<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section 240.14a-12
</TABLE>
MONRO MUFFLER BRAKE, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
MONRO MUFFLER BRAKE, INC.
200 HOLLEDER PARKWAY
ROCHESTER, NEW YORK 14615
---------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
AUGUST 12, 1997
---------------
To the Shareholders of
MONRO MUFFLER BRAKE, INC.
The Annual Meeting of Shareholders of Monro Muffler Brake, Inc. (the
"Company") will be held at The Hutchison House, 930 East Avenue, Rochester, New
York 14607, on Tuesday, August 12, 1997, commencing at 10 a.m., for the
following purposes:
1. electing five directors to Class 2 of the Board of Directors
to serve a two-year term, and until their successors are
duly elected and qualified at the 1999 annual meeting of
shareholders;
2. ratifying the re-appointment of Price Waterhouse LLP as the
independent auditors of the Company for the fiscal year
ending March 31, 1998;
3. ratifying the amendment to the Monro Muffler Brake, Inc.
Non-Employee Directors' Stock Option Plan to increase the
number of authorized shares;
4. ratifying the amendment to the 1989 Employees' Incentive
Stock Option Plan to increase the number of authorized
shares; and
5. considering such other business as may properly be brought
before the meeting or any adjournment or postponement
thereof.
Only shareholders of record at the close of business on Friday, June
20, 1997, will be entitled to vote at the meeting.
/S/ Robert W. August
--------------------
Robert W. August
Secretary
Rochester, New York
July 11, 1997
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED,
SELF-ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE> 3
PROXY STATEMENT
MONRO MUFFLER BRAKE, INC.
200 HOLLEDER PARKWAY
ROCHESTER, NEW YORK 14615
---------------
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 12, 1997
---------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Monro
Muffler Brake, Inc., a New York corporation (the "Company" or "Monro"), for use
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at The
Hutchison House, 930 East Avenue, Rochester, New York 14607, on Tuesday, August
12, 1997, commencing at 10 a.m., or at any adjournment or postponement thereof.
A shareholder who executes a proxy may revoke it at any time before it
is voted. Attendance at the meeting shall not have the effect of revoking a
proxy unless the shareholder so attending shall, in writing, so notify the
secretary of the meeting at any time prior to the voting of the proxy. A proxy
which is properly signed and not revoked will be voted for the nominees for
election as directors listed herein, for the ratification of the re-appointment
of independent auditors, for the ratification of the amendment to the
Non-Employee Directors' Stock Option Plan and for the ratification of the
amendment to the 1989 Employees' Incentive Stock Option Plan as proposed herein,
unless contrary instructions are given, and such proxy may be voted by the
persons named in the proxy in their discretion upon such other business as may
be properly brought before the meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies by telephone or otherwise. The Company will
reimburse brokers or other persons holding shares in their names or in the names
of their nominees for their charges and expenses in forwarding proxies and proxy
material to the beneficial owners of such shares. It is anticipated that the
mailing of this Proxy Statement will commence on or about July 11, 1997.
VOTING SECURITIES
Only shareholders of record at the close of business on Friday, June
20, 1997 will be entitled to vote. At such date, the Company had outstanding
7,462,468 shares of common stock, par value $.01 per share ("Common Stock").
Each share of Common Stock is entitled to one vote on each matter as may
properly be brought before the meeting.
On May 14, 1997, the Board of Directors of the Company declared a five
percent stock dividend, payable August 4, 1997, to holders of record as of June
20, 1997. Shares of Common Stock listed in this Proxy Statement as outstanding
or beneficially owned by any person do not include any shares to be issued in
connection with such dividend. Shares issued to effect the stock dividend will
not vote at the Annual Meeting.
1
<PAGE> 4
The voting rights of holders of Common Stock are subject to the voting
rights of the holders of 91,727 shares outstanding of the Company's Class C
Convertible Preferred Stock, par value $1.50 per share ("Class C Preferred
Stock"). The vote of the holders of at least 60% of the shares of Class C
Preferred Stock at the time outstanding, voting as a separate class, or,
alternatively, the written consent of the holders of all outstanding shares of
Class C Preferred Stock, is needed to effect or validate any action approved by
a vote of the holders of shares of Common Stock. Therefore, such preferred
shareholders have an effective veto over all matters put to a vote of common
shareholders, and such veto power could be used, among other things, to block
the election of directors, the ratification of the appointment of auditors, the
amendment of the Non-Employee Directors' Stock Option Plan, the amendment of the
1989 Employees' Incentive Stock Option Plan or any other transaction that the
holders of Common Stock might otherwise approve at the Annual Meeting. It is
expected that the holders of Class C Preferred Stock will approve, by unanimous
written consent, all matters currently proposed to be put to a vote of common
shareholders at the Annual Meeting.
With regard to the election of directors, votes may be cast in favor
of or withheld from each nominee. Director nominees must receive a plurality of
the votes cast at the meeting to be elected. Votes that are withheld from any
nominee are counted as present for purposes of determining the existence of a
quorum but are not deemed cast at the meeting and, thus, have no effect on the
determination of a plurality. Abstentions may be specified on proposals other
than the election of directors, which proposals require a majority of the votes
cast at the meeting for approval. Abstentions will be counted as present for
purposes of determining the existence of a quorum but are not deemed cast at the
meeting and, thus, have no effect on the determination of a majority. With
respect to shares of Common Stock held in street name, where no vote is
indicated on a matter because the nominee or broker lacks authority to vote such
shares without specific instructions from the beneficial owner and the nominee
or broker has received no such instructions (a "broker non-vote"), such shares
are not counted as present for the purpose of determining the existence of a
quorum and are not counted as votes cast with respect to any such matter.
2
<PAGE> 5
PRINCIPAL SHAREHOLDERS
As of June 2, 1997 (unless otherwise indicated), the following are the
only persons or entities known to the Company to be the beneficial owners of
more than five percent of the Common Stock:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
- - ------------------- ------------ --------
<S> <C> <C>
Peter J. Solomon 1,208,142(1) 15.5
350 Park Avenue
New York, New York 10022
FMR Corp. 764,110(2) 10.2
82 Devonshire Street
Boston, Massachusetts 02109
The Kaufmann Fund, Inc. 577,500(3) 7.7
17 Battery Place
Suite 2624
New York, New York 10004
Donald Glickman 543,098(4) 7.3
575 Park Avenue
New York, New York 10021
Robert Fleming Inc. 433,200(5) 5.8
320 Park Avenue
New York, New York 10022
Rockefeller & Co., Inc. 397,065(6) 5.0
30 Rockefeller Plaza
New York, New York 10112
- - -------------------
<FN>
(1) Includes 48,000 shares of Class C Preferred Stock (including 28,000 shares
held in trust for the benefit of Mr. Solomon's children for which Mr.
