<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 sec.240.14a-11(c) or sec.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)(1) 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 3, 1998
---------------
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 Monday, August 3, 1998, commencing at 10 a.m., for the following
purposes:
1. electing five directors to Class 1 of the Board of Directors
to serve a two-year term, and until their successors are duly
elected and qualified at the 2000 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, 1999; and
3. 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 Monday, June 8,
1998, will be entitled to vote at the meeting.
/s/ Robert W. August
--------------------
Robert W. August
Secretary
Rochester, New York
July 1, 1998
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 3, 1998
---------------
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 Monday, August
3, 1998, 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 and for the ratification of the
re-appointment of independent auditors 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 3, 1998.
VOTING SECURITIES
Only shareholders of record at the close of business on Monday, June 8,
1998 will be entitled to vote. At such date, the Company had outstanding
7,915,797 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 13, 1998, the Board of Directors of the Company declared a five
percent stock dividend, payable June 18, 1998, to holders of record as of June
8, 1998. 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, 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 1, 1998 (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 1,383,648 (1) 16.6
810 Fifth Avenue
New York, New York 10021
Robert Fleming Inc. 583,504 (2) 7.4
320 Park Avenue
New York, New York 10022
FMR Corp. 581,219 (3) 7.3
82 Devonshire Street
Boston, Massachusetts 02109
Donald Glickman 573,147 (4) 7.2
575 Park Avenue
New York, New York 10021
The Kaufmann Fund, Inc. 520,000 (5) 6.6
140 East 45th Street
43rd Floor
New York, New York 10017
Rockefeller & Co., Inc. 423,019 (6) 5.3
30 Rockefeller Plaza
New York, New York 10112
- -------------------
</TABLE>
(1) Includes 65,000 shares of Class C Preferred Stock (including 45,000
shares held in trust for the benefit of Mr. Solomon's children for which
Mr. Solomon is trustee) presently convertible into 429,015 shares of
Common Stock. Also includes 836,995 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, 1997, according to a
statement on Schedule 13G, dated February 23, 1998, of Robert Fleming
Inc., a registered investment adviser.
(3) Beneficial ownership reported as of December 31, 1997, according to a
statement on Schedule 13G, dated February 14, 1998, of FMR Corp., a
parent holding company of Fidelity Management & Research Company, a
registered investment adviser.
(4) Excludes shares of Common Stock owned by Mr. Glickman's children. Mr.
Glickman disclaims beneficial ownership of such shares.
3
<PAGE> 6
(5) Beneficial ownership reported as of December 31, 1997, according to a
statement on Schedule 13G, dated December 31, 1997, of The Kaufmann
Fund, Inc., a registered investment company.
(6) Beneficial ownership reported as of December 31, 1997, according to a
statement on Schedule 13G, dated February 12, 1998, of Rockefeller &
Co., Inc., a registered investment advisor.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into two classes
having terms which expire at the Annual Meeting (Class 1) and at the 1999 annual
meeting of shareholders (Class 2). The five Class 1 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 1
of the Board of Directors to serve (subject to the Company's by-laws) until the
election and qualification of their successors at the 2000 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 1, 1998,
for the Class 1 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>
Burton S. August May 1969 83 84,290 (1) (2) 1.1
Robert W. August July 1982 46 326,546 (1) 4.1
Donald Glickman July 1984 65 573,147 (2) (3) 7.2
Lionel B. Spiro August 1992 59 15,526 (2) *
W. Gary Wood February 1993 47 13,893 (2) *
- ----------------
* Less than 1% of the shares deemed outstanding.
</TABLE>
(1) Includes 36,289 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 11,576 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 through October 1996, Vice President - Marketing from
July 1989 to May 1992, Executive Vice President from 1984 through July 1989, and
has worked for Monro in various other capacities since 1968.
5
<PAGE> 8
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 Burke Industries, Inc., Macneal Schwendler Corporation
and General Aluminum Corporation, and a trustee of MassMutual Corporate
Investors and MassMutual Participation Investors. He is Chairman of Elgar
Holdings, Inc.
Lionel B. Spiro was the Chairman and President of Charrette
Corporation of Woburn, Massachusetts, a distributor of design supplies and
imaging services, until July 1997, when he retired. Mr. Spiro co-founded the
company 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.
