Hahn Automotive Warehouse, Inc.
415 West Main Street, Rochester, New York 14608-1944
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on March 16, 1998
To Our Shareholders:
The Annual Meeting of Shareholders of Hahn Automotive
Warehouse, Inc. ("Company"), a New York corporation, will be held
at the Hyatt Regency Hotel, 125 East Main Street, Rochester, New
York 14604 on Monday, March 16, 1998, at 10:00 a.m. (Local Time),
for the following purposes:
(1) To elect four directors of the Company, each for a term
of two years;
(2) To consider and act upon a proposal to approve an
amendment to the Company's 1992 Stock Option Plan; and
(3) To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of
business on January 30, 1998, as the record date for the
determination of shareholders entitled to notice of and to vote
at the Annual Meeting and at any continuation or adjournment
thereof. A Proxy Statement and proxy are enclosed. It is
important that all shares be represented at the Annual Meeting.
The Board of Directors extends a cordial invitation to all
shareholders to attend the Annual Meeting. If you are unable to
attend the meeting in person, you should sign, date and return
the enclosed proxy in the return envelope that has been provided.
You may revoke your proxy and vote in person if you decide to
attend the Annual Meeting.
By Order of the Board of Directors,
DANIEL J. CHESSIN,
Director, Executive Vice President
and Secretary
Rochester, New York
January 30, 1998
<PAGE> 1
Hahn Automotive Warehouse, Inc.
PROXY STATEMENT
for
ANNUAL MEETING OF SHAREHOLDERS
MARCH 16, 1998
This Proxy Statement and the accompanying proxy are
furnished to the shareholders of Hahn Automotive Warehouse, Inc.
("Company"), a New York corporation, in connection with the
solicitation by and on behalf of the Board of Directors of the
Company, to be used at the Annual Meeting of Shareholders of the
Company ("Annual Meeting"), which will be held on Monday, March
16, 1998, at 10:00 A.M. (Local Time) at the Hyatt Regency Hotel,
125 East Main Street, Rochester, New York 14604, to act upon (1)
the election of four directors, (2) the proposal to approve an
amendment to the Company's 1992 Stock Option Plan and (3) such
other business as may properly come before the Annual Meeting.
This Proxy Statement and the proxy are being first mailed to
shareholders on or about January 30, 1998.
If the enclosed proxy is properly executed and returned
prior to the Annual Meeting, the shares represented thereby will
be voted in accordance with the directions contained therein. If
the proxy is signed and returned without choices having been
specified, the shares represented thereby will be voted FOR the
election of the four director nominees and FOR the proposal to
amend the 1992 Stock Option Plan. The proxy may be revoked by
the person giving it at any time prior to its use by filing with
the Company's Secretary a written revocation, a duly signed later
dated proxy or by requesting return of the proxy at the Annual
Meeting and voting in person.
The Board of Directors has fixed the close of business on
January 30, 1998 as the record date for determining the holders
of the Company's Common Stock, par value $.01 per share, ("Common
Stock") entitled to notice of and to vote at the Annual Meeting
and at any continuation or adjournment thereof. At the close of
business on January 30, 1998, the Company had outstanding
4,745,014 shares of Common Stock, each of which is entitled to
one vote. The Common Stock is the Company's only class of voting
securities outstanding. A majority of the outstanding shares of
Common Stock (2,372,508 shares) present in person or by proxy
will constitute a quorum, which is required to transact business
at the Annual Meeting.
Four directors are to be elected at the Annual Meeting.
Directors are elected by a plurality of the shares present at the
meeting, in person or by proxy, at which a quorum of shares is
represented. This means that those nominees receiving the
largest number of votes cast are elected, up to the maximum
number of directors to be elected at the Annual Meeting. The
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for approval of the proposal
to amend the 1992 Stock Option Plan.
Boxes and a procedure of circling the name of a nominee have
been provided on the enclosed Proxy card to withhold authority to
vote for one or more of the director nominees. Votes withheld in
connection with the election of one or more of the nominees for
director will not be counted as votes cast for such persons.
Abstentions and broker non-votes are counted as present for
purposes of determining the presence or absence of a quorum, but
have no impact on the election of directors, except to the extent
that the failure to vote for a particular nominee may result in
another nominee receiving a larger number of votes.
<PAGE> 2
ELECTION OF DIRECTORS
(Proposal 1)
The Board of Directors of the Company consists of two
classes comprised of four members each. All members of one class
are elected at each annual shareholders meeting to hold office
for a full term of two years.
The Board of Directors has nominated Michael Futerman, Eli
N. Futerman, William A. Buckingham, and Robert I. Israel for
election to the Board at the forthcoming Annual Meeting. If
elected, each such nominee will hold office until the annual
shareholders meeting to be held in 2000 and until a successor is
duly elected and qualified.
The Board of Directors recommends the election of all four
nominees and it is intended that the named proxies (unless
otherwise directed) will vote the enclosed proxy FOR the election
of these nominees. Although the Board of Directors believes that
all of the nominees will be available to serve, the proxies may
exercise discretionary authority to vote for substitutes proposed
by the Board of Directors of the Company. The proxies, however,
cannot vote for more than four nominees.
INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR ELECTION
The name, principal occupation, business experience and age
of each director and nominee for director and his term of office
and period of previous service as a director of the Company are
set forth below. No person set forth below was selected as a
director or nominee pursuant to any arrangement or understanding
with any other person.
Term Expires in 1998; Nominated for Election for Term Expiring in
2000.
Michael Futerman founded the Company in 1958. He has been
Chief Executive Officer of the Company since May 1992. Mr.
Futerman served as President of the Company from the time it was
incorporated through May 1992 and has been a Director of the
Company since it was incorporated in 1958. Mr. Futerman has over
40 years experience in the automotive aftermarket. Mr. Futerman
is 70 years of age.
