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Exhibit (a)(2)
Amendment No. 1 to the
PRELIMINARY PROXY STATEMENT
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(AMENDMENT NO. 1)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [ X ]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential for the Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
HAHN AUTOMOTIVE WAREHOUSE, INC.
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(Name of Registrant as Specified in Charter)
(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-16(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(2) Aggregate number of securities to which transaction applies:
570,118
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(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):
$3.00 - Determined based upon the maximum proposed number of
shares to be cashed-out in transaction of 571,442 shares at $3.00
per share.
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(4) Proposed maximum aggregate value of transaction:
$1,710,354
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(5) Total fee paid:
$342.87
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[X] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HAHN AUTOMOTIVE WAREHOUSE, INC.
415 West Main Street
Rochester, New York
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Hahn Automotive Warehouse, Inc. to be held at Hahn's corporate headquarters at
415 West Main Street, Rochester, New York on the ____ day of ____________, 2001
at 10:00 a.m., local time.
The purpose of the Special Meeting is to consider and vote upon the amended
and restated merger agreement dated May 16, 2001, as amended, among Hahn
Automotive Warehouse, Inc., Glick, LLC, HAW Acquisition, Inc., Eli N. Futerman
and Daniel J. Chessin, and the related merger, whereby HAW Acquisition will be
merged with and into Hahn. If the merger is consummated, all of the issued and
outstanding common stock of Hahn held by shareholders other than Messrs.
Futerman and Chessin and certain other family members will be converted into the
right to receive $3.00 per share in cash, without interest. Hahn will be the
surviving corporation in the merger and will become a wholly-owned subsidiary of
Glick. The merger agreement is attached as APPENDIX A to the enclosed proxy
statement.
Consummation of the merger is subject to certain conditions, including the
approval of 66 2/3% of all of the votes entitled to be cast on the matter by
holders of Hahn's outstanding common stock on the record date. Glick and Messrs.
Futerman and Chessin and certain other family members have agreed to vote, or
cause to be voted, in favor of the merger and the merger agreement, shares
representing approximately 64% of Hahn's outstanding common stock. In addition,
officers and directors of Hahn who hold less than 1% of Hahn's outstanding
common stock have indicated that they will vote in favor of the merger and
merger agreement.
Consummation of the merger will also require the approval of the merger and
merger agreement by a majority of the votes cast on the matter, either in person
or by proxy, by our public shareholders. Our public shareholders include all
shareholders other than those affiliated with the Glick buy-out group.
THE HAHN BOARD OF DIRECTORS APPOINTED A SPECIAL COMMITTEE OF INDEPENDENT
DIRECTORS TO CONSIDER, NEGOTIATE AND RECOMMEND EITHER THE APPROVAL OR REJECTION
OF THE MERGER BY THE BOARD. THE SPECIAL COMMITTEE UNANIMOUSLY RECOMMENDED TO OUR
BOARD OF DIRECTORS THAT THE MERGER BE APPROVED.
In connection with its evaluation of the merger, the special committee
engaged Empire Valuation Consultants, Inc. to act as its financial advisor.
Empire Valuation has rendered its written opinion that, as of May 16, 2001,
based upon and subject to the assumptions, limitations and qualifications
included in its opinion, the consideration of $3.00 per share to be received in
the merger is fair from a financial point of view to our public shareholders.
Empire Valuation's
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written opinion dated May 16, 2001 is attached as APPENDIX B to the accompanying
proxy statement. You should read it carefully.
Based on the special committee's recommendation and careful consideration
of certain other factors, the board of directors believes that the terms of the
merger and merger agreement are fair to, and in the best interests of, the
public shareholders of Hahn. Thus, the board approved the merger and recommends
that shareholders vote FOR the merger and the merger agreement. Since Messrs.
Futerman and Chessin have personal conflicts of interest in recommending this
merger to you, they abstained from voting at the board meeting at which this
recommendation was made.
The accompanying proxy statement provides a description of the proposed
merger and additional information that you may wish to consider in deciding how
to vote. Please give this information your careful attention.
Whether or not you plan to attend, it is important that your shares are
represented and voted at the Special Meeting. Accordingly, please promptly
complete, sign and date the enclosed proxy card and return it in the envelope
provided.
Sincerely,
------------------------------------
William A. Buckingham,
Chairman, Special Committee
________, 2001
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HAHN AUTOMOTIVE WAREHOUSE, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on _____________, 2001
To Our Shareholders:
A special meeting of shareholders of Hahn Automotive Warehouse, Inc., a New
York corporation, will be held at Hahn's executive offices located at 415 West
Main Street, Rochester, New York 14608 on _____________, 2001, at 10:00 a.m.
(local time), for the following purposes:
(1) To consider and vote on a proposal to adopt an Amended and
Restated Agreement and Plan of Merger, dated as of May 16, 2001,
as amended, by and among Hahn and Glick, LLC, HAW Acquisition
Corp., Eli N. Futerman and Daniel J. Chessin, whereby, among
other things, HAW Acquisition will merge with and into Hahn and
each outstanding share of Hahn common stock held by shareholders,
other than Glick, Futerman, Chessin and certain other family
members, will be converted into a right to receive $3.00 in cash,
without interest. Holders of options to purchase common stock
that are vested as of the effective date of the merger, shall
have the right to receive the positive difference, if any,
between the $3.00 per share merger consideration and the stock
option exercise price. The merger agreement is more fully
described in the accompanying proxy statement and the full text
can be found as APPENDIX A thereto.
(2) To consider a potential adjournment of the special meeting, if
necessary, to solicit additional votes in favor of the merger
proposal.
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof. We are not
aware of any other business to come before the special meeting.
The board of directors of Hahn has fixed the close of business on ________,
2001 as the record date for the determination of shareholders entitled to notice
of, and to vote at the special meeting and at any adjournment thereof. A proxy
statement and proxy are enclosed. It is important that all shares be represented
at the special meeting. You have a right to dissent from the merger and obtain
payment of the fair value of your shares by complying with the New York law
provisions contained in APPENDIX C to the proxy statement.
ADOPTION OF THE MERGER AGREEMENT WILL REQUIRE THE AFFIRMATIVE VOTE OF AT
LEAST TWO-THIRDS OF THE VOTES OF ALL OUTSTANDING SHARES OF HAHN'S COMMON STOCK.
WHILE NOT REQUIRED BY THE NEW YORK BUSINESS CORPORATION LAW OR HAHN'S RESTATED
CERTIFICATE OF INCORPORATION OR AMENDED AND RESTATED BY-LAWS, THE MERGER
AGREEMENT PROVIDES THAT THE MERGER MUST ALSO BE APPROVED AND
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ADOPTED BY THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE VOTES CAST AT THE
MEETING, EITHER IN PERSON OR BY PROXY, EXCLUDING VOTES CAST BY GLICK, FUTERMAN,
CHESSIN AND CERTAIN OTHER FAMILY MEMBERS, ABSTENTIONS AND BROKER NON-VOTES. THE
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT
AND RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE MERGER AND THE MERGER
AGREEMENT.
You are cordially invited to attend the special meeting. However, to ensure
your representation at the special meeting, please complete, sign, date and
promptly mail your proxy card in the enclosed postage-paid envelope. If you are
a shareholder whose shares are not registered in your name, you will need
additional documentation from the holder of record of your shares to vote in
person at the meeting. The prompt return of your proxy will save us the expense
of further requests for proxies.
By Order of the Board of Directors,
Daniel J. Chessin
Executive Vice President
and Secretary
Rochester, New York
_______, 2001
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AGENCY
HAS APPROVED OR DISAPPROVED THIS TRANSACTION OR PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION OR THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THESE DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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HAHN AUTOMOTIVE WAREHOUSE, INC.
415 W. Main Street
Rochester, New York
PROXY STATEMENT FOR
SPECIAL MEETING OF SHAREHOLDERS
_______, 2001
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................1
WHERE YOU CAN FIND MORE INFORMATION...........................................5
FORWARD-LOOKING INFORMATION...................................................5
SUMMARY.......................................................................7
Recent Developments......................................................7
The Special Meeting......................................................7
The Parties..............................................................8
The Merger...............................................................9
Special Factors..........................................................9
The Merger Agreement....................................................11
RECENT DEVELOPMENTS..........................................................12
THE SPECIAL MEETING..........................................................12
Date, Time, Place and Matters to be Considered..........................12
Record Date; Quorum Requirements........................................13
Voting Requirements.....................................................13
Voting and Revocation of Proxies........................................13
Rights of Objecting Shareholders........................................13
Possible Adjournment of Special Meeting and Other
Matters to be Considered at the Special Meeting......................14
Costs of Soliciting Proxies.............................................15
Exchanging Stock Certificates...........................................15
Effective Time of the Merger............................................15
SPECIAL FACTORS..............................................................15
Background Of The Transaction...........................................15
Recommendation of Special Committee.....................................20
Recommendation of our Board Of Directors................................23
Glick Buy-Out Group's Purpose And Reasons For The Merger................24
Position of the Glick Buy-Out Group as to Fairness of the Merger........25
Fairness Opinion of Special Committee's Financial Advisor...............26
Hahn Management 2001 Projections........................................36
Preliminary Calculation of Value of the Glick Buy-Out
Group's Financial Advisor............................................37
Plans for Hahn After the Merger.........................................40
Conduct of the Business of Hahn if the Merger is not Consummated........41
INTERESTS OF THE GLICK BUY-OUT GROUP AND HAHN'S EXECUTIVE OFFICERS AND
DIRECTORS IN THE MERGER AND HAHN; ACTUAL OR POTENTIAL CONFLICTS OF
INTEREST.....................................................................41
Merger Consideration and Stock Options..................................41
Directors And Officers Of The Surviving Corporation.....................41
Compensation Of Directors...............................................42
Compensation of Special Committee Members...............................42
Indemnification Arrangements............................................43
Certain Other Transactions..............................................43
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EFFECTS OF THE MERGER........................................................44
THE MERGER AGREEMENT.........................................................44
The Merger; Merger Consideration........................................44
The Exchange Fund; Payment for Shares of Common Stock...................45
Transfers of Common Stock...............................................46
Treatment of Stock Options..............................................46
Tax Withholding.........................................................46
The Directors and Officers, Certificate of Incorporation and
By-Laws Following the Merger.........................................46
Representations And Warranties..........................................46
Covenants...............................................................47
Indemnification and Insurance...........................................48
Conditions..............................................................49
Termination.............................................................51
Fees And Expenses.......................................................51
Amendment And Waiver....................................................52
Accounting Treatment....................................................52
Financing of the Merger.................................................52
Regulatory Approvals and Third Party Transactions.......................53
Risk that the Merger Will Not Be Consummated............................53
Effective Time of the Merger............................................53
FEES AND EXPENSES............................................................54
FEDERAL INCOME TAX CONSEQUENCES..............................................54
INFORMATION REGARDING HAHN...................................................55
Incorporation of Documents By Reference.................................55
Business of Hahn........................................................56
Selected Consolidated Financial Data of Hahn............................60
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................61
Results of Operations...................................................61
Market Prices of and Dividends on the Common Stock......................65
Directors and Executive Officers........................................66
Stock Ownership.........................................................68
INFORMATION REGARDING GLICK AND HAW ACQUISITION..............................69
Glick, LLC..............................................................69
HAW Acquisition.........................................................70
Recent Stock Purchases..................................................70
Contribution and Voting Agreement.......................................70
INDEPENDENT AUDITORS.........................................................71
SHAREHOLDER PROPOSALS........................................................72
LIST OF APPENDICES
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Appendix A - Amended and Restated Agreement and Plan of Merger
Appendix B - Opinion of Empire Valuation Consultants, Inc.
Appendix C - Section 623 of the New York Business Corporation Law
Appendix D - Amendment to Amended and Restated Agreement and Plan of Merger
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HAHN AUTOMOTIVE WAREHOUSE, INC.
415 W. MAIN STREET
ROCHESTER, NEW YORK
PROXY STATEMENT FOR
SPECIAL MEETING OF SHAREHOLDERS
_____________, 2001
We are providing this proxy statement and accompanying proxy card to our
shareholders in connection with the solicitation by our board of directors of
proxies to be used at the special meeting of shareholders to be held on
_____________, 2001 at 10:00 a.m., local time, at Hahn's offices at 415 W. Main
Street, Rochester, New York, including at any adjournment of the special
meeting. We began mailing these materials, the accompanying letter to
shareholders and the notice of the meeting to our shareholders on or about
_______, 2001.
On May 9, 2001, Hahn's shareholders approved a 1-for-3 reverse stock split. The
reverse stock split was effected as of the close of business on May 10, 2001.
All share and per share information in this proxy statement as of all dates and
for all periods prior to the reverse stock split have been adjusted as if the
reverse stock split had been in effect as of that time.
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: Our board of directors is providing these proxy materials to give you
information to determine how to vote in connection with the special
meeting.
Q: WHAT AM I BEING ASKED TO VOTE ON AT THE MEETING?
A: You are being asked to vote and approve the merger and the merger agreement
whereby HAW Acquisition will merge with and into Hahn. You may also be
asked whether to adjourn the meeting if insufficient votes in favor of the
merger have been obtained as of the scheduled time for the meeting so that
our board may solicit additional proxies voting in favor of the merger. See
"THE SPECIAL MEETING -- Possible Adjournment of Special Meeting and Other
Matters to be Considered at the Special Meeting" on page 15, "THE MERGER
AGREEMENT -- The Merger; Merger Consideration" on page 45.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Upon consummation of the merger and unless you perfect your appraisal
rights, each share of Hahn common stock you own will be converted into the
right to receive $3.00 in cash, without interest. This represents a 60%
premium to the $1.875 closing price of the common stock on the day Futerman
and Chessin first submitted their acquisition proposal to the board -
January 18, 2001 The $1.875 price is above the $1.13 five year historical
low closing price of our common stock, and is within the 12 month trading
range of our common stock preceding January 18, 2001, of $1.13 to $6.75.
See "SPECIAL FACTORS -- Recommendation of the Special Committee" on page
20, "THE MERGER AGREEMENT -- The Merger; Merger Consideration" on page 45,
"INFORMATION REGARDING HAHN -- Market Prices of and Dividends on the Common
Stock" on page 66.
Q: HOW MANY VOTES DO I HAVE?
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A: You have one vote for each share of Hahn common stock that you owned at the
close of business on ___________. See "SPECIAL MEETING -- Record Date;
Quorum Requirements" on pages 13.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: For the merger to occur, two different shareholder approvals are required.
First, the merger and the merger agreement must be approved and adopted by
holders of 66 2/3% of our outstanding shares of common stock. This approval
is required under New York law. Futerman, Chessin and certain other family
members possess 64% of our outstanding common stock. These shareholders are
required to vote their shares and those over which they have voting control
in favor of approval of the merger and the merger agreement. In addition,
directors holding an additional 1,201 shares of our common stock have
indicated they intend to vote in favor of the merger. Accordingly, if
holders of an additional 41,694 shares of common stock, representing
approximately 2.7% of our outstanding shares of common stock, also vote in
favor of the merger and the merger agreement, the statutorily required 66
2/3% vote will be obtained.
Second, the merger and merger agreement must be approved by a majority of
all the votes cast on the merger proposal by our public shareholders,
excluding abstentions and broker non-votes. This approval is required under
the merger agreement. If all of the public shareholders cast votes at the
special meeting, an affirmative vote FOR the merger proposal by public
shareholders holding 285,060 shares of our common stock would be necessary
to obtain the public shareholder approval. See "SUMMARY -- The Special
Meeting -- Voting Requirements" on page 7, "THE SPECIAL MEETING -- Voting
Requirements" on page 13 and "SPECIAL FACTORS -- Recommendation of the
Board of Directors" on page 23.
Q: HAS OUR BOARD OF DIRECTORS RECOMMENDED THE MERGER?
A. Yes. Our board of directors and the special committee of independent
directors formed by our board of directors have both unanimously approved
the merger and the merger agreement, with Futerman and Chessin abstaining.
Our board voted unanimously to recommend that you vote "FOR" approval of
the merger and the merger agreement, again with Futerman and Chessin
abstaining. See "SPECIAL FACTORS -- Recommendation of the Special
Committee" on page 20 and "-- Recommendation of the Board of Directors" on
page 23.
Q: WHY IS OUR BOARD OF DIRECTORS RECOMMENDING THE MERGER?
A: Our board of directors and the special committee formed by the board to
consider this transaction are recommending the merger because they believe
that the merger is a more desirable alternative for you than maintaining
the status quo. In reaching this conclusion, our board of directors and the
special committee considered, among other factors:
- the current limited liquidity of your Hahn investment;
- the immediate liquidity provided by the merger at a price that
our board of directors and the special committee believe is fair;
and
- the fact that the merger eliminates your risk of loss in the
event our stock price decreases more in the future, while
recognizing that the merger would preclude you from participating
in any future growth of Hahn.
To review the reasons for the merger and the factors considered by the
special committee and the board of directors in approving the exchange in
greater detail, see "Special Factors - Background of the Transaction" on
page 15 and "-- Recommendation of the Special Committee" on page 20, "--
Recommendation of our Board of Directors" on page 23.
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Q: WHY WAS THE SPECIAL COMMITTEE FORMED?
A: Our board of directors formed a special committee of independent directors
to protect your interests in evaluating and negotiating the terms of the
merger and the merger agreement because it recognized that the merger
transaction would present a conflict of interest for Futerman and Chessin
as members of our senior management and our board of directors.
The members of the special committee are William A. Buckingham (Chairman),
Stephen B. Ashley, Nathan Lewinger and E. Philip Saunders. These directors
are not officers or employees of Hahn. The special committee independently
selected and retained legal and financial advisors to assist the committee
in its work. See "SPECIAL FACTORS -- Background of the Transaction"
beginning on page 15.
Q: WHAT WAS THE OPINION OF THE FINANCIAL ADVISOR?
A: Each of the special committee and our board of directors considered the
opinion of the special committee's financial advisor, Empire Valuation
Consultants, Inc. Empire Valuation presented a written opinion to the
effect that the merger consideration is fair, from a financial point of
view, to our public shareholders. See "SPECIAL FACTORS -- Fairness Opinion
of Special Committee's Financial Advisor" on pages 26-36.
Q: WHO ARE THE OTHER FILING PERSONS AND WHAT WAS THEIR OPINION?
A: The other persons required to file this Proxy Statement are Eli N.
Futerman, Daniel J. Chessin, Glick and HAW Acquisition. These filing
persons, along with certain other family members, comprise the Glick
buy-out group. The other members of the Glick buy-out group are the Michael
Futerman Living Trust, the Estate of Michael Futerman, Sara Futerman, Rina
Chessin, Daphne Futerman, Ira Jevotovsky and Peggy Futerman. Eli Futerman,
Rina Chessin and Daphne Futerman are siblings and the children of Michael
Futerman (deceased) and Sara Futerman. Daniel Chessin is the husband of
Rina Chessin and Ira Jevotovsky is the husband of Daphne Futerman. Peggy
Futerman is the wife of Eli Futerman. Each of these persons and entities
believe that the merger and the consideration to be paid to our public
shareholders are fair to these holders from a financial point of view. See
"SUMMARY -- The Parties" on pages 8-9, "SPECIAL FACTORS -- Glick Buy-Out
Group's Purpose and Reasons for the Merger" on page 24, and "-- Position of
Glick Buy-Out Group as to Fairness of the Merger" on page 25.
Q: DOES GLICK HAVE THE FINANCIAL RESOURCES TO PAY FOR THE COMMON STOCK HELD BY
OUR PUBLIC SHAREHOLDERS?
A: The aggregate consideration payable in the merger is approximately $1.7
million, and the aggregate amount of transaction expenses payable by the
Glick buy-out group if the merger is completed is estimated to be
approximately $300,000. The Glick buy-out group has received a commitment
from Manufacturers and Traders Trust Company to provide them with mortgage
financing to fund the aggregate merger consideration and the expenses
related to the transaction. See "THE MERGER AGREEMENT -- Financing the
Merger" on page 52.
Q: HOW DO I VOTE?
A: You may choose one of the following ways to cast your vote:
- by completing the accompanying proxy card and returning it in the
enclosed envelope; or
- by appearing and voting in person at the special meeting.
If your shares are held in "street name," which means that your shares are held
in the name of a bank, broker or other financial institution instead of in your
own name, you must either direct the
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financial institution as to how to vote your shares or obtain a proxy from the
financial institution to vote at the special meeting. See "THE SPECIAL MEETING
- -- Voting and Revocation of Proxies" on page 13.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING INSTRUCTION
CARD?
A: It means your shares are registered differently or are held in more than
one account. Please provide voting instructions for each proxy card that
you receive.
Q: HOW DO I CHANGE MY VOTE?
A: You may change your proxy instructions at any time prior to the vote at the
special meeting by following any of these procedures. If you are a
shareholder "of record," meaning one whose shares are registered in his or
her name, to revoke a proxy, you must:
- complete a new proxy bearing a later date and submit it to the
Secretary of Hahn,
- sign and send a written instrument revoking the proxy to the
Secretary of Hahn, or
- attend the special meeting and vote in person.
Attendance at the special meeting alone will not cause your previously granted
proxy to be revoked unless you vote in person. A "beneficial holder" whose
shares are registered in another name (for example in "street name") must follow
the procedures required by the holder of record, which is usually a brokerage
firm or financial institution, to revoke a proxy. You should contact the holder
of record directly for more information on these procedures. See "THE SPECIAL
MEETING -- Voting and Revocation of Proxies" on page 13.
Q: Q: MAY I ATTEND THE SPECIAL MEETING IN PERSON?
A: You may attend the special meeting in person if you have shares registered
in your name or if you present a valid proxy in your favor from the
registered holder. If shares are registered in the name of a corporation or
other organization, you must bring a letter from an authorized agent of
that corporation or organization giving you authority to vote its shares.
Q: IF I HAVE SHARES REGISTERED IN MY NAME OR IF I HAVE A PROXY IN MY FAVOR
FROM A REGISTERED HOLDER, WHAT DO I NEED TO DO TO ATTEND THE SPECIAL
MEETING IN PERSON?
A: Just bring proper photographic identification to the meeting, such as a
driver's license, passport or United States military identification.
Q: WHEN SHOULD I SEND IN MY STOCK CERTIFICATE(S)?
A: You will receive separate instructions for surrendering stock
certificate(s) following the special meeting . You should not send in your
stock certificate(s) until you receive these instructions. See "THE SPECIAL
MEETING -- Exchanging Stock Certificates" on page 15.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. We hope to
complete the merger shortly after the special meeting, assuming the
required shareholder approvals are obtained and the Glick buy-out group's
financing has been completed.
Q: WHO CAN ANSWER MY QUESTIONS?
A: If you have more questions about the merger or would like additional copies
of this proxy statement, you should contact:
Hahn Automotive Warehouse, Inc.
Donald T. Hiller, Investor Relations Manager
Telephone No.: (716) 464-3831 or
toll-free at (800) 777-HAHN (4246)
Facsimile No.: (716) 235-1688
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WHERE YOU CAN FIND MORE INFORMATION
Hahn is subject to the informational requirements of the Securities
Exchange Act of 1934. As a result, Hahn files reports, proxy statements and
other information with the SEC. You can review and copy these reports, proxy
statements and other information at the public reference facilities maintained
by the SEC Washington, D.C., at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at the following regional offices of the SEC: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Please call the SEC at
1-800-SEC-0330 for further information on the public reference facilities.
You can also access copies of these materials at the SEC's web site on the
internet at http://www.sec.gov. These documents are also available for
inspection and copying at Hahn's headquarters at 415 West Main Street,
Rochester, New York 14608, during regular business hours, by any shareholder or
representative designated in writing. Hahn will also send you copies of these
documents on request and without charge.
We are incorporating by reference our annual report on Form 10K for the
fiscal year ended September 30, 2000, and our Form 10-Q for the period ended
March 31, 2001 In addition, we are incorporating by reference all documents we
file in response to the requirements of Sections 13(a), 13(d), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, after the date of this proxy
statement and before the date of the special meeting. Accordingly, those
documents will be considered a part of this proxy statement from the date they
are filed. The Company is not incorporating by reference, however, statements in
those documents to the effect that the Company desires to take advantage of the
safe harbor which is afforded forward-looking statements under the Private
Securities Litigation Reform Act of 1995.
Hahn, Glick, HAW Acquisition, Futerman and Chessin have jointly filed a
Schedule 13E-3 with the SEC with respect to the merger. This proxy statement
does not contain all of the information contained in the Schedule 13E-3, some of
which is omitted as permitted by the SEC's rules. Statements made in this proxy
statement, while complete in all material respects, are qualified by reference
to documents filed as exhibits to the Schedule 13E-3. The Schedule 13E-3,
including exhibits, is available for inspection and copying at the SEC and at
Hahn's headquarters, as described above.
FORWARD-LOOKING INFORMATION
The following cautionary statement identifies important factors that could
cause Hahn's actual results to differ materially from those projected in
forward-looking statements included in this proxy statement, including
statements incorporated by reference into this proxy statement. Except for the
historical information, the matters discussed in this proxy statement may be
deemed forward-looking statements. Forward-looking statements are statements
that include projections, predictions, expectations or beliefs about future
events or results or otherwise are not statements of historical fact. Such
statements are often characterized by the use of qualifying words (and their
derivatives) such as "expect," "believe," "plan," "project," or other statements
concerning our opinions or judgment about future events. Forward-looking
statements involve risks and uncertainties that may cause actual events and
results to differ materially from expected events and results. As detailed in
our periodic SEC reports, these risks and uncertainties include, among others:
- our substantial leverage and significant working capital needs;
- restrictions imposed by our debt instruments;
- stock price volatility and the absence of dividends;
- competition;
- general risks of the automotive parts replacement industry;
- dependence on key personnel; and
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- the market's acceptance of our iAutoparts internet strategy.
In addition, the merger is subject to compliance with or waiver of all of
the closing conditions stated in the merger agreement. In view of these
considerations, you should not place undue reliance on the predictive value of
the forward-looking statements made in this proxy statement.
References in this proxy statement to "we," "our" or "us" refers to Hahn,
not to Glick, HAW Acquisition or Futerman and Chessin or any of their family
members who are part of the Glick buy-out group.
All information contained in this proxy statement relating to Glick, HAW
Acquisition and Messrs. Futerman and Chessin and certain other family members,
has been supplied by them for inclusion and has not been independently verified
by Hahn. No persons have been authorized to give any information or to make any
representations other than those contained in this proxy statement.
