 29, 1994
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TRAK AUTO STANDARD & RETAIL STORE
(FISCAL YEAR COVERED) CORPORATION POOR'S INDEX SPECIALTY
<S> <C> <C> <C>
1989 100 100 100
1990 76 114 117
1991 57 124 134
1992 139 152 181
1993 180 168 238
1994 121 190 231
</TABLE>
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<PAGE> 17
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen & Co.,
independent certified public accountants, to serve as auditors for the fiscal
year ending January 28, 1995. Arthur Andersen & Co. has served as the
Corporation's auditors since its organization. The Board of Directors recommends
a vote "FOR" the ratification of this selection.
A representative of Arthur Andersen & Co. is expected to attend the
Meeting. At that time the representative will have the opportunity to make a
statement if he desires, and will be available to respond to appropriate
questions regarding the most recent audit of the Corporation's financial
statements.
SOLICITATION OF PROXIES, STOCKHOLDERS'
PROPOSALS AND OTHER MATTERS
Proxies for the meeting will be solicited by mail and may be solicited by
telephone and other means of communication. Solicitation may be made by
directors, officers and other regular employees of the Corporation. The entire
cost of soliciting proxies will be borne by the Corporation. The Corporation
does not expect to pay any compensation for solicitation of proxies, but will
reimburse brokers, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy material to the beneficial owners of Shares held by such
persons.
Proposals of stockholders intended to be presented at the Corporation's
next annual meeting of stockholders must be received at the Corporation's
principal executive offices not later than February 1, 1995.
The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Meeting other than those specifically referred to herein. If, however, any other
matters should properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy to vote the Shares represented thereby in
accordance with their best judgment on such matters.
By Order of the Board of Directors
HERBERT H. HAFT
Chairman of the Board
June 1, 1994
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<PAGE> 18
TRAK AUTO CORPORATION
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 24, 1994
The undersigned, a stockholder of Trak Auto Corporation, a Delaware
corporation (the "Corporation"), hereby appoints Herbert H. Haft and R. Keith
Green, attorneys and proxies of the undersigned, with full power of
substitution, to vote and act for the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held at the Marriott Courtyard, 8330
Corporate Drive, Landover, Maryland on Friday, June 24, 1994 and at any
adjournments thereof, in respect of all shares of the Common Stock of the
Corporation registered in the name of the undersigned as fully as the
undersigned could vote and act if personally present, on the following matters:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
(CONTINUED, AND TO BE DATED AND SIGNED, ON OTHER SIDE.)
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS: VOTE FOR all nominees / / VOTE WITHHELD for all / / EXCEPTIONS* / /
listed below nominees listed
NOMINEES: Herbert H. Haft, R. Keith Green, Ronald S. Haft, Douglas M. Bregman, H. Ridgely Bullock, Larry G. Schafran, Bonita A.
Wilson
INSTRUCTIONS: To withhold authority to vote for any individual nominee, print that nominee's name on this line.
*EXCEPTIONS:
---------------------------------------------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY the selection of the firm of Arthur Andersen & 3. IN THEIR DISCRETION, on any other matters that may
Co. as auditors for the fiscal year ending January 28, 1995. properly come before the meeting or any adjournments
thereof.
FOR / / AGAINST / / ABSTAIN / /
ADDRESS CHANGE AND/OR / /
COMMENTS MARK HERE
PROXY DEPARTMENT
NEW YORK, N.Y. 10203-0523
Please date this proxy and sign
your name exactly as your name
appears herein. If the stock is
held jointly, all owners must
sign. When signing as attorney,
executor, administrator, trustee,
guardian or in another
representative capacity, please
give full title.
Dated , 1994
----------------------------------
Signature of Stockholder
----------------------------------
Signature of Stockholder
VOTES MUST BE INDICATED /// OR /X/ IN BLUE OR
BLACK INK.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
</TABLE>
<PAGE> 20
EDGAR APPENDIX
On page 14 of the printed version of the Proxy Statement, a line graph
depicting the cumulative five year total return of an assumed $100 investment
in the Corporation's Common Stock, the S&P 500 Index and the S&P Retail Store
Specialty Index appears.