Eli N. Futerman has been President of the Company since May
1992. Prior to that time, he held various offices with the
Company, including Vice President and Secretary, since beginning
employment with the Company in June 1980. Mr. Futerman has been
a director of the Company since September 1979. Mr. Futerman is
a member of the Board of Directors of Auto Value Associates,
Inc., the programmed distribution group of which the Company is a
member. Mr. Futerman is 39 years of age.
William A. Buckingham has been a Director of the Company
since November 1997 and is currently a consultant in the private
sector. From 1990 to 1997 he held several positions in the
banking industry which included Executive Vice President of First
Empire State Corporation and M&T Bank where he was responsible
for that Company's Retail Banking Division. From 1973 to 1990,
Mr. Buckingham held several positions with the Manufacturers
Hanover Trust Company where he was Executive Vice President with
responsibility for branch operations and consumer and small
business lending, and President and Chief Executive Officer of
Manufacturers Hanover, N.A. Mr. Buckingham currently serves as
Chairman of the Board of Trustees at the Rochester Institute of
Technology and as a Director of its for-profit RIT Research
Corporation subsidiary. Mr. Buckingham also serves as Vice
Chairman of the Directors Advisory Council of M&T Bank, a trustee
of St. Bernard's Institute and the Genesee Country Museum. He
serves as a Director of The Genesee Corporation. Mr. Buckingham
is 55 years of age.
<PAGE> 3
Robert I. Israel has been a Director of the Company since
May 1992. Mr. Israel has been a Managing Director of Schroder,
Incorporated, (or its predecessor-in-interest), an investment
banking firm, since May 1991, with responsibility for that firm's
Energy Group. Prior to joining Schroder, Incorporated, Mr.
Israel was a Senior Vice President at Dillon, Read & Co. Inc.,
which he joined in April 1984, where he was primarily responsible
for new business development in corporate finance. From October
1987 until July 1991, Mr. Israel served as a Director of Hi-Lo
Automotive, Inc. (an automotive parts retailer). Mr. Israel is
currently a Director of Suelopetrol C.A. and Randgold Resources.
Mr. Israel is 48 years of age.
Term Expires in 1999
Daniel J. Chessin has been Executive Vice President of the
Company since March 1995, and Secretary and a Director of the
Company since May 1992. Prior to that time, he held various
offices with the Company since beginning employment with the
Company in March 1988. From 1987 until he joined the Company in
1988, Mr. Chessin practiced law. Mr. Chessin is a member of the
Board of Governors of the Car Care Council. Mr. Chessin is 36
years of age.
Ira D. Jevotovsky has been Vice President-Human Resources
and a Director of the Company since May 1992. From September
1989, when he joined the Company, to May 1992, he managed a
region of the Company's operations. From September 1983 through
September 1989, Mr. Jevotovsky was employed as a counselor and
therapist by Student Assistant Services in Ardsley, New York.
Mr. Jevotovsky is 42 years of age.
Stephen B. Ashley has been a Director of the Company since
May 1992. Effective January 1, 1997, Mr. Ashley is Chairman and
Chief Executive Officer of the Ashley Group (related companies
focused on management, brokerage, financing and investment in
commercial and multi-family real- estate). Mr. Ashley served as
Chairman and Chief Executive Officer of both Sibley Mortgage
Corporation and Sibley Real Estate Services, Inc. from January
1991 to March 1996, at which time he resigned as Chief Executive
Officer of Sibley Mortgage Corporation. Prior to 1991 he served
as President and Chief Executive Officer of both corporations (or
their predecessors-in-interest) since 1975. He is also a
director of The Genesee Corporation, the Federal National
Mortgage Association, Inc. (Fannie Mae) and Manning & Napier
Fund, Inc. (an advisory firm to a family of mutual funds). Mr.
Ashley is 57 years of age.
E. Philip Saunders has been a director of the Company since
May 1992. Mr. Saunders has been Chairman and Chief Executive
Officer of Sugar Creek Corp. and its subsidiaries, W.W. Griffith
Oil Co. (a petroleum distributor) and Sugar Creek Stores, Inc. (a
convenience chain store operation) since 1977 and 1982,
respectively. He has also been Chairman and Chief Executive
Officer of Travel Ports of America, Inc. (a truck stop chain
operation) since November 1987. Mr. Saunders previously served
as a director of Truckstops of America, Inc. and of Ryder
Systems, Inc. after that corporation acquired Truckstops of
America, Inc. and as a director of Richardson Food Corporation (a
distributor of dessert toppings and condiments). Mr. Saunders is
60 years of age.
<PAGE> 4
Family Relationships
Eli N. Futerman is the son of Michael Futerman. Both Daniel
J. Chessin and Ira D. Jevotovsky are sons-in-law of Michael
Futerman. There are no other family relationships between any of
the other directors or executive officers of the Company.
<PAGE> 5
DIRECTORS MEETINGS AND BOARD COMMITTEES
The Board of Directors of the Company met four times during
the fiscal year ended September 30, 1997. No director attended
fewer than 75% of the aggregate of all meetings of the Board of
Directors and Board committees on which they served during fiscal
1997.
The standing committees of the Board of Directors consist of
the Executive, Compensation, Audit and Retirement Committees.
The Board of Directors does not have a nominating committee.
The Executive Committee members are Messrs. Michael
Futerman, Eli N. Futerman and Robert I. Israel. The Executive
Committee may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the
Company except as limited by law. The Executive Committee did
not hold any formal meetings during fiscal 1997.
The Compensation Committee is comprised of Messrs. Michael
Futerman, Eli N. Futerman, William A. Buckingham and Robert I.