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SUMMARY
This summary highlights information from the proxy statement that Hahn
believes is important information about the merger and merger agreement. You
should read this entire document carefully and the documents to which it refers
for a complete description of the merger and merger agreement. This summary
includes page references in parentheses to direct you to more complete
descriptions of the topics presented in this summary.
RECENT DEVELOPMENTS (page 12)
Hahn completed a 1-for-3 reverse stock split on May 10, 2001. The reverse
stock split was proposed so that Hahn could endeavor to satisfy the maintenance
requirements established by the Nasdaq SmallCap Market for continued listing,
which, among other things, requires that Hahn's common stock maintain a bid
price of at least $1.00 per share. On June 1, 2001 Nasdaq notified Hahn that it
had met the Nasdaq minimum bid requirement for continued listing.
THE SPECIAL MEETING (page 12)
Date, Time, Place and Purpose. The special meeting will be held at 10:00
a.m., local time, on _ __, 2001, at Hahn's headquarters at 415 West Main Street,
Rochester, New York. At the special meeting, you will be asked to consider and
vote upon the merger proposal, or if necessary, the adjournment of the special
meeting to allow time to solicit additional proxies in favor of the merger
proposal.
Record Date; Quorum Requirements. The close of business on _______, 2001,
is the record date for determining holders of shares of our common stock
entitled to vote at the special meeting. On the record date, we had outstanding
1,581,671 shares of common stock.
Voting Requirements. The merger proposal is subject to both the approval of
shareholders holding 66 2/3% of our outstanding common stock and the approval by
a majority of our public shareholders who cast votes on the matter (excluding
abstentions and broker non-votes) at the special meeting. Holders of our common
stock are entitled to one vote for each share of their common stock. The first
approval is required by law and the second approval was required by the special
committee and the board of directors as a condition to approving the merger. As
a result of their stock ownership, as of May 11, 2001, the Glick buy-out group
held and controlled 1,011,553 shares or 64% of our outstanding common stock.
These shareholders have agreed to vote, or cause to be voted, all of the shares
of common stock owned by them, or over which they have voting power, for
approval of the merger proposal. Hahn's other directors and executive officers,
who together own 1,201 shares, or approximately 0.07% of our outstanding shares
of common stock, have indicated that they also intend to vote their shares in
favor of the merger proposal. Accordingly, the 66 2/3% approval only requires
the affirmative vote by shareholders holding 41,694 additional shares of common
stock, or approximately 2.7% of our outstanding common stock. The number of
shares of common stock necessary to receive the public shareholder approval
depends on the number of shares of common stock held by public shareholders who
are present, in person or by proxy, and vote at the special meeting. If all of
the public shareholders are present and voting at the special meeting, an
affirmative vote in favor of the merger proposal by those shareholders holding
285,060 shares of common stock will be necessary to obtain this second
shareholder approval.
In the event that Hahn has not obtained a sufficient number of proxies to
approve the merger and the merger agreement as of the special meeting date, then
Hahn may also ask you to vote upon a motion to adjourn the special meeting in
order to solicit additional votes in favor of the merger to the extent necessary
to obtain the required vote necessary to approve the merger and the merger
agreement. If this motion is made, a majority of the shares of common stock
present and voting will be required to approve the motion. Futerman
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and Chessin own and control sufficient shares to approve this motion.
Voting and Revocation of Proxies. Unless contrary instructions are
indicated on your proxy, all of your shares represented by valid proxies will be
voted FOR the approval of the merger proposal, or if necessary, the adjournment
proposal. You may revoke your proxy at any time before the special meeting by
delivering a written notice of revocation to our Secretary, by executing and
delivering a later-dated proxy or by attending the meeting and giving oral
notice of your intention to vote in person. Your attendance at the special
meeting will not by itself constitute a revocation of your proxy. You must also
vote your shares in person at the special meeting. If you have instructed a
broker to vote your shares, you must follow the directions received from your
broker to change those instructions. (Page 14).
Rights of Objecting Shareholders. If the merger is to be completed, but you
do not wish to exchange your shares of our common stock for the merger
consideration, you have the right under New York law to have the "fair value" of
your shares determined by a New York court. (Page 14). This "right of appraisal"
is subject to a number of restrictions and technical requirements. Generally, in
order to exercise appraisal rights, you must, among other things:
- Not vote in favor of the merger and the merger agreement;
- Make a written demand for appraisal before the vote on the merger
and the merger agreement; and
- Submit your stock certificates to Hahn to have the proper legend
placed thereon.
You will not protect your right of appraisal by merely voting against the merger
and the merger agreement. A copy of the relevant sections of New York law
regarding dissenters' rights is included in this proxy statement as APPENDIX C.
You should read the provisions of this law carefully.
THE PARTIES (pages 56 and 70)
Hahn. Hahn was incorporated in New York in 1958. Hahn is a distributor of
automotive aftermarket replacement parts through its seven direct Professional
Automotive Warehouse Distributions Centers to the professional installer, 13
strategically located distribution centers to 78 Advantage Auto Stores, and
approximately 1,100 independent jobbers, in the Midwest and along the Eastern
Seaboard. Through its wholly-owned subsidiary, iAutoparts, Inc., Hahn operates
iAutoparts.com(R), an on-line automotive parts store. Its principal executive
offices are located at 415 West Main Street, Rochester, New York 14608, and its
telephone number is (716) 235-1595.
Glick. Glick, LLC is a Nevada limited liability company organized on April
27, 2001, by Futerman, Chessin and certain other family members for the purpose
of effecting the merger. Futerman and Chessin are the only voting members of
Glick. Glick is a holding entity that has no material assets other than the
shares of HAW Acquisition. Glick is a party to a Contribution and Voting
Agreement effective May 11, 2001 with Futerman, Chessin and certain other
family members, whereby those individuals have agreed to contribute their
shares of Hahn common stock to Glick on or before the merger so that at the
effective time of the merger, Glick will hold 1,011,553 shares of Hahn common
stock, or approximately 64% of Hahn's outstanding common stock. The other
members of Glick are the Michael Futerman Living Trust, the Estate of Michael
Futerman, Sara Futerman, Rina Chessin, Peggy Futerman, Daphne Futerman and Ira
Jevotovsky. Eli Futerman is the sole trustee of the Michael Futerman Living
Trust and the sole executor of the Estate of Michael Futerman. Eli Futerman,
Rina Chessin and Daphne Futerman are siblings and the children of Michael
Futerman (deceased) and Sara Futerman. Daniel Chessin is the husband of Rina
Chessin and Ira Jevotovsky is the husband of Daphne Futerman. Peggy Futerman is
the wife of Eli Futerman. Except in connection with entering into the merger
agreement and carrying out the transactions contemplated by the merger
agreement, including the organization of HAW Acquisition and the execution and
delivery of the Contribution and Voting Agreement, Glick has not engaged in any
activities since its organization. Futerman and Chessin are managers of Glick
and, together, hold 100% of the voting
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control of Glick. Glick LLC has no executive officers, only managers. The
address of Glick is c/o Eli N. Futerman and Daniel J. Chessin, 415 West Main
Street, Rochester, New York 14608, and its telephone number is (716) 235-1595.
HAW Acquisition. HAW Acquisition is a New York corporation organized on
April 5, 2001 by Futerman and Chessin for the purpose of effecting the merger.
The only shareholder of HAW Acquisition is Glick. If the merger is consummated,
then at the effective time, HAW Acquisition will be merged with and into Hahn,
with Hahn as the surviving corporation following the merger. HAW Acquisition has
no material assets and has not engaged in any activities except in connection
with entering into the merger agreement and carrying out the transactions
contemplated by the merger agreement. Futerman and Chessin are co-chief
executive officers of HAW Acquisition, and are its only executive officers and
directors. The address of HAW Acquisition is c/o Eli N. Futerman and Daniel J.
Chessin, 415 West Main Street, Rochester, New York 14608, and its telephone
number is (716) 235-1595.
THE MERGER (Page 44)
The merger will be effected by having HAW Acquisition merge with and into
Hahn. Hahn will continue as the surviving corporation and will become a wholly
owned subsidiary of Glick.
After the merger, (i) public trading of Hahn common stock will cease, (ii)
Hahn common stock will be delisted from the Nasdaq SmallCap Market and (iii)
Hahn will formally terminate its reporting obligations under the Securities
Exchange Act of 1934 and no longer will be required to file periodic and other
reports with the SEC. As a result of the merger, public shareholders (other than
those who perfect their appraisal rights) will be entitled to receive the cash
merger price and will no longer have any ownership interest in Hahn, including
the right to participate in the future earnings and growth of Hahn.
SPECIAL FACTORS (Page 15)
Background of the Transaction. For a description of the events leading to
the approval of the merger agreement and the merger by the board and the reasons
for such approval, you should refer to pages 15-20.
Recommendation of the Special Committee and our Board of Directors. On
March 20, 2001, the merger proposal was presented for consideration to a meeting
of the special committee, consisting of four directors of Hahn who are not
employees of, or consultants to, Hahn, Glick, HAW Acquisition, Futerman, Chessin
or any of Futerman's and Chessin's family members, and have no interest in the
proposed merger, other than as holders of non-employee director stock options
and, in some cases, as public shareholders. The special committee concluded that
the proposed merger, on the terms reflected in the January 16, 2001 proposal
letter submitted by Futerman and Chessin, including the cash merger
consideration, but modified to include the public shareholder vote as a
condition, was fair to, and in the best interests of the public shareholders,
and resolved to recommend to the board that it approve the merger and authorize
the execution of a merger agreement. Thereafter, on March 26, 2001, our board of
directors, based in part upon the recommendation of the special committee,
concluded that the merger on the terms and conditions approved by the special
committee and more specifically set forth in a letter of intent submitted to the
board, dated March 26, 2001, was fair to, and in the best interests of the
public shareholders. Our board of directors then approved the merger, authorized
the chairman of the special committee to negotiate and enter into the merger
agreement on behalf of Hahn, and resolved to recommend to the public
shareholders that they vote to approve the merger and the merger agreement. The
special committee addressed its recommendation to our board and our board
specifically addressed its recommendation to the public shareholders. Neither
the special committee nor our board addressed its recommendation to Glick,
Futerman, Chessin or the other members of the Glick buy-out group. (Pages 20 and
24).
Factors Considered by the Special Committee and our Board of Directors. The
special committee, in reaching its decision to recommend approval of the merger
to our board, and our board, in approving the merger and the execution of the
merger agreement and recommending adoption of the merger and the merger
agreement by the public shareholders, each considered the benefits and
detriments to the public shareholders
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and a number of other factors, including, among others, the following:
- The belief of the special committee that the merger was a better
financial alternative for the public shareholders than continuing
to operate Hahn as a public company due to the limited liquidity
of its publicly traded shares and the uncertainty of its future
financial performance;
- The fact that the merger would preclude the public shareholders
from participating in any future growth in the financial
performance or stock price of Hahn;
- Empire Valuation's opinion that, as of March 20, 2001, the date
of the special committee's meeting to consider the merger, the
merger consideration was fair, from a financial point of view, to
the public shareholders;
- The fact that the terms of the merger agreement and the merger
consideration are the product of negotiations between Futerman
and Chessin and the special committee where the special committee
was represented by separate counsel; and
- The other factors described in more detail on pages 20 through
23.
Glick's Purpose And Reasons for the Merger. Futerman and Chessin believe
that as a private company, Hahn will be better positioned for long-range
planning, without the concern of short-term impact on stock price. They also
believe that reducing the expenses and pressures of being a public company will
enhance our long-term success. They believe that the merger offers public
shareholders the opportunity to obtain a fair value for their shares, with the
merger price of $3.00 per share being 60% above the $1.875 closing price of our
common stock on the day that Futerman and Chessin submitted the Glick buy-out
group's initial proposal to the board. The $1.875 price was above the historical
low trading price for our common stock over the past five years of $1.13 per
share and within the trading range of our common stock over the 12 months
preceding Futerman and Chessin's submission of the proposal, of $1.13 to $6.75
per share.
Fairness Opinion of Special Committee's Financial Advisor Empire Valuation
delivered its oral opinion to the special committee on March 20, 2001, to the
effect that, as of that date, based upon and subject to the various
considerations, assumptions and limitations stated therein, the merger price of
$3.00 per share in cash is fair, from a financial point of view, to the public
shareholders. Empire Valuation reviewed this opinion with our board of directors
on March 26, 2001. Empire Valuation confirmed its oral opinion in a written
opinion dated May 16, 2001 to the same effect. The full text of the written
opinion of Empire Valuation is set forth as Appendix B to this proxy statement.
You should read this opinion carefully. (Pages 26-36).
Interest of The Glick Buy-Out Group and Hahn's Executive Officers and
Directors in the Merger and Hahn; Actual or Potential Conflicts of Interest. In
considering the recommendations of the special committee and of our board of
directors, you should be aware that the Glick buy-out group and certain
executive officers and directors of Hahn have relationships or interests in the
merger and Hahn that are different from your interests as a shareholder that may
present actual or potential conflicts of interest. For example, Eli N. Futerman,
our President and Chief Executive Officer and a member of our board of
directors, and Daniel J. Chessin, our Executive Vice-President and Secretary and
a member of our board of directors, are co-managers and members of Glick;
Futerman and Chessin and members of their family who constitute the Glick
buy-out group own 100% of the outstanding equity of Glick, which will own 100%
of Hahn's equity after consummation of the merger. In addition, our executive
officers are expected to continue to serve as executive officers of Hahn after
consummation of the merger. See page 46 for more information. The special
committee and our board of directors were aware of these potential or actual
conflicts of interest and considered them in evaluating the proposed merger. For
a more detailed description of these and other interests, see pages 41-44.
Federal Income Tax Consequences. Generally, for United States federal
income tax purposes, you will be taxed on your receipt of the $3.00 per share
cash merger consideration in the same manner as if you sold your
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shares for such amount. Thus, you will be taxed on any gain you recognize as a
result of the merger and will be able, subject to some limitations, to deduct
any loss that you recognize as a result of the merger. You are advised to see
your own tax advisor regarding the tax consequences of the merger to you.
Financing of the Merger. Approximately $2.0 million will be required to pay
the aggregate merger consideration to the public shareholders and to pay the
estimated fees and expenses of the Glick buy-out group related to the
transaction. The Glick buy-out group intends to obtain financing for this entire
amount by mortgaging certain personal assets, and contributing the net proceeds
of the financing to Glick. Manufacturers Traders and Trust Company has issued a
commitment letter, dated April 27, 2001, to an affiliate of the Glick buy-out
group for this mortgage financing, in an amount sufficient to complete the
merger transaction. Glick will contribute the proceeds to HAW Acquisition to
fund the payment of the aggregate merger consideration which is due to the
public shareholders who have not perfected their appraisal rights. The closing
of the financing by the Glick buy-out group is a condition to the obligation of
HAW Acquisition to close under the merger agreement.
THE MERGER AGREEMENT
The following is only a brief summary of the material terms of the merger
agreement, and are qualified in their entirety by reference to the merger
agreement. See pages 44-54 and Appendix A at the back of this proxy statement
for the complete text of the merger agreement.
The Merger Consideration. If the merger is consummated, each share of our
common stock held by public shareholders (other than those held by public
shareholders who have perfected their appraisal rights) will be converted into
the right to receive the merger consideration of $3.00 per share in cash,
without interest.
Payment of Merger Consideration and Surrender of Stock Certificates. If the
merger is completed, we will send you detailed instructions regarding the
surrender of your stock certificates. You should not send your stock
certificates to Hahn or anyone else until you receive these instructions. We
will send payment of the merger consideration to you as promptly as practicable
following our receipt of your stock certificates and other required documents.
For further information concerning procedures for delivery of your shares and
receipt of the merger consideration, see pages 45-46.
Conditions To, And Termination Of, The Merger. The respective obligations
of the parties to consummate the merger are subject to the satisfaction or
waiver of each of the following conditions:
- the merger and the merger agreement having been approved by the
required shareholder votes;
- receipt of an approval by Hahn's lender, Fleet Capital, so that
the consummation thereof shall not result in an event of default
under Hahn's loan agreement;
- all material third party consents or government approvals having
been obtained;
- absence of any law or court order imposing material limitations
on the ability of Glick to effectively acquire or hold the
business and Hahn and its subsidiaries, taken as a whole;
- with certain exceptions, the representations and warranties of
the parties being true and correct in all material respects at
the closing date of the merger and the obligations to be
performed and complied with by the parties having been performed
and complied with; and
- the other conditions described in more detail on pages 49 through
51.
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The obligation of Hahn to consummate the merger is subject to the
additional condition that Empire Valuation's fairness opinion is not withdrawn
or modified or amended in such a manner that is not acceptable to the special
committee prior to the special meeting.
The obligations of the Glick buy-out group to consummate the merger are
subject to the satisfaction or waiver of the following additional conditions:
- the Glick buy-out group having completed the financing necessary
to pay the aggregate merger consideration and expenses related to
the transaction;
- the number of shares of common stock with respect to which public
shareholders have perfected their appraisal rights not exceeding
113,334 shares;
- nothing having occurred that has a material adverse effect on
Hahn with certain exceptions;
- all stock options and plans, programs or arrangements which
obligate Hahn to issue any equity securities having been
cancelled; and
- all existing Hahn directors, other than Messrs. Futerman and
Chessin, having resigned.
Effective Time. The merger will be effective when, following the required
shareholder approvals of the merger agreement, a certificate of merger is filed
with the Secretary of State of the State of New York. If the merger is approved
by the requisite shareholder approvals at the special meeting, the merger is
expected to be completed and a certificate of merger filed as soon as
practicable after the special meeting, subject to the satisfaction or waiver of
the terms and conditions included in the merger agreement, including the
financing condition. Pages 49 and 53-54.
If all of the conditions are not either satisfied or waived, the merger
will not be completed even if Hahn's shareholders vote to approve the merger and
there are no other legal restraints hindering its completion. Hahn does not
intend to resolicit proxies in connection with any waiver of the conditions to
the merger. Any such waiver would be given by Hahn only with the approval of the
special committee. The time at which the merger becomes effective is referred to
in this proxy statement as the "effective time."
RECENT DEVELOPMENTS
On May 9, 2001, at Hahn's annual meeting of shareholders, by a majority
vote, Hahn's shareholders approved a 1-for-3 reverse stock split of its issued
and outstanding shares of common stock. The reverse stock split was effective as
of the close of business on May 10, 2001. The reverse stock split had the effect
of reducing Hahn's outstanding common stock from 4,745,014 shares to
approximately 1,581,671 shares. Wherever a number of shares of Hahn common stock
or per share information is listed in this proxy statement for a date or period
prior to the close of business on May 10, 2001, that number has been
proportionately adjusted as if the 1-for-3 reverse stock split had been in
effect as of that date.
The reverse stock split was proposed so that Hahn could endeavor to satisfy
the maintenance requirements established by the Nasdaq SmallCap Market for
continued listing, which, among other things, requires that Hahn's common stock
maintain a bid price of at least $1.00 per share. On June 1, 2001 Nasdaq
notified Hahn that it had met the Nasdaq minimum bid requirement for continued
listing.
THE SPECIAL MEETING
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DATE, TIME, PLACE AND MATTERS TO BE CONSIDERED.
The special meeting will be held on _____________, 2001 at 10:00 a.m.,
local time, at Hahn's executive offices at 415 West Main Street, Rochester, New
York 14608.
RECORD DATE; QUORUM REQUIREMENTS.
The close of business on ________, 2001 has been fixed as the record date
for determining shareholders entitled to notice of, and to vote at, the special
meeting. Each holder of record of common stock on the record date is entitled to
one vote for each share then held for each matter submitted to shareholders at
the special meeting. As of the record date, 1,581,671 shares of common stock
were outstanding, held by ____ holders of record. The presence, in person or by
proxy, of a majority of all outstanding common stock is required to constitute a
quorum for the transaction of business at the special meeting. Proxies marked as
abstentions are counted as shareholders present represented by proxy at the
special meeting for purposes of this quorum requirement.
VOTING REQUIREMENTS.
Under New York law, the affirmative vote of at least 66 2/3% of all
outstanding shares of common stock is required to approve the merger and the
merger agreement. The members of the Glick buy-out group who own, or have voting
power over, 1,011,553 shares of common stock, or approximately 64% of the
outstanding common stock, have agreed to vote these shares in favor of the
merger proposal. In addition, the merger agreement provides that it is a
condition to the consummation of the merger that at least a majority of the
votes cast, in person or by proxy, at the special meeting by the public
shareholders (excluding abstentions and broker non-votes) be cast in favor of
the merger proposal. Abstentions and proxies relating to "street name" shares
that are returned to Hahn but marked by brokers as "not voted" are counted as
present for purposes of determining the presence or absence of a quorum unless
authority to vote is completely withheld on the proxy. These votes will have the
same effect as a vote against the merger proposal for purposes of the
statutorily required 66 2/3% approval, but will not have an effect on the public
shareholder approval.
Approval of a motion to adjourn the special meeting in order to solicit
additional proxies will require the affirmative vote of a majority of the shares
of common stock voting in person or by proxy at the special meeting. The
shareholders affiliated with the Glick buy-out group hold in excess of 50% of
our outstanding common stock. Accordingly, if such a motion is made at the
special meeting, the Glick buy-out group has the voting power to approve the
motion and adjourn the meeting to allow additional time to solicit proxies
voting in favor of the merger.
OUR BOARD OF DIRECTORS HAS RECOMMENDED A VOTE "FOR" ADOPTION OF THE MERGER AND
THE MERGER AGREEMENT.
VOTING AND REVOCATION OF PROXIES.
A proxy card is enclosed for your use in voting by mail. If the enclosed
proxy is properly executed and returned prior to the special meeting and not
revoked, 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 in
favor of the merger proposal, or, if made, an adjournment motion. The proxy may
be revoked by the person giving it at any time prior to its use by filing with
Hahn's Secretary a written revocation, a duly signed later dated proxy or by
requesting return of the proxy at the special meeting and voting in person.
Attendance at the special meeting alone will not cause your previously granted
proxy to be revoked unless you vote in person. For shares held in "street name"
this may be accomplished by following the instructions of your broker or nominee
who is the record holder of the shares. A proxy may be revoked at any time prior
to its exercise at the special meeting.
RIGHTS OF OBJECTING SHAREHOLDERS.
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If you oppose the merger you may vote against it at the special meeting.
Even if you vote against the merger, if the requisite shareholder votes are
obtained and the merger and merger agreement are so approved, the merger will be
completed and your shares of common stock will be converted into the right to
receive $3.00 per share of common stock, in cash without interest, as the merger
consideration. Because Hahn is incorporated in New York, New York law governs
its internal affairs, as well as any rights you may have if you object to the
merger. New York, like many states, generally provides a statutory remedy to
shareholders who object to a merger. This remedy, commonly called "appraisal
rights," entitles shareholders who object to a merger and who follow required
procedures to ask a court to determine the fair value of their shares and
requires payment of that amount instead of the merger consideration.
The New York statute establishing appraisal rights provides that appraisal
rights are the exclusive remedy available to shareholders who object to a
merger, except that those shareholders may challenge a merger if the merger is
unlawful or fraudulent. Pursuant to Section 910 of the New York Business
Corporation Law, holders of common stock at the close of business on the record
date have the right to dissent from the merger and, if the merger and the merger
agreement are approved and the merger is consummated, receive payment of the
fair value of their common stock by complying with the requirements of Section
623 of the New York Business Corporation Law (the full text of which is set
forth as Appendix C to this proxy statement).
Section 623 requires that any shareholder who wishes to exercise such
appraisal rights must not vote in favor of the adoption of the merger or the
merger agreement, and must file with Hahn, before shareholders vote on the
merger or the merger agreement, a written objection including a notice of
election to dissent, his name and residence address, the number of shares as to
which he or she dissents (shareholders may not dissent as to less than all of
their shares) and a demand for payment of the fair value for his or her shares
if the merger is effected. Such objection is not required from any shareholder
to whom Hahn did not give proper notice of the special meeting. Within 10 days
after the vote of shareholders authorizing the merger, Hahn must give written
notice of such authorization to each dissenting shareholder who filed written
objection or from whom written objection was not required. Any shareholder from
whom written objection was not required and who elects to dissent from the
merger must file with Hahn, within 20 days after the giving of such notice to
him or her, a written notice of such election, stating his or her name and
residence address, the number of shares as to which he or she dissents and a
demand for payment of the fair value for his or her shares.
At the time of filing the notice of election to dissent or within one month
thereafter, the shareholder must submit the certificates representing his or her
shares to Hahn or its transfer agent for notation thereon of the election to
dissent, after which such certificates will be returned to the shareholder.
Failure to submit the certificates for such notation may result in the loss of
appraisal rights. Within 15 days after the expiration of the period within which
shareholders may file their notices of election to dissent or within 15 days
after consummation of the merger, whichever is later (but not later than 90 days
after the shareholders' vote authorizing the merger agreement), Hahn must make a
written offer (which if the merger has not been consummated, may be conditioned
upon such consummation) to each shareholder who has filed such notice of
election to pay for his or her shares at a specified price which Hahn considers
to be their fair value. If Hahn fails to make the offer within such 15-day
period, or if any dissenting shareholder fails to agree to it within 30 days
after it is made, Hahn shall institute a judicial proceeding within 20 days
after the expiration of the applicable period to determine the rights of
dissenting shareholders and to fix the fair market value of their shares of
common stock. If Hahn fails to institute such proceeding, a dissenting
shareholder may institute the same. A negative vote on the merger agreement does
not constitute a "written objection" required to be filed by a dissenting
shareholder.
The foregoing summary does not purport to be a complete statement of the
provisions of Section 623 of the New York Business Corporation Law, and is
qualified in its entirety by reference to a copy of Section 623 of the New York
Business Corporation Law which is attached as Appendix C.
If you object to the merger and wish to examine your rights further, you
should consult your legal counsel at your expense. Neither Hahn, Glick, HAW
Acquisition, Futerman nor Chessin nor any other members of the Glick buy-out
group has made any provision to reimburse you for any of your legal expenses or
for any
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expenses for any appraisal services you may obtain in separately evaluating the
merger. Your right to examine Hahn's corporate records is described in "Where
You Can Find More Information."
POSSIBLE ADJOURNMENT OF SPECIAL MEETING AND OTHER MATTERS TO BE CONSIDERED AT
THE SPECIAL MEETING.