Solomon is trustee) presently convertible into 301,725 shares of Common
Stock. Also includes 797,138 shares of Common Stock held in trusts for the
benefit of Mr. Solomon's children for which Mr. Solomon is the trustee. Mr.
Solomon disclaims beneficial ownership of all such shares held in trust.
(2) Beneficial ownership reported as of December 31, 1996, according to a
statement on Schedule 13G, dated February 7, 1997, of FMR Corp., a parent
holding company of Fidelity Management & Research Company, a registered
investment adviser.
(3) Beneficial ownership reported as of December 31, 1996, according to a
statement on Schedule 13G, dated December 31, 1996, of The Kaufmann Fund,
Inc., a registered investment company.
(4) Excludes shares of Common Stock owned by Mr. Glickman's children. Mr.
Glickman disclaims beneficial ownership of such shares.
</TABLE>
3
<PAGE> 6
(5) Beneficial ownership reported as of December 31, 1996, according to a
statement on Schedule 13G, dated February 14, 1997, of Robert Fleming Inc.,
a registered investment adviser.
(6) Beneficial ownership reported as of March 1997 by Rockefeller & Co., Inc.,
according to a summary of recent 13F filings.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into two classes,
currently consisting of five directors each, having terms which expire at the
Annual Meeting (Class 2) and at the 1998 annual meeting of shareholders (Class
1). The five Class 2 directors are proposed for re-election at the Annual
Meeting.
CURRENT NOMINEES
It is proposed to elect at the Annual Meeting five persons to Class 2
of the Board of Directors to serve (subject to the Company's by-laws) until the
election and qualification of their successors at the 1999 annual meeting of
shareholders. If any such person should be unwilling or unable to serve as a
director of the Company (which is not anticipated), the persons named in the
proxy will vote the proxy for substitute nominees selected by them unless the
number of directors has been reduced to the number of nominees willing and able
to serve.
The following table sets forth certain information, including
information concerning beneficial ownership of Common Stock as of June 2, 1997,
for each of the Class 2 directors, each of whom is nominated for re-election:
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK PERCENT
NAME SINCE AGE BENEFICIALLY OWNED OF CLASS
- - ------------------------- ----------------- --------- ------------------------ --------------
<S> <C> <C> <C> <C>
Charles J. August February 1959 78 224,784 (1) (5) 3.0
Frederick M. Danziger July 1984 57 20,266 (5) *
Lawrence C. Day July 1993 47 39,084 (2) *
Jack M. Gallagher October 1987 60 177,517 (3) 2.4
Peter J. Solomon July 1984 58 1,208,142 (4) (5) 15.5
- - ----------------
<FN>
* Less than 1% of the shares deemed outstanding.
(1) Includes 37,514 shares of Common Stock held in The Charles J. and Burton S.
August Family Foundation, a charitable trust for which Mr. August is a
trustee. Mr. August disclaims beneficial ownership of such shares held in
trust.
(2) Includes 37,044 shares of Common Stock issuable upon the exercise of
outstanding options; excludes 190,206 shares of Common Stock attributable
to options not exercisable within the next 60 days.
(3) Includes 28,941 shares of Common Stock issuable upon the exercise of
outstanding options.
(4) See note (1) under "Principal Shareholders."
(5) Includes 8,268 shares of Common Stock attributable to options granted
pursuant to the Non-Employee Directors' Stock Option Plan.
</TABLE>
5
<PAGE> 8
BIOGRAPHICAL INFORMATION
- - ------------------------
Charles J. August founded the predecessor to the Company in 1957 and
served as the Company's Chairman, President and Chief Executive Officer until
October 1987, when he retired.
Frederick M. Danziger is President of Griffin Land & Nurseries, Inc.
Mr. Danziger was previously of counsel in the law firm of Latham & Watkins from
1995 to 1997, and was a partner of the law firm of Mudge Rose Guthrie Alexander
& Ferdon from 1989 to 1995. Mr. Danziger is a general partner of Ryan
Instruments, L.P., and a director of First Financial Caribbean Corporation.
Lawrence C. Day has been President and Chief Executive Officer since
April 1, 1995. Mr. Day was Executive Vice President and Chief Operating Officer
from July 1993 through March 31, 1995, and has been a member of the Company's
Board of Directors since July 1993. Prior to joining the Company, Mr. Day was
Vice President of the Auto Express Division of Montgomery Ward & Co.,
Incorporated from December 1991 to June 1993, Field Director of the Auto Express
Division of Montgomery Ward & Co., Incorporated from December 1989 to December
1991 and Vice President of Automotive Industries, Inc. from February 1989 to
December 1989. From September 1976 to January 1989, Mr. Day held various
management positions for Bridgestone/Firestone, Inc.
Jack M. Gallagher has been Director - Special Projects since April 1,
1995, and was President and Chief Executive Officer from October 1987 through
March 31, 1995. Prior to joining the Company, Mr. Gallagher was President of
Auto Works, a 240-store chain of discount auto parts stores headquartered in
Pontiac, Michigan, from May 1985 to October 1987. Mr. Gallagher has held various
other positions in the auto parts and service industries, including 20 years
with Bridgestone/Firestone, Inc., where he was Chief Executive of the Fidesta
Company, a 200-store nationwide chain of tire and service centers.
Peter J. Solomon has been Chairman of the Board of Directors and
Treasurer of Peter J. Solomon Company Limited, an investment banking firm, since
May 1989. From 1985 to May 1989, he was a Vice Chairman and member of the board
of directors of Shearson Lehman Hutton, Inc. Mr. Solomon is a director of
Centennial Cellular Corp., Century Communications Corp., Charrette Corporation,
Culbro Corporation, Office Depot, Inc. and Phillips-Van Heusen Corporation.
CONTINUING DIRECTORS
The following table sets forth certain information for each of the
continuing Class 1 directors, including information concerning beneficial
ownership of Common Stock as of June 2, 1997:
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK PERCENT
NAME SINCE AGE BENEFICIALLY OWNED OF CLASS
- - ------------------------- ----------------- --------- ------------------------ --------------
<S> <C> <C> <C> <C>
Burton S. August May 1969 82 80,473 (1) (2) 1.1
Robert W. August July 1982 45 319,378 (1) 4.3
Donald Glickman July 1984 64 543,098 (2) (3) 7.3
Lionel B. Spiro August 1992 58 12,032 (2) *
W. Gary Wood February 1993 46 10,475 (2) *
- - ----------------
<FN>
* Less than 1% of the shares deemed outstanding.
</TABLE>
6
<PAGE> 9
(1) Includes 37,514 shares of Common Stock held in The Charles J. and Burton S.
August Family Foundation, a charitable trust for which Mr. August is a
trustee. Mr. August disclaims beneficial ownership of such shares held in
trust.