Israel. Mr. Buckingham was appointed by the Board of Directors
is fiscal 1998. The function of the Compensation Committee is to
make recommendations to the Board with respect to the salaries
and other compensation for the executive officers and certain key
employees of the Company and its subsidiaries. The Compensation
Committee held one meeting during fiscal 1997.
The Audit Committee members include Messrs. Ashley,
Buckingham and Saunders. The Audit Committee is responsible for
evaluating and approving annually the services performed by the
Company's accountants as well as reviewing the Company's
accounting practices and internal controls. The Audit Committee
recommends to the Board the appointment of independent public
accountants and reviews with representatives of the independent
public accountants the scope of their examination, their fees,
the results of their examination and any problems identified by
the independent public accountants regarding internal controls,
together with their recommendations. The Audit Committee met on
two occasions during fiscal 1997.
On November 8, 1996, the Board of Directors elected to
assume responsibilities for the administration of the 1992 Stock
Option Plan. A standing committee no longer exists for this
function.
The Retirement Committee consists of Messrs. Michael
Futerman, Eli N. Futerman and Ira D. Jevotovsky. The Retirement
Committee is authorized to make decisions relating to the
Company's retirement plans. The Retirement Committee did not
meet in fiscal 1997.
The Company's non-employee directors are paid $1,000 for
each Board meeting and $500 for each committee meeting attended
and reimbursed for ordinary and necessary expenses incurred in
connection with such meetings. Pursuant to the Company's 1993
Stock Option Plan for Non-Employee Directors, Messrs. Ashley,
Israel, Saunders, and a former director, Gordon E. Forth, were
each awarded on March 15, 1997 non-qualified stock options to
purchase 1,000 shares of Common Stock at $7.50 per share. The
exercise price for these options is based on the closing price of
the Common Stock on the date the options were granted.
<PAGE> 6
INFORMATION ABOUT EXECUTIVE OFFICERS
The following table sets forth certain information about the
Company's executive officers:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Michael Futerman 70 Director and Chief Executive Officer
Eli N. Futerman 39 Director and President
Daniel J. Chessin 36 Director, Executive Vice President and Secretary and Secretary
Ira D. Jevotovsky 42 Director and Vice President - Human Resources
David M. Appelbaum 45 Vice President - Direct Distribution
Daniel R. McDonald 47 Vice President - General Counsel
Albert J. Van Erp 60 Vice President - Finance
Timothy Vergo 48 Vice President - Wholesale Operations
</TABLE>
David M. Appelbaum became Vice President - Direct
Distribution in September 1994. Prior to joining the Company,
Mr. Appelbaum served as President of Meisenzahl Auto Parts, Inc.
and Regional Parts, Inc. since 1986 and 1979, respectively; both
companies engage in the direct distribution of automotive
aftermarket parts and were acquired by the Company on September
30, 1994. Mr. Appelbaum is 45 years of age.
Daniel R. McDonald joined the Company as Vice President
and General Counsel in July 1997. Prior to joining the Company,
Mr. McDonald was Associate General Counsel of First Federal
Savings and Loan Association of Rochester, which was
headquartered in Rochester, New York. Before joining First
Federal in April 1993, Mr. McDonald was engaged in private law
practice. Mr. McDonald has also served as Vice-President and
Deputy General Counsel of Goldome FSB and was previously a
partner in the Buffalo law firm of Jaeckle, Fleischmann & Mugel.
Mr. McDonald is 47 years of age.
Albert J. Van Erp has been Vice President - Finance of the
Company since May 1992. From December 1985 to May 1992, he
served as Controller of the Company. Mr. Van Erp has over 35
years experience in corporate internal accounting. Mr. Van Erp
is 60 years of age.
Timothy Vergo has been Vice President - Wholesale Operations
of the Company since May 1992. From August 1981 to May 1992, he
served as Director of Operations of the Company. Mr. Vergo is 48
years of age.
See Election of Directors above for information concerning
the Company's other executive officers.
<PAGE> 7
AMENDMENT TO 1992 STOCK OPTION PLAN
PROPOSAL (2)
Between fiscal 1993 and 1997 the Company granted options to
purchase an aggregate of 439,453 shares of the Company's Common
Stock at prices varying from $8.00 to $13.50 per share, based
upon the market price on the date of the grant. The lower market
values for the stock which have prevailed have negated the
incentive value of the options. The Board of Directors believes
it would be in the best interests of the shareholders if the
options were repriced in order to provide effective incentive to
the non-Director option holders to exercise their options and
more closely align their interests with those of the Company's
shareholders. Accordingly, on December 1, 1997, the Board of
Directors approved a reduction in the exercise price of certain
options totaling 202,780 shares which were granted as set forth
in the following table. The closing market value of the stock on
December 1, 1997 was $6.25. It is noted that none of the options
granted to Directors (including members of the Futerman family)
are included in the reduction. Only options granted to 30
employees of the Company or its subsidiaries, including two of
the most highly compensated executive officers, are affected.
(The two executive officers, David M. Appelbaum, Vice President -
Direct Distribution and Timothy Vergo, Vice President - Wholesale
Operations, have an interest in the outcome of this proposal.
See "Options/SAR Grants in Last Fiscal Year" table below.) The
reduction is conditioned upon approval of the amendment to the
Company's 1992 Stock Option Plan setforth below by shareholders
owning a majority of shares represented at the annual meeting.
STOCK OPTION RECAST PROPOSAL
DECEMBER 1, 1997
<TABLE>
<CAPTION>
GRANT DATE FISCAL ORIGINAL PROPOSED PROJECTED NUMBER OF
YEAR OPTION REDUCTION OPTION SHARES
PRICE PRICE AFFECTED*
<S> <C> <C> <C> <C> <C>
01/20/93 1993 12.50 25% $ 9.38 15,748
10/28/93 1994 10.38 25% $ 7.79 51,633
03/14/95 1995 13.50 25% $ 10.13 49,103
11/29/95 1996 10.38 15% $ 8.82 30,396
11/1796 1997 8.00 15% $ 6.80 55,900
TOTAL 202,780
</TABLE>
*Includes adjustments for 4% stock dividends where applicable.