Under New York law, only the specific matters included in a notice of the
meeting and procedural motions regarding the conduct of the meeting may be
presented for shareholder approval at a special meeting. In the event Hahn has
not obtained a sufficient number of proxies to approve the merger, then Hahn may
also ask you to vote upon a motion to adjourn the meeting in order to solicit
additional proxies in order to obtain the required vote necessary to approve the
merger. If you send your proxy card to us for use at the special meeting and
either vote "FOR" this motion or do not specify a choice and do not revoke that
proxy by the means indicated above, we will have authority to vote your shares
in our discretion with regard to such motion to adjourn.
COSTS OF SOLICITING PROXIES
Hahn will pay all expenses incurred in connection with solicitation of the
enclosed proxy. Hahn's officers, directors and regular employees may solicit
proxies by telephone or personal call, but they will receive no additional
compensation for doing so. Hahn has requested brokers and nominees who hold
stock in their names to furnish this proxy material to their customers and to
request authority for the execution of the proxy. Hahn will reimburse these
brokers and nominees for their related reasonable out-of-pocket expenses. In
addition, Hahn has engaged Mellon Investor Services to solicit proxies. Hahn has
agreed to pay Mellon Investor Services, a fee of approximately $6,000, plus
out-of-pocket expenses, for its services.
EXCHANGING STOCK CERTIFICATES
Holders of our common stock should not send in their stock certificates
with the proxy cards. If the merger is completed, you will receive written
instructions for exchanging your stock certificates for cash.
EFFECTIVE TIME OF THE MERGER
The merger will be effective when, following both required shareholder
approvals of the merger proposal, a certificate of merger is filed with the
Secretary of State of the State of New York. Provided that both required
shareholder approvals are obtained at the special meeting, we expect to complete
the merger and file a certificate of merger as soon as practicable after the
special meeting, subject to the satisfaction or waiver of the other terms and
conditions included in the merger agreement. See "The Merger Agreement --
Conditions." Hahn does not intend to resolicit shareholder approval if a
material condition under the merger agreement is waived. Any such waiver would
be given by Hahn only with the approval of the special committee.
SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
During the period from July 2000 to September 30, 2000, Eli N. Futerman,
Hahn's president and chief executive officer and a director, and Daniel J.
Chessin, Hahn's executive vice president and secretary and a director, had
several conversations between themselves regarding whether Hahn should continue
to operate its business as a public company, but had not reached a conclusion or
formed a plan of action or an intent to proceed with a transaction until January
2001.
In August 2000, Mr. Futerman, as trustee of the Michael Futerman Living
Trust, purchased 49,700 shares of Hahn common stock in open market transactions
at prices ranging from $2.75 to $3.75 per share. The purchased shares
constituted approximately 8% of Hahn's outstanding common stock held by persons
other than members of the Glick buy-out group and officers and directors of
Hahn. Mr. Futerman considered the purchases attractive based upon the market
value of the stock at that time.
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Beginning in September 2000, Futerman and Chessin had conversations with
Hahn's other directors about taking Hahn private. These conversations revolved
around whether Hahn should consider becoming a private company due to its
relatively small size, lack of growth, and the illiquidity of its shares.
Futerman and Chessin further discussed with these directors the
under-performance of the common stock and the best way to maximize the value of
the shareholders' investment. They also discussed the costs associated with
being a public company.
Due to a depressed stock price, by letter dated November 7, 2000, Nasdaq
notified Hahn that it failed to meet the $1.00 per share minimum bid requirement
for continued listing on Nasdaq and that Hahn had 90 days, or until February 5,
2001, to regain compliance. On November 29, 2000, at our board's regular
quarterly meeting, the board considered the Nasdaq delisting issue and discussed
its potential effects on Hahn's stock and shareholders. Our board then discussed
ways to bring Hahn's stock price in compliance with Nasdaq's minimum per share
bid requirements. Our board considered the fact that if, subsequently, Hahn's
common stock was delisted, the only practical alternative would be trading on
the OTC Bulletin Board and that this would likely result in a more limited
trading volume, rendering the holdings of Hahn's shareholders even less liquid.
Our board then discussed the mechanics and anticipated effects of a reverse
stock split. After a full discussion, our board approved the reverse stock
split, subject to shareholder approval, if the price for our common stock did
not increase by December 14, 2000, and authorized management to proceed with the
reverse stock split and to present the proposal at Hahn's 2001 annual
shareholders' meeting.
In December 2000, after the audit of Hahn's financial statements for Fiscal
2000 had been completed, Futerman and Chessin reviewed Hahn's business
operations, financial results and stock prices. At this time Futerman and
Chessin decided to explore with their family members the possibility of Hahn
becoming a private company. Among other things, Futerman and Chessin spoke with
Sara Futerman about financing a possible going private transaction.
On January 6, 2001, Futerman and Chessin met with representatives of
Manufacturers and Traders Trust Company regarding possible financing in
connection with taking Hahn private. There was a general discussion regarding
the availability of financing and the structuring of possible transactions which
would involve the mortgaging of certain real estate owned by the Futerman
family. Following the meeting, Futerman and Chessin decided to proceed with a
transaction to take Hahn private.
On January 16, 2001, Futerman and Chessin submitted a letter to our board
of directors expressing their interest in acquiring Hahn in a merger transaction
at a valuation of $3.00 per share to public shareholders, for an aggregate
purchase price of approximately $1.7 million, following which Hahn would be
privately held. The Glick buy-out group determined the consideration to be
offered after receiving input from its financial advisor, Bonadio & Co., LLP.
The contemplated transaction included as closing conditions:
- the consent of Hahn's lender, Fleet Capital;
- receipt of a fairness opinion from a financial advisor to the
special committee that the proposed transaction is fair from a
financial point of view to public shareholders.
- approval of the transaction by the special committee, the full
board and the holders of 66 2/3% of Hahn's outstanding shares of
common stock;
- receipt of satisfactory financing for the merger consideration;
and
- execution of a definitive merger agreement with Hahn.
On January 18, 2001, our board of directors convened to consider Futerman's
and Chessin's acquisition proposal and to review the Nasdaq delisting situation.
In addition to the directors, Futerman's and Chessin's counsel attended the
meeting. Futerman and Chessin and their counsel reviewed the acquisition
proposal in detail with the directors. Futerman and Chessin also informed the
directors that neither they nor the family members which constitute the Glick
buy-out group were interested in selling their shares to a third party.
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Hahn's counsel reviewed with the directors their duties and responsibilities and
the steps that needed to be taken for the board to consider and take action with
respect to the proposal. Following this discussion, our board established a
special committee consisting of independent directors Stephen B. Ashley, William
A. Buckingham, Nathan Lewinger and E. Philip Saunders. Our board delegated to
the special committee broad authority to consider any proposal made by the Glick
buy-out group and to retain independent legal counsel and financial advisors.
Our board formed the special committee primarily because it believed that the
exploration by the full board of a possible acquisition of Hahn would present
conflicts of interest for Futerman and Chessin as directors of Hahn since,
unlike other shareholders, they would have a continuing interest in Hahn
following the completion of such a transaction and they would be negotiating
against themselves.
At the January 18, 2001 board meeting, Hahn's counsel also reviewed with
the directors the status of the Nasdaq delisting process and the previously
approved reverse stock split. In light of further declines in the trading price
of Hahn's common stock since the last board meeting, our board increased the
reverse stock split ratio to a 1-for-3 reverse split in order to increase the
probability of meeting Nasdaq's minimum bid requirement for continued listing.
Immediately following the January 18, 2001 board meeting, the special
committee convened its first meeting and elected William A. Buckingham as the
committee's chairman. Hahn's general counsel and outside corporate counsel also
attended the meeting. The committee also authorized the chairman to identify and
interview candidates to be the committee's independent legal counsel and
financial advisor to assist the special committee in its work.
On January 19, 2001, Hahn issued a press release announcing its receipt of
the Glick buy-out group's acquisition proposal and the board's formation of a
special committee to consider the proposal. The press release also noted that
the special committee had been authorized to retain independent legal and
financial advisors.
Beginning on January 20, 2001, the chairman of the special committee began
the process of retaining independent legal and financial advisors. The chairman
contacted various legal counsel with experience in representing boards of
directors and special committees in merger and acquisition transactions. After
considering these firms, the special committee retained as its legal counsel,
Underberg & Kessler, LLP, of Rochester, New York. In addition, the chairman
contacted and interviewed Empire Valuation Consultants, Inc., a regionally
recognized professional services firm that provides business valuations for
businesses and securities, mergers, acquisitions and private placement
transactions. The chairman interviewed Empire Valuation representatives to
determine the qualifications of, and the terms for, that firm to act as the
special committee's financial advisor.
On January 24, 2001, Futerman and Chessin contacted Wells Fargo, N.A. to
discuss possible financing for the proposed transaction. The discussions
involved the possibility of providing mortgage financing and related due
diligence questions.
On January 31, 2001, the special committee convened to further consider the
Glick buy-out group's acquisition proposal. At the meeting, the committee
unanimously approved the selection of Underberg & Kessler as counsel to the
committee. The committee's counsel then reviewed with the committee members
their fiduciary duties in considering the proposal and the scope of the
committee's authority in carrying out these duties. The committee chairman then
reviewed his discussions with Empire Valuation, including the proposed terms of
engagement, and the qualifications of Empire Valuation. After considering the
matter, the committee unanimously approved the selection of Empire Valuation,
authorized the chairman to engage Empire Valuation for the purpose of evaluating
the financial terms of the acquisition proposal and, if requested, to render a
fairness opinion concerning the proposed transaction. The committee also
established time frames for responding to the Glick buy-out group. The committee
further recommended that compensation for the committee members would be the
same as for other board committees or $500 per meeting, but that the chairman
would receive $1,000 per meeting.
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On February 14, 2001, the special committee chairman signed a retainer
letter with Empire Valuation that is dated February 8, 2001. During the next
three weeks, Empire Valuation representatives gathered from various public and
company sources information regarding Hahn, its products, operations, prospects,
customers, competitors and other relevant information. As part of this process,
Empire Valuation representatives visited Hahn's headquarters and had several
discussions with Albert Van Erp, Vice President - Finance, and Daniel R.
McDonald, Vice President and General Counsel. On March 8, 2001, Empire Valuation
completed its analysis and a written summary of its analysis, which it
distributed to the special committee and its counsel.
On February 26, 2001, Hahn contacted its lender, Fleet Capital, requesting
its consent to the proposed buyout and its agreement to make an adjustment to
Hahn's financial covenants to exclude expenses expected to be incurred in
connection with the transaction. Without the consent, the proposed transaction
would not have been permitted under Hahn's loan and security agreement.
On March 14, 2001, the special committee convened with its legal and
financial advisors. At that meeting, Empire Valuation presented an overview of
its valuation of Hahn and the fairness of the merger consideration. Empire
Valuation discussed the various methods it used in valuing Hahn, including the
investment value, the market value and the net asset value. Following the
presentation, the committee requested that Empire Valuation perform further
analysis of the net asset value. The special committee made this request because
Empire Valuation had not included in its original determination of net asset
values appropriate discounts for the liquidation of Hahn's receivables and
inventory and projected settlement of lease and contingent obligations. The
committee believed that significant discounts were appropriate based on the
experience of certain committee members who served as directors of Hahn when its
wholly-owned subsidiary, Autoworks, Inc. liquidated in connection with its
Chapter 11 bankruptcy filing in 1997. Upon review and consideration of all the
presented information the special committee was of the view that it should
negotiate the best price attainable at or above $3.00 per share and it
authorized its chairman to do so.
Following the March 14th meeting, the special committee chairman and the
committee's counsel met with Futerman and Chessin and the Glick buy-out group's
counsel to discuss the terms of the transaction. At the meeting, the chairman
advised Futerman and Chessin that the special committee would recommend to the
board that the merger be approved if the Glick buy-out group increased the
offered price to $3.90 per share and eliminated the financing contingency. The
special committee chairman also indicated that the special committee was
considering a requirement that its recommendation of the merger to the board be
conditioned on a requirement that the merger be approved by a majority vote of
the public shareholders. Futerman and Chessin indicated that they believed the
$3.00 valuation was more than appropriate given the state of the automotive
parts industry, the recent steep declines in the financial market place and the
impending delisting of Hahn's common stock by Nasdaq. Futerman and Chessin also
offered to provide the committee with a preliminary calculation of value by the
Glick buy-out group's financial advisors, Bonadio & Co, LLP. This preliminary
calculation of value was not a valuation of Hahn performed in accordance with
the Uniform Standards of Professional Appraisal Practice and Bonadio & Co., LLP
did not express any opinion or conclusion as to the value of Hahn.
On March 15, 2001, Futerman and Chessin, on behalf of the Glick buy-out
group, delivered to the special committee chairman a letter stating that they
did not intend to increase the proposed acquisition price, but would accept a
condition being included in the merger agreement that the merger would be
subject to approval by a majority vote of the public shareholders present and
voting at the meeting. In their letter, Futerman and Chessin also stated that if
such a vote were required, it would be a condition to the merger that the public
shareholders who perfect their appraisal rights hold less than 113,334 shares of
common stock. Enclosed with this letter was the preliminary calculation of value
by the Glick buy-out group's financial advisor Bonadio & Co., LLP. These
calculations, which are not opinions or conclusions as to the value of Hahn,
resulted in a range of values for Hahn's common stock from a negative value to
$1.92 per share.
On March 20, 2001, the special committee held a meeting to consider the
response of Futerman and Chessin and the Glick buy-out group's refusal to
increase the acquisition price of $3.00 per share. At the
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request of the chairman, Futerman and Chessin and their counsel attended the
meeting to address the committee directly. At the meeting, Futerman and Chessin
reviewed their valuation of Hahn and the preliminary calculation of value
prepared by Bonadio & Co., LLP. After making their presentation, Futerman and
Chessin departed the meeting. Empire Valuation delivered its supplemental report
concerning Hahn's net asset value. The report indicated that if a 14%
liquidation discount is applied to Hahn's receivables and inventory, no proceeds
would be available to shareholders from either a going concern or orderly or
forced liquidation of Hahn's net assets. The special committee concluded that a
discount of 40% to 50% would probably apply and therefore, no further analysis
of net asset value was required.
Empire Valuation then reviewed its assessment of the Bonadio & Co., LLP
report and stated that it did not agree entirely with the Glick buy-out group's
underlying assumptions, including the comparable companies used by Bonadio & Co,
LLP, the valuation dates used and the projected financial information as
calculated by Bonadio & Co, for the four fiscal years ending September 30, 2005.
Empire Valuation objected to the use of projected financial information beyond
September 30, 2001 since its was not originated or approved by Hahn's
management. Nevertheless, Empire Valuation did concur with its overall
conclusion that Hahn's fair market value was reasonably stated at, or below,
$3.00 per share. Empire Valuation then reported that it would be prepared to
render an opinion that the $3.00 per share acquisition price was fair to the
public shareholders from a financial point of view.
Following a discussion by the committee that included consideration of the
factors mentioned under "Special Factors -- Recommendation of the Special
Committee" below, the committee resolved unanimously to recommend to our board
that it approve and adopt the merger and the merger agreement and declare its
advisability and recommend it to Hahn's public shareholders, provided that
Futerman and Chessin furnished more detailed information regarding their
proposed financing for the transaction. The special committee also resolved to
recommend to our board that it approve the merger, subject to the statutory 66
2/3% approval and the public shareholder approval. The special committee
requested that Empire Valuation confirm its fairness opinion in writing prior to
the execution of a merger agreement. Stephen Ashley was unable to attend the
meeting, but subsequently approved the merger and the merger agreement in his
capacity as a director and voted in favor of recommending approval of the merger
and the merger agreement to Hahn's shareholders, and has confirmed that he would
have voted in favor of recommending the merger proposal to our board had he been
able to attend the special committee meeting.
By letter dated March 21, 2001, Fleet Capital provided its consent to the
transaction and agreed to the requested financial covenant adjustments, which
factor in a $200,000 adjustment for anticipated transaction expenses.
Futerman and Chessin subsequently prepared and submitted to our board a
non-binding letter of intent incorporating the material terms of the proposed
merger. On March 26, 2001, our board of directors held a meeting at which the
special committee chairman gave a presentation summarizing the special
committee's work to date and the terms of the merger that had been negotiated.
The special committee's legal counsel also reviewed the terms of the merger and
the fiduciary duties of the directors. Empire Valuation then presented its oral
opinion that the proposed merger consideration of $3.00 per share in cash for
each share of common stock held by the public shareholders was fair to the
public shareholders from a financial point of view. The chairman then reported
to our board that the special committee had concluded, and so advised and
recommended to our board, that the terms of the merger be approved and that our
board authorize and recommend its approval to the shareholders. After full
discussion and deliberation (including consideration of the special committee's
recommendation), our board (i) determined that the terms of the merger were fair
to, and in the best interests of, the public shareholders, (ii) approved the
non-binding letter of intent, (iii) authorized the special committee's chairman
to execute the letter of intent and to negotiate and execute on behalf of Hahn a
merger agreement consistent with the terms of the letter of intent, and (iv)
resolved that a recommendation would be made to the public shareholders that
they vote to adopt the merger and the merger agreement. All directors present
other than Futerman and Chessin, both of whom abstained, voted in favor of the
resolutions. E. Philip Saunders was unable to attend the meeting, but had
recommended that the board of directors approve the merger and the merger
agreement in his capacity as a special committee member, and has confirmed that
he would have voted in favor of the merger had he been able to attend the
meeting.
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Prior to commencement of trading in the common stock on the next business
day, on March 27, 2001, Hahn issued a press release announcing our board's
approval of the merger and the execution of the letter of intent.
On March 27, 2001, Hahn's counsel distributed to the special committee, the
Glick buy-out group and their respective legal counsel a form of merger
agreement consistent with the terms of the letter of intent. Between March 30,
2001 and April 6, 2001, upon the authorization of the special committee, counsel
for the special committee, Hahn and the Glick buy-out group negotiated open
issues with respect to the non-financial terms of the proposed merger agreement,
including who would be the parties to the merger agreement, the nature of the
financing condition and expense reimbursement by the Glick buy-out group.
On April 6, 2001, Empire Valuation issued its written opinion confirming
its previously delivered oral opinion as to the fairness of the merger
consideration to the public shareholders from a financial point of view. The
merger agreement was then executed. Prior to the commencement of trading in the
common stock on the next business day, April 9, 2001, Hahn issued a press
release announcing that the merger agreement had been executed by the parties.
On April 27, 2001, Manufacturers and Traders Trust Company issued a written
commitment letter to a member of the Glick buy-out group for a commercial
mortgage in an amount sufficient to fund the obligations of HAW Acquisition
under the merger agreement and to pay related transaction expenses.
As a result of the reverse stock split and the filing by the Company of its
quarterly report on Form 10-Q, Empire Valuation was requested by the special
committee to review its prior analysis and to update and reissue its fairness
opinion, taking into account the reverse stock split, the Company's financial
performance through April 30, 2001, and changes in economic and market
conditions, if any. Empire Valuation's updated fairness opinion was issued on
May 16, 2001.
Also on May 16, 2001, Hahn, Glick, HAW Acquisition and Messrs. Futerman and
Chessin entered into an amended and restated merger agreement as described in
this proxy statement reflecting the impact of the 1-for-3 reverse stock split
and clarifying certain issues. The merger agreement was also amended in the
following materials ways to change or clarify the following issues: (1) the
deadline to complete the merger was extended from July 15, 2001 to September 1,
2001; (2) to substitute Glick as a party in place of PERD Holding Corp.; the
Glick buy-out group owned and controlled PERD Holding Corp. but decided to
change the name and use a limited liability company as the parent of the
purchasing entity in the merger instead of a corporation; (3) to reflect that
the Glick buy-out group had obtained a commitment for financing from
Manufacturers and Traders Trust Company and would be attempting to pursue
financing with that entity instead of Wells Fargo Bank, N.A.; and (4) to reflect
that all members of the Glick buy-out group had entered into the Contribution
and Voting Agreement dated May 11, 2001. On July 12, 2001, Hahn, Glick, HAW
Acquisition and Messrs. Futerman and Chessin entered into an amendment to the
amended and restated merger agreement to extend the deadline to complete the
merger from September 1, 2001 to October 15, 2001.
RECOMMENDATION OF SPECIAL COMMITTEE.
In determining to recommend that our board approve the merger and the
merger agreement, the special committee considered a number of factors. The
material factors considered by the special committee were:
(1) The belief of the special committee that the merger was a better
alternative for the public shareholders than continuing to
operate Hahn as a public company. The special committee also
concluded that, based on Hahn's limited trading volume, lack of
institutional sponsorship, limited public float (which has been
further reduced as a result of the May 10, 2001 1-for-3 reverse
stock split), its small market capitalization, and the lack of
research attention that it received from market analysts, Hahn's
continuing status as a public company would limit the ability of
Hahn's shareholders to obtain a fair price in selling their
shares in the market.
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(2) The belief of the special committee that the merger would provide
shareholders with liquidity for their investment that might not
otherwise be available in the public market and would protect
shareholders against further decreases in the stock price.
(3) The fact that the $3.00 per share merger consideration
represented a significant premium to recent trading prices of
Hahn's common stock. The special committee recognized that the
merger consideration was 60% above the $1.875 per share closing
price of Hahn common stock, the day before we announced that
Futerman and Chessin had submitted their initial acquisition
proposal to the board. This $1.875 price was above the $1.13 five
year historical low for our common stock, and within the trading
range of our common stock of $1.13 to $6.75 per share over the 12
months preceding January 18, 2001. Additionally, in relation to
the historical market price the merger consideration was above
the closing prices of our common stock from October 5, 2000 to
the date of the announcement of the merger prposal. See " Market
Prices of Common Stock; Dividends."
(4) Empire Valuation's opinion that, as of March 20, 2001, the date
of the special committee's meeting to consider the merger, the
merger consideration was fair, from a financial point of view, to
the public shareholders. Empire Valuation confirmed the opinion
in writing. The special committee also considered the
presentations by Empire Valuation to the special committee
regarding:
- Hahn's investment value, market value and net asset value;
- Hahn's current financial condition, results of operations
and future prospects (both as a public and a private
company);
- the industry in which Hahn operates and the financial,
operating and stock price history of Hahn in comparison to
certain other distributors of automotive aftermarket
replacement parts, all of which are reflected in the report
presented by Empire Valuation to the special committee on
March 20, 2001.
(5) The fact that the terms of the merger agreement and the merger
consideration are the product of negotiations between Futerman
and Chessin and the special committee for which the special
committee had retained separate counsel to assist it. Futerman
and Chessin made it clear in these discussions that $3.00 per
share was the highest price that the Glick buy-out group would be
willing to pay for the public shareholders' shares.
(6) The terms and conditions of the merger, including:
- the requirement that the merger agreement be adopted by the
affirmative vote of a majority of the votes cast at the
special meeting by the public shareholders (excluding
abstentions and broker non-votes), as well as by 66 2/3% of
all outstanding shares of common stock, thereby allowing for
an informed vote by the public shareholders on the merits of
the transaction without requiring a tender of shares or
other potentially coercive transaction structure, and which
could possibly require (because Futerman and Chessin own or
control the vote of approximately 64% of the outstanding
shares) that, for the merger to be approved, holders of up
to approximately 82.1% of Hahn's outstanding shares of
common stock (if all such shareholders attend or are present
by proxy and vote at the special meeting) must vote to
approve the transaction;
- the requirement that the approval of the special committee
is required for any action that may be taken by the board
pursuant to the merger agreement (including any amendment or
termination of the merger agreement or waiver of any of
Hahn's rights thereunder);
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- the absence of any termination or "break up" fees payable by
Hahn and the fact that Hahn would have no financial
obligation to the Glick buy-out group in the event of
termination of the merger agreement;
- the fact that if the merger agreement is terminated and HAW
Acquisition could not close due to the lack of necessary
financing to pay the merger consideration that Glick, HAW
Acquisition, Futerman and Chessin must pay Hahn $75,000 as
reimbursement for the fees and expenses incurred by Hahn in
connection with the merger, provided that, as of the
termination, neither the special committee nor our board of
directors has withdrawn their recommendation to the
shareholders to approve the merger and the merger agreement,
the merger and the merger agreement has been approved by
Hahn's shareholders, no injunction prohibiting the merger or
requiring certain actions has been issued by any court and
Hahn is not in material default under the merger agreement;
and
- the fact that the merger agreement may be terminated by the
special committee if our board or special committee
withdraws or modifies its approval or recommendation of the
merger, merger agreement or the transactions contemplated
thereby, and determines to pursue a more advantageous
transaction.
(7) The belief of the special committee that there are no
developments or events planned or anticipated by Hahn's board of
directors or management that can be expected to cause a
significant increase in the market trading price of, or interest
in our common stock in the foreseeable future, our declining
sales over the past three years, the extent to which our cost
control program has been implemented to date leaving few expenses
left that can be eliminated or decreased, our highly leveraged
capital structure, the general softness in the automotive
aftermarket replacement parts industry and other factors
impacting Hahn's current financial condition, results of
operations and future prospects.
(8) The special committee considered the possibility of seeking, or
hiring an investment banking firm to seek, an independent or
competing proposal for the purchase of Hahn's common stock.
However, because the Glick buy-out group had stated an
unwillingness to sell their 64% ownership interest in Hahn to an
independent purchaser, the special committee did not pursue this
alternative. Thus, the special committee sought instead to obtain
a fair price for the common stock owned by the public
shareholders by negotiating with Futerman and Chessin for the
highest possible cash price for the common stock owned by the
public shareholders. The special committee recognized that
consummation of the merger will preclude current shareholders of
Hahn, other than the Glick buy-out group, from participating in
any future growth of the surviving corporation. The special
committee also recognized that the Glick buy-out group will have
an investment in the equity of the surviving corporation.
Nevertheless, the special committee concluded that, in light of
its analysis of Hahn, its business and its growth prospects,
receiving a premium above the market price of the common stock by
public shareholders is preferable to an uncertain future return
in light of the historical limited trading market, the lack of
any significant market interest in the common stock and the lack
of payment of any dividends on the common stock.
Although there was no intention to liquidate Hahn, the special committee
did attempt to determine the approximate net asset value of Hahn on a
liquidation basis in light of the $9.17 per share net book value of Hahn at
December 31, 2000 (which was the end of Hahn's last fiscal quarter for which
such information was calculated prior to the special committee's determination).