CONTINUING DIRECTORS
The following table sets forth certain information, for each of the
continuing Class 2 directors, including information concerning beneficial
ownership of Common Stock as of June 1, 1998:
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK PERCENT
NAME SINCE AGE BENEFICIALLY OWNED OF CLASS
- --------------------------- --------------- --- ------------------- ---------
<S> <C> <C> <C> <C>
Charles J. August February 1959 79 217,243 (1) (4) 2.7
Frederick M. Danziger July 1984 58 24,174 (4) *
Jack M. Gallagher October 1987 61 174,480 (2) 2.2
Peter J. Solomon July 1984 59 1,383,648 (3) (4) 16.6
- ----------------
* Less than 1% of the shares deemed outstanding.
</TABLE>
(1) Includes 36,289 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 52,888 shares of Common Stock issuable upon the exercise of
outstanding options, exercisable within 60 days of June 1, 1998.
Includes 55,000 shares held in trust for the benefit of Mr.
Gallagher's children for which Mr. Gallagher is trustee. Mr. Gallagher
disclaims beneficial ownership of such shares.
(3) See note (1) under "Principal Shareholders."
(4) Includes 11,576 shares of Common Stock attributable to options granted
pursuant to the Non-Employee Directors' Stock Option Plan.
6
<PAGE> 9
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.
Jack M. Gallagher has been President and Chief Executive Officer since
February 17, 1998. Mr. Gallagher was Director of Special Projects from April 1,
1995 through February 17, 1998, and 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 Firestone Tire & Rubber Co., 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 a member of the
board of directors of Shearson Lehman Hutton, Inc. Mr. Solomon is a director of
Centennial Cellular Corp., Lawfin International Limited, General Cigar Holdings,
Inc., Office Depot, Inc. and Phillips-Van Heusen Corporation.
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.
Lawrence C. Day served as President and Chief Executive Officer of the
Company through February 17, 1998, when he resigned from the position. On
February 17, 1998, Jack M. Gallagher, formerly Director - Special Projects of
the Company, assumed the position of President and Chief Executive Officer on an
interim basis while the Company searches for a permanent replacement for Mr.
Day. Mr. Gallagher previously served as President and Chief Executive Officer
from October 1987 through March 1995.
The Company has entered into an employment agreement (the "Agreement")
with Mr. Gallagher which requires full time services of Mr. Gallagher during the
"Interim Term", defined as the period during which Mr. Gallagher serves as Chief
Executive Officer. The "Interim Term" may not be extended beyond six months
without Mr. Gallagher's consent. The Agreement provides for a base monthly
salary of $35,000 during the Interim Term. The Agreement states that subsequent
to the "Interim Term", Mr. Gallagher will continue in the employ of the Company,
providing consulting services, at a reduced monthly salary of $2,000 through
February 2003. The Agreement includes a covenant against competition with the
Company for two years after termination.
As of June 1, 1998, all executive officers and directors of the Company
as a group (13 persons) owned beneficially 2,770,940 shares of Common Stock,
including 65,000 shares of Class C Preferred Stock presently convertible into
429,015 shares of Common Stock, 163,266 shares of Common Stock issuable upon the
exercise of outstanding options and 1,225,294 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 32.6% 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 1,225,294 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 18.2% of Common Stock deemed outstanding on June 1, 1998. As of
June 1, 1998, Named Officers (as hereinafter defined) not identified in the
foregoing tables, G. Michael Cox, Executive Vice President- Store Operations,
owned beneficially, 17,199 shares of Common Stock issuable upon the exercise of
outstanding options, constituting less than 1% of the shares deemed outstanding
on such date, and Catherine D'Amico, Senior Vice President - Finance, owned
beneficially 11,758 shares of Common Stock (including 10,601 shares of Common
Stock issuable upon the exercise of outstanding options) constituting less than
1% of the shares deemed outstanding on such date.
8
<PAGE> 11
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during fiscal 1998(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 2,894 shares of Common Stock.
