<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Information Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
/X/ Definitive Information Statement
</TABLE>
TRAK AUTO CORPORATION
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(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) 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:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
[TRAK AUTO LOGO]
DISCOUNT PARTS SUPERMART
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
------------------------
NOTICE OF THE TAKING OF CORPORATE ACTION
WITHOUT A MEETING BY WRITTEN CONSENT
Notice is hereby given that Dart Group Corporation, a Delaware corporation,
as holder of approximately 68% of the outstanding capital stock of Trak Auto
Corporation, a Delaware corporation (the "Corporation"), shall, on or about June
30, 1995, elect six Directors to the Corporation's Board of Directors by the
taking of corporate action in lieu of an annual meeting of stockholders.
The accompanying information statement is furnished pursuant to Section
14(c) of the Securities Exchange Act of 1934.
By Order of the Board of Directors
/s/ ELLIOT R. ARDITTI
----------------------------
Elliot R. Arditti
Secretary
May 30, 1995
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
<PAGE> 3
TRAK AUTO CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
---------------------------------------
INFORMATION STATEMENT
---------------------------------------
This Information Statement is furnished in connection with the taking of
corporate action without a meeting by less than unanimous written consent of
stockholders. Dart Group Corporation, a Delaware corporation ("Dart"), as holder
of 3,962,246 shares of the common stock, par value $.01 per share (the "Common
Stock"), of Trak Auto Corporation, a Delaware corporation (the "Corporation"),
is entitled to vote such shares or approximately 68% of the outstanding capital
stock of the Corporation. On or about June 30, 1995, Dart intends to re-elect
all six Directors to the Corporation's Board of Directors by less than unanimous
written consent in lieu of taking such action at an annual meeting of
stockholders. Please be advised, therefore, that this is only an Information
Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
This Information Statement is first being sent or given to stockholders on
May 30, 1995. Record holders of the Common Stock at the close of business on May
9, 1995 are entitled to receive a copy of this Information Statement. Each
stockholder is entitled to one vote for each share of Common Stock held. On May
9, 1995, there were 5,803,268 shares of Common Stock outstanding.
1
<PAGE> 4
ELECTION OF DIRECTORS
Pursuant to this corporate action without a meeting, six directors are to
be elected to the Board of Directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. In the event
that a nominee for any reason should become unavailable for election (which is
not anticipated), Dart intends to elect a substitute nominee as may be proposed
by the Board of Directors, unless the Board of Directors reduces the number of
Directors.
The following information is furnished with respect to the nominees:
HERBERT H. HAFT, age 74, has been Chairman of the Board and Chief Executive
Officer of the Corporation since its incorporation in 1983. Mr. Haft is the
founder of Dart and has been its chairman and chief executive officer since
1960. He was also the co-Chairman or Chairman of Crown Books Corporation ("Crown
Books"), a subsidiary of Dart, from its organization in 1981 until 1991. Mr.
Haft became Chairman of Crown Books, again, in June 1993. Mr. Haft has been a
director of Shoppers Food Warehouse Corp. ("Shoppers Food"), in which Dart owns
a 50 percent interest, since 1989.
R. KEITH GREEN, age 44, 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. Prior to 1987, he served as Vice President
of Stores of Auto Zone.
RONALD S. HAFT, age 36, was elected a director of each of the Corporation,
Dart and Crown Books on July 28, 1993 and has served as Interim President and
Chief Executive Officer of Crown Books since June 1994. He also has served as
President and Chief Operating Officer of Dart since August 1, 1993. Mr. Haft is
also a director of Shoppers Food and has been president of Combined Properties,
Inc. a real estate management company, since 1984.
DOUGLAS M. BREGMAN, age 45, 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.
LARRY G. SCHAFRAN, age 56, 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 53, has been a retail consultant since October 1993
for Dalton Brody. Prior to that she was a retailing executive with the May
Company. Ms. Wilson serves on the board of directors of Wedgewood Capital
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.