To assist the special committee in this process, Empire Valuation prepared a
report on Hahn's net asset value in a going concern orderly liquidation and a
forced liquidation. Based in part on this report and the experience of the
committee
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members with the liquidation of Hahn's wholly-owned subsidiary, Autoworks, Inc.,
in connection with its Chapter 11 bankruptcy filing in 1997, the special
committee concluded that it was likely that a liquidation would yield no
proceeds to shareholders.
During August 2000, Eli Futerman, as trustee of the Michael Futerman Living
Trust, purchased 49,700 shares of Hahn common stock on the open market at prices
ranging from $2.75 to $3.75 per share. Approximately 60% of these purchases
were made at prices above the merger consideration of $3.00 per share. Prior to
these purchases being made, these shares constituted approximately 8% of Hahn's
issued and outstanding shares of common stock not held by the Glick buy-out
group and Hahn's executive officers and directors. The special committee did
not give significant weight to these purchases because they were made over four
months prior to the date on which the Glick buy-out group first submitted their
acquisition proposal, and before Hahn encountered delisting issues with Nasdaq.
The Special Committee also did not give significant weight to the purchase of
Hahn's common stock made by Eli Futerman in a private transaction in May, 2000
because the transaction did not reflect fair market value as other
considerations were involved in the structure and purchase of these shares. See
"Information Regarding Glick and HAW Acquisition -- Recent Stock Purchases"
(Page 71). The special committee did not consider the general performance of
the stock market as it did not believe this was a significant factor in Hahn's
trading price, given its small market capitalization, small public float and
the thinness of its trading market.
RECOMMENDATION OF OUR BOARD OF DIRECTORS.
In reaching its determination that the merger and merger consideration are
fair to, and in the best interests of the public shareholders, approving the
merger and the merger agreement and recommending that the public shareholders
adopt the merger agreement, our board considered the special committee's
analysis of the factors discussed above and the committee's recommendation and
specifically adopted these analyses, conclusions and recommendations .
In light of the number and variety of factors that the special committee
and our board considered in their respective evaluations of the merger, neither
the special committee nor the board found it practicable to assign relative
weights to the foregoing factors and, accordingly, neither did so.
Each of the special committee and our board believes that the merger is
procedurally fair because, among other things, (i) the special committee
consisted of independent directors appointed by our board to represent solely
the interests of, and to negotiate on behalf of, the public shareholders, (ii)
the special committee retained and was advised by Underberg & Kessler, LLP as
the committee's legal counsel, which assisted the special committee in its
negotiations, (iii) the special committee retained Empire Valuation to assist it
in evaluating the merger consideration and received an opinion from Empire
Valuation as to the fairness of the merger
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consideration to the public shareholders from a financial point of view, (iv)
the terms and conditions of the merger agreement, including the merger
consideration, resulted from negotiations between the special committee and the
Glick buy-out group and their respective independent advisors, and (v) the
merger and the merger agreement is subject to approval by the affirmative vote
of a majority of the votes cast at the special meeting by the public
shareholders (excluding abstentions and broker non-votes), in addition to the
statutory requirement that the merger agreement be adopted by two-thirds of the
votes of all outstanding shares of common stock.
EACH MEMBER OF THE SPECIAL COMMITTEE AND OUR BOARD OF DIRECTORS BELIEVES
THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC
SHAREHOLDERS. OUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE MERGER AND THE
MERGER AGREEMENT.
Except to the extent a recommendation is made in a person's capacity as a
director, no executive officer of Hahn, Glick or HAW Acquisition nor any of
Futerman or Chessin or their family members in an individual capacity, has made
any recommendation with respect to the approval of the merger and the merger
agreement. Messrs. Eli N. Futerman and Daniel J. Chessin have agreed to vote or
to cause to be voted all of the shares of common stock which they own or control
in favor of the merger and the merger agreement.
See "The Merger."
Hahn, Glick, HAW Acquisition, Futerman and Chessin have been informed by
the other directors and executive officers of Hahn, who owned an aggregate of
1,201 shares of common stock on the record date, that they plan to vote their
common stock in favor of adoption of the merger and the merger agreement.
GLICK BUY-OUT GROUP'S PURPOSE AND REASONS FOR THE MERGER
The Glick buy-out group entered into the merger transaction in order to
become the sole owners of Hahn. The Glick buy-out group decided to proceed with
the going private transaction at this time for the following reasons:
- Hahn's low stock price made the transaction attractive in terms
of the aggregate funds necessary to acquire the public shares;
- Hahn's declining sales and the weakness in the wholesale
autoparts industry generally, coupled with the drop in the stock
market, made it unlikely that Hahn's stock could recover value
significantly;
- Hahn's low stock price and trading volume made access to and use
of equity capital markets impracticable, thereby eliminating a
significant advantage of being a public company;
- the high cost of operating as a public company(which are
estimated to be approximately $205,000 annually) relative to
Hahn's sales; and
- support of the Futerman family, coupled with availability of
financing to the family to finance the transaction, made it
feasible.
The transaction is structured as a merger, in which the equity interest in
Hahn of all the public shareholders would be extinguished in exchange for $3.00
in cash per share of common stock. The Glick buy-out group considered a tender
offer as an alternative means to accomplish the transaction. A merger enables
the transaction to be completed in one step, instead of two steps, as would be
required by a tender offer. The Glick buy-out group believed that proceeding
with a merger minimized the risk that the contemplated transactions would not be
finalized and would reduce transaction costs. Therefore, the Glick buy-out group
did not pursue the tender offer alternative.
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Over the past few years, there has been a general softness and decreasing
profitability in the automotive replacement parts industry generally. Consistent
with this trend, our sales have decreased steadily over the last few years.
Although our net profits rose in Fiscal 2000 as compared to Fiscal 1999, this
was due in part to a one time gain in the sale of a marketable security and the
performance of debt and equity investments of Hahn's wholly-owned subsidiary
HFV, Inc., in Autoworks Ltd., and not from what the Glick buy-out group believes
to be a trend in the industry's profitability. This general industry softness
has been caused by various factors, including improved vehicle performance,
longer vehicle warranties, an increase in leased vehicles and increased
competition in all segments of distribution. Those factors have also caused an
increasing risk in the industry due to the lower demand for automotive
replacement parts. As a result of these factors, and our small size and the lack
of equity research coverage for our common stock (factors they believe are in
large measure beyond our control), it is and will continue to be difficult for
us to attract new investor interest and to obtain access to the capital markets,
and for our shareholders, including themselves, to get a fair price when selling
their shares in the market which is important due to Hahn's highly leveraged
capital structure. In addition, trading volume in our common stock has
historically been low. For the twelve months immediately preceding January 19,
2001, when we announced that we were in talks with the Glick buy-out group
regarding a possible transaction, the trading volume averaged approximately
4,993 shares a day.
While the Glick buy-out group believes that these factors do and would
continue to limit the ability of our shareholders, including themselves, to
receive a fair price selling their shares in the market, they also believe that
we are a viable company with the opportunity to increase our revenues and net
income in the future. The Glick buy-out group believes that as a private
company, Hahn can better position itself for long-range strategic planning,
without the concern of short-term impact on stock price. They further believe
that the merger offers our public shareholders the opportunity to obtain a fair
value for their shares, with the offer price of $3.00 per share being 60% above
the $1.875 per share closing price of our common stock on January 18, 2001, the
day before we initially announced our board's receipt of the acquisition
proposal The $1.875 price was above the $1.13 five year historical low trading
price of our common stock, and within the trading range of our common stock for
the 12 months preceding January 18, 2001, $1.13 to $6.75 per share. However, the
Glick buy-out group also recognizes that the merger will deprive our public
shareholders of the opportunity to share in any future increase to its revenues
or net income.
The Glick buy-out group owns 1,011,553 shares of common stock. Immediately
prior to completion of the merger, Futerman, Chessin and certain other family
members intend to contribute their shares to Glick. This represents an indirect
investment in Glick by Futerman, Chessin and certain other family members of
approximately $3,034,659 (based on the $3.00 per share to be received by the
public shareholders in the merger). Certain members of the Glick buy-out group
will also contribute approximately $2.0 million in cash to Glick. If the merger
and financing are completed, Futerman, Chessin and certain other family members
will own 100% of Glick's outstanding equity interest and Glick will own 100% of
the surviving corporation's outstanding equity interest. The Glick buy-out group
believes that, if Hahn is able to successfully continue its business strategy,
then the value of its ownership interest in Hahn will, over time, exceed the
amount that they will have invested through completion of the merger.
POSITION OF THE GLICK BUY-OUT GROUP AS TO FAIRNESS OF THE MERGER
The Glick buy-out group has concluded that the merger, including the merger
consideration of $3.00 per share in cash and the terms and conditions of the
merger agreement, are fair to the public shareholders. The Glick buy-out group
arrived at this conclusion after considering the preliminary mathematical
calculations of value determined by their financial advisor, Bonadio & Co., LLP,
and analyses and findings of the special committee and the board of directors
(described in detail in "Special Factors -- Recommendation of the Special
Committee and "-- Recommendation of our Board of Directors") with respect to the
fairness of the merger to Hahn's public shareholders. As of the date of this
proxy statement, the Glick buy-out group adopted the analyses and findings of
the special committee and the board with respect to the
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34
fairness of the merger and they believe that the merger is both procedurally and
substantively fair to Hahn's public shareholders.
The Glick buy-out group recognizes that the merger consideration of $3.00
per share in cash is less than Hahn's per share net book value as of the end of
the last quarter prior to the submission of their acquisition proposal to our
board. The Glick buy-out group, however, believes that Hahn's liquidation value
would be much less than its net book value, due to the discounts that would
occur in liquidating Hahn's assets (including its receivables and inventory) and
the significant lease and contingent obligations that would have to be settled.
The discounts applied to determine the liquidation value of Hahn's assets were
determined by Glick based on the experience of certain members who served as
directors of Hahn at the time that its wholly-owned subsidiary, Autoworks, Inc.
liquidated in connection with its Chapter 11 bankruptcy filing in 1997. The
Glick buy-out group believes that the liquidation value would not yield any net
proceeds to Hahn's shareholders. Based on this liquidation estimate, the Glick
buy-out group did not give significant weight to the per share net book value of
Hahn in assessing the fairness of the merger consideration.
The Glick buy-out group believes that Hahn's going concern value ranges
from $0 to $1.92 per share based on the preliminary mathematical calculations of
value arrived at by its financial advisor. Consequently, the Glick buy-out group
believes that the merger consideration of $3.00 in cash does not represent less
than Hahn's going concern value. See "Special Factors - Preliminary Calculation
of Value of the Glick Buy-Out Group's Financial Advisor."
The Glick buy-out group recognizes that, following the merger, the public
shareholders will no longer have an equity interest in Hahn and, therefore, will
not participate in any potential future earnings and growth of Hahn. This could
be detrimental to the public shareholders if Hahn successfully grows. In
adopting the analysis and findings of the special committee and the board, the
Glick buy-out group noted that its members, as holders of approximately 64% of
Hahn's outstanding common stock, had stated their unwillingness to sell their
shares to any third party acquirer. The Glick buy-out group also recognizes
that, as a result, a purchase offer from a third party is not available to
determine the fairness of the transaction. The Glick buy-out group believes,
however, that offering the public shareholders the opportunity to select, by
majority action of the public shareholders present and voting at the special
meeting, whether to approve the transaction ensures the fairness of the
transaction to them.
As members of our board of directors, Futerman and Chessin abstained from
voting on approval of the merger agreement and on the recommendation to the
shareholders that they vote to approve the agreement.
The Glick buy-out group believes that the merger is both procedurally and
substantively fair to Hahn's public shareholders.
FAIRNESS OPINION OF SPECIAL COMMITTEE'S FINANCIAL ADVISOR
On March 20, 2001, Empire Valuation delivered its opinion to the special
committee to the effect that, as of such date, the merger consideration was
fair, from a financial point of view, to the public shareholders. Empire
Valuation presented the financial analysis underlying its opinion at meetings of
the special committee on March 14, 2001 and March 20, 2001 and presented its
report to our board of directors on March 26, 2001. Empire Valuation confirmed
its opinion in writing on April 6, 2001, except that the opinion was given as of
that date.
As a result of the reverse stock split and the filing by the Company of its
quarterly report on Form 10-Q,
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Empire Valuation was requested by the special committee to review its prior
analysis and to update and reissue its fairness opinion, taking into account the
reverse stock split, the Company's financial performance through April 30, 2001,
and changes in economic and market conditions, if any. Empire Valuation's
updated fairness opinion was issued on May 16, 2001. Empire Valuation did not
consider any other additional factors when updating and reissuing its opinion
from the ones discussed below.
The full text of the Empire Valuation updated written opinion, dated May
16, 2001, which sets forth the assumptions made, matters considered and limits
on the review undertaken, is attached to this proxy statement as Appendix B and
is incorporated herein by reference. The summary of the Empire Valuation opinion
set forth below is qualified in its entirety by reference to the full text of
the Empire Valuation opinion. You are urged to read the Empire Valuation opinion
in its entirety. We do not intend to obtain a further updated fairness opinion
of Empire Valuation unless a material amendment is made to the financial terms
of the merger agreement.
THE EMPIRE VALUATION OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE MERGER
CONSIDERATION TO THE PUBLIC SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW A SHAREHOLDER
SHOULD VOTE AT THE MEETING OR AS TO ANY OTHER ACTION THAT A SHAREHOLDER SHOULD
TAKE REGARDING THE PROPOSED MERGER.
The summary contained herein of the presentation by Empire Valuation
relating to its opinion is qualified in its entirety by reference to the full
text of the presentations of March 14, 2001 and March 20, 2001, filed as
exhibits to the Schedule 13E-3. See "Where You Can find More Information."
In preparing its opinion, among other things, Empire Valuation:
- reviewed and analyzed certain publicly available historical,
business, financial and operating data for Hahn including, but
not limited to, (i) the Annual Report to shareholders and Annual
Report on Form 10-K for the fiscal year ended September 30, 2000,
(ii) the Quarterly Reports on Form 10-Q for the fiscal quarters
ended December 31, 2000, and March 31, 2001, respectively, (iii)
Hahn prepared interim financial statements for the period ended
April 30, 2001 (which Hahn's management identified as being the
most current financial statements available as of the time they
were provided), (iv) Hahn's preliminary proxy statement dated
January 29, 2001 for Hahn's 2001 annual meeting of shareholders
and (v) additional public filings made by Hahn with the SEC since
1996;
- visited Hahn's corporate headquarters and held discussions with
Hahn's Vice-President and General Counsel, Daniel R. McDonald,
and Vice-President-Finance, Albert J. Van Erp, to address its
business, operations and prospects;
- reviewed and analyzed certain publicly available information
regarding the automotive aftermarket replacement parts industry;
- reviewed and analyzed certain information relating to Hahn,
including a projected balance sheet and statements of income and
cash flow data for the 2001 fiscal year (ending September 30,
2001), prepared by the management of Hahn;
- reviewed and analyzed historical stock market prices and trading
volumes for the common stock;
- reviewed and analyzed publicly available financial, operating and
stock market data concerning certain companies engaged in
businesses that Empire Valuation deemed comparable to Hahn or
otherwise relevant to its inquiry;
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- reviewed the initial Glick buy-out group proposal submitted to
our board of directors dated January 16, 2001 and the executed
letter of intent dated March 26, 2001 between Hahn and Messrs.
Futerman and Chessin on behalf of the Glick buy-out group;
- reviewed a draft, dated April 6, 2001, of the original merger
agreement, including the exhibits thereto; and
- considered such other information, financial studies and analyses
and performed such other analyses, studies and investigations as
it deemed relevant.
Empire Valuation assumed, with the special committee's consent, that the
draft of the merger agreement that they reviewed would conform in all material
respects to the definitive merger agreement.
In connection with its review and analysis and in the preparation of its
opinion, Empire Valuation relied upon the accuracy and completeness of the
financial and other information publicly available or provided to it by Hahn and
did not undertake any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of Hahn.
Further, the Empire Valuation opinion was based on economic, financial and
market conditions as they existed on the date the opinion was rendered and can
only be evaluated as of such date.
Neither Hahn nor any member of the Glick buy-out group imposed any
limitations upon the scope of the investigation to be performed by Empire
Valuation in formulating its opinion.
The Empire Valuation opinion, including Empire Valuation's presentation of
such opinion to the special committee, was one of the many factors that the
special committee took into consideration in making its determination to
recommend to our board approval of the merger and the merger agreement. See
"Special Factors -- Recommendation of the Special Committee" and "--
Recommendation of our Board of Directors." Consequently, Empire Valuation's
analyses described below should not be viewed as solely determinative of the
opinion of the special committee with respect to the merger consideration.
In arriving at its opinion, Empire Valuation performed a variety of
financial analyses. While the summary set forth below describes all material
analyses presented to the special committee at the March 14, 2001 and March 20,
2001 meeting, it does not purport to be a complete description of the analyses
performed. The preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to the particular
circumstance. Therefore, such an opinion is not necessarily susceptible to
partial analysis or summary description. Empire Valuation believes that its
analyses must be considered as a whole and selecting portions thereof or
portions of the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process underlying
its opinion. Empire Valuation made numerous assumptions with respect to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Hahn. In particular,
Empire Valuation reviewed general assumptions about the United States economy
and the wholesale autoparts industry segment in particular to judge the
reasonableness of Hahn's 2001 financial projections and the stock prices for
Hahn and the comparable companies. In terms of United States economic
assumptions, Empire Valuation reviewed projected gross domestic product and
housing starts for the next two years. It reviewed the Value Line Investment
Survey, dated March 2, 2001, which projected only modest growth in the gross
domestic product and housing starts. For the wholesale industry, Empire
Valuation used he Automotive Warehouse Distributors Association Aftermarket
Intelligence Annual, 2001 edition. The report projected only modest growth in
United States aftermarket revenue. Any estimates contained in Empire Valuation's
analyses are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the values of businesses and securities do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities may be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty.
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Empire Valuation arrived at valuation ranges for Hahn by utilizing two
principal valuation methodologies: the investment value and the market value.
Empire Valuation also considered and placed secondary reliance on Hahn's net
asset value. Empire Valuation then reached its fairness conclusion based on the
valuation ranges derived from these valuation methodologies. The following is a
brief summary of these analyses and the other factors considered by Empire
Valuation and reviewed with the special committee and our board in Empire
Valuation's oral presentation and Empire Valuation's opinion to the special
committee on March 14, 2001 and March 20, 2001 and to our board on March 26,
2001 and subsequently confirmed in writing.
Investment Value. The investment value, which is sometimes referred to as
the income value or earnings value, establishes a range of values of a business
based on various methods. One investment value method frequently used estimates
the present value of an enterprise's future earnings or cash flow. Another
recognized investment value method is to determine the level of current annual
benefits (i.e., earnings, cash flow, dividends, etc.), and then capitalize one
or more of the benefit types using an appropriate capitalization rate. Yet
another method of calculating investment value is a cash flow analysis of the
ability of an enterprise to service acquisition debt obligations (at a certain
price level) while providing sufficient earnings for reasonable dividends and
capital adequacy requirements. In connection with the cash flow analysis, the
return on investment that would accrue to a prospective buyer at the transaction
value is calculated.
Due to Hahn's highly leveraged nature, the investment value method which
Empire Valuation selected to analyze Hahn was the capitalization of current
annual benefits in the form of Hahn's annual debt-free operating cash flow.
Under this method, Empire Valuation first calculated Hahn's current earnings
capacity based on Hahn's historical operating income for the three fiscal years
ended September 30, 2000, and Hahn's projected operating income for the fiscal
year ended September 30, 2001 which had been provided to Empire Valuation by
Hahn. See "SPECIAL FACTORS -- Hahn Management 2001 Projections." Empire
Valuation then calculated Hahn's operating cash flow by adjusting Hahn's current
earnings capacity for depreciation and normalized capital expenditures. Empire
Valuation then capitalized Hahn's adjusted operating cash flow using a range of
capitalization rates based on various changes in the assumptions used to
determine Hahn's weighted average cost of capital. From these figures, Empire
Valuation deducted Hahn's long-term debt and applied a 30% control premium.
Empire Valuation was unable to locate any comparable transaction from which it
could derive a control premium. As a result, it used a 30% control premium based
on its general experience of control premiums paid in control transactions
involving public companies. Empire Valuation then added back the net present
value of Hahn's net operating loss tax carry-forwards. Empire applied a
reasonable range of capitalization rates from 8.25% to 9.25%. These
capitalization rates were based on Hahn's weighted average cost of capital. The
weighted average cost of capital represents the cost of capital for Hahn based
on the relative proportion of debt and common equity employed in its capital
structure. As a result, Empire Valuation derived an implied per share value
ranging from $2.40 to $2.97 on a control basis.
Market Value. Market value is generally defined as the price, established
on an "arms-length" basis, at which knowledgeable, unrelated buyers and sellers
would agree. The "hypothetical" market value for a corporation is normally
determined by comparison of certain financial data of similarly situated
publicly traded corporations, adjusting for significant differences in financial
performance criteria and for any lack of marketability or liquidity. The market
value in connection with the evaluation of control is determined by the sales of
comparable companies. In valuing a business enterprise, when sufficient
comparable trading data is available, the market value deserves similar emphasis
as the investment value, and greater weight than the net asset value.
Under the market approach, Empire Valuation, using publicly available
information compared selected financial data of Hahn with similar data of
selected publicly-traded companies. For this purpose, Empire Valuation selected
companies that are engaged in the sale of automotive replacement parts in the
wholesale, jobber and, in some cases, retail markets. Empire Valuation excluded
companies that are more heavily dependent on retail, as opposed to the wholesale
business. Also as selection criteria, Empire Valuation selected companies that
had a positive financial results for at least the three years prior to its
analysis, or ones for which its primary products, services and sales were not
tied to a specific niche or single customer. From
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these criteria, Empire Valuation selected Genuine Parts Company, Keystone
Automotive Industries, Inc., O'Reilly Automotive, Inc., R&B Inc. and Clarcor
Inc. Hahn is smaller than those companies and four of these companies are the
largest or leading company in its business.
Empire Valuation compared the following financial statistics for the
comparable companies to those for Hahn:
- historical revenue growth over the trailing four years ended
between September 30, 2000 and December 30, 2000;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
9.7% 39.1% -2.4%
- historical earnings before interest, taxes, depreciation and
amortization ("EBITDA") growth over the same four years;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
7.7% 36.7% -11%
- historical earnings before interest and taxes ("EBIT") growth
over the same four years;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
6.4% 35.1% 14.06%
- historical net income growth for the same four year period;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
3.06% 33.1% 29.8%
- total latest twelve months revenue as of the latest reported
quarter prior to March 7, 2001;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
$372.5 million $7,981.7 million $125.6 million
- equity market capitalization as of March 7, 2001;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
$19.8 million $4,702.5 million $3.6 million
- EBITDA margins as of the fiscal year ended closest to September
30, 2000;
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Comparable Companies Hahn
-------------------- ----
Low High
--- ----
9.6% 15.5% 5.3%
- Gross margins for the same fiscal year; and
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
30.1% 43.1% 38.6%
- total debt to total book capitalization as of the latest reported
quarter ended prior to March 7, 2001.
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
0.3x 3.4x 7.2x
Empire Valuation's analysis also showed that Hahn's liquidity ratios and
profitability were at or below those of the comparable companies, and that its
operating cycle (days receivable and days inventory) were significantly longer
than those of the comparable companies.
Empire Valuation used three liquidity ratios to measure us against the
comparable companies. The following table lists the median current ratio for the
fiscal years ended closest to September 30, 1996 through 2000 for the comparable
companies to the current ratio for Hahn. The current ratio indicates a company's
current assets over current liabilities:
CURRENT RATIO
-------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 3.6 3.3 3.7 3.2 3.2
Hahn 4.1 2.7 3.1 3.2 3.1
The following table lists the quick ratio of the comparable companies for
the fiscal years ended closest to September 30, 1996 through 2000 as compared to
the quick ratio for Hahn over that time period. The quick ratio measures the
cash on hand and receivables as compared to the current liabilities of a
company. It provides a more conservative view of a creditor's protection as
compared to the current ratio.
QUICK RATIO
-----------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 1.6 1.1 1.6 1.6 1.1
Hahn 0.8 0.7 0.8 0.8 0.7
The following table lists the median times interest earned for the
comparable companies for the fiscal years ended closest to September 30, 1996
through 2000 as compared to Hahn for the same period. Times interest earned
measures the ability of a company to cover interest payment by dividing income
before taxes plus nonrecurring expenses and interest by interest expense:
TIMES INTEREST EARNED
---------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 11.7 11.9 43.9 22.8 15.8
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Hahn 2.0 1.5 1.4 1.1 1.3
Empire Valuation also measured the profitability of Hahn relative to the
comparable companies and used four profitability ratios to do so. The following
table lists the median EBITDA total return on tangible invested capital ratio
for the comparable companies for the fiscal years ended closest to September 30,
1996 through 2000 as compared to Hahn for the same period. The EBITDA total
return on tangible invested capital ratio is determined by dividing EBITDA plus
non-recurring expenses by the net book value of total tangible invested capital.
EBITDA TOTAL RETURN ON TANGIBLE INVESTED CAPITAL
------------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 30.8 29.2 29.5 26.9 22.8
Hahn 13.2 18.7 13.0 10.7 12.9
The following table lists the median EBITDA total return on assets ratio
for the comparable companies for the fiscal years ended closest to September 30,
1996 through 2000 as compared to Hahn for the same period. The EBITDA total
return on assets ratio is measured by dividing EBITDA plus nonrecurring expenses
by the book value of the company's total assets.
EBITDA TOTAL RETURN ON ASSETS
-----------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 21.8 20.8 20.4 18.2 15.6
Hahn 10.6 11.0 8.5 6.9 8.2
The following table lists the median EBITDA margin ratio for the comparable
companies for the fiscal years ended closest to September 30, 1996 through 2000
as compared to Hahn for the same period. The EBITDA margin ratio is determined
by dividing EBITDA and nonrecurring expenses by net sales of the company.
EBITDA MARGIN
-------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 12.5 12.0 12.4 11.4 9.6
Hahn 7.8 6.3 5.2 4.4 5.3
The following table lists the median gross margin ratios for the comparable
companies for the fiscal years ending closest to September 30, 1996 through 2000
as compared to Hahn for the same period. The gross margin ratio is determined by
dividing gross profit by net sales of the company.