The Board of Directors has created four standing committees: a
four-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 1998, the Executive Committee did
not meet. Through February 17, 1998, its members were Robert W. August, Lawrence
C. Day, Donald Glickman and Peter J. Solomon. Upon Mr. Day's resignation as
President and Chief Executive Officer in February 1998, Jack M. Gallagher was
appointed to the Executive Committee.
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 1998. Through February 17, 1998, its members were Frederick
M. Danziger, Donald Glickman, Jack M. Gallagher and W. Gary Wood. Upon his
appointment as interim President and Chief Executive Officer in February 1998,
Mr. Gallagher resigned from this committee.
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 1998. Its members
are Donald Glickman, Peter J. Solomon, Lionel B. Spiro and, until his
resignation in February 1998, Lawrence C. Day.
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
1998, the Stock Option Committee met six times. Its members are Charles J.
August, Donald Glickman, Lionel B. Spiro 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
1998" are to the Company's fiscal year ended March 31, 1998).
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, 1998, (i) the Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------
FISCAL YEAR
NAME AND ALL OTHER
PRINCIPAL ENDED SALARY BONUS OPTIONS (4) COMPENSATION (1)
POSITION MARCH 31, ($) ($) (#) ($)
- -------- --------- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Jack M. Gallagher 1998 122,500 0 90,000
President and 1997 80,000 0 0 1,814
Chief Executive Officer (2) 1996 130,000 0 0 725
G. Michael Cox 1998 140,400 0 0
Executive Vice President - 1997 126,650 42,778 17,500 2,843
Store Operations 1996 125,200 0 10,500 21,328
Robert W. August 1998 146,900 0 0
Senior Vice President - 1997 142,360 46,385 0 3,227
Store Support, and Secretary 1996 140,995 0 0 725
Catherine D'Amico 1998 113,865 25,000 0
Senior Vice President - 1997 109,200 35,681 5,000 2,475
Finance, and Chief Financial Officer 1996 108,150 0 6,300 707
Lawrence C. Day 1998 235,000 0 0
Former President and 1997 225,000 176,445 75,000 3,400
Chief Executive Officer (3) 1996 221,330 0 105,945 725
- ------------
</TABLE>
(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 1998
profit sharing contributions is not yet available.
For Mr. Cox, All Other Compensation for 1996 represents only
reimbursement for relocation expenses.
(2) Until February 17, 1998, Mr. Gallagher was Director - Special Projects.
(See "Other Information Concerning Directors").
(3) Mr. Day served as President and Chief Executive Officer through February
17, 1998, when he resigned from the position. Mr. Day terminated
employment with the Company on March 31, 1998. (See "Other Information
Concerning Directors").
(4) The number of options shown has been adjusted to reflect the impact of
the five percent stock dividends paid in August 1997 and August 1996.
10
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for the Company's fiscal year ended
March 31, 1998, 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) ($/SH) DATE APPRECIATION OF
- ---- ----------- --------------- ------- ---- ----------------------
5% (1) 10% (1)
------ -------
<S> <C> <C> <C> <C> <C> <C>
Jack M. Gallagher 90,000 72.48 14.00 1/29/08 792,407 2,008,115
</TABLE>
- -----------------
(1) These values are calculated by comparing the exercise price of such
options to the market value of the shares of Common Stock subject to
such options, assuming that the market price of such shares increases
by 5% and 10%, respectively, during each year of the options' terms.
Actual gains, if any, on the stock option exercises are dependent on
the future performance of the Common Stock and overall stock
conditions, as well as the option holder's continued employment through
the vesting period. The value stated may not necessarily be achieved.
(2) Options granted in fiscal 1998 under the Company's 1989 Employees'
Incentive Stock Option Plan. Subject to certain conditions, 25% of such
options become exercisable on the date of grant, 37.5% become
exercisable one year after the date of grant and 37.5% become
exercisable two years after the date of grant.