Information regarding legal proceedings pending against certain directors
and executive officers of the Corporation is incorporated herein by reference to
Item 3 of the Corporation's Annual Report on Form 10-K for the fiscal year ended
January 28, 1995, which may be obtained without charge upon written request to
Robert A. Marmon, Principal Financial Officer, Trak Auto Corporation, 3300 75th
Avenue, Landover, Maryland 20785.
2
<PAGE> 5
THE BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION
The Board of Directors of the Corporation held seven meetings and took
action by written consent on two occasions during the year ended January 28,
1995. The Board of Directors has an Audit Committee and a Compensation
Committee. The Corporation does not have a standing committee on nomination. In
1994, the Board of Directors established an Executive Committee and a Special
Litigation Committee. All Directors attended at least seventy-five percent of
the meetings of the Board of Directors and the committees on which such
Directors served during fiscal 1995.
The Audit Committee currently consists of Larry G. Schafran, Bonita A.
Wilson and Douglas M. Bregman. The Audit Committee, which held four meetings
during fiscal 1995, reviews potential conflicts of interest, reviews the results
of the annual audit with the Corporation's independent auditors and the adequacy
of the Corporation's internal accounting controls and practices, and recommends
to the Board of Directors the independent auditors to be retained by the
Corporation.
The Compensation Committee was formed in December 1994 and currently
consists of Douglas M. Bregman, Larry G. Schafran and Bonita A. Wilson. The
Compensation Committee held one meeting in fiscal 1995. The Corporation's Chief
Executive Officer is to consult with the Compensation Committee prior to
exercising such officer's authority to fix the compensation of the Corporation's
officers. The Compensation Committee also advises the Board of Directors as to
the compensation of the Chief Executive Officer.
On September 7, 1994, the Board of Directors of Dart established an
Executive Committee comprised of Dart's outside directors to conduct the affairs
of Dart with respect to matters that are the subject of dispute between the
Chairman of the Board and Chief Executive Officer of Dart, Herbert H. Haft, and
the President and Chief Operating Officer of Dart, Ronald S. Haft. On October
11, 1994, the Board of Directors of the Corporation established an Executive
Committee comprised of the same outside directors, with authority parallel to
that of Dart's Executive Committee. The Executive Committee currently consists
of Douglas M. Bregman, Larry G. Schafran and Bonita A. Wilson, with Mr. Schafran
as the Chairman of the Executive Committee. The disputes between Herbert H. Haft
and Ronald S. Haft concerning issues involving Dart and the Corporation have
been extensive. Accordingly, the respective Executive Committees have assumed
day-to-day involvement in these disputed issues and other matters affecting Dart
and the Corporation, in particular matters relating to litigation to which Dart
or the Corporation is a party. The continuing roles of the Executive Committees
of Dart and the Corporation are dependent upon future developments.
The Special Litigation Committee currently consists of Larry G. Schafran.
The Special Litigation Committee assesses, on behalf of the Corporation, whether
to pursue, settle or abandon certain derivative litigation.
A Standstill Agreement entered into in September 1994 in connection with a
lawsuit filed by Ronald S. Haft against Dart (the "Standstill Agreement")
provides, among other things, that Dart may not, until further order is entered
by the Delaware Court of Chancery, (i) change the current composition of the
board of directors of Dart or any of its subsidiaries, or (ii) change the
current Haft family officers of Dart or any of its subsidiaries.
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
3
<PAGE> 6
members of the Corporation's audit committee and profit sharing committee
receive an annual fee of $5,000 for each committee.
Members of the Executive Committee are compensated at a salary rate of $275
per hour plus reimbursement of expenses. Members of the Special Litigation
Committee of the Board of Directors, which was established on January 4, 1994,
have been compensated at a salary rate of $250 per hour plus reimbursement of
expenses. Through January 28, 1995, the compensation paid by Dart and its
subsidiaries, including the Corporation, to members of the respective Executive
Committees for their services on those committees totaled $666,000 ($166,000
paid by the Corporation), and the compensation paid by Dart and its
subsidiaries, including the Corporation, to members of the Special Litigation
Committee for their service on that committee totaled $269,000 ($27,000 paid by
the Corporation), in each case exclusive of expense reimbursement.