(2) Includes 8,268 shares of Common Stock attributable to options granted
pursuant to the Non-Employee Directors' Stock Option Plan.
(3) See note (4) under "Principal Shareholders."
BIOGRAPHICAL INFORMATION
- - ------------------------
Burton S. August was a Vice President of the Company until May 1980,
when he retired. Mr. August has been a director of Home Properties of New York
since August 4, 1994.
Robert W. August has been Senior Vice President - Store Support since
October 1996 and Secretary since July 1984. Mr. August was Senior Vice President
- - - Marketing from May 1992 to October 1996, Vice President - Marketing from July
1989 to May 1992, Executive Vice President from 1984 to July 1989, and has
worked for Monro in various other capacities since 1968.
Donald Glickman is a private investor and has been a partner of J.F.
Lehman & Company, an investment banking firm, since January 1993. He was an
executive employee of Peter J. Solomon Company Limited, an investment banking
firm, from July 1989 to June 1992. From July 1988 to July 1989, he was a
managing director of Shearson Lehman Hutton, Inc. Prior to July 1988, Mr.
Glickman was a Senior Vice President of the First National Bank of Chicago. Mr.
Glickman is a director of Sperry Marine, Inc., and a trustee of MassMutual
Corporate Investors and MassMutual Participation Investors. He is Chairman of
General Aluminum Corporation (formerly CalTex Industries, Inc.), a company that
filed a petition under Chapter 11 of the federal bankruptcy laws on December 21,
1992. Such company reorganized on April 29, 1994, and is no longer operating
under Chapter 11.
Lionel B. Spiro is the Chairman and President of Charrette Corporation
of Woburn, Massachusetts, a distributor of design supplies and imaging services,
which he cofounded in 1964.
W. Gary Wood was a principal with Deloitte & Touche, an accounting, tax
and consulting firm, from 1984 through 1993 in the management consulting
practice, working from Deloitte & Touche's Michigan office. Mr. Wood currently
is an independent business owner with operations in computer services and in
specialty manufacturing.
7
<PAGE> 10
OTHER INFORMATION CONCERNING DIRECTORS
Burton S. August and Charles J. August are brothers. Burton S. August
is the father of Robert W. August and John W. August.
The Company has entered into an employment agreement (the "Day
Agreement") with Lawrence C. Day, its President and Chief Executive Officer. The
Agreement, which provides for a base salary of $225,000 plus a bonus, subject to
the discretion of the Compensation Committee, has a two-year base term which
commenced on February 26, 1997, and continues year to year until terminated by
Mr. Day or the Company. The Agreement includes a covenant against competition
with the Company for two years after termination. The Day Agreement provides
that, in the event of a termination without cause (as defined therein), Mr. Day
shall receive two years' salary plus certain other additional benefits, and that
in the event of a termination caused by a change of control (as defined
therein), Mr. Day shall receive two years' salary and all unvested stock options
held by Mr. Day will be accelerated.
Jack M. Gallagher, formerly President and Chief Executive Officer of
the Company, resigned from that position effective March 31, 1995. Mr. Gallagher
continues to serve as a director of the Company. Mr. Gallagher entered into a
three-year employment agreement, effective April 1, 1995, with the Company (the
"Agreement") pursuant to which he serves as Director-Special Projects of the
Company. In such capacity, Mr. Gallagher is responsible for, among other things,
finding, investigating and negotiating with acquisition candidates, and advising
and consulting with respect to investor and shareholder relations. As
compensation for such services, Mr. Gallagher is paid a salary of $80,000 per
year. Through August 31, 1995, Mr. Gallagher was also responsible for
supervising the completion of the Company's new corporate headquarters and
distribution center and was paid a salary of $200,000 per year. Upon Mr.
Gallagher's death or the termination of his employment by the Company, the
Company shall pay him an amount equal to the product of $5,000 times the number
of months remaining in the term of the Agreement. Mr. Gallagher also receives
other benefits, including vacation, paid holidays, medical coverage and
additional benefits customarily provided to the Company's senior executives.
During the term of the Agreement, Mr. Gallagher has agreed not to compete in any
manner with the business of the Company.
As of June 2, 1997, all executive officers and directors of the Company
as a group (15 persons) owned beneficially 2,802,299 shares of Common Stock,
including 48,000 shares of Class C Preferred Stock presently convertible into
301,725 shares of Common Stock, 130,228 shares of Common Stock issuable upon the
exercise of outstanding options and 1,033,810 shares of Common Stock
beneficially owned by the family members of, or other parties (including a
charitable foundation) affiliated with certain officers and directors, which
constituted approximately 35.4% of the shares deemed outstanding on that date.
The officers and directors have sole voting power and sole investment power with
respect to all such shares, except for the 1,033,810 shares beneficially owned
by the family members of, or other parties affiliated with, such officers and
directors (beneficial ownership of which has been disclaimed by such officers
and directors). Exclusive of shares as to which beneficial ownership has been
disclaimed, officers and directors of the Company as a group owned beneficially
approximately 22.4% of Common Stock deemed outstanding on June 2, 1997. As of
June 2, 1997, Named Officers (as hereinafter defined) not identified in the
foregoing tables, John W. August, Senior Vice President - Business Development,
owned beneficially 234,546 shares of Common Stock (including 23,152 shares held
in trust for the benefit of Mr. August's niece for which Mr. August is trustee)
constituting approximately 3.1% of the shares deemed outstanding on such date,
and Catherine D'Amico, Senior Vice President - Finance, owned beneficially 6,311
shares of Common Stock (including 5,209 shares of Common Stock issuable upon the
exercise of outstanding options) constituting less than 1% of the shares deemed
outstanding on such date. G. Michael Cox, Executive Vice President - Store
Operations, held no shares of Common Stock on such date.
8
<PAGE> 11
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four meetings during fiscal 1997(1).
Non-employee directors of the Company receive directors' fees at the rate of
$2,000 per year plus $750 per meeting attended. All directors are reimbursed for
actual expenses incurred in connection with attendance at meetings of the Board
of Directors or committees thereof. In addition, each non-employee director
receives an annual grant of an option to purchase 2,756 shares of Common Stock.
The Board of Directors has created four standing committees: a
five-member Executive Committee, a three-member Audit Committee, a four-member
Compensation and Benefits Committee (the "Compensation Committee") and a
four-member Stock Option Committee.
The Executive Committee has and may exercise, between meetings of the
Board of Directors, all the power and authority of the full Board of Directors,
subject to certain exceptions. During fiscal 1997, the Executive Committee did
not meet. Its members are Robert W. August, Lawrence C. Day, Jack M. Gallagher,
Donald Glickman and Peter J. Solomon.