All of the options are Non-Qualified Stock Options (as opposed to
Incentive Stock Options which are intended to qualify under
Section 422 of the Internal Revenue Code). They were granted
under the Company's 1992 Stock Option Plan which was approved by
the shareholders. The Plan provides in Section 7.B. that the
exercise price shall be not less than 100% of the Fair Market
Value of the stock on the date the option is awarded. Thus, the
proposed reduction in exercise price requires shareholder
approval of the following restatement of Section 7.B. (new matter
is underlined):
"Section 7.B. Purchase Price. Each Incentive Stock Option
will provide for an exercise price of not less than 100% of
the Fair Market Value of the Stock (hereafter defined), on
the date the option is awarded; provided that, in the event
the option holder owns more than 10% of the combined voting
power of all classes of stock of a parent or subsidiary of
the Company at the time of such grant, then the purchase
price will be not less than 110% of such Fair Market Value.
<PAGE> 8
The exercise price of each Non-Qualified Stock Option,
however, may be less than the Fair Market Value of the Stock
on the date the option is awarded, whether fixed at time of
grant or thereafter repriced. The Fair Market Value of a
share of Stock on any day shall be the reported closing
price on the NASDAQ System or, if there is no such quote,
then as determined by the Committee, but not less than par
value."
Options which are exercised at prices less than Fair Market Value
on the date of the grant will have a greater dilutive effect on
shareholder equity than options granted the same day with an
exercise price of not less than 100% of the Fair Market Value of
the Stock on the date the option is awarded.
The Board of Directors does not intend to reprice options
heretofore granted to its members. The Board of Directors has no
present plan to issue additional options at less than Fair Market
Value, but will have the ability to do so if the proposal is
approved.
Management recommends a vote FOR the proposal.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors, officers and beneficial owners of more than
10% of the Company's Common Stock to file with the Securities and
Exchange Commission reports of transactions in its Common Stock.
The Company believes that during fiscal 1997, Section 16(a)
filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were complied
with by all such persons.
<PAGE> 9
EXECUTIVE COMPENSATION
The summary compensation table below sets forth the
compensation paid or accrued for services rendered in all
capacities to the Company during the last three fiscal years to
the Company's Chief Executive Officer and each of the Company's
four other most highly compensated executive officers during
fiscal 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Name and Principal Fiscal Salary Bonus Securities Underlying
Position Year ($) ($) Options/SARs (#) <F2>
<F1>
<S> <C> <C> <C> <C>
Michael Futerman 1997 353,824
Chief Executive 1996 336,921 60,000
Officer 1995 327,338
Eli N. Futerman 1997 307,693
President 1996 292,847 40,000
1995 284,425 140,608
Daniel J. Chessin 1997 128,197 12,480
Executive Vice 1996 117,377 25,000 6,490
President 1995 110,911 11,249
David M. Appelbaum 1997 134,873 43,768 20,400
Vice President 1996 128,561 61,907 5,408
Direct Distribution 1995 125,974 46,750 8,436
Timothy Vergo 1997 135,899 36,000 20,400
Vice President 1996 129,453 40,000 5,408
Wholesale Operations 1995 119,404 30,000 8,436
<FN>
<F1> Includes portion of salary deferred under the
Company's 401(k) Profit Sharing and Savings Plan.
<F2> Options granted during fiscal 1997, fiscal 1996 and
fiscal 1995 have been restated to reflect a 4% stock dividend
approved by the Board of Directors on March 15, 1995, 1996 and
1997 to holders of record on April 10, 1995, 1996
and 1997 and distributed on May 1, 1995, 1996 and
1997 respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Name and Principal Position Fiscal All Other Compensations ($)
Year <F3> <F4>
<S> <C>
Michael Futerman 1997 53,425 <F5>
Chief Executive Officer 1996 53,283 <F5>
1995 52,861 <F5>
Eli N. Futerman 1997 32,655 <F6>
President 1996 32,551 <F6>
1995 28,524 <F6>
Daniel J. Chessin 1997 2,890
Executive Vice President 1996 2,777
1995 2,312
David M. Appelbaum 1997 1,671
Vice President 1996 1,999
Direct Distribution 1995 1,795
Timothy Vergo 1997 2,306
Vice President 1996 2,094
Wholesale Operations 1995 1,658
<FN>
<F3> Includes the aggregate value of the Company's
matching contribution during fiscal 1997 to the Company's
401(k) Profit Sharing and Savings Plan.
During the 1997 fiscal year, the Company made matching
contributions in the following amounts to
the accounts of the following executive officers: Michael
Futerman, $1,425; Eli N. Futerman, $1,365; David M.
Appelbaum, $471; Daniel J. Chessin, $1,365; and Timothy Vergo,
$1,223.
<F4> Includes premiums paid by the Company during fiscal 1997
on insurance policies on the lives of the executive
officers named in the table. The Company is the owner and
beneficiary of such insurance policies that were purchased in
connection with the non-qualified selective incentive plan
provided by the Company which provides for certain retirement or death
benefits to the officers or their designated beneficiaries.
During fiscal 1997, the Company made premium payments in the
following amounts for such insurance
policies on the lives of the following executive officers:
Eli N. Futerman, $2,206; David M. Appelbaum, $1,200; Daniel
J. Chessin, $1,525; and Timothy Vergo, $1,083.
<F5> Includes $52,000 that the Company accrued under a
deferred compensation agreement entered into by the Company
with Mr. Futerman in November, 1992, which provides for the
payment to Mr. Futerman or his designees of 15 annual
payments of $50,000 each after his retirement from the Company.