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.
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.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning all
shareholders known by the Corporation to be beneficial owners of five percent or
more of the Common Stock as of May 9, 1995.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP(1) CLASS
- ------------------------------------------------------------------ ------------ ----------
<S> <C> <C>
Dart Group Corporation(2)......................................... 3,962,246 68.3
3300 75th Avenue
Landover, MD 20785
Heartland Advisors, Inc.(3)....................................... 740,453 12.8
790 N. Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors Inc.(4)................................. 325,600 5.6
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- ---------------
(1) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be a beneficial owner of a security if such owner has or
shares the power to vote or direct the voting of such security or the power
to dispose or direct the disposition of such security. Accordingly, more
than one person may be deemed to be a beneficial owner of the same
securities. Unless otherwise indicated by footnote, the persons named in the
table have sole voting and investment power with respect to the shares of
Common Stock beneficially owned.
(2) Both Herbert H. Haft and Ronald S. Haft may be deemed to be beneficial
owners of all shares of Common Stock owned by Dart. Herbert H. Haft holds
sole voting power with respect to 57.0% of the Class B Common Stock of 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 voting power and Ronald S. Haft has investment
power with respect to the shares of the Common Stock 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 "Potential Changes in
Control" for a description of certain events relating to the 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 15, 1995. In its
Schedule 13G, Heartland has reported that it does not have sole voting power
over the shares. Heartland has sole investment power over 740,453 shares.
(4) Based on holdings reported on a Schedule 13G filed by Dimensional Fund
Advisors Inc., an investment advisor registered under the Investment
Advisors Act of 1940 ("DFA"), on February 16, 1995. DFA has sole voting
power with respect to 212,400 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 the DFA Investment Trust
Company (the "Trust"). In their capacities as officers of the Fund and the
Trust, these persons vote 92,000 shares (representing 1.6% of the shares
outstanding) owned by the Fund and 21,200 shares (representing .4% of the
shares outstanding) owned by the Trust. DFA has sole investment power with
respect to 325,600 shares.
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<PAGE> 8
POTENTIAL CHANGES IN CONTROL
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 68.3% of the Common Stock.
On September 6, 1994, Ronald S. Haft tendered to Dart a letter requesting:
(1) to exercise, effective immediately, options (the "Options") to
purchase, at an exercise price of $89.65 per share, 197,048 shares of
Dart's Class B Common Stock (the "Option Shares") and
(2) to exercise his right under an employment agreement, dated August 1,
1993 (the "Agreement"), between Dart and Ronald S. Haft, effective
immediately, to obtain a loan from Dart in the amount of
$17,665,353.20, for part of the exercise price of the Options.
Together with that letter, Ronald S. Haft tendered to Dart a check payable
to Dart in the amount of $197,048 as payment of the par value of the Option
Shares; and an executed unsecured promissory note of Ronald S. Haft payable to
the order of Dart in the amount of $17,665,353.20, the balance of the exercise
price for the Option Shares under the Options.
Dart has rejected the validity of Ronald S. Haft's exercise of the Options
and the promissory note tendered in connection therewith. Issuance of the Option
Shares has not been recorded in the stock records of Dart, Dart has returned his
$197,048 check, and Dart has not issued any stock certificate to Ronald S. Haft
for the Option Shares. Dart delivered to Ronald S. Haft a check in the amount of
the $985,000 price (plus interest) previously paid by him for the Options, but
he returned the check to Dart. These funds are now in an interest bearing escrow
account.
On September 12, 1994, Ronald S. Haft filed a lawsuit against Dart (Ronald
S. Haft v. Dart Group Corporation, Del. Ch., C.A. No. 13736) (the "Options
Lawsuit") in the Delaware Court of Chancery for New Castle County seeking a
court order that Dart issue the Option Shares and grant him a loan of
$17,665,353.20 to be used as part of the payment for such shares. Dart has
denied the validity of the Options and the Agreement and is contesting the
Options Lawsuit. Trial in the Options Lawsuit is currently scheduled for October
10, 1995.