The Audit Committee has the power and authority to select and engage
independent auditors for the Company, subject to the approval of shareholders,
and reviews with the auditors and with the Company's management all matters
relating to the annual audit of the Company. The Audit Committee held two
meetings in fiscal 1997. Its members are Frederick M. Danziger, Donald Glickman
and W. Gary Wood.
The Compensation Committee has the power and authority to review and
approve the remuneration arrangements for executive officers and employees of
the Company and to select participants, approve awards under, interpret and
administer the employee benefit plans of the Company (other than stock option
plans). The Compensation Committee held two meetings in fiscal 1997. Its members
are Lawrence C. Day, Donald Glickman, Peter J. Solomon and Lionel B. Spiro.
The Stock Option Committee has the power and authority to select
participants and approve awards under, and to interpret and administer or
otherwise act with respect to, the Company's stock option plans. During fiscal
1997, the Stock Option Committee met twice. Its members are Charles J. August,
Donald Glickman, Jack M. Gallagher and Peter J. Solomon.
- - -------------------
(1) References in this Proxy Statement to fiscal years are to the Company's
fiscal years ending or ended March 31 of each year (e.g., references to "fiscal
1997" are to the Company's fiscal year ended March 31, 1997).
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal
years, the annual and long-term compensation of those persons who were, at March
31, 1997, (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------
FISCAL
NAME AND YEAR ALL OTHER
PRINCIPAL ENDED SALARY BONUS OPTIONS (4) COMPENSATION (1)
POSITION MARCH 31, ($) ($) (#) ($)
- - -------- --------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Lawrence C. Day 1997 225,000 176,445 75,000
President and 1996 221,330 0 105,945 725
Chief Executive Officer (2) 1995 157,500 92,925 0 50,192
G. Michael Cox 1997 126,650 42,778 17,500
Executive Vice President - 1996 125,200 0 10,500 21,328
Store Operations (3) 1995 26,515 11,523 22,050 42,339
John W. August 1997 130,420 42,484 0
Senior Vice President - 1996 129,165 0 0 725
Business Development 1995 113,333 41,853 0 4,249
Robert W. August 1997 142,360 46,385 0
Senior Vice President - 1996 140,995 0 0 725
Store Support, and Secretary 1995 136,500 50,334 0 4,561
Catherine D'Amico 1997 109,200 35,681 5,000
Senior Vice President - 1996 108,150 0 6,300 707
Finance, and Chief Financial Officer 1995 105,000 38,719 0 3,667
- - ------------
<FN>
(1) For most officers, All Other Compensation represents the Company's
contributions to the Monro Muffler Brake, Inc. Profit Sharing Plan for the
accounts of the Named Officers. Information relating to fiscal 1997 profit
sharing contributions is not yet available.
For Mr. Day, All Other Compensation also includes reimbursement for
relocation expenses in fiscal 1995. For Mr. Cox, All Other Compensation for
both fiscal 1995 and 1996 represents only reimbursement for relocation
expenses.
(2) Until March 31, 1995, Mr. Day was Executive Vice President and Chief
Operating Officer of the Company.
(3) Mr. Cox joined the Company in fiscal 1995.
(4) The number of options shown has been adjusted to reflect the impact of the
five percent stock dividends paid in August 1996 and August 1995.
</TABLE>
10
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for the Company's fiscal year ended
March 31, 1997, information concerning the granting of options to the Named
Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS EXERCISE VALUE ASSUMING RATES
OPTIONS (2) GRANTED IN PRICE EXPIRATION OF STOCK PRICE
NAME (#) FISCAL YEAR (3) ($/SH) DATE APPRECIATION OF
- - ---- --- --------------- ------ ---- ---------------
5%(1) 10%(1)
------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence C. Day 75,000 66.6 15.13 11/25/06 713,638 1,808,499
G. Michael Cox 17,500 15.5 15.13 11/25/06 166,516 421,983
John W. August 0 ---- ---- ---- ---- ----
Robert W. August 0 ---- ---- ---- ---- ----
Catherine D'Amico 5,000 4.4 15.13 11/25/06 47,576 120,567
- - -----------------
<FN>
(1) These values are calculated by comparing the exercise price of such
options to the market value of the shares of Common Stock subject to
such options, assuming that the market price of such shares increases by
5% and 10%, respectively, during each year of the options' terms. Actual
gains, if any, on the stock option exercises are dependent on the future
performance of the Common Stock and overall stock conditions, as well as
the option holder's continued employment through the vesting period. The
value stated may not necessarily be achieved.
(2) Options granted in fiscal 1997 under the Company's 1989 Employees'
Incentive Stock Option Plan. Subject to certain conditions, 60% of such
options become exercisable three years after the date of grant, 20%
become exercisable four years after the date of grant and 20% become
exercisable five years after the date of grant.
(3) Based on a total of 112,609 options granted to 298 employees of the
Company in fiscal 1997.
</TABLE>
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for the Company's fiscal year ended
March 31, 1997, information concerning the exercise of options by the Named
Officers and the value of unexercised options of the Named Officers:
<TABLE>
<CAPTION>
NUMBER OF TOTAL VALUE OF
SHARES TOTAL NUMBER OF UNEXERCISED, IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE UNEXERCISED OPTIONS HELD AT HELD AT
EXERCISE REALIZED MARCH 31, 1997 MARCH 31, 1997
NAME (#) ($) (#) ($)
- - ---- --- --- --- ---
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence C. Day 0 0 27,783 199,467 327,046 357,816
G. Michael Cox 0 0 0 50,050 0 62,115
John W. August 31,429 511,239 0 0 0 0
Robert W. August 47,144 767,952 0 0 0 0
Catherine D'Amico 0 0 5,209 14,773 66,384 39,019
</TABLE>
- - ---------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
setting the Chief Executive Officer's compensation and making annual
recommendations for the compensation of the other executive officers to the full
Board of Directors after considering recommendations made by the Chief Executive
Officer.
Executive compensation is a mix of salary, annual bonus awarded under
the executive bonus plan, Company contributions to the profit sharing plan and
pension plan, long-term compensation in the form of stock options and other
benefits generally available to all employees. The Company relies to a large
degree on bonus, stock options and stock ownership to attract and retain
executives of outstanding ability and to motivate them to work to their fullest
potential. Under the executive bonus plan, the Compensation Committee seeks to
enhance the profitability of the Company by aligning closely the financial
interest of the Company's executives with those of its shareholders through the
payment of bonuses based on attainment of profit targets. In setting base
salaries, the Company refers to the National Executive Compensation Survey
published by The Management Association of Illinois.