GROSS MARGIN
------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 38.8 38.1 39.2 39.5 31.7
Hahn 37.5 38.6 37.7 37.3 38.6
Empire Valuation also measured the efficiency ratios of the comparable
companies in relation to Hahn and used the following efficiency ratios: days
receivable; days inventory; and operating cycle.
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The following table lists the median days' receivable ratio for the
comparable companies for the fiscal years ended closest to September 30, 1996
through 2000 for the same period. Days' receivable indicates the number of days
to collect receivables.
DAYS' RECEIVABLE
----------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 39.2 39.7 41.7 50.1 46.0
Hahn 45.0 43.6 42.6 49.0 46.7
The following table lists the median days' inventory for the comparable
companies for the fiscal years ended closest to September 30, 1996 through 2000
as compared to Hahn for the same period. The days' inventory ratio indicates the
number of days to convert inventory into sales.
DAYS' INVENTORY
---------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 124.4 125.4 133.6 142.2 138.1
Hahn 191.9 192.8 207.2 210.9 232.9
The following table lists the median operating cycle ratios for the comparable
companies for the fiscal years ended closest to September 30, 1996 through 2000
as compared to Hahn for the same period. The operating cycle ratio indicates the
length of time to convert inventory into cash.
OPERATING CYCLE
---------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Median 163.7 163.9 168.9 192.2 180.7
Hahn 236.9 236.4 249.8 259.9 279.6
Based on this analysis, Empire Valuation concluded that:
- Hahn's historical growth of revenue and earnings is below that of
the comparable companies;
- Hahn is more highly leveraged than the comparable companies;
- Hahn's liquidity ratios, efficiency ratio and operating cycles
compared unfavorably to those of the comparable companies; and
- Hahn's gross profit was in line with the comparable companies,
however, its operating and net margins were significantly below
that of comparable companies.
Empire Valuation analyzed Hahn's historical stock trading price prior to,
and after the announcement of the merger proposal. Empire Valuation compared
these stock prices and total invested capital (which includes Hahn's funded debt
and market priced equity) relative to Hahn's revenue, EBIT, EBITDA, book value,
net income and operating cash flow. Empire Valuation compared the following
pricing multiples for the trailing 12 months closest to December 31, 2000 for
the comparable companies to those for Hahn:
- the stock price-to-earnings ratio;
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Comparable Companies Hahn
-------------------- ----
Low High
--- ----
5.20x 13.75x 4.59x
- the stock price-to-operating cash flows;
Comparable Companies Hahn
-------------------- ----
Low High
1.70x 8.84x 1.09x
- the price-to-book value ratio;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
.50x 4.42x .20x
Empire Valuation also compared the debt-free multiples for the trailing 12
months closest to December 31, 2000 for the comparable companies to those for
Hahn:
- the total invested capital-to-revenue ratio;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
.37x 1.29x .39x
- the total invested capital-to-EBIT ratio;
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
7.93x 13.60x 9.85x
- the total invested capital-to-EBITDA ratio; and
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
5.05x 9.72x 7.24x
- the total invested capital-to-book value ratio.
Comparable Companies Hahn
-------------------- ----
Low High
--- ----
.82x 2.67x .89x
From this analysis, Empire Valuation concluded that prior to the merger
proposal announcement, Hahn's stock price was reasonably priced relative to the
comparable companies. Based on this, Empire Valuation determined that a
reasonable control price for Hahn's common stock was in the range of $2.25 to
$2.43 per share.
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Empire Valuation searched for, but did not identify any merger, acquisition
or other comparable transactions during the last three years which Empire
Valuation deemed to be sufficiently meaningful for purposes of analyzing the
fairness of the merger consideration. For this reason, Empire Valuation did not
employ this analysis in its evaluation of Hahn.
None of the comparable companies used in the above analysis for comparative
purposes is, of course, identical to Hahn. Accordingly, a complete analysis of
the results of the foregoing calculations cannot be limited to a quantitative
review of such results and involves complex considerations and judgments
concerning differences in financial and operating characteristics of each of the
comparable companies and other factors that could affect the public trading
value of the comparable companies as well as the proposed merger consideration
for Hahn.
Net Asset Value. Net asset value is the value of the net equity of an
entity, including every kind of property and value. To establish net asset
value, Empire Valuation used Hahn's December 31, 2000 balance sheet to which it
then made adjustments, as appropriate or necessary, to reflect the estimated
market value of Hahn's assets in a forced and orderly liquidation and probable
actual liabilities as opposed to their current (historical) book value. This
involved an adjustment to net book value by eliminating capitalized leases,
capitalized financing closing costs, leasehold improvements, goodwill and
deferred taxes and a reduction in the amounts recorded for computer equipment,
furniture and fixtures, vehicles and certain equity investments in related
operating companies (including iAutoparts and CC of Rochester). In addition,
the net book value is adjusted for the amount estimated to satisfy contingent
liabilities. These liabilities included operating leases and residual
liabilities from Hahn's wholly-owned subsidiary, Autoworks, Inc. which filed
for protection under Chapter 11 of the Bankruptcy Code in 1997. A mathematical
computation was then done to determine what discount rate would apply to the
accounts and the inventory in an orderly or forced liquidation to reduce the
net asset value to the offer price. By employing this analysis, Empire
Valuation determined that Hahn's net asset value would be less than zero if 14%
discount was applied to Hahn's accounts receivable and inventory (on a
first-in, first-out basis). The special committee believed, based upon its
experience in the Autoworks liquidation in 1997, that inventory would be
discounted 40% to 50%. Based on the special committee's belief that Hahn's
inventory would be discounted in a range of 40% to 50% in an orderly
liquidation, it was determined that Hahn's net asset value was reasonably
expected to fall significantly below the cash merger consideration of $3.00 per
share.
Delaware Block Approach. Empire Valuation used the "Delaware Block"
approach to determine the fair value of Hahn's shares. Under the Delaware Block
approach, the three factors described above, (1) the income value, (2) the asset
value (and its corollary, liquidation value) and (3) the market value of the
stock, were each taken into account through weighting to determine a fair value.
This approach yielded the following fair market values applying different
weighting and values for the three factors based on different assumptions used
to arrive at these values:
High end $3.51 to $4.74
Mid point $2.82 to $3.12
Low end $2.10 to $2.37
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Conclusion. It is Empire Valuation's opinion that the proposed cash merger
consideration of $3.00 per share is fair from a financial perspective to the
public shareholders. In arriving at its opinion, Empire Valuation, based on its
experience and judgment as an independent appraiser, subjectively weighed the
values arrived at using the market value, investment value and net asset value
appraisal methods previously summarized, and concluded that each analysis
independently supports Empire Valuation's ultimate opinion regarding the
fairness of the transaction. There were no specific factors considered by Empire
Valuation which did not support its fairness opinion.
The special committee engaged Empire Valuation to be its exclusive
financial advisor in connection with the Glick buy-out group's merger proposal
and to provide a fairness opinion because Empire Valuation is a recognized
regional firm engaged in the valuation of businesses and their securities in
connection with merger and acquisition transactions. Pursuant to an engagement
letter dated February 8, 2001 between Hahn and Empire Valuation, Hahn paid
Empire Valuation a retainer of $5,000 on February 20, 2001 and agreed to pay an
additional fee of $20,000 for the valuation analysis and the delivery of its
fairness opinion. No portion of Empire Valuation's fee was contingent upon the
successful completion of the merger. In addition, the February 8, 2001
engagement letter with Empire Valuation provides that Hahn will reimburse Empire
Valuation for its out-of-pocket expenses and will indemnify Empire Valuation and
certain related persons against certain liabilities, including liabilities under
securities laws, arising out of the merger or its engagement. Empire Valuation
has no material prior relationship with Hahn or its affiliates.
HAHN MANAGEMENT 2001 PROJECTIONS
As discussed above, Hahn prepared projections in August, 2000 with respect
to its financial performance over a one-year period ending September 30, 2001,
which projections were provided to Empire Valuation. The following is a summary
of the projections:
MANAGEMENT PROJECTIONS
FOR FISCAL YEAR ENDING
SEPTEMBER 30, 2001
------------------
(in thousands,
except per share data)
INCOME STATEMENT DATA:
Net sales $126,229
Cost of products sold 77,155
--------
Gross profit 49,073
Selling, general and administrative
expense 42,310
Depreciation and amortization expense 1,722
Income from operations 5,041
Interest expense 4,300
Service Charge Income 343
--------
Income before provision for
income taxes 1,084
Provision for income taxes 423
--------
Income from continuing operations $661
CASH FLOW DATA:
Net cash provided be operating activities $3,193
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Net cash used in investing activities (1023)
Net cash used in financing activities (2,169)
Net increase(decrease) in cash 0
BALANCE SHEET DATA:
Working capital $47,495
Total assets 74,995
Long-term obligations 41,714
Shareholders' equity 14,658
Hahn does not as a matter of course make public forecasts or projections as
to future performance (including as to revenues, earnings, other income
statement items and cash flows) or financial position. Hahn's projections are
included in this proxy statement solely because they were provided to Empire
Valuation for purposes of performing its work for the special committee and
rendering a fairness opinion. Hahn's projections were prepared by Hahn's
executive officers.
Hahn's projections reflect its then current view of Hahn's future prospects
in light of present and expected future business trends. Hahn's projections were
based upon numerous estimates and assumptions that are inherently subject to
significant uncertainties, are difficult to predict and, in many cases, are
influenced by factors beyond Hahn's control. Accordingly, there can be no
assurance that the projected results will be realized or that actual results
will not be significantly higher or lower than those predicted. See "Summary --
Forward-Looking Information."
While Hahn's projections were prepared in good faith by Hahn's executive
officers, no assurance can be made regarding future events. Therefore, Hahn's
projections cannot be considered a reliable prediction of future operating
results and should not be relied on as such. Additionally, Hahn's projections
were prepared at the times indicated above and do not reflect any subsequent
results or any changes that have occurred or may occur in the future regarding
the business, assets, operations, properties, management, capitalization,
corporate structure or policies of Hahn, general economic or business
conditions, or any other transaction or event that has occurred since the
respective dates of preparation, or that may occur, and were not anticipated at
the time such information was prepared. Hahn's projections were not prepared to
comply with the published guidelines of either the SEC regarding projections or
forecasts or the American Institute of Certified Public Accountants' Guide for
Prospective Financial Statements, nor in accordance with generally accepted
accounting principles. Hahn's independent auditors have not examined, compiled
or performed any procedures regarding management's projections, nor have they
expressed any opinion or given any assurance on such information or its
achievability and, accordingly, they assume no responsibility for management's
projections. Neither Hahn nor the Glick buy-out group intend to update or
supplement management's projections prior to the special meeting. Shareholders
are cautioned not to place undue reliance on management's projections.
PRELIMINARY CALCULATION OF VALUE BY THE GLICK BUY-OUT GROUP'S FINANCIAL ADVISOR
Futerman and Chessin engaged Bonadio & Co. LLP to act as their financial
advisor with respect to the merger transaction. Bonadio & Co., LLP is a
Rochester, New York, based accounting firm which provides valuation services for
businesses for merger and acquisition transactions. Before engaging them,
Futerman and Chessin interviewed Bonadio & Co., LLP's representatives to
determine the qualifications of and terms for, that firm to act as their
financial advisor. Thereafter, based on the firm's experience in providing
valuation services for businesses for merger and acquisition transactions,
including specifically its experience in going private transactions,
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Futerman and Chessin determined to retain Bonadio & Co., LLP as the Glick
buy-out group's financial advisor for a possible going private transaction.
As part of its engagement, Futerman and Chessin asked Bonadio & Co., LLP to
perform preliminary mathematical calculations of value of Hahn based on
assumptions and financial information provided by Futerman and Chessin to assist
them in determining an amount to bid for Hahn's public shares and to assess the
level of financing necessary to complete the merger at a fair price. Bonadio &
Co., LLP did not perform a valuation of Hahn in accordance with Uniform
Standards of Professional Appraisal Practice and, accordingly, does not express
any opinion or conclusion as to the value of Hahn or the fairness of the
proposed transaction, from a financial point of view, to the public
shareholders. In addition, during the course of negotiations with the special
committee, Bonadio & Co., assisted the Glick buy-out group in its determination
of the amount it would offer.
On January 16, 2001, Bonadio & Co., LLP presented a preliminary calculation
of value of Hahn to Futerman and Chessin. Bonadio & Co., LLP's preliminary
calculation of value consisted of 13 pages of calculations and an oral
explanation by Bonadio & Co., LLP of its procedures. Bonadio & Co., LLP's
preliminary calculations of value were based upon information provided to it by
Futerman and Chessin, including historical Fiscal 2000 financial information for
Hahn, Hahn's 2001 operating budget and names of other publicly traded companies
operating in Hahn's industry. The comparable companies were chosen because they
engaged in businesses similar or related to the business engaged in by Hahn to
one extent or another. Futerman and Chessin discussed with Bonadio & Co., LLP
their personal belief as to the range of appropriate assumptions for the growth
of Hahn's sales and expense amounts for Fiscal 2002 through 2005 and estimated
weighted average cost of capital for Hahn. Based on this information, Bonadio &
Co., LLP prepared projections for Fiscal 2002 through 2005. These projections
were not approved by Hahn management or the Hahn board of directors or subjected
to the review and scrutiny to which Hahn subjects its annual operating budget.
Bonadio & Co., LLP did not audit, review, examine or compile, and Bonadio & Co.,
LLP expresses no opinion or other form of assurance on this historical or
projected information.
These projections of Bonadio & Co., LLP were based upon a number of
assumptions provided to Bonadio & Co., LLP by Messrs. Futerman and Chessin,
including the following material assumptions:
- Annual revenue increases of 1.75%;
- Annual gross margin increases of .25%;
- Annual salary and wage increases at a rate of 1.65%;
- Annual increases of operating expenses at a rate of 2.5%;
- Rent increases at 0.5% annually as expired leases are renewed;
- No deferred tax adjustment being available in Fiscal 2003 through
2005; and
- Future depreciation and amortization based on the remaining
useful lives of existing assets and $500,000 of additional
capital expenditures per year.
These assumptions compared to the selected historical results for Hahn as
folllows: Hahn's sales decreased by 4.1% in 2000, 1.9% in 1999 and 6.1% in 1998.
Gross margin increased by 1.2% in 2000 and decreased by .6% in 1999 and .9% in
1998. Operating expenses, excluding depreciation and amortization, decreased by
2.1% in 2000, 1.2% in 1999 and 5.7% in 1998. Working capital increased by
$1,363,000 in 2000, $1,897,000 in 1999 and $649,000 in 1998.
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BONADIO & CO., LLP
PROJECTED STATEMENTS OF CASH FLOW
FOR THE FISCAL YEARS ENDING SEPTEMBER 30,
2001 2002 2003 2004 2005
Net Sales $ 126,217,000 $ 128,426,000 $ 130,673,000 $ 132,960,000 $ 135,287,000
Cost of Goods Sold (77,119,000) (78,147,000) (79,188,000) (80,241,000) (81,307,000)
--------------- --------------- --------------- --------------- --------------
Gross Profit 49,098,000 50,279,000 51,485,000 52,719,000 53,980,000
--------------- --------------- --------------- --------------- --------------
SELLING, GENERAL &
ADMIN: 44,033,000 44,757,000 45,521,000 46,301,000 47,098,000
--------------- --------------- --------------- --------------- --------------
Income from Operations 5,065,000 5,522,000 5,964,000 6,418,000 6,882,000
Service Charge & Other
Income 342,000 342,000 342,000 342,000 342,000
--------------- --------------- --------------- --------------- --------------
Earnings before taxes
and interest 5,407,000 5,864,000 6,306,000 6,760,000 7,224,000
--------------- --------------- --------------- --------------- --------------
Income taxes (2,109,000) (2,287,000) (2,459,000) (2,636,000) (2,817,000)
--------------- --------------- --------------- --------------- --------------
Net income 3,298,000 3,577,000 3,847,000 4,124,000 4,407,000
Adjustments to reconcile
net income to net cash
flow:
Depreciation 1,722,000 1,700,000 1,700,000 1,700,000 1,700,000
Purchases of property
& equipment (500,000) (500,000) (500,000) (500,000) (500,000)
Change in deferred
taxes 2,109,000 293,000 -- -- --
Self-insurance deposit (65,000) (65,000) (65,000) (65,000) (65,000)
Change in working
capital 1,103,000 (831,000) (845,000) (861,000) (876,000)
--------------- --------------- --------------- --------------- --------------
Net cash flow $ 7,667,000 $ 4,174,000 $ 4,137,000 $ 4,398,000 $ 4,666,000
=============== =============== =============== =============== ==============
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BONADIO & CO., LLP
PROJECTED BALANCE SHEETS
FOR THE FIVE FISCAL YEARS SUBSEQUENT TO TRANSACTION,
ENDING SEPTEMBER 30,
2001 2002 2003 2004 2005
Working Capital 41,898,000 42,797,000 43,574,000 44,435,000 45,311,000
-------------- --------------- --------------- -------------- ---------------
Other net assets 11,312,000 9,884,000 8,749,000 7,614,000 6,479,000
-------------- --------------- --------------- -------------- ---------------
Less interest bearing
debt (43,120,000) (43,120,000) (43,120,000) (43,120,000) (43,120,000)
-------------- --------------- --------------- -------------- ---------------
Stockholders' Equity $ 10,090,000 $ 9,493,000 $ 9,203,000 $ 8,929,000 $ 8,670,000
============== =============== =============== ============== ===============
Using this information, Bonadio & Co., LLP made preliminary calculations of
the value of Hahn using generally accepted valuation calculation methods and
techniques.
Bonadio & Co., LLP calculated a range of value for Hahn using a market
approach and an income approach based on EBITDA. Market multiples were
calculated using financial information of Rankin Automotive Group, Inc, The
Coast Distribution System, Inc., Discount Autoparts, Inc. and O'Reilly
Automotive Group, Inc. These companies were chosen because they engage in
businesses similar or related to the business engaged in by Hahn, to one extent
or another. Except for Rankin Automotive Group, Inc. and The Coast Distribution
Systems, Inc. each of these comparable companies have significantly larger
market capitalizations than Hahn.
Using the latest 12 months financial data, Bonadio & Co., LLP calculated a
multiple for market value of total invested capital to EBITDA of 6.71 for these
companies. Bonadio & Co. LLP then applied this multiple to Hahn's Fiscal 2000
EBITDA (adjusted for extraordinary items) and deducted the market value of
Hahn's interest-bearing debt. For the income method, Bonadio & Co., LLP
performed a discounted cash flow analysis for the five fiscal years ended
September 30, 2005 using a weighted average cost of capital of 14.4% and a
terminal value of $21.5 million. Terminal value was determined using the
terminal year (2005) projected cash flow, a projected 5% future cash flow growth
rate and the weighted average cost of capital of 14.4%. The weighted average
cost of capital was derived based upon industry capitalization guidelines and
current rates of return of 60% equity at a cost of 20%, and 40% debt at a cost
of 6%. Bonadio & Co., LLP then added to the resulting amount the book value of
liquid non-operating assets and deducted the market value of Hahn's
interest-bearing debt. These methods indicated an equity valuation per share for
Hahn ranging from a negative value of ($1.74) per share to $1.92 per share.
You may review and copy Bonadio & Co., LLP's preliminary calculation of
value during regular business hours at Hahn's headquarters located at 415 West
Main Street, Rochester, New York. The preliminary calculation of value was also
filed as an exhibit to the Schedule 13E-3 filed by Hahn, Glick, HAW Acquisition,
Futerman and Chessin. In addition, we will provide you with a copy of the
preliminary calculation of value at no cost to you. See "Where You Can Find More
Information."
PLANS FOR HAHN AFTER THE MERGER
Neither Hahn nor the Glick buy-out group have any plans or proposals that
relate to or would result in an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving Hahn or any of its subsidiaries,
a sale or transfer of a material amount of assets of Hahn or any of its
subsidiaries or, except as indicated elsewhere in this proxy statement, see
"Interests Of The Glick Buy-Out Group and Hahn's Executive Officers and
Directors In The Merger and Hahn -- Directors And Officers Of The Surviving
Corporation, and "Effects Of The Merger," any material change in Hahn's
capitalization, corporate structure or business or the
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composition of the executive officers following the consummation of the merger.
However, Futerman and Chessin intend, from time to time, to evaluate and review
Hahn's businesses, operations, properties, management and other personnel,
corporate structure and capitalization, and to make such changes as are deemed
appropriate. Futerman and Chessin also intend to continue to look for
opportunities to expand Hahn's business following the merger. In that regard,
Futerman and Chessin may review proposals or may propose the acquisition or
disposition of assets or other changes in Hahn's business, corporate structure,
capitalization, management or dividend policy which they consider to be in the
best interests of Hahn and its then shareholders.
CONDUCT OF THE BUSINESS OF HAHN IF THE MERGER IS NOT CONSUMMATED
Our board has made no determination as to the direction of Hahn should the
merger not be consummated. Our board currently expects that Hahn's present
management will continue to operate Hahn's business substantially as presently
operated. However, even if the merger is not consummated, management and the
board intend, from time to time, to evaluate and review Hahn's businesses,
operations, properties, management and other personnel, corporate structure,
dividend policy and capitalization, and make such changes as are deemed
appropriate and to continue to explore opportunities to expand Hahn's business.
INTERESTS OF THE GLICK BUY-OUT GROUP AND HAHN'S EXECUTIVE
OFFICERS AND DIRECTORS IN THE MERGER AND HAHN; ACTUAL OR POTENTIAL
CONFLICTS OF INTEREST
In considering the recommendation of the special committee and of our
board, you should be aware that Futerman, Chessin and certain other family
members who are members of the Glick buy-out group, and certain executive
officers and directors of Hahn have certain relationships or interests in the
merger and Hahn that are different from the interests of public shareholders and
that may present actual or potential conflicts of interest. These conflicts of
interest are discussed and/or referenced below. The special committee and our
board were aware of these potential and actual conflicts of interest and
considered them in evaluating the proposed merger.
MERGER CONSIDERATION AND STOCK OPTIONS.
As of the record date, Futerman, Chessin and certain other family members
owned 64% of Hahn's outstanding common stock. Glick, Futerman, Chessin and
certain other family members have entered into a Contribution and Voting
Agreement dated May 11, 2001 which requires them, prior to the merger, to
contribute each of their shares of Hahn common stock to Glick for non-voting
membership interests in Glick in proportion to the shares they contribute. In
the merger, the contributed shares then held by Glick will be cancelled for no
consideration and the shares of HAW Acquisition owned by Glick will be converted
into new shares of Hahn's common stock. Following the merger, Glick will own all
of the outstanding common stock of Hahn, as the surviving corporation.
As of the record date, directors and executive officers of Hahn and members
of their immediate families, other than Futerman and Chessin, owned an aggregate
of 1,201 shares of Hahn common stock for each of which shares, they, as public
shareholders, will be entitled to receive the merger consideration of $3.00 per
share in cash. Accordingly, as a group, upon consummation of the merger, these
persons will receive $3,603 in the form of merger consideration for their shares
of common stock.
At the effective time of the merger, each outstanding option to purchase
shares of our common stock held by our directors and executive officers,
including Futerman and Chessin will terminate and each option holder will be
entitled to receive the merger consideration for each share of common stock
subject to the option less the exercise price of the option. Because, however,
each of the outstanding options has an exercise price per share in excess of
$3.00, each option will be terminated without any payment. See "The Merger
Agreement -- Treatment of Options" and "Information Regarding Hahn -- Stock
Ownership."
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
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Under the terms of the merger agreement, upon consummation of the merger,
the current executive officers of Hahn will remain as the initial executive
officers of the surviving corporation. The merger agreement further provides
that the directors of HAW Acquisition will be the initial directors of the
surviving corporation. The initial directors of HAW Acquisition will be Futerman
and Chessin.
COMPENSATION OF DIRECTORS.
Non-employee directors currently receive $1,000 for each meeting of the
board attended and $500 for each meeting attended of a committee of the board on
which they serve, except that the chairman of the special committee received
additional compensation for service on that committee as described below.
Members of our board also are reimbursed for reasonable travel expenses incurred
in attending board and committee meetings. The regular compensation of employee
directors of Hahn covers compensation for services as a director.
The non-employee directors earned the following cash compensation
(exclusive of travel reimbursements) from Hahn for services as members of our
board (other than for service on the special committee) during Fiscal 2000:
Stephen B. Ashley.................................... $5,500
William A. Buckingham................................ $6,500
Gordon E. Forth...................................... $3,500
Nathan Lewinger...................................... $5,000
E. Philip Saunders................................... $5,500
Hahn's 1993 Non-Employee Director stock option plan, as amended provided
for the automatic grant of an option to purchase 1,000 shares of common stock to
each non-employee director immediately after election to our board of directors
and 334 shares for each director in office immediately after each annual meeting
of shareholders. Each option has a ten year term, is subject to early
termination in certain instances, and is exercisable commencing one year
following the date of grant at an exercise price equal to 100% of the fair
market value of the common stock on the date of grant. The 1993 Non-Employee
Director Stock Option Plan expired in December 1998; however, the plan remains
in effect for the purpose of determining the rights of the holders of
outstanding and unexpired options previously issued under the plan. In addition,
on March 15, 2000, the board of directors approved a grant to each non-employee
director of stock options for the purchase of 1,667 shares of common stock each
at an exercise price of $3.84 per share. This grant was approved at Hahn's 2001
annual shareholders meeting held on May 9, 2001. As of the date of this proxy
statement, the non-employee directors of Hahn, including each member of the
special committee, holds stock options under this plan to purchase an aggregate
of 14,501 shares of common stock at exercise prices ranging from $3.84 to $38.25
per share. Because each of the outstanding options has an exercise price per
share in excess of the merger consideration, the directors have agreed to
terminate these options upon consummation of the merger without consideration or
payment of any kind.
COMPENSATION OF SPECIAL COMMITTEE MEMBERS.
As compensation for serving on the special committee, each committee member
received the established committee fee of $500 per meeting. Hahn also agreed to
pay to the special committee's chairman, William A. Buckingham, $1,000 for each
meeting. Each member of the special committee is being reimbursed for all
out-of-pocket expenses incurred in performing his services.