<F6> Includes $29,093 of premiums paid by the Company during
fiscal 1997 on four insurance policies owned by, and on the life
of, Mr. Futerman, which have a total death benefit of approximately
$2,525,000 and under which Mr. Futerman has the
discretion to designate the beneficiary or beneficiaries.
<PAGE> 10
</FN>
</TABLE>
OPTIONS GRANTS IN FISCAL 1997
The following table sets forth stock options granted during
fiscal 1997, to the Company's Chief Executive Officer and the
Company's four other most highly compensated executive officers
during such fiscal year.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
(a) (b) (c) (d) (e)
Name Number of % of Exercise Expiration
Total
Securities Options/ or Base Date
Underlying SARs Price
Options/ Granted ($/sh)
to
SARs Employees <F2>
Granted (#) in Fiscal
<F1> Year
<C> <S> <S> <S> <S>
Mike Futerman
Chief Executive
Officer
Eli N. Futerman
President
Daniel J. Chessin 12,480 16.72% 8.00 11/7/06 <F3>
Executive Vice
President
David M. Appelbaum 10,400 13.94% 6.80 <F5> 11/7/06 <F3>
Vice President 10,000 19.05% 6.00 9/22/07 <F3>
Direct Distribution
Timothy Vergo 10,400 13.94% 6.80 <F5> 11/7/06 <F3>
Vice President 10,000 19.05% 6.00 9/22/07 <F3>
Wholesale Operations
<FN>
<F1> Each option shown in the table was granted under the Company's
1992 Plan. Each option becomes exercisable in equal ratable
installments over three years, commencing one year after the grant
date. The options permit the exercise price to be paid, in whole or in
part, by cash, surrender to the Company of already-owned Common
Stock or "in-the-money" exercisable options for the Common Stock.
Under the option grants, the Company will grant a reload option
for the amount of shares of Common Stock so surrendered, subject
to sufficient shares being available under the 1992 Plan. The
option grants which expire on November 7, 2006 have been adjusted
for a 4% stock dividend which was authorized by the Board of
Directors on March 15, 1997 and was distributed on May 1, 1997.
<F2> The exercise price for grants to Messrs. Appelbaum, Chessin and
Vergo were at the closing price of the Common Stock on the date
of the grant.
<F3> These options were granted for a term of no grater than ten years
subject to earlier termination upon the occurrence of certain
events related to termination of employment.
<F5> Exercise Price and Potential Realizble Value give effect to assumed
and Potential Realizable Value give effect to assumed
Stockholder approval of Proposal 2 as if it occurred on the grant
date. If such approval is not granted, the Exercise Price will
remain $8.00 and the Potential Realizable Value will
remain $52,332 at 5% appreciation and $132,621 at 10% appreciation.
<PAGE> 11
</FN>
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants Potential
Realizable Value
at
Assumed Annual
Rates of
Stock Price
Appreciation for
(a) Option Terms ($)
<F4>
Name 5% ($) 10% ($)
<C> <C> <C>
Michael Futerman
Chief Executive Officer
Eli N. Futerman
President
Daniel J. Chessin 62,799 159,145
Executive Vice President
David M. Appelbaum 64,813 145,101
Vice President 37,740 95,624
Direct Distribution
Timothy Vergo 64,813 145,101
Vice President 37,740 95,624
Wholesale Operations
<FN>
<F4> Under the Securities and Exchange Commission's rules and
regulations, companies are required to show hypothetical "option
spreads" that would result from assumed appreciation of the
underlying securities of awarded options during their respective
terms. The "option spread" shown is based on assumed annual
compound stock appreciation rates of 5% and 10%, respectively,
during the entire term of the options. The ultimate option
spread, however, will depend on the market value of the Common
Stock at a future date, which may or may not correspond to such
hypothetical appreciation.
<PAGE> 12
</FN>
</TABLE>
OPTION EXERCISES IN FISCAL 1997
The following table sets forth stock options exercised by the
Company's Chief Executive Officer and the Company's four other
most highly compensated executive officers during fiscal 1997,
and the number and value of all unexercised options at September
30, 1997.
<TABLE>
<CAPTION>
Aggregated Options/SAR Exercises in the Last Fiscal Year and
Fiscal Year-End Option/SAR Values
Number of
Securities
Underlying Value of
Unexercised Unexercised In-
Shares Options/SARs The-Money
Options/
Acquired at Fiscal SARs Fiscal
on Value Year-End 1997 Year-End 1997
Exercise Realized Exercisable Exercisable
Name (#) ($) Unexercisable Unexercisable
<F1>
<S> <C> <C> <C> <C>
Michael
Futerman
Chief
Executive
Officer
Eli N.
Futerman
President 187,291
Daniel J.
Chessin
Executive Vice
President 40,596 20,556
David M.
Appelbaum
Vice President
Direct
Distribution 7,427 26,817
Timothy Vergo
Vice President
Wholesale
Operations 24,300 26,817
<FN>
<F1> An "in-the-money" stock option is an option for which the
market price on September 30, 1997, of the Company's
Common Stock underlying the option exceeds the options
exercise price. As of September 30, 1997, the market price
of the Company's Common Stock was $6.00. The exercise
price of the options disclosed in the above table including
those affected by Proposition 2 above, if approved, in
all cases equaled or exceeded the market price of the
Company's Common Stock on that date.
<PAGE> 13
</FN>
</TABLE>
REPORT ON EXECUTIVE MANAGEMENT COMPENSATION
The Company's goals for the compensation of its executive
management are to compensate fairly for a job well done and to
retain key employees while providing them with proper motivation
to maximize shareholder value. The Company's executive
compensation program consists of three principal elements: (1)
base salary, (2) annual bonuses, which reward for overall Company
performance and individual performance, and (3) options awarded
under the Company's 1992 Stock Option Plan, which also reward and
provide long-term incentives that are intended to align the
interests of option recipients with those of shareholders.