The Chief Executive Officer's fiscal 1997 compensation consisted of a
salary of $225,000 which was set at the beginning of the year, a bonus of
$176,445 and other benefits extended to all full-time employees. Due to his
promotion to Chief Executive Officer on April 1, 1995, the bonus percentage for
which Mr. Day is eligible increased. Therefore, his fiscal 1997 bonus is greater
than his fiscal 1995 bonus. Mr. Day did not receive a bonus for fiscal 1996
because the Company did not attain the minimum required percentage of targeted
profit performance. The Chief Executive Officer does not participate in the
Compensation Committee's determination of his compensation.
The salaries of other executive officers are set at amounts the Company
believes to be equal to those paid to comparable executives at other automotive
service companies of comparable size. Bonuses are paid based on attainment of
profit targets. In 1997, bonuses generally are less than those paid for fiscal
1995 because the Company attained a lower percentage of targeted profit
performance in 1997 than in 1995. Executive officers did not receive bonuses for
fiscal 1996 because the Company did not attain the minimum required percentage
of targeted profit performance.
12
<PAGE> 15
All employees, including executive officers, may receive stock options
from time to time under the Company's stock option plans. Stock option grants
are recommended by the Stock Option Committee of the Board of Directors, a
committee composed primarily of non-management directors. Under the stock option
plans, 24,711 shares are currently available for grants to employees. During
fiscal 1997, the Stock Option Committee granted options, including 75,000 to
Lawrence C. Day, President and Chief Executive Officer; 17,500 to G. Michael
Cox, Executive Vice President - Store Operations; and 5,000 to Catherine
D'Amico, Senior Vice President - Finance, and Chief Financial Officer, in
recognition of such officers' new or expanded management responsibilities.
Options exercisable for an aggregate of 19,294 shares were also granted to seven
non-employee directors of the Company under the terms of the Non-Employee
Directors' Stock Option Plan approved by shareholders in August 1995.
The executive officers participate in the Company's qualified,
non-contributory profit sharing and pension plans on the same basis as all other
employees. The Company offers health care, life insurance, disability insurance
and other benefits to the executive officers on substantially the same terms as
available to all employees of the Company. The amount of perquisites received by
any executive officer in fiscal 1997 did not exceed $50,000 or ten percent of
his or her cash compensation.
The federal income tax laws impose limitations on the deductibility of
compensation in excess of $1 million paid to executive officers in certain
circumstances. The Compensation Committee intends that all compensation paid to
executive officers in fiscal 1997 will be deductible by the Company under such
tax laws.
The members of the Compensation Committee are Lawrence C. Day, Donald
Glickman, Peter J. Solomon and Lionel B. Spiro.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lawrence C. Day, the President and Chief Executive Officer of the
Company, served on the Compensation Committee during the Company's last fiscal
year.
In June 1991, the Company entered into a management agreement effective
July 1, 1991, with Peter J. Solomon Company Limited ("PJSC") pursuant to which
PJSC provides to the Company strategic and financial advice relating to
financing, capital structure, mergers and acquisitions and offensive/defensive
positioning for a fee of $160,000 per year (plus reimbursement of out-of-pocket
expenses). Pursuant to such agreement, the Company has agreed to indemnify PJSC
against certain liabilities. In addition, PJSC, from time to time, provides
additional investment banking services to the Company for customary fees. Peter
J. Solomon, a director and principal shareholder of the Company, is Chairman,
Treasurer and sole shareholder of PJSC.
13
<PAGE> 16
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
shareholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the S&P 400 Index and the S&P Retail
Stores-Specialty Index for the sixty month period from March 31, 1992 to March
31, 1997 (March 31, 1992 = 100):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MONRO MUFFLER BRAKE, INC., THE S & P INDUSTRIALS INDEX
AND THE S & P RETAIL (SPECIALTY) INDEX
<TABLE>
<CAPTION>
Monro Muffler S & P S & P Retail
Brake, Inc. Industrials (Specialty)
<S> <C> <C> <C>
3/92 100 100 100
3/93 93 111 127
3/94 129 114 118
3/95 152 134 120
3/96 138 174 128
3/97 151 207 135
</TABLE>
*$100 INVESTED ON 03/31/92 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING MARCH 31.
14
<PAGE> 17
PENSION PLAN
The Company sponsors a qualified, noncontributory retirement plan (the
"Pension Plan"). Each employee who has attained age 21 becomes a participant on
the April 1 or October 1 following the date the employee completes one year of
service. The basic benefit under the Pension Plan is a straight life annuity.
Benefit payments generally begin upon retirement at age 65 or age 60 with 20
years of service. Subject to certain limits required by law, benefits are
payable monthly in an amount equal to (i) 45% of a participant's average monthly
earnings for the highest ten consecutive years prior to retirement, less (ii)
45% of the monthly primary Social Security benefit payable to a participant at
retirement. The amount of the benefit is reduced for short service participants
and also is reduced if a participant terminates his or her employment prior to
retirement.
Remuneration covered by the Pension Plan includes any kind of
compensation that is subject to tax for Social Security benefits without regard
to the dollar limitation on such compensation subject to FICA taxes. The Pension
Plan only recognizes such earnings up to $100,000 for plan years beginning after
March 31, 1986.
Benefits under the Pension Plan are 100% vested in each participant
upon completion of five years of service, attainment of age 65 or the
termination of the Pension Plan. Lump sum distributions are available at
termination or retirement only for accrued benefits of $3,500 or less.
The following table shows the estimated annual benefits payable upon
retirement at age 65 under the formula described above to participants under the
Pension Plan, excluding the offset for Social Security benefits:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
AVERAGE COMPENSATION NUMBER OF YEARS OF SERVICE
- - -------------------- -------------------------------------------------------------------------
5 10 15 20 25
---------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$100,000 $22,500 $45,000 $45,000 $45,000 $45,000
</TABLE>
The following are estimated years of credited service at age 65
(rounded to the nearest year) under the Pension Plan for each of the Named
Officers: Lawrence C. Day -- 21 years; G. Michael Cox -- 22 years; Robert W.
August -- 43 years; John W. August -- 47 years; and Catherine D'Amico -- 28
years.
CERTAIN TRANSACTIONS
AFFILIATE LEASES
The Company leases 41 stores from Charles J. August, Burton S. August
and others or partnerships or trusts in which such persons or members of their
families, including Robert W. August and John W. August, have interests. In
fiscal 1997, the Company paid or accrued $1,828,000 as rent for these stores. As
of June 2, 1997, most of these properties were subject to mortgages or notes
under which such persons or entities were obligated.
The Company has not entered into any affiliate leases, other than
renewals or modifications of existing leases, since May 1989, and as a matter of
policy, will not do so.
(See also "Compensation Committee Interlocks and Insider
Participation").
15
<PAGE> 18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of the Company's Common
Stock, to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of Common Stock.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during fiscal 1997, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with; except that Jack M. Gallagher, an officer and
director of the Company, reported a sale of 20,000 shares of Common Stock on a
Form 4 that was filed late; and W. Gary Wood, a director of the Company,
reported a purchase of 1,000 shares of Common Stock on a Form 4 that was filed
late.