Through April 6, 2001, the members of the special committee have earned the
following cash compensation (exclusive of travel reimbursements) from Hahn in
connection with the Glick buy-out group acquisition proposal:
William A. Buckingham, Chairman...................... $3,000
Stephen B. Ashley.................................... $1,000
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Nathan Lewinger...................................... $1,500
E. Philip Saunders................................... $1,500
INDEMNIFICATION ARRANGEMENTS.
For a discussion of certain requirements in the merger agreement for the
indemnification of directors and officers of Hahn and the maintenance of
directors' and officers' insurance, see "The Merger Agreement -- Indemnification
and Insurance." (Pages 48-49).
CERTAIN OTHER TRANSACTIONS.
As of September 30, 2000, Hahn leased from Michael Futerman's estate, Eli
N. Futerman, Daniel J. Chessin and other relatives and partnerships,
corporations or trusts in which such persons have an interest, 14 of its 21
distribution center sites and 33 of its 77 Advantage Auto Stores sites. (Michael
Futerman, deceased, was Hahn's Chairman of the board of directors and Eli N.
Futerman is the executor of Michael Futerman's estate, and trustee of the
Michael Futerman Living Trust, which together hold 787,354 shares of Hahn common
stock). The approximate total gross distribution center space under such leases
was 355,360 square feet. The approximate aggregate store space under such leases
was 181,008 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 applied to the preceding year's base rent, and
for Hahn to pay insurance, real property taxes, utilities and to perform all
maintenance and repairs. In Fiscal 2000, Hahn paid approximately $1,835,000 as
base rental for all distribution centers and store properties under such related
party leases. As of September 30, 2000, the total base rentals payable under all
such distribution center and store leases through the end of their respective
terms was approximately $7.1 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.
In February, 1996, Michael Futerman and Eli N. Futerman advanced $2.5
million to Hahn. Hahn repaid $350,000 of this debt and exchanged five-year
subordinated 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
Hahn, in whole or part, at any time, subject to a subordination agreement with
Hahn's lender, Fleet Capital. During Fiscal 2000, the estate of Michael
Futerman, and Eli N. Futerman, deferred principal payments due them from Hahn
under the subordinated notes until 2003. As a result, in Fiscal 2000, Hahn made
interest payments only on the subordinated notes. In the event that Hahn's net
income is $4,141,000 or greater in any fiscal year, then Hahn must make a
principal prepayment on the notes equal to 19.186% of its net income in excess
of such amount, provided Hahn is not in default under the credit facility with
Fleet Capital. The notes are unsecured and subordinate to all of Hahn's
indebtedness to Fleet Capital.
On or about December 3, 1998, FCA Associates, a partnership consisting of,
at that time, Eli N. Futerman, Daniel J. Chessin and David M. Appelbaum (a
former executive officer), entered into a purchase and sale agreement with a
third party for the purchase of three (3) properties located in Rochester, New
York and the Towns of Gates, New York and Farmington, New York. Hahn is a tenant
with direct distribution facilities at the latter two locations. The closing of
the transaction took place on January 15, 1999 and the Hahn leases were assigned
from the third party to FCA Associates. In May 2000, Mr. Futerman withdrew from
FCA Associates and transferred his entire interest in FCA Associates. The total
gross space of the latter two leases is approximately 9,500 square feet. The
leases require Hahn to pay for liability insurance, real property taxes, and
utilities and to perform all interior maintenance and repairs. Hahn closed its
Merchants Road direct distribution facility in Rochester, New York on or about
October 1, 1999 and ended its occupancy and terminated the lease on or about
December 31, 1999. As of September 30, 2000, the total base rentals payable
under the leases for Gates, New York and Farmington, New York, until the end of
their terms on October 31, 2001, will be approximately $104,000, or $96,000
annually.
In May 2000, Eli N. Futerman, as trustee of the Michael Futerman Living
Trust, purchased 80,024 shares
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of Hahn common stock from David M. Appelbaum, for $660,203.50 at a price of
$8.25 per share in a private transaction. Mr. Appelbaum is a former executive
officer of Hahn. This transaction was in connection with the settlement of a
dispute between Mr. Appelbaum and Mr. Futerman. Also in connection with the
transaction, Mr. Futerman transferred to Mr. Appelbaum his interest in FCA
Associates, a real estate partnership, and Mr. Appelbaum resigned from his
position with Hahn. See "Information Regarding Glick and HAW Acquisition --
Recent Stock Purchases."
EFFECTS OF THE MERGER
As of December 31, 2000, Hahn had a net book value of $9.19 per share and
earnings for the 12 months ended December 31, 2000 of $.64 per share. If the
merger is consummated, Glick will own Hahn and have rights to its entire net
book value and future earnings and will benefit from any increases in the value
of Hahn and also bear the risk of any decreases in the value of Hahn. The sole
members of Glick are Futerman, Chessin and certain other family members. As a
result of the merger, Hahn's public shareholders will no longer have any
ownership in Hahn or benefit from any increases in the value of Hahn, nor will
they bear the risk of any decreases in the value of Hahn. Instead, upon
consummation of the merger, each public shareholder will have the right to
receive $3.00 in cash for each share of common stock held. Thus, the public
shareholders will achieve immediate liquidity for their shares at a price
approximately 60% above the closing price of Hahn's common stock preceding the
announcement of the Glick buy-out group's merger proposal.
Because the common stock will be closely held and cease to be publicly
traded, the Glick buy-out group believes that they will be able to focus on
increasing the long-term value of Hahn to a greater degree by reducing
management's commitment of resources with respect to procedural and compliance
requirements of a company with publicly owned common stock. Management has
calculated the direct expense of this compliance to be approximately $205,000
per year. However, the Glick buy-out group will bear the risks associated with
the lack of liquidity of their continuing investment in Hahn.
Following the merger, the public shareholders will have no continuing
interest in Hahn. As a result, the common stock will no longer meet the
requirements of the Nasdaq SmallCap for continued listing and will be delisted
from the Nasdaq SmallCap.
The common stock is currently registered as a class of securities under the
Exchange Act. Registration of the common stock under the Exchange Act may be
terminated upon application of Hahn to the SEC if the common stock is not listed
on a national securities exchange or quoted on Nasdaq and there are fewer than
300 record holders of the outstanding shares. Termination of registration of the
common stock under the Exchange Act would substantially reduce the information
required to be furnished by Hahn to its shareholders and to the SEC and would
make certain provisions of the Exchange Act, such as the short-swing trading
provisions of Section 16(b), the requirement of furnishing a proxy statement in
connection with shareholders' meetings pursuant to Section 14(a) and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions no longer applicable to Hahn. In addition, "affiliates" of
Hahn and persons holding "restricted securities" of Hahn may be deprived of the
ability to dispose of those securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended. It is the present intention of Hahn to
make an application for the termination of the registration of its common stock
under the Exchange Act as soon as practicable after the effective time of the
merger.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger
agreement. This summary and all other descriptions in this proxy statement of
the merger agreement are qualified in their entirety by reference to the full
text of the merger agreement, a copy of which is attached as Appendix A to this
proxy statement and incorporated herein by reference.
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THE MERGER; MERGER CONSIDERATION
The merger agreement provides that the merger will become effective at such
time as a certificate of merger is duly filed with the New York Department of
State by both Hahn and HAW Acquisition, or at such later time as is specified in
the certificate of merger. If the merger agreement is adopted at the special
meeting by both the statutorily required 66 2/3% shareholder approval and the
public shareholder approval, it is currently anticipated that the merger will
become effective as soon thereafter as practicable after all conditions have
been satisfied, including HAW Acquisition's financing condition. See "The Merger
Agreement -- Conditions." However, there can be no assurance as to the timing of
the consummation of the merger or that the merger will be consummated.
At the effective time of the merger, HAW Acquisition will be merged with
and into Hahn, the separate corporate existence of HAW Acquisition will cease,
and Hahn will continue as the surviving corporation. In the merger, each share
of common stock issued and outstanding immediately prior to the effective time
(other than common stock then (i) held in the treasury of Hahn, (ii) owned of
record by the Glick buy-out group) or (iii) public shareholders who dissent and
seek appraisal rights in accordance with New York law will, by virtue of the
merger and without any action on the part of the holder of the shares, be
converted into the right to receive the merger consideration in cash, without
interest, upon surrender of the stock certificate representing such common
stock. At the effective time, the public shareholders will cease to have any
rights as shareholders of Hahn, except the right to receive the merger
consideration. Each certificate representing a share of common stock held by a
public shareholder will, after the effective time, evidence only the right to
receive, upon the surrender of such certificate, an amount of cash per share
equal to the merger consideration multiplied by the number of shares evidenced
by such certificate.
Each share of common stock issued and outstanding immediately prior to the
effective time which is then (i) held in the treasury of Hahn or (ii) owned of
record by any member of the Glick buy-out group will automatically be canceled,
retired and cease to exist and no payment will be made with respect to those
shares.
Each share of HAW Acquisition capital stock issued and outstanding
immediately prior to the effective time of the merger will be converted into and
become one share of common stock of the surviving corporation, and will
constitute the only issued or outstanding shares of capital stock of the
surviving corporation immediately after the effective time of the merger.
Accordingly, after the merger, Glick will be the only shareholder of the
surviving corporation. Glick's members will be Futerman, Chessin and certain
other family members.
THE EXCHANGE FUND; PAYMENT FOR SHARES OF COMMON STOCK
As of or as soon as reasonably practicable following the effective time of
the merger, the surviving corporation will deposit in trust with Hahn's
registrar or transfer agent or a bank or trust company, for the benefit of the
public shareholders, cash in an aggregate amount equal to the product of (i) the
number of shares held by the public shareholders issued and outstanding
immediately prior to the effective time and (ii) the merger consideration. The
paying agent will, pursuant to irrevocable instructions, make the payments
provided for under the merger agreement out of the exchange fund. We plan to
engage our transfer agent, American Stock Transfer & Trust Company, to act as
the paying agent.
Promptly after the effective time of the merger, the surviving corporation
will cause the paying agent to mail to each public shareholder holding shares of
common stock on the record date a form letter of transmittal containing
instructions for use in surrendering certificates for payment in accordance with
the merger agreement in exchange for the merger consideration. NO SHAREHOLDER
SHOULD SURRENDER ANY CERTIFICATES UNTIL THE SHAREHOLDER RECEIVES THE LETTER OF
TRANSMITTAL AND OTHER MATERIALS FOR SUCH SURRENDER. Upon surrender of a
certificate for cancellation, together with a properly completed and executed
letter of transmittal, to the paying agent after the effective time, the holder
of such certificate will be entitled to receive the merger consideration in
exchange for each share formerly represented by such certificate, without any
interest, less any required withholding of taxes. See "The Merger Agreement --
Tax Withholding." The certificate so surrendered will be canceled.
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Until surrendered pursuant to the procedures described above, after the
effective time of the merger, each certificate will represent, for all purposes,
only the right to receive the merger consideration in cash multiplied by the
number of shares evidenced by such certificate, without any interest.
Any portion of the exchange fund that remains unclaimed by the public
shareholders 180 days after the effective time of the merger (including any
interest, dividends, earnings or distributions received on the unclaimed funds)
will be repaid to the surviving corporation, upon demand. Any public
shareholders who have not complied with the procedures set forth above may look
only to the surviving corporation for payment of their claim for the merger
consideration, without any interest, but will have no greater rights against the
surviving corporation than may be accorded to general creditors of the surviving
corporation under New York law. Notwithstanding the foregoing, neither the
paying agent nor any party to the merger agreement will be liable to any public
shareholder holding certificates formerly representing shares of common stock
for any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
TRANSFERS OF COMMON STOCK
After the effective time of the merger, there will be no transfers of
shares of common stock on the stock transfer books of Hahn. If, after the
effective time, certificates are presented to the paying agent or the surviving
corporation by anyone other than the Glick buy-out group, they will be canceled
and exchanged for the merger consideration multiplied by the number of shares
evidenced by such certificates, without any interest.
TREATMENT OF STOCK OPTIONS
At the effective time of the merger, all outstanding stock options,
including stock options held by members of the Glick buy-out group, are to be
terminated. Under the merger agreement, in consideration of such termination,
the surviving corporation is obligated to pay to the holder of each such stock
option, in cash and as full settlement for such stock option, whether or not
then exercisable, an amount determined by multiplying (i) the excess, if any, of
the merger consideration over the applicable exercise price per share of common
stock subject to such stock option by (ii) the total number of shares of common
stock subject to such stock option. However, because each of the outstanding
options has an exercise price per share in excess of $3.00, each option will be
terminated without any payment.
TAX WITHHOLDING
The surviving corporation and the paying agent will be entitled to deduct
and withhold from the amounts payable to any public shareholder or holder of
stock options such amounts as HAW Acquisition, the surviving corporation or the
paying agent are required to deduct and withhold with respect to the making of
such payment under applicable tax law. To the extent that amounts are so
deducted and withheld by the surviving corporation or the paying agent, such
amounts will be treated for all purposes of the merger agreement as having been
paid to the relevant public shareholder or holder of stock options. See "Federal
Income Tax Consequences."
THE DIRECTORS AND OFFICERS, CERTIFICATE OF INCORPORATION AND BY-LAWS FOLLOWING
THE MERGER
The merger agreement provides that the directors of HAW Acquisition will be
the initial directors of the surviving corporation and the current executive
officers of Hahn will be the officers of the surviving corporation.
The Restated Certificate of Incorporation of Hahn in effect immediately
prior to the effective time will be the Certificate of Incorporation of the
surviving corporation until it is subsequently amended, and the By-Laws of HAW
Acquisition immediately prior to the effective time will be the By-Laws of the
surviving corporation until subsequently amended.
REPRESENTATIONS AND WARRANTIES
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The merger agreement contains certain representations and warranties of
Hahn to Glick, HAW Acquisition, Futerman and Chessin and from these entities and
individuals back to Hahn. The representations of Hahn relate to, among other
things, its organization, capitalization, power and authority to enter into the
merger agreement and the transactions contemplated thereby, the binding effect
of the merger agreement, the fairness opinion of Empire Valuation, the
recommendations by the special committee and by our board, compliance with
required filings and consents under applicable law, and the absence of conflicts
with corporate documents and agreements. The representations of Glick, HAW
Acquisition and Futerman and Chessin (which are joint and several) relate to,
among other things, the organization of Glick and HAW Acquisition, the ownership
of Glick and HAW Acquisition, the absence of obligations, liabilities or
activities of Glick and HAW Acquisition, except in furtherance of the
transactions contemplated by the merger agreement, the power and authority of
Glick and HAW Acquisition to enter into the merger agreement and the
transactions contemplated by the merger agreement, the binding effect of the
merger agreement, required filings and consents and the financing. The
representations and warranties expire at the effective time of the merger. No
party is entitled to indemnification based on a breach of the representations
and warranties which may be discovered after the effective time of the merger.
COVENANTS
Hahn has agreed that, prior to the effective time of the merger, neither
Hahn nor its subsidiaries will: (i) carry on their respective businesses other
than in the usual, regular and ordinary course of business consistent with past
practice, (ii) issue shares of common stock (other than pursuant to the exercise
of outstanding stock options) or capital stock or options to purchase common
stock or capital stock, (iii) declare, set aside or pay any dividend or other
distribution in respect of its capital stock or other equity interest (with
certain exceptions in the case of subsidiaries), or (iv) repurchase its capital
stock, or agree to do any of the foregoing. Hahn has agreed to use its
commercially reasonable efforts to obtain the necessary approval of the merger
and the merger agreement by the public shareholders. The merger agreement
provides that this proxy statement will include the recommendation of our board
to the public shareholders in favor of the adoption of the merger and the merger
agreement (and reflect that the special committee has made a similar
recommendation to our board), subject to the fiduciary duties under applicable
law of such directors (including the directors constituting the special
committee). Notwithstanding any other provision of the merger agreement to the
contrary, if our board or the special committee determines, in good faith in the
exercise of its fiduciary duties under applicable law, that it is required to
withdraw, modify or amend its recommendation in favor of the merger, such
withdrawal, modification or amendment will not constitute a breach of the merger
agreement.
Futerman and Chessin have agreed (i) to vote at the special meeting all
shares of outstanding common stock owned of record or controlled by them for
adoption of the merger agreement, (ii) not to grant a proxy to vote any shares
other than to Glick, HAW Acquisition or certain other family members or to
persons identified in a proxy card distributed on behalf of our board, to vote
such shares at the special meeting in the manner provided in clause (i), and
(iii) not to sell, transfer or otherwise dispose of any of their shares (other
than transfers of shares to Glick or HAW Acquisition or any family members or
trusts for their benefit or the benefit of their family members).
Glick and HAW Acquisition have agreed not to conduct any business or enter
into any activities of any nature prior to the effective time, other than
activities in connection with the merger agreement and the transactions
contemplated by the merger agreement. Futerman and Chessin have agreed to
proceed in good faith and use their best efforts to obtain as soon as reasonably
practicable the financing necessary to pay the aggregate merger consideration
and related transaction expenses.
In addition, Hahn, Glick, HAW Acquisition and Futerman and Chessin have
made further agreements regarding access to Hahn's records, the calling of the
special meeting, the preparation, filing and mailing of this proxy statement and
the Schedule 13E-3, the obtaining of consents of third parties and governmental
authorities and making public announcements.
Subject to the terms and conditions provided in the merger agreement and
the fiduciary duties under
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applicable law of the directors of Hahn, including directors constituting the
special committee, as determined by such directors in good faith, each of the
parties has agreed to use commercially reasonable efforts consistent with
applicable legal requirements to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary or proper and advisable under
applicable laws and regulations to ensure that the conditions to consummation of
the merger are satisfied and to consummate and make effective, in a commercially
reasonable manner, the transactions contemplated by the merger agreement. Glick,
HAW Acquisition, Futerman and Chessin and Hahn also have agreed to use their
commercially reasonable efforts to obtain all material consents of third parties
and governmental authorities, and to make all governmental filings, necessary
for the consummation of the transactions contemplated by the merger agreement.
INDEMNIFICATION AND INSURANCE
The New York Business Corporation Law permits, in general, a New York
corporation, such as Hahn, to indemnify any person made, or threatened to be
made, a party to an action or proceeding by reason of the fact that he or she
was a director or officer of the corporation, or served in any capacity at the
request of the corporation, against any judgment, fines, amounts paid in
settlement and reasonable expenses, including attorney's fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted in good faith, for a purpose he or
she reasonably believes to be in, or, in the case of service for another entity,
not opposed to, the best interests of the corporation and, in criminal actions
or proceedings, in addition, had no reasonable cause to believe that his or her
conduct was unlawful. The New York Business Corporation Law also permits the
corporation to pay in advance of a final disposition of such action or
proceeding the expenses incurred in defending such action or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount
as, and to the extent, required by law. The New York Business Corporation Law
provides that indemnification and advancement of expense provisions contained in
the New York Business Corporation Law are not exclusive of any rights to which a
person seeking indemnification or advancement of expenses may be entitled,
whether contained in the certificate of incorporation or the by-laws of the
corporation or, when authorized by such certificate of incorporation or by-laws,
(i) a resolution of shareholders, (ii) a resolution of directors or (iii) an
agreement providing for indemnification. However, the New York Business
Corporation Law also provides that no indemnification may be made on behalf of
any such person if a judgment or other final adjudication adverse to the person
establishes that his or her acts were committed in bad faith or were the result
of active or deliberate dishonesty and were material to the cause of action so
adjudicated, or that he or she personally gained, in fact, a financial profit or
other advantage to which he or she was not legally entitled.
Hahn's Restated Certificate of Incorporation provides, in accordance with
the New York Business Corporation Law, that a director will not be personally
liable to Hahn or its shareholders for damages for any breach of duty as a
director unless a judgment or other final adjudication adverse to the director
establishes that (i) the director's acts or omissions were in bad faith or
involved intentional misconduct or knowing violation of law, (ii) the director
personally gained, in fact, a financial profit or other advantage to which the
director was not legally entitled, or (iii) the director's acts violated
provisions of the New York Business Corporation Law that impose liability upon
directors in certain instances for declarations of dividends, stock repurchases
or redemptions, distributions of assets following a dissolution, or loans to
directors, when made contrary to New York Business Corporation Law provisions.
Hahn's Restated Certificate of Incorporation and Amended and Restated
By-Laws provide, among other things, that Hahn will indemnify any officer or
director (including officers and directors serving another entity in any
capacity at Hahn's request) to the fullest extent permitted by-law.
The merger agreement provides that the provisions of Hahn's Restated
Certificate of Incorporation limiting the personal liability of directors for
damages and the indemnification provisions of Hahn's Restated Certificate of
Incorporation as they relate to those who have served as directors or officers
of Hahn at any time through the effective time of the merger will not be
amended, repealed or otherwise modified in any manner that would make any of
such provisions less favorable to the directors or officers of Hahn or the
surviving corporation than those that pertain to directors and officers on the
date of the merger agreement. The merger agreement further provides that the
by-laws of the surviving corporation in the merger will be no less
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favorable to those who served as directors immediately before the merger. After
the effective time of the merger (subject to extension until the final
disposition of any claim asserted or made during such period), the surviving
corporation will (i) indemnify, defend and hold harmless the present and former
officers and directors of Hahn and its subsidiaries, from and against, and pay
or reimburse indemnified parties for, all losses, obligations, expenses, claims,
damages or liabilities resulting from or arising out of actions or omissions of
such indemnified parties occurring on or prior to the effective time (including,
without limitation, the transactions contemplated by the merger agreement) to
the fullest extent permitted or required, as the case may be, under (a)
applicable law, (b) Hahn's Restated Certificate of Incorporation or By-Laws in
effect on the date of the merger agreement, including, without limitation,
provisions relating to advances of expenses incurred in the defense of any
action or suit and (ii) advance to any indemnified party's expenses incurred in
defending any action or suit with respect to such matters upon receipt of an
undertaking (which need not be secured) by or on behalf of such indemnified
party to repay such amount as, and to the extent, it is not entitled to be
indemnified, in each case to the fullest extent such indemnified party is
entitled to indemnification or advancement of expenses under Hahn's Restated
Certificate of Incorporation or new by-laws in effect on the date hereof and
subject to the terms of such Restated Certificate of Incorporation and new
by-laws,.
To support its indemnification obligation, the surviving corporation has
agreed to use its best efforts to obtain, and maintain effective for a period of
at least three years after the effective time of the merger, at least $3.0
million of directors' and officers' liability insurance (i) covering
reimbursement of the surviving corporation for any obligation it may incur as a
result of indemnification of directors and officers and (ii) providing insurance
for directors and officers in cases where such reimbursement is not applicable,
including in the event of insolvency of Hahn. However, the surviving corporation
is not required to pay a premium in excess of 200% of the last annual premium
for such insurance, but, if such premium would exceed such amount, the surviving
corporation is required to purchase as much coverage as possible for such
amount.
CONDITIONS
The respective obligations of each party to the merger agreement to effect
the merger are subject to the following conditions:
- the adoption of the merger and the merger agreement at the
special meeting by the affirmative vote (i) of at least
two-thirds of the votes of all outstanding shares of common stock
and (ii) by a majority of the votes cast at the special meeting
by the public shareholders (excluding abstentions and broker
non-votes),
- the approval of the merger and the merger agreement by Hahn's
lender, Fleet Capital,
- the obtaining by Hahn and HAW Acquisition of all necessary
consents from third parties and approvals from governmental
instrumentalities as are required for the consummation of the
transactions contemplated by the merger agreement, except for
such consents the failure to obtain which would not have a
"material adverse effect," and
- the lack of any United States federal or state statute, rule or
regulation enacted or promulgated after April 6, 2001 that would
result in the imposition of material limitations on the ability
of Glick effectively to acquire or hold Hahn's business or any
court order prohibiting the merger.
When used with respect to HAW Acquisition's obligations, a material adverse
effect is defined in the merger agreement as something that is or is reasonably
likely to have a material adverse effect on the business, condition (financial
or otherwise), properties, assets or prospects of Hahn and its subsidiaries,
taken as a whole.
The obligations of HAW Acquisition and Futerman and Chessin to effect the
merger are also subject to the additional conditions that:
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- with certain exceptions, the representations and warranties of
Hahn contained in the merger agreement will be true and correct
as of the date of the merger agreement and as of the closing date
of the merger (except where the failure to be true and correct
does not have a material adverse effect on Hahn )
- each and all of the covenants and agreements of Hahn contained in
the merger agreement will have been duly performed and complied
with in all material respects,
- there has been no material adverse change in the business,
condition (financial or otherwise), properties, assets or
prospects of Hahn and its subsidiaries taken as a whole (except
that the delisting of the common stock by Nasdaq will not be
deemed a material adverse effect),
- no federal, state or foreign government or governmental authority
or court or governmental agency of competent jurisdiction shall
have issued any order, decree or ruling, or taken any other
action restraining or enjoining or otherwise (a) prohibiting the
consummation of the merger or the transactions contemplated by
the merger agreement, (b) prohibiting or limiting the ownership
or operation by Hahn or any of its subsidiaries any material
portion of Hahn's business or requiring it to dispose of or hold
separate any material portion of Hahn's business or assets as a
result of the merger or any of the transactions contemplated by
the merger agreement, or (c) imposing material limitations on the
ability of Glick to effectively exercise full rights of ownership
with respect to the shares of common stock to be issued to them
pursuant to the merger agreement,
- Glick shall have obtained the financing necessary to pay the
aggregate merger consideration and related transaction expenses,
- all stock options shall be canceled or terminated,
- all existing directors of Hahn shall have tendered their
resignation,
- the public shareholders who have perfected their appraisal rights
as of the effective time shall hold less than 113,334 shares of
common stock and
- Glick and HAW Acquisition shall have received a satisfactory
opinion of counsel to Hahn concerning due formation and
existence, authorization, the binding nature of the merger
agreement, capitalization, compliance with securities laws and
other matters that are customary for going private merger
transactions.