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%).
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<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of May 9, 1995 regarding the
ownership of the Common Stock, Dart's Class A Common Stock, $1.00 par value per
share ("Class A"), and Dart's Class B Common Stock, $1.00 par value per share
("Class B"), by the following persons: (a) each of the Corporation's current
directors, (b) the Corporation's Chief Executive Officer and the other four most
highly paid executive officers of the Corporation and (c) all of the
Corporation's current directors and executive officers as a group.
<TABLE>
<CAPTION>
APPROXIMATE
TITLE OF NO. OF PERCENTAGE
NAME CLASS SHARES OF CLASS
- -------------------------------------------------- ------------ ------- -----------
<S> <C> <C> <C>
Herbert H. Haft................................... Class A 262,496(1) 16.43(2)
Class B 172,730(3) 57.02(4)
Trak Auto 60,498(5) 1.03
Ronald S. Haft.................................... Class A 123,709(6)(7) 8.46(2)
Class B 197,976(3)(8) 65.35(4)
Trak Auto 3,333(9) .06
R. Keith Green.................................... Class A 333(10) .02(2)
Trak Auto 5,000 .08
Bonita A. Wilson.................................. Class A 1,125(11) .08(2)
Trak Auto 3,000(12) .05
Douglas M. Bregman................................ Class A 1,125(11) .08(2)
Trak Auto 3,000(12) .05
Larry G. Schafran................................. Class A 375(13) .03(2)
Trak Auto 1,500(14) .03
Robert E. Brann................................... None
Thomas V. Reilly.................................. Trak Auto 5,223(15) .09
David B. MacGlashan............................... None
All directors and officers as a group (10 Class A 389,163(16) 24.25(2)
persons)........................................
Class B 197,976 65.35(4)
Trak Auto 81,554(17) 1.39
</TABLE>
- ---------------
(1) Includes exercisable options for 139,749 Class A shares. These options
include 99,750 shares under Dart's 1987 Executive Non-Qualified Stock
Option Plan, the validity of which is subject to challenge by Dart.
(2) Calculated based upon a class including shares subject to exercisable stock
options under stock option plans, which are subject to challenge by Dart.
See "Potential Changes in Control".
(3) Herbert H. Haft retains sole voting power over 172,730 Class B shares(owned
by Ronald S. Haft) pursuant to a proxy from Ronald S. Haft. See "Potential
Changes in Control".
(4) Calculated based upon a class excluding 197,048 shares to which Ronald S.
Haft claims a right to purchase pursuant to stock options challenged by
Dart. See "Potential Changes in Control".
(5) Includes exercisable options for 59,998 shares. Does not include 3,962,245
shares owned by Dart, as to which Herbert H. Haft and Ronald S. Haft may
also be deemed to have beneficial ownership.
(6) Includes 58,028 shares where the ownership of such shares is the subject of
dispute with Robert M. Haft and Linda G. Haft.
(7) Includes exercisable options for 3,333 Class A shares.
(8) Excludes 197,048 shares to which Ronald S. Haft claims a right to purchase
pursuant to stock options challenged by Dart. See "Potential Changes in
Control".
7
<PAGE> 10
(9) Exercisable options for 3,333 shares. Does not include 3,962,245 shares
owned by Dart, as to which Ronald S. Haft may also be deemed to have
beneficial ownership
(10) Exercisable options for 333 Class A shares.
(11) Exercisable options for 1,125 Class A shares.
(12) Exercisable options for 3,000 shares.
(13) Exercisable options for 375 Class A shares.
(14) Exercisable options for 1,500 shares.
(15) Exercisable options for 3,533 shares.
(16) Includes exercisable options for 146,040 Class A shares.