APPROVAL OF AUDITORS
Subject to ratification by shareholders at the Annual Meeting, the
Board of Directors, upon recommendation of the Audit Committee, has re-appointed
Price Waterhouse LLP as independent auditors to audit the books and accounts of
the Company for fiscal 1998. A representative of Price Waterhouse LLP will be
present at the Annual Meeting to respond to questions and will have an
opportunity to make a statement if he or she desires to do so.
PROPOSAL TO RATIFY THE AMENDMENT TO THE NON-EMPLOYEE DIRECTORS' STOCK OPTION
PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The Company has a Non-Employee Directors' Stock Option Plan (the
"Plan") adopted in 1995 and previously approved by shareholders. The Plan
currently provides that options for a maximum of 60,637 shares (as restated to
give retroactive effect to the 5% stock dividend paid August 5, 1996) of Common
Stock, in the aggregate, may be granted. As of March 31, 1997, options covering
57,882 shares of Common Stock, in the aggregate, were outstanding under the
Plan, leaving 2,755 shares of Common Stock available for grant of future
options.
On May 14, 1997, subject to approval by shareholders of the Company,
the Board of Directors of the Company approved an increase in the aggregate
number of shares of Common Stock authorized for awards of options under the Plan
from 60,637 shares (as restated to give retroactive effect to the 5% stock
dividend paid August 5, 1996) to 125,637 shares, an increase of 65,000 shares,
or approximately .9% of the number of shares of Common Stock currently
outstanding. As required by the terms of the Plan, shareholders of the Company
are asked to approve an amendment to the Plan reflecting such increase (as so
amended, the "Amended Plan"). Other than the increase in the number of shares
authorized, the Amended Plan will be identical to the Plan as currently in
effect.
PURPOSE OF AMENDED PLAN
The purpose of the Amended Plan is to secure for the Company and its
shareholders the benefits of the incentive inherent in increased Common Stock
ownership by members of the Board who are not employees of the Company or any of
its subsidiaries ("Non-Employee Directors"). The Amended Plan is designed to
provide a means of giving existing and new Non-Employee Directors an increased
opportunity to acquire an investment in the Company, thereby maintaining and
strengthening their desire to remain with or join the Company's Board of
Directors and stimulating their efforts on the Company's behalf.
16
<PAGE> 19
SUMMARY OF PLAN
The Amended Plan authorizes the Company to grant options ("Options") to
purchase Common Stock to Non-Employee Directors. Seven directors are currently
eligible to receive Options under the Amended Plan.
The Amended Plan is administered by the Stock Option Committee of the
Board (the "Committee"). The Committee is authorized to construe and interpret
the Amended Plan and Options granted thereunder, to establish and amend rules
for its administration and to correct any defect or omission or reconcile any
inconsistency in the Amended Plan or in any Option to the extent the Committee
deems desirable to carry the Amended Plan or any Option into effect.
Options granted under the Amended Plan are non-incentive stock options.
The exercise price per share of Common Stock under each Option (the "Exercise
Price") is the Fair Market Value of a share of Common Stock on the date of
grant. The Amended Plan provides for an annual grant of an Option to purchase
2,756 shares of Common Stock (as restated to give retroactive effect to the 5%
stock dividend paid August 5, 1996) to each Non-Employee Director on the date of
the Annual Shareholders Meeting. The Fair Market Value is determined by
reference to the closing sale price of the Common Stock as reported on the
NASDAQ National Market System. The term of each Option is ten years.
Options granted under the Amended Plan are subject to such terms and
conditions and evidenced by agreements in such form as is determined from time
to time by the Committee and are in any event subject to the terms and
conditions set forth in the Amended Plan. Options granted under the Amended Plan
are not transferable, except by will and the laws of descent and distribution.
Under the Amended Plan, Options may be exercised immediately on the
date of grant, provided, however, that no shares of the Company's Common Stock
underlying any Option may be sold, assigned, pledged or otherwise transferred
for a period of six months after the date of the grant of such Option.
Each Option shall be exercisable only during the holder's term as a
director, except that an Option may be exercisable after the death, disability,
as defined under Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Disability"), or retirement from the Board at the age of
65 or thereafter ("Retirement"), of a holder while a director of the Company
until the earlier of (i) the one year anniversary of the termination of the
director's term due to death, Disability or Retirement and (ii) the expiration
of the Option (ten years after the date of grant).
Options may be exercised by written notice to the Company accompanied
by payment in full of the Exercise Price. Payment of the Exercise Price may be
made (i) in cash (including check, bank draft or money order), (ii) by delivery
of Common Stock (valued at the Fair Market Value thereof on the date of
exercise), or (iii) by delivery of a combination of cash and Common Stock.
The Company intends to file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), to register the
Common Stock to be issued to Non-Employee Directors under the Amended Plan.
Persons who are "affiliates" of the Company (i.e., persons who are deemed to
control the Company directly or indirectly) may resell Common Stock acquired
under the Amended Plan only by complying with the requirements and limitations
of Rule 144 under the Securities Act.
17
<PAGE> 20
The Amended Plan provides that the Board or the Committee may at any
time suspend or terminate the Amended Plan or make such additions or amendments
as they deem advisable; provided, that certain of such additions or amendments
are made with approval of the Company's shareholders. No Options may be granted
under the Amended Plan after August 1, 2004, although Options previously granted
under the Amended Plan and outstanding on August 1, 2004 remain outstanding,
unless terminated, in accordance with the terms of the Amended Plan and the
Option agreement under which they were granted.
The Amended Plan provides that in the event of a reorganization,
merger, consolidation, recapitalization, stock split-up, stock dividend,
combination of shares or other change in the Common Stock, appropriate changes
to prevent dilution or enlargement of Options will be made by the Committee in
the aggregate number of shares subject to Options to be granted, and in the
number of shares and price per share subject to outstanding Options.
The Amended Plan provides that in the event of a merger of the Company
with or into another corporation constituting a change of control, a sale of all
or substantially all of the Company's assets or a sale of a majority of the
Company's outstanding voting securities (a "Sale of the Company"), the Options
may be assumed by the successor corporation or substantially equivalent Options
substituted by the successor corporation, and if the successor corporation does
not assume the Options or substitute Options, then the Options shall terminate
if not exercised as of the date of the Sale of the Company or other prescribed
period of time. In the event of a liquidation or dissolution of the Company, the
Options shall terminate immediately prior to the liquidation or dissolution.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Options granted or to be granted under the Amended Plan will be
"non-qualified" stock options and are not intended to qualify as incentive stock
options under Section 422 of the Code. In general, no taxable income will be
recognized by the optionee and no deduction will be allowed to the Company upon
the grant of an Option. Upon exercise of an Option, except as described below,
an optionee will recognize an amount of ordinary income equal to the excess of
the fair market value on the exercise date of the shares of Common Stock issued
to an optionee over the Exercise Price. The Company will be entitled to a
corresponding tax deduction equal to the amount included in the optionee's
income.