The obligations of Hahn to effect the merger are also subject to the
additional conditions that:
- with certain exceptions, the representations and warranties of
Glick, HAW Acquisition and Futerman and Chessin in the merger
agreement will be true and correct as of the date of the merger
agreement and the closing date of the merger (except where the
failure to be true and correct does not have a material adverse
effect on Glick, HAW Acquisition or Futerman and Chessin),
- each and all of the covenants and agreements of Glick, HAW
Acquisition and Futerman and Chessin contained in the merger
agreement will have been duly performed and complied with in all
material respects prior to the consummation of the merger, except
where the failure to comply would not have a material adverse
effect to consummate the transactions contemplated by the merger
agreement,
- no federal, state or foreign government or governmental authority
or court or governmental agency of competent jurisdiction shall
have issued any order, decree or ruling, or taken any other
action restraining or enjoining or otherwise (a) prohibiting the
consummation of the
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merger or the transactions contemplated by the merger agreement,
(b) prohibiting or limiting the ownership or operation by Hahn or
any of its subsidiaries any material portion of Hahn's business
or requiring it to dispose of or hold separate any material
portion of Hahn's business or assets as a result of the merger or
any of the transactions contemplated by the merger agreement, or
(c) imposing material limitations on the ability of Glick to
effectively exercise full rights of ownership with respect to the
shares of common stock to be issued to them pursuant to the
merger agreement,
- Hahn shall receive a satisfactory opinion from Boylan, Brown,
Code, Vigdor & Wilson, LLP, counsel for Glick, HAW Acquisition
and Futerman and Chessin concerning due formation and existence,
authorization, the binding nature of the merger agreement,
capitalization, compliance with securities laws and other matters
that are customary for going private merger transactions and
- the fairness opinion delivered to the special committee shall not
have been withdrawn or, in the alternative, modified or amended
to such an extent that it is no longer acceptable to the special
committee.
When used with respect to Glick, HAW Acquisition, Futerman and Chessin, a
"material adverse effect" means something that is or is reasonably likely to be
materially adverse (i) to the assets, liabilities, business, property, condition
(financial or otherwise) or operations or prospects of any of them or (ii) the
ability of any of them to perform their obligations under the merger agreement
or to obtain the financing.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time, whether before or after approval by the shareholders of Hahn: (i) by
mutual consent of the board and Glick, HAW Acquisition and Futerman and Chessin;
(ii) by either the Glick buy-out group or Hahn, if, at the special meeting,
Hahn's shareholders have not voted to adopt the merger agreement by the
requisite shareholder votes, including both the statutorily required 66 2/3%
approval and the public shareholder approval; (iii) by Hahn or HAW Acquisition
if, without the fault of the terminating party, the merger has not been
consummated on or prior to September 1, 2001; (iv) by Hahn, HAW Acquisition,
Futerman and Chessin, if the board or the special committee has failed to
recommend that shareholders approve the merger and the merger agreement or
either the board or the special committee withdraws or modifies in a manner
adverse to HAW Acquisition its approval or recommendation of the merger, the
merger agreement or the transactions contemplated by the merger agreement (or
the board or the special committee resolve to do either of the foregoing); or,
(v) by Hahn or Glick, HAW Acquisition and Futerman and Chessin if the other
parties shall be in material breach of the merger agreement and such breach is
not cured within 20 days after receipt of written notice of such from the
non-breaching party of such breach. See "The Merger Agreement -- Conditions."
The merger agreement provides that, in the event of its termination, the
merger agreement will become void and have no effect, and no party to the merger
agreement will have any liability or further obligation to any other party to
the merger agreement. However (i) any termination by Hahn arising out of a
breach by Glick, HAW Acquisition or Futerman and Chessin of any representation,
warranty, covenant or agreement contained in the merger agreement will be
without prejudice to the rights of Hahn to seek damages with respect such
breach, and (ii) any termination by Glick, HAW Acquisition and Futerman and
Chessin arising out of a breach by Hahn of any representation, warranty,
covenant or agreement contained in the merger agreement, other than a breach by
Hahn, will be without prejudice to the rights of Glick, HAW Acquisition and
Futerman and Chessin to seek damages with respect to such breach. The
obligations described in this paragraph and the obligations of the parties with
respect to the payment of fees and expenses described below survive any
termination of the merger agreement.
FEES AND EXPENSES
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If the merger agreement is terminated for any reason, except as discussed
below, Hahn, on the one hand, and Glick, HAW Acquisition and Futerman and
Chessin, on the other hand, are each to pay their own fees and expenses. The
fees and expenses of Hahn will include fees and expenses of financial advisors
(including Empire Valuation), accountants and counsel for Hahn and the special
committee, and fees and expenses for the preparation, printing, mailing and
filing of documents used in connection with the merger. The fees and expenses of
Glick, HAW Acquisition and Futerman and Chessin will include any commitment and
other fees or expenses of any person providing or proposing to provide the
financing, and fees and expenses of counsel and financial advisors for the Glick
buy-out group. Except with respect to any stock transfer taxes payable by public
shareholders, the surviving corporation will pay any transfer taxes (including
any interest and penalties thereon and additions on any transfer taxes) payable
in connection with the merger and will be responsible for the preparation and
filing of any required tax returns, declarations, reports, schedules, terms and
information returns with respect to such transfer taxes.
If termination of the merger agreement is due to the failure to obtain the
required financing by Glick and HAW Acquisition, then they will reimburse Hahn
for the fees and expenses incurred by them in connection with the merger by
making a $75,000 payment to them in the absence of certain circumstances. In
particular, Glick, HAW Acquisition, Futerman and Chessin shall not be liable for
payment of the $75,000 if (i) the Hahn board or special committee has withdrawn
their recommendation to the shareholders that they approve and adopt the merger,
(ii) a court has issued an order restraining, enjoining or otherwise prohibiting
the merger or imposing any other actions which would cause a condition to
closing to fail, (iii) the merger is not approved by the shareholders of Hahn or
(iv) Hahn is in material default of the obligations to be performed under the
merger agreement.
AMENDMENT AND WAIVER
Subject to applicable law, the merger agreement may be amended, modified or
supplemented by the written agreement of the parties at any time prior to the
effective time, except that, in the case of Hahn, the special committee must
approve such action. In addition, after the requisite shareholder adoption of
the merger agreement has been obtained, no amendment may be made that reduces
the amount or changes the form of the merger consideration or otherwise
materially and adversely affects the rights of the public shareholders without
further approval by the holders of such number of votes of common stock that are
required to adopt the merger agreement in accordance with the merger agreement.
Hahn, on the one hand, and Glick, HAW Acquisition, Futerman and Chessin, on
the other hand, may waive the satisfaction of any obligation, covenant,
agreement or condition of the other under the merger agreement. However, the
waiver of any of Hahn's rights under the merger agreement requires the approval
of the special committee. Hahn has made no determination as to whether it would
waive any condition and any such determination would be made on behalf of Hahn
by the board with the special committee's approval based on the facts and
circumstances existing at the time such waiver is requested.
ACCOUNTING TREATMENT
For accounting and financial reporting purposes, the historical cost basis
of assets and liabilities will remain the same after the completion of the
proposed merger.
FINANCING OF THE MERGER
The Glick buy-out group estimates that approximately $2.0 million will be
required to complete the merger, including $1.7 million to pay the aggregate
merger consideration to the public shareholders and $300,000 for fees and
expenses related to the transactions. Since none of the stock options have an
exercise price below the merger consideration, no additional payment will be due
for the stock options following consummation of the merger. Further, since by
letter signed March 22, 2001, Hahn's lender, Fleet Capital, has consented to the
merger, no additional financing will be necessary to fund Hahn's ongoing working
capital needs, including capital expenditures.
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Unless waived by Glick and HAW Acquisition, obtaining financing to pay the
merger consideration is a condition of the Glick buy-out group to complete the
merger. In order to fund the merger consideration and related fees and expenses,
the Glick buy-out group intends to borrow the necessary funds from Manufacturers
and Traders Trust Company. On May 22, 2001, Manufacturers and Traders Trust
Company provided a commitment letter to Abba, L.P., as borrower, and Sara
Futerman (mother of Eli N. Futerman and mother-in-law of Daniel J. Chessin and
Eli N. Futerman as guarantor. Abba L.P. is a New York limited partnership in
which Abba, Inc., a New York corporation, is sole general partner, and Sara
Futerman is sole limited partner. Sara Futerman is the sold shareholder of Abba,
Inc. Abba, L.P. plans to contribute the borrowed funds to Glick in exchange for
a non-voting membership interest. It is anticipated that Glick will then
contribute the proceeds to HAW Acquisition to fund the merger consideration and
related expenses.
The commitment letter provides that the loan proceeds will be payable over
120 months at either a floating rate based upon the prime rate as quoted by the
bank, or a fixed rate which is the greater of 7.5% or 200 basis points over the
bank's cost of funds based upon the yield on United States Treasury obligations.
Disbursement of the proceeds of the loan is contingent upon shareholder approval
of the merger. The commitment is contingent upon shareholder approval of the
merger proposal and the closing of the loan by August 1, 2001. The commitment
provides that the financing will be secured by a commercial building owned by
Abba, L.P. in Rochester, New York. It is anticipated that the proceeds of the
loan will be repaid through cash flow from rental proceeds paid by tenants of
the commercial building. Glick and HAW Acquisition have no alternative financing
plans.
If the financing is not consummated, the merger will likely not be
consummated, even if the merger and the merger agreement are approved by the
shareholders at the special meeting. See "The Merger Agreement -- Conditions."
REGULATORY APPROVALS AND THIRD PARTY TRANSACTIONS
Hahn is not aware of any license or regulatory permit that is material to
the business of Hahn and that is likely to be adversely affected by the merger.
Hahn has sought and obtained the consent of its lender, Fleet Capital, to
the transaction. Hahn does not believe there are any other material third party
consents required by Hahn under the merger agreement.
RISK THAT THE MERGER WILL NOT BE CONSUMMATED
Subject to the terms and conditions of the merger agreement, the
consummation of the merger is expected to take place as soon as practicable,
after the approval and adoption of the merger agreement and the transactions
contemplated by the merger agreement by the shareholders at the special meeting
and the satisfaction or waiver of the other conditions to the merger contained
in the merger agreement, unless another date is agreed to in writing by the
parties. This date of consummation is referred to as the "closing date."
Consummation of the merger is subject to certain conditions, including,
among other things, (i) shareholder adoption of the merger agreement, including
approval by the public shareholders (ii) continuing approval of the merger by
Hahn's lender, Fleet Capital (which was obtained on March 22, 2001), and (iii)
receipt by Glick of financing for the transactions contemplated by the merger
agreement. See "The Merger Agreement -- Conditions." The merger agreement
provides that Glick and HAW Acquisition are not obligated to consummate the
merger if, among other things, the financing is not consummated. Glick, HAW
Acquisition, Futerman and Chessin are obligated to expend their best efforts to
obtain a commitment for the financing on terms and conditions which are
reasonably satisfactory to them and to close such financing. Nevertheless, even
if the requisite approval by shareholders is obtained, there can be no assurance
that the merger will be consummated. See "Special Factors -- Conduct of the
Business of Hahn if the Merger is not Consummated" and "The Merger Agreement --
Fees and Expenses" with respect to obligations of Hahn, on the one hand, and
Glick, HAW Acquisition, Futerman and Chessin, on the other hand, to reimburse
each other for fees and expenses in certain instances if the merger agreement is
terminated.
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Hahn cannot be assured that all conditions to the merger contained in the
merger agreement will be satisfied or waived. However, Hahn currently has no
reason to believe that the conditions to the merger will not be satisfied, and
accordingly, cannot identify any foreseeable circumstances under which it is
likely that Hahn would waive any condition to the merger. Any such waiver would
be given by Hahn only with the approval of the special committee. Hahn does not
intend to resolicit proxies in connection with any such waiver.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective when the certificate of merger is filed,
together with any required related documents, with the Secretary of State of the
State of New York in accordance with the BCL. The filing will be made on the
closing date.
FEES AND EXPENSES
Estimated fees and expenses (rounded to the nearest thousand dollars)
incurred or to be incurred by Hahn and the Glick buy-out group in connection
with the merger are approximately as follows:
Financial advisory fees and expenses................$ 50,000.00
Legal fees and expenses.............................$167,000.00
SEC filing fee......................................$ 342.87
Printing and mailing expenses.......................$ 7,000.00
Proxy solicitation agent fees and expenses..........$ 6,000.00
Paying agent fees...................................$ 4,000.00
Special committee fees and expenses.................$ 8,000.00
Accounting fees.....................................$ 5,000.00
Miscellaneous.......................................$ 78,000.00
---------
Total...............................................$325,342.87
The above fees and expenses include approximately $100,000, which represent
fees and expenses incurred or to be incurred by or on behalf of the Glick
buy-out group in connection with the merger that will, in effect, be borne by
Hahn if the merger is consummated since, by operation of law, in a merger, the
surviving corporation assumes and becomes liable for the obligations of the
entity merging into it.
The merger agreement provides that, except in certain circumstances, in the
event of termination of the merger agreement without consummation of the merger,
Hahn, on the one hand, and Glick, HAW Acquisition and Futerman and Chessin, on
the other hand, will pay their own expenses. Futerman and Chessin, however, have
agreed to pay to Hahn $75,000 in reimbursement of expenses incurred by Hahn in
connection with the merger if the merger agreement is terminated due to the
Glick or HAW Acquisition, failing to obtain financing for the aggregate merger
consideration due under the merger agreement, provided that, as of the time of
the termination of the merger agreement, neither the special committee nor the
board of directors has withdrawn their recommendation to the shareholders to
approve the merger and the merger agreement, the merger agreement has been
presented to Hahn's shareholders for consideration, no injunction prohibiting
the merger or requiring certain actions has been issued by any court and Hahn
has not been in material default under the merger agreement. See "The Merger
Agreement -- Fees and Expenses." The fees and expenses to be borne by Hahn will
include those of Hahn's financial advisor, accountants and counsel for Hahn and
the special committee, and fees and expenses for the preparation, printing,
mailing and filing of documents used in connection with the merger and proxy
solicitation fees. The fees and expenses of HAW Acquisition will include any
commitment and other fees or expenses of any person providing or proposing to
provide financing and fees and expenses for HAW Acquisition's counsel and
financial advisor.
For information regarding payment of fees and expenses to the special
committee, see "Interests of Certain Persons in the Merger and Hahn --
Compensation of Special Committee Members." For information regarding Empire
Valuation's engagement by the special committee and the payment of fees and
expense in connection
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with that engagement, see "Special Factors -- Presentation and Fairness Opinion
of Empire Valuation, Inc." For information regarding payment of fees and
expenses of the proxy solicitations see "The Special Meeting - Costs of
Soliciting Proxies."
None of the parties to the merger agreement will pay any fees or
commissions to any broker or dealer or any other person (other than the proxy
solicitation agent) for soliciting proxies pursuant to the merger. Brokers,
banks, and other custodians, nominees and fiduciaries will, upon request, be
reimbursed by Hahn for reasonable out-of-pocket expenses incurred by them in
forwarding proxy soliciting materials to the beneficial owners of shares.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material United States federal
income tax consequences of the merger to the public shareholders under
provisions of the Code, and regulations and administrative and judicial
interpretations thereunder as currently in effect, and all of which are subject
to change, possibly with retroactive effect. The discussion applies only to
shareholders who hold shares of common stock as capital assets within the
meaning of Section 1221 of the Code. In addition, the discussion does not apply
to any shareholder who is attributed any shares of the Glick buy-out group under
Section 318 of the Code (to whom the entire merger consideration may be treated
as a dividend taxable at ordinary income tax rates), any shareholder who is not
a U.S. person within the meaning of Section 7701(a)(30) of the Code, any
shareholder who acquired shares in a compensatory transaction, including upon
the exercise of an option, any shareholder who holds shares as part of a hedging
or conversion transaction, straddle or other risk reduction transaction, and any
other category of shareholder who is subject to special tax rules, such as
financial institutions, insurance companies, broker-dealers and tax-exempt
entities. In addition, the following discussion does not consider the effect of
any state, local, foreign or other tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, YOU ARE ADVISED TO CONSULT
WITH YOUR OWN TAX ADVISOR AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF THE MERGER TO YOU.
If the merger is consummated, each public shareholder will be treated as
having sold shares for the merger consideration. As a result, a public
shareholder will recognize capital gain or loss in an amount equal to the
difference between the merger consideration and the public shareholder's
adjusted tax basis in his or her shares of common stock. Such capital gain or
loss will be a long-term capital gain or loss if the public shareholder has held
those shares for more than one year on the effective date of the merger even
though the merger consideration is not paid to the public shareholder on the
effective date of the merger. There are certain limitations on the deductibility
of capital losses. Gain or loss must be determined separately for each block of
common stock (i.e., shares acquired at the same cost in a single transaction).
In general, (i) capital gain from the disposition of capital stock acquired
after December 31, 2000, and held more than five years is currently taxed at a
maximum federal income tax rate of 18%; (ii) capital gain from the disposition
of stock held more than one year but five years or less is currently taxed at a
maximum federal income tax rate of 20%; and (iii) capital gain from the
disposition of stock held one year or less is currently taxed at a maximum
federal income tax rate of 39.6%.
To prevent backup withholding equal to 31% of the merger consideration
payable to a public shareholder, the public shareholder must either (i)
establish an exemption from backup withholding (e.g., because it is a
corporation) or (ii) provide its taxpayer identification number to the paying
agent, certify that the public shareholder is not subject to backup withholding
and otherwise comply with the backup withholding rules under the Code. Backup
withholding is not an additional tax; rather, any amount so withheld is credited
against the shareholder's federal income tax liability. See "The Merger
Agreement -- Tax Withholding."
Certain penalties may apply to a failure to furnish correct information. A
public shareholder should consult with his or her own tax advisor as to the
qualifications for an exemption from withholding and the procedures for
obtaining an exemption.
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Neither Hahn nor any member of the Glick buy-out group will recognize gain
or loss as a result of the merger.
INFORMATION REGARDING HAHN
INCORPORATION OF DOCUMENTS BY REFERENCE
We are incorporating by reference our annual report on Form 10K for the
fiscal year ended September 30, 2000 (Commission File No. 0-20984), and our Form
10-Q for the period ended March 31, 2001, both filed with the SEC In addition,
we are incorporating by reference all documents we file in response to the
requirements of Sections 13(a), 13(d), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended, after the date of this proxy statement and before the
date of the special meeting. Accordingly, those documents will be considered a
part of this proxy statement from the date they are filed. The Company is not
incorporating by reference, however, statements in those documents to the effect
that the Company desires to take advantage of the safe harbor which is afforded
forward-looking statements under the Private Securities Litigation Reform Act of
1995.
If you would like copies of the documents we file after the date of this
proxy statement, please contact Donald T. Hiller at Hahn Automotive Warehouse,
Inc., 415 W. Main Street, Rochester, New York 14608 or by telephone (716)
464-3831 or toll free at (800) 777-HAHN (4246). You may also review our filings
with the SEC as described under "Where You Can Find More Information."
BUSINESS OF HAHN
Hahn is engaged in the sale of automotive aftermarket products to
commercial service establishments on a regional basis and to consumers via the
internet. Hahn's traditional business is conducted through ten full-service
distribution centers, four specialty distribution centers, seven direct
distribution centers and 77 jobbing stores that operate in the same areas as
Hahn's full-service distribution centers generally under the name Advantage Auto
Stores, except in the Dayton, Ohio area, where Hahn's jobbing stores operate
under the name Genuine Auto Parts. Hahn's operations are located along the
Eastern Seaboard and in the Midwest.
Hahn, through its wholly-owned subsidiary iAutoparts, Inc., operates
iAutoparts.com(R), an online automotive parts store. iAutoparts extended Hahn's
reach directly to the consumer, entering new geographical and customer markets,
and further expanded its distribution mix. To date, iAutoparts has had a nominal
financial impact on Hahn.
Hahn's wholly owned subsidiary, H.F.V. Inc. owns debt and a 37.5% equity
investment in Autoworks, Ltd. a distributor of automotive aftermarket products,
based in Tel Aviv, Israel.
Hahn's operations are contained in two industry segments: the full-service
distribution segment and the direct distribution segment. Below is a description
of each segment. Financial information about these segments is contained in Note
11, Notes to Consolidated Financial Statements, September 30, 2000 page F-22.
Industry Overview. The market itself is composed of two basic parts:
Passenger car and light truck products and heavy duty truck products. Hahn
operates in the passenger car and light truck market, and currently has a minor
presence in the heavy duty truck market. The market for passenger car and light
truck products has two basic sales channels: (i) wholesale or installed parts
service, serving professional installers, vehicle dealers, retail auto parts
stores and other distributors, and (ii) retail, serving do-it-yourself ("DIY")
retail customers.
The wholesale market is Hahn's primary area of focus. Traditionally, the
wholesale market has distributed automotive parts using a three-step or
full-service distribution process. With full-service distribution, parts
manufacturers deliver parts to warehouse distributors, who then deliver to local
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jobbers who sell individual parts to end users for installation. Full service
distribution allows jobbers to provide rapid parts availability to local area
professional installers, including service stations, garages and major accounts.
Hahn's full service distribution centers and jobbing stores operate in this
market.
The two-step or direct distribution process has evolved in response to
increasing capital needs and shrinking margins, and to date, has been more
successful in metropolitan areas where there are higher concentrations of
professional installers. Direct distributors eliminate a level of distribution
from the traditional full-service distribution process. Thus, a large jobber may
purchase directly from manufacturers and sell directly to professional
installers, thereby eliminating the warehouse distributor level, or a warehouse
distributor may skip the jobber level and sell parts directly to installers.
Hahn's direct distribution division targets this market.
Distribution Business. Hahn purchases nearly 150,000 automotive aftermarket
stock keeping units ("SKUs"), consisting predominately of nationally branded
automotive hard parts, as well as maintenance items, accessories and private
label products, from 240 manufacturers, and distributes these products through
its distribution network to approximately 1,050 independent jobbing stores and
77 Company owned jobbing stores, which operate principally under the Advantage
Auto Stores name. These jobbers supply automotive parts to commercial
establishments performing automotive services and, to a much lesser extent, the
DIY market. Hahn's distribution network consists of ten full-service
distribution centers, four specialty distribution centers, seven direct
distribution centers and 77 Advantage Auto jobbing stores located along the
Eastern Seaboard and in the Midwest. Hahn generally does not sell tires or
perform automobile repairs or installations through either its distribution
centers or jobbing operations.
Distribution Strategy. Hahn's distribution strategy is based on five key
elements:
- Rapid Delivery From Extensive Inventory - Hahn maintains a broad
product inventory consisting of approximately 150,000 stock
keeping units (SKU's) throughout its full-service distribution
network, from which it generally delivers products to customers
within 24 hours of receipt of an order. Hahn believes that speed
of delivery is essential for a jobber to meet the time
constraints of its service establishment customers and to manage
its own inventory.
- Strong Customer Relationships and Trained Work Force - Hahn is a
customer driven company built on strong, long-term relationships.
Hahn provides operational support to its customers on a regular
basis to assist them in many aspects of their businesses. In
addition, Hahn maintains trained and experienced sales and
distribution center personnel to assist jobbers in selecting
parts and filling their inventory needs.
- Growth in Existing Markets - Hahn seeks to build its revenue base
in existing markets by (i) adding new jobbing store customers
within territories presently served, and (ii) encouraging
existing accounts to purchase additional product lines from Hahn.
- Leadership in Aftermarket Auto Parts Alliance Programmed
Distribution Group - Aftermarket Auto Parts Alliance, Inc.
("AAPA") (formerly Auto Value Associates, Inc. ("Auto Value")) is
an independent national purchasing and marketing program in the
automotive aftermarket. Hahn seeks to convert its independent
jobbing customers to the AAPA Auto Value program, as Hahn
believes AAPA's Auto Value purchasing and marketing programs are
beneficial to the jobbers and result in such customers purchasing
the preponderance of their inventory needs from Hahn.
Operating Efficiencies. Hahn's operations are structured to realize
operating efficiencies both for itself and for its customers, to benefit from
economies of scale in product purchasing, information systems and employee
training and to provide an efficient distribution system with the objectives of
ease of order placement and speed of delivery.
Products. Hahn's distribution centers and Company-owned jobbing stores,
operating as Advantage Auto
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Stores (and Genuine Auto Parts in the Dayton, Ohio, area) (herein collectively
referred to as "Advantage Auto Stores"), generally offer a wide selection of
predominantly nationally branded automotive products for domestic and foreign
cars, vans and light trucks. Hahn stocks a wide range of automotive aftermarket
products throughout its distribution network, consisting principally of new and
remanufactured automotive hard parts, as well as maintenance items and accessory
products. Hard parts include, among others, brake parts, exhaust components,
engine parts, suspension parts and fuel systems.
Hahn's customers purchase name-brand products and private label products
which carry a larger gross profit margin. These private-label products, marketed
under the Parts Master label, are manufactured by a variety of vendors for
members of the AAPA Auto Value programmed distribution group. Parts Master
products accounted for approximately 21.1%, 19.9% and 17.8% of Hahn's net sales,
in Fiscal 2000, 1999 and 1998, respectively, with the remainder of net sales
derived from manufacturer's branded products. Since Parts Master brand products
have higher profit margins than name brand products, Hahn continually seeks ways
to expand sales of Parts Master products, in some instances by having national
brand manufacturers supply products under this label.
Distribution Centers. Central to Hahn's strategy of providing rapid
distribution of a broad variety of parts is a distribution network comprised of
three varieties of distribution centers: full-service, direct distribution and
specialty (which consist of pick-up and accessory distribution centers).
Full-Service Distribution Centers. Full-service distribution centers
distribute to jobbers within a radius of approximately 150 miles, and nine of
them serve as hubs for a surrounding network of Company-owned Advantage Auto
Stores. Hahn extends the distribution area of three of its full service
distribution centers with smaller pick-up distribution centers. These pick-up
distribution centers carry specialized inventory categories, with lower
inventory turns, for customer pickup when needed, to supplement regular
deliveries from the full service distribution center. Hahn also operates a
specialty distribution center to centralize the purchasing and distribution of
accessory items.
Hahn, in total, operates ten full-service distribution centers, three
pick-up distribution centers and one accessory distribution center. The
inventory carried by full-service distribution centers generally range from
approximately 33,500 to over 75,500 SKUs, while the pick-up distribution centers
stock, on average, approximately 19,000 SKUs and the accessory distribution
center stocks selected items.
Each full-service distribution center employs a General Manager, sales
force, clerical, stock-handling and delivery employees. Customers may place
their stock orders by computer, telephone, fax or in person at service counters.
Direct Distribution Centers. Hahn operates seven (7) direct distribution
centers, one of which does business under the Professional Auto Warehouse
("PAW") name in Albany, New York. Hahn has selected direct distribution center
locations that it has acquired or has opened based upon a high concentration of
repair bays and competitive rent. On September 22, 2000, Hahn closed its
Professional Auto Warehouse location in Harrisburg, Pennsylvania. Hahn has no
plans to replace the PAW Harrisburg location.