(17) Includes exercisable options for 74,368 shares. Does not include 3,962,245
shares owned by Dart, as to which Herbert H. Haft and Ronald S. Haft may
also be deemed to have beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dart provides the Corporation with certain general and administrative
services including executive management, accounting, personnel administration,
legal and real estate. Dart charged the Corporation approximately $712,000 for
such services during the year ended January 28, 1995. In addition, the
Corporation provides similar services to Dart and its other subsidiaries
including advertising administration, data processing and loss prevention. The
Corporation charged Dart and its subsidiaries approximately $468,000 for such
services in the year ended January 28, 1995. In management's opinion, the
intercompany charges for these services were equal to the costs incurred by Dart
or the Corporation to provide these functions. 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 the
Corporation for actual expenses that 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 $2,893,000 in the year ended January 28,
1995.
Of the Corporation's 282 stores as of January 28, 1995, 28 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.
These 28 store lease agreements provide for various termination dates from 1995
to 2023 (assuming option periods are exercised) and require future minimum
rentals aggregating $54,237,000 at January 28, 1995. These lease agreements also
require payment of a percentage of sales in excess of a stated minimum. During
the year ended January 28, 1995, the fees and rentals paid by the Corporation
under these agreements were $2,893,000.
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 $651,000. The lease also requires the payment of maintenance,
utilities, insurance and taxes on the warehouse.
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
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<PAGE> 11
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 $1,330,000. The sublease also requires the payment
of maintenance, utilities, insurance and real estate 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 Haft family-owned entity for vacant 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 $35,000 with increases of three percent per year.
The Corporation has paid the annual rent for the vacant land.
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 "Pennsy
Leases"). The term of the sublease is one year (with nine one-year option
periods). Under the sublease agreement the current annual rental is $21,000 and
increases 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 intends to give notice to terminate this sublease and hold over in
the warehouse on a month-to-month basis.
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. The current annual rental is $1,374,000. The lease requires the payment
of maintenance, utilities, insurance and taxes.
The total of annual fees and rent paid to Haft-owned entities was
$5,991,000 in fiscal 1995.
On February 10, 1995, after a legal review by Dart's Executive Committee,
Dart filed a complaint for rescission of the Pennsy Leases and for the return of
rent paid since 1991 on such leases. The Executive Committees of Dart, the
Corporation and Crown Books have also undertaken a legal review of the leasing
arrangements and real estate transactions between Dart, the Corporation and
Crown Books, on the one hand, and Haft-owned entities, on the other hand. This
review is ongoing and the Executive Committees have not yet determined whether
other actions will be taken as a result of this legal review.
9
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors formulated policies regarding executive compensation
during fiscal 1995. The Compensation Committee, which was created in December
1994, did not take any action affecting compensation paid in fiscal 1995. 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 Interim President and Chief
Executive Officer and a director of Crown Books.
REPORT ON EXECUTIVE COMPENSATION
This report describes the Corporation's compensation policies applicable to
its executive officers during the fiscal year ended January 28, 1995. During
fiscal 1995, executive compensation policies were formulated by the entire Board
of Directors. The Compensation Committee, which was formed in December 1994,
took no action affecting compensation paid to executive officers in fiscal 1995.
The key elements of the Corporation's executive compensation program
consist of base salaries that are determined based upon (a) concerns of
competitive pay and performance, (b) cash bonus awards that are driven solely on
performance and (c) ownership of stock options to align the interests of
management with those of stockholders. Each of these elements are described in
more detail below.
Executive compensation during fiscal 1995 consisted principally of salary.
For executive officers other than the Chief Executive Officer, and the Principal
Financial Officer, who was compensated by Dart in fiscal 1995, 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 Chief Executive Officer),
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.
In December 1994, the Board of Directors formed a Compensation Committee
with which the Corporation's Chief Executive Officer is to consult prior to
exercising such officer's authority to fix the compensation of the Corporation's
officers. The Compensation Committee also advises the Board of Directors as to
the compensation of the Chief Executive Officer.
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. Mr.
Green's bonus for the fiscal year ended January 28, 1995 was $97,500. No bonuses
were awarded to any other executive officers.