As the optionees will be directors of the Company, the stock received
upon the exercise of an Option may be subject to restrictions under Section
16(b) of the Exchange Act if the Option is exercised and the underlying stock is
sold within six months after the grant date (the "Restriction Period"). Options
exercised during the Restriction Period will not be deemed to be exercised for
purposes of the above income recognition rules until the date that the
Restriction Period ends, unless the optionee makes an election to be taxed
currently under Section 83(b) of the Code. If such an election is made within 30
days after the transfer of Common Stock pursuant to the exercise of the Option,
the optionee will recognize ordinary income on the date of the actual exercise
of Options (and the Company will be entitled to a corresponding tax deduction
equal to the amount included in the optionee's income).
If an optionee delivers previously-acquired Common Stock, however
acquired, in payment of all or part of the Exercise Price of a non-qualified
stock option, the optionee will not, as a result of such delivery, be required
to recognize as taxable income or loss any appreciation or depreciation in the
value of the previously-acquired Common Stock after its acquisition date. The
fair market value of the shares received in excess of the shares surrendered
constitutes compensation taxable to the optionee as ordinary income. Such fair
market value is determined on the date of exercise. The Company is entitled to a
tax deduction equal to the compensation income included by the optionee in his
income.
The preceding is only a summary and is based upon an analysis of the
Code as currently in effect, existing laws, judicial decisions, administrative
rulings, regulations and proposed regulations, all of which are subject to
change. Moreover, the preceding summary relates only to United States income
taxation and optionees subject to taxation in other jurisdictions may have
different tax consequences, either more or less favorable, from those described
above.
18
<PAGE> 21
APPROVAL OF AMENDMENT
The amendment to the Plan requires the approval of a majority of the
votes cast at the Annual Meeting (in person or by proxy) by the holders of
shares entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES
FOR APPROVAL OF THE AMENDMENT TO THE PLAN AS DESCRIBED ABOVE.
PROPOSAL TO RATIFY THE AMENDMENT TO THE 1989
EMPLOYEES' INCENTIVE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The Company has three Employees' Incentive Stock Option Plans adopted
in 1984, 1987 and 1989, respectively (the "Stock Option Plans"), and previously
approved by shareholders. The Stock Option Plans currently provide that options
for a maximum of 1,150,758 shares (as restated to give retroactive effect to the
5% dividend paid August 5, 1996) of Common Stock, in the aggregate, may be
granted. As of March 31, 1997, options covering 489,877 shares of Common Stock,
in the aggregate, were outstanding under the Stock Option Plans, leaving 38,211
shares of Common Stock available for grant of future options, all of which were
available under the 1989 Employees' Incentive Stock Option Plan (the "1989
Plan").
On May 14, 1997, subject to approval by shareholders of the Company,
the Board of Directors of the Company approved an increase in the aggregate
number of shares of Common Stock authorized for awards of options under the 1989
Plan from 490,738 shares (as restated to give retroactive effect to the 5%
dividend paid August 5, 1996) to 690,738 shares, an increase of 200,000 shares
or approximately 2.7% of the number of shares of Common Stock currently
outstanding. As required by the terms of the 1989 Plan, shareholders of the
Company are asked to approve an amendment to the 1989 Plan reflecting such
increase (as so amended, the "Amended 1989 Plan"). Other than the increase in
the number of shares authorized, the Amended 1989 Plan will be identical to the
1989 Plan as currently in effect.
PURPOSE OF AMENDED PLAN
The purpose of the Amended 1989 Plan is to encourage and enable
employees of the Company to acquire a proprietary interest in the Company
through the ownership of the Company's Common Stock or to increase such
proprietary interest. Ownership of Common Stock will provide such employees with
a more direct stake in the future welfare of the Company and encourage them to
remain with the Company. It is also expected that the Amended 1989 Plan will
strengthen the Company's ability to attract and retain, in its employ,
additional persons of training, experience and ability.
SUMMARY OF PLAN
The Amended 1989 Plan will be administered by the Stock Option
Committee and will provide for grants of "incentive stock options" as defined
under the Code. Under the Amended 1989 Plan, options may be granted to key
employees, including executive officers of Monro, as shall be determined by the
Stock Option Committee. Approximately 2,000 employees, including eight executive
officers, will be eligible to participate. Options granted to employees under
the Amended 1989 Plan will have a maximum term of ten years, except as described
below, and will not be transferable except by will or pursuant to the laws of
descent and distribution.
19
<PAGE> 22
The number and exercise price of options granted is determined by the
Stock Option Committee, but the exercise price of an option may not be less than
the fair market value of the shares subject to the option on the date of the
grant. The option price for owners of more than 10% of the total combined voting
power of all classes of shares of the Company must be at least 110% of the fair
market value of the Common Stock at the date the option is granted and the
maximum term thereof may not exceed five years. Vesting provisions under the
Amended 1989 Plan will be determined by the Stock Option Committee at the time
of grant. The exercise price with respect to any option must be paid in cash.
Generally, an optionee may exercise his options during his lifetime
provided he is employed by the Company. In the event an optionee's employment is
terminated for reasons other than death or disability, an optionee may exercise
his options to the extent exercisable at such time for three months from his
date of termination or the balance of the term of the options, whichever is
shorter.
If an optionee's employment is terminated as the result of being
disabled within the meaning of Section 22(e)(3) of the Code, the three-month
period after cessation of employment during which options may be exercised (as
described above) is extended to one year.
If an optionee dies while employed by the Company or within three
months after retirement from the Company, the optionee's remaining options, to
the extent exercisable at such time, may be exercised by the optionee's estate,
or the person to whom the optionee's rights under the option pass under the
optionee's will or the laws of descent and distribution, within one year of the
date of the optionee's death or the balance of the term of the option, whichever
is shorter.
The Amended 1989 Plan provides that the aggregate number and kind of
shares available for options and the option price of each outstanding option
shall be adjusted to reflect any increase, decrease or change in the total
outstanding shares of the Company resulting from a stock dividend,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or similar transaction.
The Amended 1989 Plan provides that the Board of Directors of the
Company may at any time suspend, terminate or amend the Plan without seeking the
approval of the shareholders of the Company. However, shareholder approval will
be required to give effect to any amendment which would increase the maximum
number of shares for which options may be granted, change the eligibility
requirements for participation in the Plan or cause options granted or to be
granted to fail to qualify as "incentive stock options" under the Code.