(3) Based on a total of 124,175 options granted to 32 employees of the
Company in fiscal 1998.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for the Company's fiscal year ended March
31, 1998, information concerning the exercise of options by the Named Officers
and the value of unexercised options of the Named Officers:
<TABLE>
<CAPTION>
NUMBER OF TOTAL VALUE OF
SHARES TOTAL NUMBER OF UNEXERCISED, IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE UNEXERCISED OPTIONS HELD AT HELD AT
EXERCISE REALIZED MARCH 31, 1998 MARCH 31, 1998
NAME (#) ($) (#) ($)
- ---- --- --- --- ---
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack M. Gallagher 0 0 52,888 67,500 164,621 177,525
G. Michael Cox 0 0 13,892 38,661 7,492 62,115
Catherine D'Amico 0 0 7,293 13,688 32,776 43,109
Lawrence C. Day 0 0 38,896 * 210,783 *
</TABLE>
* Mr. Day resigned from the Company effective March 31, 1998 and any
unexercisable options were forfeited at that time.
- ---------------
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 fiscal 1998 compensation of Lawrence C. Day, who until February 17,
1998 served as Chief Executive Officer, consisted of a salary of $235,000 which
was set at the beginning of the year, a bonus and other benefits extended to all
full-time employees. Mr. Day did not receive a bonus for fiscal 1998 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 comparable to those paid to executives holding similar positions
at other automotive service companies of comparable size. Bonuses are paid based
on attainment of profit targets. Executive officers did not receive bonuses for
fiscal 1998 and fiscal 1996 because the Company did not attain the minimum
required percentage of targeted profit performance. However, Catherine D'Amico
was awarded a bonus in connection with her performance in the negotiation of the
pending acquisition of the Speedy Muffler stores in the United States (the
"Speedy Stores") from Speedy Muffler King, Inc.
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,
322,420 shares are currently available for grants to employees. During fiscal
1998, the Stock Option Committee granted options, including 90,000 to Jack M.
Gallagher, interim President and Chief Executive Officer in recognition of such
officer's new or expanded management responsibilities. Options exercisable for
an aggregate of 20,258 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 1998 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 1998 will be deductible by the Company under such
tax laws.
The members of the Compensation Committee are Donald Glickman, Peter J.
Solomon, Lionel B. Spiro and until his resignation in February 1998, Lawrence C.
Day.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lawrence C. Day, who until February 17, 1998 was 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. The
firm is providing financial advisory services to the Company in connection with
the acquisition of and financing for the Speedy Stores. Peter J. Solomon,
Chairman of the Board and principal shareholder of the Company, is Chairman
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, 1993 to March
31, 1998 (March 31, 1993 = 100):
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: Jack
M. Gallagher -- 14 years; G. Michael Cox -- 22 years; Robert W. August -- 43
years; Catherine D'Amico -- 28 years; and Lawrence C. Day -- 21 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, have interests. In fiscal 1998, the
Company paid or accrued $1,786,000 as rent for these stores. As of June 1, 1998,
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 1998, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with; except that John W. August, a former officer of the
Company, reported a sale of 17,400 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 1999. 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.
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the annual meeting to be
held in 1999 must be received by the Company for inclusion in the Company's next
proxy statement and form of proxy by March 4, 1999.
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, 1998, 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 1, 1998
16
<PAGE> 19
MONRO MUFFLER BRAKE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 3, 1998
The undersigned hereby appoints Jack M. Gallagher and Catherine D'Amico, as
proxies, each with the power to appoint his substitute and hereby authorize
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 3, 1998 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> 20
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MONRO MUFFLER BRAKE, INC.
AUGUST 3, 1998
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
A X Please mark your votes as in this example:
---
1. To elect Class 1 directors to the Board of Directors.
FOR WITHHOLD Nominees: Burton S. August
all nominees authority for Robert W. August
all nominee(s) Donald Glickman
[ ] [ ] Lionel S. Spiro
W. Gary Wood
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the person's name below.)
- -----------------------------------------------------------------------------
2. Ratification of the re-appointment of FOR AGAINST ABSTAIN
Price Waterhouse LLP as the independent
auditors of the Company. -- ------- -------
Mark here for change of address and note in full.
-------
I will not attend meeting I will attend meeting
-------- -------
SIGNATURE DATE
----------------------------------------------------- --------
SIGNATURE DATE
----------------------------------------------------- --------
SIGNATURE, IF SHARES HELD JOINTLY
Instruction: Please sign exactly as your name appears hereon. When shares are
held by joint persons, 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.