The Compensation Committee annually recommends to the Board
of Directors the salary and bonuses to be paid to the Company's
Chief Executive Officer and other members of executive
management. The Compensation Committee's salary and bonus
recommendations for such persons are generally based on a
subjective assessment of the performance of the Company and the
executive management member under consideration as well as the
executive's particular experience and level of responsibility.
The Committee does not use any specific criteria for measurement
of corporate performance or weight in a formalized manner any of
the various factors which it considers. The Board members vote on
the Committee's recommendations (except with respect to salary
and bonuses proposed for them) in light of their own experiences
and familiarities with compensation practices. In fiscal 1997,
all recommendations of the Compensation Committee were approved
by the Board.
The Board of Directors is responsible for awarding options
under and otherwise administering the Company's 1992 Plan.
During fiscal 1997, the Board of Directors awarded options under
the 1992 Plan to executive management members and certain key
employees for the purchase of up to 141,430 (adjusted for the 4%
1997 stock dividend) shares of Common Stock. The Board of
Directors based the amount of such awards on the subjective
determination of the members as to the past contribution and
potential contribution of the option recipients to the Company's
overall success, without particular emphasis on either such
component. In determining the award of options during fiscal
1997, the Board of Directors did not take into account options
already held by option recipients.
Section 162(m) of the Internal Revenue Code generally limits
the tax deductibility of annual compensation paid to certain
executive officers to $1 million, unless specified requirements
are met. The Compensation Committee has carefully considered the
impact of this provision in the Tax Law. At this time, it is the
Committee's intention to continue to compensate all officers
based on overall performance.
The Committee expects that most, if not all, compensation
paid to officers will qualify as a tax deductible expense.
However, it is possible that at some point in the future
circumstances may cause the Committee to authorize compensation
that is not deductible.
Respectfully submitted,
January 30, 1998 Michael Futerman* Eli N. Futerman*
Daniel J. Chessin Ira D. Jevotovsky
Stephen B. Ashley William A. Buckingham*
Robert I. Israel* E. Philip Saunders
* Compensation Committee Member
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Compensation Committee was comprised
of Messrs. Michael Futerman, Eli N. Futerman and Mr. Robert I.
Israel. Mr. Michael Futerman is the Company's Chief Executive
Officer and Mr. Eli N. Futerman is the Company's President. Mr.
Robert I. Israel is a Managing Director of the Investment Banking
firm which follows the Company's progress and periodically
provides investment banking services to the Company.
<PAGE> 15
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total
shareholder return on the Company's Common Stock, based on the
market price of the Common Stock, with the total return on the
CRSP Total Return Index for the NASDAQ Stock Market (U.S.
Companies) and the Motor Vehicle New Parts Supply and Wholesale
Industry peer group constructed by the Company. The comparison
of total return assumes that a fixed investment of $100 was
invested on January 20, 1993, in the Company's Common Stock and
in the foregoing index and peer group and further assumes the
reinvestment of dividends. The stock price performance shown on
the graph is not necessarily indicative of future price
performance.
Comparison of Cumulative Total Return <F1>
TOTAL SHAREHOLDERS RETURN
Base Period Return Return Return Return Return
1/20/93 9/93 9/94 9/95 9/96 9/97
Hahn Automotive 100.00 88.00 123.00 58.24 69.22 53.99
Whs. Inc.
NASDAQ 100.00 109.26 109.54 150.81 178.97 245.63
Peer Group 100.00 130.41 139.03 158.49 177.40 182.12
[FN]
<F1> The component issuers of the Motor Vehicle new Parts Supply
and Wholesale Industry Group shown above included: ICIS
Management Group (f/k/a Altier Sales Co., Inc.), Amalgamated
Automotive Industries, APS Holding Corp., Capital Industries,
Inc., Coast Distributor Systems, Inc., Custom Chrome, Inc.,
Genuine Auto Parts Company, Hahn Automotive Warehouse, Inc.,
Oakhurst Co., Inc. (f/k/a Oakhurst Capital Inc.) and Republic
Automotive Parts. The returns of the component issuers have been
weighted according to their respective market capitalizations as
of the beginning of each period for which a return is indicated.
</FN>
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information
concerning each group or person known to the Company who
beneficially owned in excess of 5% of the Company's outstanding
Common Stock at December 31, 1997.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class <F1>
<S> <C> <C>
Michael and Sara
Futerman
415 West Main Street
Rochester, NY 14608 2,220,667 <F2> 46.8%
Eli N. Futerman
415 West Main Street
Rochester, NY 14608 450,905 <F3> 9.1%
Morgan Stanley & Co.,
Inc.
NSCC 55 Water Street
Plaza Level South Bldg. 359,439<F4> 7.6%
New York, NY 10041
JSC, Inc.
200 C Baynard Bldg.
3411 Silverside Pool
Wilmington, DE 19810 292,464 <F5> 6.2%
David M. Appelbaum
415 West Main Street
Rochester, NY 14608 258,694 <F6> 5.4%
<FN>
<F1> The percentages in this column have been calculated on the
bases of the 4,745,014 shares outstanding on December 31, 1997,
plus the number of shares of Common Stock deemed outstanding
pursuant to the Securities and Exchange Commission Rule 13d-
3(d)(1).
<F2> Michael Futerman is the record owner of 2,040,707 shares and
Sara Futerman is the record owner of 179,960 shares. Mr. and
Mrs. Futerman disclaim beneficial ownership over all shares not
held of record by them in their respective names.