FISCAL 1997 GRANTS
The number of options granted in fiscal 1997 to the Named Officers is
set forth in the table entitled "Option Grants in Last Fiscal Year" on page 11.
The following table sets forth the number of options granted in fiscal 1997 to
the following groups:
<TABLE>
<S> <C>
All current executive officers (eight persons) 97,500
All other employees 15,109
</TABLE>
On June 2, 1997, the closing price per share of the Company's Common
Stock on the NASDAQ National Market System was $18.63.
20
<PAGE> 23
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS
In general, neither the grant nor the exercise of an incentive stock
option granted under the Amended 1989 Plan will result in taxable income to the
employee or a deduction to the Company. The sale of Common Stock received
pursuant to the exercise of such an option will result in a long-term capital
gain or loss to the employee equal to the difference between the amount realized
on the sale and the exercise price and will not result in a tax deduction to the
Company. However, the excess of the fair market value of the Common Stock
acquired upon the exercise of an incentive stock option over the option price is
included in the "alternative minimum taxable income" of the optionee for the
year in which such option is exercised and may subject the optionee to increased
taxes under the "alternative minimum tax." In general, the current maximum
Federal ordinary income tax rate is 39.6% while the maximum tax rate on
long-term capital gains is 28% (the phase-out of certain deductions and
exemptions for amounts may result in a marginal tax rate in excess of such rates
on certain items of income). To receive incentive stock option treatment, the
employee must not dispose of the Common Stock within two years after the option
is granted and must hold the Common Stock itself for at least one year after the
transfer of such Common Stock to such employee.
If the holding period rules for incentive stock option treatment are
not satisfied, income is recognized by the employee upon disposition of the
Common Stock (a "disqualifying disposition"). Any gain realized by the employee
will be taxable at the time of such disqualifying disposition as (i) ordinary
income to the extent of the difference between the option price and the lesser
of (a) the fair market value of the Common Stock on the date the incentive stock
option is exercised or (b) the amount realized on such disqualifying disposition
and (ii) short-term or long-term capital gain to the extent of any excess of the
amount realized on the disposition over the fair market value of the Common
Stock on the date the incentive stock option is exercised. With respect to
officers, directors and persons deemed to be beneficial owners of more than 10%
of the Common Stock, the date an incentive stock option is exercised for
purposes of determining the tax consequences of a disqualifying disposition is
generally deemed to be the later of the actual exercise date or the date the
restrictions of Section 16(b) of the Exchange Act lapse (generally six months
after the date of grant). The Company will be entitled to a deduction equal to
the amount of ordinary income recognized by the employee at the time such income
is recognized.
Section 162(m) of the Code limits the deduction for certain
compensation paid to certain senior executive officers of the Company in a
taxable year to $1 million for each such officer. Compensation includes all
salary and other amounts paid to such officers as remuneration for services, but
would not include the gain realized upon the exercise of an incentive stock
option granted under the Amended 1989 Plan unless there is a disqualifying
disposition with respect to such option.
The preceding summary is based upon an analysis of the Code as
currently in effect, existing laws, judicial decisions, administrative rulings,
regulations and proposed regulations, all of which are subject to change.
Moreover, the preceding summary relates only to United States income taxation
and employees subject to taxation in other jurisdictions may have different tax
consequences, either more or less favorable, from those described above.
APPROVAL OF AMENDMENT
The amendment to the 1989 Plan requires the approval of a majority of
the votes cast at the Annual Meeting (in person or by proxy) by the holders of
shares entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE THEIR SHARES
FOR APPROVAL OF THE AMENDMENT TO THE 1989 PLAN AS DESCRIBED ABOVE.
21
<PAGE> 24
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the annual meeting to be
held in 1998 must be received by the Company for inclusion in the Company's next
proxy statement and form of proxy by March 13, 1998.
ADDITIONAL INFORMATION
THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, UPON WRITTEN REQUEST, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH
31, 1997, AS FILED WITH THE SEC, WITHOUT CHARGE, EXCEPT THAT COPIES OF ANY
EXHIBIT TO SUCH REPORT WILL BE FURNISHED UPON PAYMENT BY SUCH SHAREHOLDER OF THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT. WRITTEN REQUESTS MAY
BE DIRECTED TO THE COMPANY, 200 HOLLEDER PARKWAY, ROCHESTER, NEW YORK 14615,
ATTENTION: SECRETARY.
By order of the Board of Directors
/S/ Robert W. August
--------------------
Robert W. August
Secretary
Rochester, New York
July 11, 1997
22
<PAGE> 25
MONRO MUFFLER BRAKE, INC.
Proxy Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders, August 12, 1997
The undersigned hereby appoints Lawrence C. Day and Catherine D'Amico,
as proxies, each with the power to appoint his substitute and hereby authorizes
such person acting individually, to represent and to vote, as specified on the
reverse side hereof, all of the shares of common stock of Monro Muffler Brake,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held at The Hutchison House, 930 East Avenue, Rochester, New
York, 14607, commencing at 10:00 a.m. on August 12, 1997 and at any
postponement or adjournment thereof; and in the discretion of the proxies,
their substitutes or delegates, to vote such shares and to represent the
undersigned in respect of other matters properly brought before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
SIGNING STOCKHOLDER ON THE REVERSE SIDE HEREOF. UNLESS THE AUTHORITY TO VOTE
FOR ELECTION OF ANY NOMINEE FOR DIRECTOR IS WITHHELD IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE REVERSE SIDE HEREOF, THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
(To Be Signed on Reverse Side.)
<PAGE> 26
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MONRO MUFFLER BRAKE, INC.
AUGUST 12, 1997
Please Detach and Mail in the Envelope Provided
- - ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
A /X/ Please mark your
votes as in this
example.
WITHHOLD
FOR authority for
all nominees all nominee(s) FOR AGAINST ABSTAIN
1. To elect / / / / NOMINEES: Charles J. August 2. Ratification of the / / / / / /
Class 2 Frederick M. Danziger re-appointment of
directors Lawrence C. Day Price Waterhouse LLP
to the Jack M. Gallagher as the independent
Board of Peter J. Solomon auditors of the Company.
Directors.
3. Ratification of the / / / / / /
(INSTRUCTIONS: To withhold authority to vote for any amendment to the Non-
individual nominee, write the person's name below.) Employee Directors'
___________________________________________________ Stock Option Plan to
increase the number of shares.
4. Ratification of the / / / / / /
amendment to the 1989
Employee's Incentive Stock
Option Plan to increase the
number of authorized shares.
Mark here for / /
change of address
and note at left.
I will not / / I will / /
attend attend
meeting meeting
SIGNATURE _____________________________________ DATE ___________ _____________________________________________ DATE ______________
SIGNATURE, IF SHARES HELD JOINTLY
Instruction: Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership
name by authorized person.
</TABLE>