The Board believes 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 Common Stock. The exercise price for such options
granted is the market value of the Common Stock on the date of grant. Options
become exercisable over time. One-third become exercisable one year from the
date of grant, an additional one-third become exercisable two years from the
date of grant and the last third 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
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<PAGE> 13
formula for allocating options among the officers. The amount of options awarded
to each executive officer is based on the Board's subjective evaluation of the
relative contributions of the executives to the Corporation.
During the fiscal year ended January 28, 1995, stock option grants were
approved by the Board of Directors subject to approval by the Delaware Chancery
Court as a result of the Standstill Agreement. As of the end of fiscal 1995, the
court had not approved the grant of options and, consequently, no options were
deemed to have been granted in fiscal 1995. On April 18, 1995, a hearing was
held at which the court issued an order stating that the Standstill Agreement
did not enjoin the issuance of stock options approved by the Board of Directors.
Because the hearing took place after the end of the fiscal year, there were no
stock options granted during fiscal 1995. However, the Corporation expects to
grant stock options to certain executive officers based upon performance during
fiscal 1995.
FISCAL 1995 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Herbert H. Haft, the Chief Executive Officer, received $250,000 in salary
from the Corporation in fiscal 1995. Mr. Haft's salary has been the same since
1986 and was not reviewed by the Board during the past fiscal year.
LIMIT ON DEDUCTIBILITY OF CERTAIN COMPENSATION
It is the responsibility of the Board to address the issues raised by a
recent change in the federal income tax laws that made certain non-performance
based compensation to executive officers of public companies in excess of $1
million non-deductible to such companies beginning in 1994. In this regard, the
Board must determine whether any actions with respect to this new limit should
be taken by the Corporation. At this time, it is not anticipated that any
executive officer of the Corporation will receive any such compensation in
fiscal 1996. Therefore, the Board has not taken any action to comply with the
new limit. The Board will continue to monitor this situation and will take
appropriate action if it is warranted in the future.
STATUS OF REPORT
The foregoing report on Executive Compensation shall not be deemed to be
"soliciting material" or be "filed" with the SEC or subject to Regulation 14A
promulgated by the SEC or Section 18 of the Securities Exchange Act of 1934.
Board of Directors
Herbert H. Haft
R. Keith Green
Ronald S. Haft
Larry G. Schafran
Bonita A. Wilson
Douglas M. Bregman
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<PAGE> 14
STOCK PRICE PERFORMANCE GRAPH
The following graph compares cumulative total returns (assuming
reinvestment of dividends) on the Common Stock, the S&P Composite-500 Stock
Index and a peer company index (the S&P Retail Store Specialty Index) for the
five-year period ending January 28, 1995. This stock price performance graph
assumes that the value of the investment in the Common Stock and each index was
$100 on January 31, 1990. Through January 28, 1995, no dividends were paid on
the Common Stock. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED JANUARY 28, 1995
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TRAK AUTO STANDARD & RETAIL STORE
(FISCAL YEAR COVERED) CORPORATION POOR'S INDEX SPECIALTY
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 76.00 108.00 115.00
1992 184.00 133.00 155.00
1993 239.00 147.00 204.00
1994 160.00 166.00 203.00
1995 223.00 176.00 197.00
</TABLE>
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<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Corporation and its subsidiaries for
the three years ended January 28, 1995 to (i) the Chief Executive Officer of the
Corporation and (ii) the other four most highly paid executive officers of the
Corporation (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) (#) ($)(2)
- ------------------------ ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Herbert H. Haft......... 1995 250,000 -- 15,000(3) -- 3,000
Chief Executive 1994 250,000 -- 12,500(3) 20,000 1,000
Officer 1993 250,000 -- 10,000(3) 20,000 3,200
R. Keith Green.......... 1995 273,000 97,500 20,000(4) -- 3,000
President 1994 263,000 -- 12,500(3) 10,000 1,000
1993 236,700 115,000 15,200(5) 6,500 3,200
Robert E. Brann......... 1995 220,000 -- -- -- 3,000
Executive 1994 211,100 -- -- 1,600 500
Vice President 1993 196,200 -- -- 1,500 3,100
Thomas V. Reilly........ 1995 198,000 -- -- -- 3,000
Executive 1994 187,100 -- -- 1,600 500
Vice President 1993 170,400 -- -- 1,500 2,700
David B. MacGlashan..... 1995 183,000 -- -- -- 3,000
Vice President,
Principal 1994 171,700 -- -- 1,600 500
Accounting Officer 1993 158,400 -- -- 1,000 --
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits, unless the aggregate
amount of such compensation is at least $10,000 or 10% of the total annual
salary and bonus reported for the Named Executive Officer.