<F3> Includes 16,482 shares owned by Mr. Futerman's immediate
family and 187,291 shares which may be purchased by Mr. Futerman
pursuant to stock options that are currently exercisable or
become exercisable within 60 days from December 31, 1997. Mr.
Futerman disclaims beneficial ownership of shares not held of
record by him.
<F4> As reported by American Stock Transfer & Trust Company, the
Company's transfer agent.
<F5> This information is based solely on a Schedule 13D dated
November 27, 1996, relating to the Common Stock filed by JSC,
Inc. with the Securities and Exchange Commission plus a 4% stock
dividend authorized by the Board of Directors on March 15, 1997
to holders of record on April 10, 1997 and distributed on May 1,
1997.
<F6>Includes 12,696 shares which may be purchased by Mr.
Appelbaum pursuant to stock options that are currently
exercisable or become exercisable within 60 days from December
31, 1997.
</FN>
</TABLE>
<PAGE> 17
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of Common
Stock beneficially owned at December 31, 1997 by each director,
each nominee for director, each executive officer named in the
summary Compensation Table and by all directors and officers of
the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Director, Nominee or Group Ownership <F1> Class <F8>
<S> <C> <C>
Mike Futerman, Chief Executive
Officer and Director 2,220,667 <F2> 46.8
Eli N. Futerman, President and
Director 450,905 <F3> 9.1
Daniel J. Chessin, Executive Vice
President, Secretary and Director 132,561 <F4> 2.8
Ira D. Jevotovsky, Vice President
Human Resources and Director 98,857 <F5> 2.1
Stephen B. Ashley, Director 7,212 <F6> *
William A. Buckingham, Director --- *
Robert I. Israel, Director 9,547 <F6> *
E. Philip Saunders, Director 5,611 <F6> *
David M. Appelbaum, Vice President
Direct Distribution 258,694 <F6> 5.4
Timothy Vergo, Vice President
Wholesale Operations 29,569 <F6> *
All Directors and Executive
Officers of the Company as a Group
(12 persons) 3,252,319 <F7> 63.9
* Indicates the number of shares constitutes less than 1% of the
outstanding Common Stock.
<FN>
<F1> Each director, nominee and executive officer in the above
table possesses sole voting and sole investment power with
respect to the shares owned by him except for such shares as to
which beneficial ownership is disclaimed in a footnote.
<F2> Includes 179,960 shares owned of record by members of Mr.
Futerman's spouse. Mr. Futerman disclaims beneficial ownership
over the shares held by his spouse.
<F3> Includes 16,482 shares owned of record by members of Mr.
Futerman's immediate family and 187,291 shares which may be
purchased by Mr. Futerman pursuant to stock options that are
currently exercisable or become exercisable within 60 days of
December 31, 1997. Mr. Futerman disclaims beneficial ownership
over all shares owned by his immediate family members.
<F4> Includes 77,899 shares owned of record by members of Mr.
Chessin's immediate family and 46,919 shares which may be
purchased by Mr. Chessin pursuant to stock options that are
currently exercisable or become exercisable within 60 days of
December 31, 1997. Mr. Chessin disclaims beneficial ownership
over all shares owned by his immediate family members.
<F5> Includes 71,151 shares owned of record of Mr. Jevotovsky's
immediate family and 24,462 shares which may be purchased by Mr.
Jevotovsky pursuant to stock options that are currently
exercisable or become exercisable within 60 days of December 31,
1997. Mr. Jevotovsky disclaims beneficial ownership over all
shares owned by his immediately family members.
<F6> Includes shares issuable upon exercise of stock options
presently exercisable or which become exercisable within 60 days
from December 31, 1997 as follows: Stephen B. Ashley, 5,611
shares; Robert I. Israel, 5,611 shares; E. Philip Saunders,5,611
shares; David M. Appelbaum, 12,696 shares; Timothy Vergo
29,569 shares.
<F7> Includes 346,472 shares issuable upon exercise of stock
options presently exercisable or which become exercisable
within 60 days of December 31, 1997.
<F8> The percentages in this column have been calculated on the
basis of the 4,745,014 shares outstanding on December 31, 1997,
plus the number of shares of Common Stock deemed outstanding
pursuant to Securities and Exchange Commission Rule 13d-
3(d)(1).
</FN>
</TABLE>
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of September 30, 1997, the Company leased from Michael
Futerman, Eli N. Futerman, Daniel J. Chessin and Ira D.
Jevotovsky and their wives or partnerships, corporations or
trusts in which such persons have interest, 12 of its 21
distribution center sites and 34 of its 83 Advantage Auto Stores
sites. (Michael Futerman is the Company's Chief Executive
Officer and director and a greater than 5% beneficial owner of
Common Stock; Eli N. Futerman is the Company's President, a
director and a greater than 5% beneficial owner of Common Stock;
Daniel J. Chessin is the Company's Executive Vice President,
Secretary and a director; Ira D. Jevotovsky is the Company's Vice
President-Human Resources and a director.) The approximate total
gross distribution center space under such leases was 345,300
square feet. The approximate aggregate store space under such
leases was 168,278 square feet. All such leases provide for
security deposits equal to one month's rent, annual base rental
increases equal to the annual increase in a specified Consumer
Price Index ("CPI") applied to the preceding year's base rent,
and for the Company to pay insurance, real property taxes,
utilities and to perform all maintenance and repairs. In fiscal
1997, the Company paid approximately $1,637,500 as base rental
for all distribution centers and store properties under such
related party leases. As of September 30, 1997, the total base
rentals payable under all such distribution center and store
leases through the end of their respective terms was
approximately $4.3 million, subject to CPI-based increases
described above. Some of the aforementioned leases have been
capitalized. These rental figures are total rents for all such
leases, including amounts representing interest under those
leases which have been capitalized. The Company believes that
these related party distribution center and Advantage Auto Store
leases taken as a whole are no less favorable to the Company than
leases which could have been obtained from third parties dealing
at arm's length.