(2) Includes allocations to the accounts of the Named Executive Officers
pursuant to the profit-sharing plans of the Corporation.
(3) Includes fees received as a director of the Corporation.
(4) Includes fees received as a director of the Corporation ($15,000) and
health, life and disability insurance ($20,000).
(5) Includes fees received as a director of the Corporation ($10,000) and auto
allowance ($5,200).
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Executive Officers to purchase shares
of Common Stock during the year ended January 28, 1995.
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<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
For each of the Named Executive Officers, the following table provides
information regarding the exercise of options during fiscal 1995 and the number
and value of unexercised options held as of January 28, 1995.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END FY-END($)
------------- --------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------ --------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Herbert H. Haft............... 10,000 30,200 59,998/20,002 410,900/86,700
R. Keith Green................ 17,665 145,300 --/ 8,835 --/42,000
Robert E. Brann............... 3,533 32,100 --/ 1,567 --/ 7,400
Thomas V. Reilly.............. -- -- 3,533/ 1,567 27,700/ 7,400
David MacGlashan.............. 2,199 20,770 --/ 1,401 --/ 6,700
</TABLE>
EMPLOYMENT AGREEMENTS
On January 24, 1995, the Corporation entered into an employment agreement
with each of Messrs. Green, Brann, Reilly and MacGlashan. Mr. Green's agreement
is for a term of two years from February 1, 1995 to January 31, 1997, and is
automatically extended two years at the end of this term unless Mr. Green is
terminated pursuant to the agreement prior to that time. The other agreements
are for the period from February 1, 1995 to January 31, 1996, and are
automatically extended one year at the end of such term unless the individual is
terminated pursuant to the agreement prior to that time.
The agreements provide for the following rates of annual compensation: Mr.
Green, $300,000; Mr. Brann, $240,000; Mr. Reilly, $215,000; Mr. MacGlashan,
$200,000. Annual compensation is subject to annual increases as recommended to
the Board by the Compensation Committee following review and performance
appraisal by the Compensation Committee and approval by the Board.
Mr. Green is eligible for an annual bonus pursuant to his Bonus Agreement
based on performance. The bonus base is $75,000 if the Corporation meets budget,
is increased by a percentage of the Corporation's net income that exceeds budget
and is decreased by a percentage of net income that is below budget.
INDEPENDENT AUDITORS
Arthur Andersen LLP has served as the independent auditors of the
Corporation for the fiscal year ended January 28, 1995 and has been appointed by
the Board of Directors to serve as the Corporation's independent auditors for
the fiscal year ending February 3, 1996.
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<PAGE> 17
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 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 28, 1995, all filing
requirements applicable to its officers, directors and ten percent shareholders
were complied with.
For the year ended January 29, 1994, David MacGlashan, Thomas V. Reilly,
Robert E. Brann, Elliot R. Arditti and Ronald T. Rice did not file on Form 5
reporting the granting of stock options on July 31, 1993 pursuant to the
Corporation's stock option plan. These stock option grants were reported on Form
5 on March 15, 1995.
By Order of the Board of Directors
/s/ ELLIOT R. ARDITTI
---------------------------------
Elliott R. Arditti
Secretary
May 30, 1995
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
JANUARY 28, 1995, WHICH HAS BEEN FILED WITH THE SEC PURSUANT TO THE EXCHANGE
ACT, MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO ROBERT A. MARMON,
PRINCIPAL FINANCIAL OFFICER, TRAK AUTO CORPORATION, 3300 75TH AVENUE, LANDOVER,
MARYLAND 20785.
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