The Company leases certain computer equipment from Eli N.
Futerman. The aggregate rentals payable under this lease in
fiscal 1997 were approximately $42,000. Total rentals payable
through the end of the computer leases term is $21,000.
As of September 30, 1997, the Company's wholly-owned
subsidiary Meisenzahl Auto Parts, Inc. ("Meisenzahl"), leased two
locations from David M. Appelbaum. (Mr. Appelbaum is the
Company's Vice President-Direct Distribution.) The total gross
space under such leases is approximately 45,000 square feet.
Both leases require the Company to pay insurance, real property
taxes, utilities and to perform all maintenance and repairs. As
of September 30, 1997, the total base rentals payable under both
leases through the end of their respective terms was
approximately $1.8 million or approximately $250,000 annually.
The Company believes that these leases taken as a whole are no
less favorable to Meisenzahl than leases which could have been
obtained from third parties dealing at arm's length.
Meisenzahl is liable under guarantees in favor of the holder
of first priority mortgages covering the property leased from Mr.
Appelbaum pursuant to which approximately $1.7 million in the
aggregate was outstanding as of September 30, 1997. Mr.
Appelbaum agreed to indemnify, defend and hold harmless the
Company from any losses which arise from or are related to such
guarantees.
<PAGE> 19
By an Agreement dated August 14, 1995, the Company entered
into a split-dollar arrangement with a Trust established by Eli
N. Futerman of which Fleet Trust Company is the Trustee.
Pursuant to the Agreement, the Company pays a portion of the
annual premium on an insurance policy held in the Trust. The
policy is a single life policy payable upon the death of Mr.
Futerman. The face value of the policy is $1 million. Pursuant
to the terms of the Trust, Mr. Futerman's wife will receive the
proceeds of the policy (less reimbursement to the Company for
premiums) if she survives her husband. The amount of all
premiums paid by the Company constitutes indebtedness from the
Trust to the Company. Upon termination of the Agreement, the
Company is entitled to receive from the Trust the amount equal to
the premiums it has paid. The Company paid $14,008 of premiums
during the 1997 fiscal year in connection with this arrangement.
Mr. Futerman acquired this policy during fiscal year 1994.
By an Agreement dated January 18, 1996, the Company entered
into a split-dollar arrangement with a Trust established by
Daniel J. Chessin of which Fleet Trust Company is the Trustee.
Pursuant to the Agreement, the Company pays a portion of the
annual premium on an insurance policy held in the Trust. The
policy is a single life policy payable upon the death of Mr.
Chessin. The face value of the policy is $1 million. Pursuant
to the terms of the Trust, Mr. Chessin's wife will receive the
proceeds of the policy (less reimbursement to the Company for
premiums) if she survives her husband. The amount of all
premiums paid by the Company constitutes indebtedness from the
Trust to the Company. Upon termination of the Agreement, the
Company is entitled to receive from the Trust the amount equal to
the premiums it has paid. The Company paid $11,851 of premiums
during the 1997 fiscal year in connection with this agreement.
Mr. Chessin acquired this policy during fiscal year 1994.
In February 1996, Michael Futerman and Eli N. Futerman
advanced $2.5 million to the Company. The Company repaid
$350,000 of this debt and exchanged five-year subordinated notes
for the demand notes representing the $2,150,000 principal
balance of this debt. The Futermans' subordinated notes bear
interest at the rate of 12% per annum. Interest is payable
monthly. The notes are redeemable at the option of the Company,
in whole or part, at any time, subject to a subordination
agreement with the Company's lender, Fleet Capital Corporation.
The notes are payable in 50 equal monthly principal payments
which commenced January 1, 1997, and continue through and
including February 1, 2001. In the event that the Company's net
income is $4,141,000 or greater in any fiscal year, then the
Company must make a principal prepayment on the notes equal to
19.186% of its net income in excess of such amount, provided the
Company is not in default under the credit facility with Fleet
Capital Corporation. The Futermans' notes are unsecured and
subordinate to all of the Company's indebtedness to Fleet Capital
Corporation.
Robert I. Israel, a Director of the Company, is a Managing
Director of Schroder, Incorporated, which periodically provides
investment banking services to the Company.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has not, as of the date hereof,
selected independent auditors for the fiscal year ending
September 30, 1998. Coopers & Lybrand L.L.P. audited the
Company's financial statements for the 1997 fiscal year and has
performed such services since 1988. Representatives of Coopers &
Lybrand L.L.P. are expected to be present at the Annual Meeting,
and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
<PAGE> 20
OTHER BUSINESS
As of the date of this Proxy Statement, the Company's
management does not intend to present, and has not been informed
that any other person intends to present, any matter for action
at the Annual Meeting other than those described above. If any
other matters properly come before the meeting, it is intended
that the persons named in the enclosed proxy will vote the proxy
on such matters in accordance with their best judgment.
The cost of solicitation of proxies in connection with the
Annual Meeting will be paid by the Company. In addition to
solicitation by use of mails, some of the officers and regular
employees of the Company, without extra remuneration, may solicit
Proxies personally or by telephone, telegraph or cable. The
Company will reimburse any banks, brokers and other custodians,
nominees and fiduciaries for their expenses in forwarding proxy
and solicitation material to the beneficial owners of the Common
Stock held by them.
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Shareholder proposals for inclusion in the proxy statement
and form of proxy for the next Annual Meeting of Shareholders
must be received by the Company at its executive offices on or
before November 15, 1998.
Daniel J. Chessin,
Director, Executive Vice President
and Secretary
Rochester, New York
January 30, 1998
<PAGE> 21