Hahn believes that its direct distribution centers carry a more complete
inventory selection than most other national direct distributors. The average
Company direct distribution center stocks approximately 23,000 SKU's, with the
largest stocking approximately 51,000 SKU's. In addition to parts, the direct
distribution centers also supply professional installers with equipment and
tools. Each direct distribution center maintains a delivery fleet to provide
professional installers with rapid delivery of parts orders.
Aftermarket Auto Parts Alliance Program. Hahn is a member of AAPA (formerly
Auto Value Associates, Inc.), an independent corporation which was created by a
merger with All Pro/ Bumper to Bumper, another large programmed automotive parts
buying group, in July 1999. This union increased the size and buying power of
Auto Value, which provides to its shareholders the benefits of collective
purchasing power under arrangements which it negotiates with vendors from whom
its shareholders may purchase inventory. AAPA neither purchases nor sells
automotive parts and is not involved in the chain of distribution.
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AAPA offers its shareholders value-added marketing, merchandising,
advertising and promotion and interior and exterior design layout for delivery
to the participating jobber customers of its shareholders. AAPA also offers its
shareholders access to private label products under the Parts Master name.
AAPA requires its shareholders to participate in its purchasing programs to
a specified degree and to contribute equally toward its operating expenses.
Shareholders, whose jobber customers participate in the marketing service of the
Auto Value program, are required to pay a basic fee plus charges for goods and
services provided under the program.
Eli N. Futerman, President and Chief Executive Officer of Hahn, is a past
Chairman and currently a director and Treasurer of AAPA. Hahn does not believe
that any material conflicts of interests exist as a result of Mr. Futerman's
positions in Hahn and AAPA.
Jobber Services. Hahn's extensive inventory line provides jobber customers
with the opportunity to purchase aftermarket products from a single source,
which affords its jobber customers the opportunity to reduce operating expenses
and improve inventory planning and control.
Hahn provides support to its customers through its account executives who
visit them on a regular basis, advising such customers on products and services,
assisting in solving logistical, marketing, merchandising and other problems, as
well as soliciting increased purchases from Hahn. These customer support
services are supplemented by manufacturers' sales representatives who
periodically call on Hahn's customers on behalf of Hahn and by annual trade
shows at Company locations. In Fiscal 2000, Hahn held trade shows in Dayton,
Ohio and Goldsboro, North Carolina.
Hahn provides value-added services to its jobber customers that participate
in the AAPA programmed distribution group. Through the AAPA program, Hahn
assists its participating jobber customers in marketing, merchandising,
inventory management and control, store appearance, advertising and product
promotion.
During Fiscal 2000, 29 of Hahn's independent jobber customers joined the
AAPA program through Hahn and 24 independent jobber customers resigned or were
terminated from the program. As of October 31, 2000, 273 of Hahn's independent
jobber customers and all of Hahn-owned jobbing stores participated in the AAPA
marketing program.
Advantage Auto Stores. To support its distribution center business, Hahn
operates a chain of jobbing stores under the Advantage Auto Stores name, except
for certain Company-owned jobbing stores which operate under "Genuine Parts
Company" in Dayton, Ohio, "Finn Auto Parts" in Canandaigua, New York and "Eagle
Auto Parts" in East Rochester, New York. References to Advantage Auto Stores in
this report include these jobbing stores. The Advantage Auto Stores are located
only in regions supplied by Hahn's full-service distribution centers. As of May
11, 2001, Hahn owned and operated a total of 78 Advantage Auto Stores.
As the Advantage Auto Stores are members of the AAPA program, they
typically feature certain consistent appearances and merchandising programs. The
stores emphasize knowledgeable sales people and rapid availability of parts with
daily truck deliveries. Approximately nine years ago, Hahn embarked on a jobbing
store remodeling project. During Fiscal 2000, Hahn remodeled nine jobbing
stores, leaving seven stores to be remodeled. Hahn plans to remodel or relocate
six more jobbing stores in the next fiscal year.
iAutoparts. On July 6, 1999, Hahn, through its wholly-owned subsidiary,
iAutoparts, Inc., launched iAutoparts.com(R), its online automotive parts store
available 24 hours a day. iAutoparts.com(R) was the first online automotive
parts store powered by the industry's leading CCI/Triad ePartExpert electronic
parts catalog. The Web site guides users through a logical search to ensure
accurate automotive parts selection. ePartExpert provides technical tips, parts
specifications and suggestions for related parts.
iAutoparts.com(R) is operated by iAutoparts, Inc., a wholly- owned
subsidiary of Hahn, with the assistance of its information technology service
provider, CCI/Triad, located in Austin, Texas. iAutoparts has a direct
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relationship with parts manufacturers which enables it to provide rapid delivery
of hard-to-find parts. All iAutoparts.com(R) orders have been fulfilled from
Hahn's full service distribution center in Rochester, New York. To date,
iAutoparts has had a nominal financial impact on Hahn.
iAutoparts, Inc., has joined in the formation of Internet Autoparts, Inc.,
("IAP") a new internet company that will provide the automotive aftermarket's
first industry-sponsored, web-based parts ordering and communications platform
linking automotive service providers and the wholesale distributors who supply
them with automotive aftermarket products. IAP intends to focus on three major
initiatives in the automotive aftermarket parts industry: business-to-business
("B2B") from the professional service dealer to local auto parts stores and
warehouses, business-to-consumer ("B2C") from the "do-it-yourselfer" to local
auto parts stores and other suppliers; and B2C from the "do-it-for-me" consumer
to service dealers. IAP's primary objective is the creation and launch of a
quality B2B service. No specific date has been announced for the launch of IAP's
internet parts ordering and communications site.
H.F.V. Inc. A subsidiary of Hahn, H.F.V. Inc. owns a 37.5% interest in
Autoworks, Ltd., a corporate joint venture, which distributes automotive
aftermarket products in Tel-Aviv, Israel. See Note 4, Notes to Consolidated
Financial Statements, September 30, 2000 page F-17.
SELECTED CONSOLIDATED FINANCIAL DATA OF HAHN
The following table presents our selected historical financial data and
other operating information for the five fiscal years ended September 30, 2000
and for the six months ended March 31, 2001. We derived the financial
information for each of the five fiscal years from our audited consolidated
financial statements. The consolidated financial statements for such five fiscal
years have been audited by PricewaterhouseCoopers LLP, independent auditors We
have derived the selected information as of and for the six-month periods ended
March 31, 2001 and 2000, from our consolidated financial statements, which are
not audited. In the opinion of management, however, all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation at such dates
and for such periods have been made. The income statement data for the six
months ended March 31, 2001 is not necessarily indicative of results for a full
year. The following data should be read together with "Management's Discussion
and Analysis of Financial Condition and Results of Operation" of Hahn appearing
in this proxy statement, and also should be read together with the consolidated
audited and unaudited financial statements of Hahn and the notes thereto
included at the end of this proxy statement. All share and per share data has
been proportionately adjusted for the May 10, 2001 1-for-3 reverse stock split
as if the reverse stock split had occurred as of the date for which the
information is presented.
SIX MONTHS ENDED YEARS ENDED
MARCH 31, SEPTEMBER 30,
--------------------- ----------------------------------------------------------
2001 2000 2000 1999 1998 1997(1) 1996
---- ---- ---- ---- ---- ------- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
INCOME STATEMENT DATA:
Net sales $57,910 $60,425 $125,575 $130,998 $133,503 $142,242 $138,395
Cost of products sold 34,785 37,129 77,071 82,002 82,778 86,967 86,077
Gross profit 23,125 23,296 48,504 48,996 50,725 55,275 52,318
Selling, general and
administrative expense 20,353 20,929 42,587 43,512 44,059 46,717 41,657
Depreciation and amortization
expense 887 895 1,789 1.775 1,602 2,005 1,756
Income from operations 1,885 1,472 4,128 3,709 5,064 6,553 8,905
Interest expense (2,037) (1,920) (3,796) (3,650) (3,771) (4,670) (4,402)
Service charge and other
income 233 179 509 399 631 719 600
Gain on sale of marketable
security ---- ---- 196 ---- ---- ---- ----
Income (loss) from equity
investment 28 53 189 (27) (220) ---- ---
Income (loss) before provision
for income taxes 109 (216) 1,226 431 1,704 2,602 5,103
Provision for income taxes 41 (82) 450 151 665 1,011 1,950
Income (loss) from continuing
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operations 68 (134) 776 280 1,039 1,591 3,153
Loss from discontinued operations:
Write-down of investment in
subsidiary, net of tax ---- ---- ---- ---- ---- (18,789)(1) ----
Loss from discontinued
operations, net of tax ---- ---- ---- ---- ---- (3,937) (1,294)
Total loss from discontinued
operations ---- ---- ---- ---- ---- (22,726) (1,294)
Net income (loss) $68 $(134) $776 $280 $1,039 ($21,135) $1,859
Income from continuing operations
per share $0.04 ($0.08) $0.49 $0.18 $0.66 $1.01 $1.99
Loss from discontinued operations
per share ---- ---- ---- ---- ---- (14.37) (0.82)
Basic and diluted net income
(loss) per share $0.04 ($0.08) $0.49 $0.18 $0.66 ($13.36) $1.17
Weighted average shares
outstanding 1,581,671 1,581,671 1,581671 1,581,671 1,581,671 1,581,671 1,581,671
Balance sheet data:
Working capital $43,055 $44,636 $43,684 $44,919 $42,212 $45,485 $65,452
Total assets 76,438 76,505 78,951 79,723 78,311 77,792 97,819
Long-term obligations 42,972 44,277 44,043 45,484 44,645 45,908 40,893
Shareholders' equity 14,527 13,665 14,459 13,773 13,561 12,364 33,499
Book value per share $9.18
- ----------------------
(1) On July 24, 1997, Autoworks, Inc. filed for protection under Chapter 11 of
the United States Bankruptcy Code. In connection with the filing, Hahn recorded
a one time after tax charge of $18.8 million and restated all of its financial
statements to reflect Autoworks as a discontinued business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The discussion contained in this section should be read in conjunction with
the Selected Financial Data section of this proxy statement, the consolidated
financial statements and accompanying notes appearing at the end of this proxy
statement. In all periods discussed in this proxy statement, Hahn's fiscal year
ended on September 30th of the indicated year.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31,
2000. Hahn's net sales declined $1.8 million or 5.9% to $29.1 million for the
fiscal quarter ended March 31, 2001 from $30.9 million, for the same fiscal
quarter for the last fiscal year. A major factor causing the net sales decline
was the general softness in the auto parts aftermarket caused by various
factors, which include improved vehicle manufacturing and performance, longer
vehicle warranties, leased vehicles and increased competition in all segments of
distribution. Another factor causing the decline in net sales was the closing of
an under-performing direct distribution center. For the quarter, on a comparable
location basis, and in comparison to the same quarter last year, net sales
decreased by 7.0% at the full service distribution centers, 3.6% at the
Advantage Auto Stores and 9.5% at the direct distribution centers.
Gross profit for the current quarter decreased $218,000 as compared to the
second quarter of Fiscal 2000. This decline resulted from a decrease in net
sales which was partially offset by an increase in gross profit margin. Gross
profit expressed as a percentage of net sales increased to 40.0% from 38.4%.
This is primarily due to the increase in the net sales at the Advantage Auto
Stores as a percentage of Hahn's total net sales and a focused effort to sell
slow moving product at a higher margin.
Selling, general and administrative expense decreased $200,000 from $10.5
million in the second quarter of Fiscal 2000, to $10.3 million, for the
comparable quarter of Fiscal 2001. The decline is primarily due to the closing
of a direct distribution center and Hahn's efforts to control and reduce
expenses. As a percentage of net
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sales, selling, general and administrative expense increased to 35.4% from
33.9%. The percentage increase is a result of the net sales decline.
As a result of the factors discussed above, operating income decreased to
$911,000 for the second quarter of Fiscal 2001, from $946,000, for the second
quarter of fiscal 2000. As a percentage of net sales, operating income remained
even at 3.1% for the second quarter of both fiscal years.
Depreciation and amortization increased $17,000 from $430,000 during the
second fiscal quarter last year, to $447,000 for the second quarter of the
current fiscal year. This increase is attributable to the purchase of equipment
at lease expiration and was partially offset by certain assets becoming fully
depreciated.
Interest expense increased $24,000 to $1.0 million from $979,000 for the
same quarter of the previous fiscal year. This increase is primarily the result
of interest charges on overadvances which were not charged in the previous
fiscal year.
As a result of the factors discussed above, Hahn had net income of $19,000
or $.01 per share, in the current fiscal year's second quarter, compared to a
net profit of $59,000 or $.04 per share for the same quarter of the previous
fiscal year.
Six Months Ended March 31, 2001 Compared to Six Months Ended March 31,
2000. Hahn's net sales declined $2.5 million or 4.2%, to $57.9 million for the
fiscal six months ended March 31, 2001, from $60.4 million for the same six
month period of Fiscal 2000. A major factor causing the net sales decline was
the general softness in the auto parts aftermarket caused by various factors,
which include improved vehicle manufacturing and performance, longer vehicle
warranties, leased vehicles and increased competition in all segments of
distribution. During this six month period, Hahn had one less direct
distribution center operating compared to the same period one year ago. On a
comparable location basis, for the same period during the previous fiscal year,
net sales declined by 3.5% at the full service distribution centers, 2.1% at the
Advantage Auto Stores and 7.8% at the direct distribution centers.
Gross profit for the first six months of the current fiscal year decreased
$171,000 from $23.3 million in fiscal year 2000 to $23.1 million in Fiscal 2001.
This was due to the decline in net sales, partially offset by an increase in
gross profit margin. As a percentage of net sales, gross profit increased to
39.9% from 38.6% for the previous fiscal year. This percentage increase is
primarily due to the increase in Advantage Stores net sales as a percentage of
Hahn's total net sales and a focused effort to sell slow moving product at a
higher margin.
Selling, general and administrative expense decreased $576,000, from $20.9
million for the first six months of Fiscal 2000, to $20.4 million, for the same
period of Fiscal 2001. This decline is primarily due to the closing of a direct
distribution center and Hahn's efforts to control and reduce expenses. As a
percentage of net sales, selling, general and administrative expense increased
to 35.1% from 34.6% in the previous fiscal year. This percentage increase was
due to a decline in net sales as discussed above.
Depreciation and amortization decreased $8,000 from $895,000 for the first
six months of Fiscal 2000 to $887,000 for the same period of Fiscal 2001. This
decrease is primarily the result of certain assets becoming fully depreciated,
partially offset by the purchase of equipment at lease expiration.
As a result of the factors discussed above, operating income increased to
$1.9 million for the first six months of Fiscal 2001 from $1.5 million for the
first six months of Fiscal 2000. As a percentage of net sales, operating income
increased to 3.3% from 2.4% in the same six month period of fiscal 2000.
Interest expense increased $117,000, in the first six months of Fiscal
2001, to $2.0 million. This increase is primarily attributable to higher
interest rates in the first quarter of Fiscal 2001 as compared to the rates for
the same period of Fiscal 2000.
As a result of these factors, Hahn reported a net profit of $68,000, or
$.04 per share for the six month
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period ended March 31, 2001, compared to a net loss of $134,000 or $.08 per
share for the first six months of Fiscal 2000.
Fiscal Year 2000 Compared to Fiscal Year 1999. Net sales for Fiscal 2000
decreased $5.4 million, or 4.1% from the prior fiscal year, to $125.6 million.
This decrease is attributable to net sales decreases of 6.9% at the direct
distribution centers and 6.8% at the full-service distribution centers,
partially offset by a net sales increase of .2% at the Advantage Auto Stores.
The Advantage Auto Stores net sales increase was the result of the
acquisition of two former jobbing store customers and a 1.7% increase in
comparable store sales which were partially offset by the closing of three
Advantage Auto Stores. The net sales decreases in the direct distribution and
full service distribution centers are attributable to the softness in the
automotive aftermarket parts industry. This softness is the result of factors
such as leasing, improved vehicle performance, warranties and increased
competition in the industry. Additionally, direct distribution sales were
affected by the closing of one direct distribution center while the full service
distribution decrease was compounded by the purchase of two jobbing customers
that are now operated as Advantage Auto Stores. Sales on a comparable location
basis improved by 1.7% in the Advantage Auto Stores, 3.0% in the direct
distribution division and declined by 6.8% in the full service distribution.
Gross profit declined $492,000 or 1.0% to $48.5 million in Fiscal 2000 from
$49.0 million in the previous fiscal year. The gross profit decrease was due to
the decline in net sales and partially offset by an increase in the gross profit
margin. Gross profit margin increased to 38.6% in Fiscal 2000 from 37.4% in
fiscal 1999.
Selling, general and administrative expenses decreased $925,000 from $43.5
million in Fiscal 1999 to $42.6 million, in the current fiscal year. The expense
reduction is net of an increase in fuel costs of approximately $349,000 in
Fiscal 2000 when compared to Fiscal 1999. This dollar decrease is generally due
to Hahn's expense control programs, the closing of one direct distribution
center and the closing of one Advantage Auto Store, net of openings. Due to the
decrease in net sales, the selling, general and administrative expense, as a
percentage of net sales, increased to 33.9% in fiscal 2000, from 33.2% in Fiscal
1999.
Depreciation and amortization expense increased $14,000 and remained at
$1.8 million for both fiscal years ending September 30, 2000 and 1999. As a
percentage of net sales, depreciation and amortization increased to 1.42% in
fiscal 2000, compared to 1.35% for the previous Fiscal year.
As a result of the factors discussed above, income from operations for
Fiscal 2000, increased $419,000 from $3.7 million or 2.8% of net sales in the
prior fiscal year to $4.1 million or 3.3% of net sales in the current fiscal
year.
Interest expense increased $146,000 in Fiscal 2000 to $3.8 million from
$3.7 million for Fiscal 1999. This increase is attributable to the increase in
interest rates during Fiscal 2000, as compared to Fiscal 1999.
In Fiscal 2000 the Company realized a one-time gain resulting from the sale
of its only marketable security. It also recorded, under the equity method of
accounting, income of $189,000 from the debt and equity investments of H.F.V.
Inc., a wholly owned subsidiary of the Company, in Autoworks, Ltd. There are no
assurances that Autoworks, Ltd. will achieve similar results in the future due
to the political instabilities in Israel.
In Fiscal 2000 the provision for income taxes on income was $450,000, an
effective rate of 36.7%, as compared to $151,000, an effective rate of 35.0%, in
fiscal 1999.
As a result of the factors discussed above, Hahn had net income for Fiscal
2000 of $776,000, or $.16 per share, as compared to $280,000, or $.06 per share,
of net income for fiscal 1999.
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Fiscal Year 1999 Compared to Fiscal Year 1998. Net sales for Fiscal 1999
decreased $2.5 million, or 1.9% from the prior fiscal year, to $131.0 million.
This decrease is attributable to net sales decreases of 3.3% at the direct
distribution centers and 3.7% at the full-service distribution centers,
partially offset by a net sales increase of 1.1% at the Advantage Auto Stores.
The Advantage Auto Stores net sales increase was the result of the
acquisition of two former jobbing store customers and partially offset by the
closing of five Advantage Auto Stores and a 1.8% decrease in comparable store
sales. The net sales decreases in the direct distribution and full service
distribution centers are attributable to the softness in the automotive
aftermarket parts industry. This softness is the result of factors such as
leasing, improved vehicle performance, warranties and increased competition in
the industry. Sales on a comparable location basis declined by 1.8% in the
Advantage Auto Stores, 3.3% in the direct distribution division and 3.7% in the
full service distribution. Full service distribution decrease was compounded by
the purchase of two jobbing customers that are now operated as Advantage Auto
Stores.
Gross profit declined $1.7 million or 3.4% to $49.0 million in Fiscal 1999
from $50.7 million in the previous fiscal year. Gross profit decrease was due to
the decline in net sales and the gross profit margin. Gross profit margin
declined to 37.4% in Fiscal 1999 from 38.0% in Fiscal 1998.
Selling, general and administrative expenses decreased $547,000 from $44.1
million in Fiscal 1998 to $43.5 million, in the current fiscal year. This dollar
decrease is generally due to a net reduction of three Advantage Auto Store
locations. Due to the decrease in net sales, the selling, general and
administrative expense as a percentage of net sales increased to 33.2% in fiscal
1999 from 33.0% in Fiscal 1998.
Depreciation and amortization expense increased $173,000 from $1.6 million
in Fiscal 1998 to $1.8 million in the fiscal year ending September 30, 1999.
This increase is primarily attributable to negative goodwill being fully
amortized in January of Fiscal 1999.
As a result of the factors discussed above, income from operations before
interest and taxes for Fiscal 1999, decreased $1.4 million from $5.1 million or
3.8% of net sales in the prior fiscal year to $3.7 million or 2.8% of net sales
in the current fiscal year.
Interest expense decreased $121,000 in Fiscal 1999 to $3.7 million from
$3.8 million for Fiscal 1998. This decrease is attributable to slightly lower
outstanding debt balances during fiscal 1999 as compared to fiscal 1998.
In Fiscal 1999, the provision for income taxes on income was $151,000, an
effective rate of 35.0%, as compared to $665,000, an effective rate of 39.0%, in
1998.
As a result of the factors discussed above, Hahn had net income for fiscal
1999 of $280,000 or $.06 per share as compared to $1.0 million or $.22 per share
of net income for Fiscal 1998.
Liquidity and Capital Resources. Hahn's principal sources of liquidity
for its operational and capital requirements are internally generated funds,
borrowings under its revolving credit facility, leasing arrangements and
extended terms from vendors.
During the first six months of Fiscal 2001, operations provided net cash of
$575,000. This was largely due to a decrease in inventory of $2,669,000 and
non-cash items of depreciation and amortization of $887,000. These were
partially offset by a decrease in accounts payables and other accrued expenses
of $2,396,000 and an increase in accounts receivable of $728,000.
During Fiscal 2000, 1999 and 1998, operating activities provided net cash
of $1.6 million, $300,000 and $2.4 million, respectively, including non-cash
items for depreciation and bad debt of $2.2 million, $1.9 million and $2.1
million, respectively. These were partially offset by increases in inventory of
$1.7 million, $500,000 and $1.5 million for fiscal years 2000, 1999 and 1998,
respectively.
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During the first six months of Fiscal 2001 and during Fiscal 2000, 1999 and
1998, investing activities consisted mainly of routine capital expenditures for
delivery vehicles, computer equipment, and store and warehouse fixtures. Capital
expenditures were $393,000 during the first six months of Fiscal 2001 compared
to $162,000 during the same period of the previous fiscal year. Net capital
expenditures during Fiscal 2000, 1999 and 1998 were $600,000, $800,000, and
$300,000, respectively. The Company anticipates making capital expenditures of
approximately $250,000 during the remainder of the current fiscal year.
Financing activities during the first six months of Fiscal 2001 consumed
$185,000 of cash. This was primarily due to payments on long-term debt.
Financing activities during Fiscal 2000 consumed cash of approximately $1.7
million, during Fiscal 1999 financing activities generated approximately
$300,000, and in Fiscal 1998 financing activities consumed approximately $2.5
million. The cash used in financing activities during both Fiscal 2000 and
Fiscal 1998 reflect the payment of long term debt. The funds generated by
financing activities during Fiscal 1999 resulted from the increased use of
Hahn's line of credit, partially offset by paydowns on other long term notes
payable. During Fiscal 2000, the Estate of Michael Futerman, (the former
Chairman of the board and majority shareholder of Hahn), and Eli Futerman, (the
President and Chief Executive Officer of Hahn), deferred principal payments due
them from the Company under the subordinated notes until 2003. As a result, in
Fiscal 2000, Hahn made interest payments only on the subordinated notes.
Hahn has a Loan and Security Agreement with Fleet Capital, which matures on
October 22, 2002. The facility provides for, among other things, a revolving
credit facility with $50 million in maximum availability subject, however, to
borrowing base restrictions, and a $2.5 million term loan, a $3.5 million
supplemental availability line and a $2.0 million letter of credit sub-facility.
The obligations of Hahn under the credit facility are collateralized by a first
priority security interest on substantially all present and future assets of
Hahn and is guaranteed up to a maximum amount of $2.5 million by the Estate of
Michael Futerman. Mortgages on certain real estate were pledged as collateral
for the estate's guarantee. These obligations are now guaranteed by the Estate
of Michael Futerman. The credit facility contains restrictive covenants,
including, without limitation, restrictions on changes in the character of the
business, mergers, sales or transfers of assets, acquisitions, capital
expenditures, liens, indebtedness, restricted payments or repurchases of other
indebtedness, dividends and transactions with affiliates. (See Note 5, Notes to
Consolidated Financial Statements, page F-17.) Hahn is required to meet a fixed
charge coverage ratio of .50 for the first three quarters and .7 for the fourth
quarter of Fiscal 2000, which will be measured on a rolling twelve month basis.
As of May 11, 2001, Hahn had an outstanding balance of $36.4 million under the
credit facility, with availability of an additional $1.7 million due to
borrowing base restrictions.
On July 24, 1997, Hahn's wholly-owned subsidiary, Autoworks, Inc., filed
for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
On April 22, 1998, a settlement agreement and release was negotiated between
Hahn and the official unsecured creditors' committee. The settlement agreement
was approved by the bankruptcy court on June 18, 1998. Under the settlement
agreement, as amended on November 18, 1999, Hahn agreed to make certain payments
in exchange for the committee's release of the Company from all claims. In
Fiscal 2000, the Company paid $353,333 to the creditor trust and is due to make
payments of the same amount in both Fiscal 2001 and 2002. Such payments are
appropriately reserved for by Hahn. Hahn has also reserved for the present value
of future minimum rental payments of Autoworks, Inc. that were guaranteed by the
Company. During Fiscal 2000, the bankruptcy court approved the Autoworks, Inc.
plan of reorganization which included establishing a creditor trust to make
distributions to creditors under the plan.
In the future Hahn may make minor strategic acquisitions and open new
direct distribution centers and Advantage Auto Stores to the extent that its
debt service and other funding requirements permit. Hahn's ability to open new
direct distribution centers depends on Hahn's ability to negotiate extended
payment terms with vendors (which initially minimizes additional working capital
requirements), and on consents from Hahn's lender.
Hahn anticipates that its sources of cash flow will provide sufficient
working capital to operate its business, make expected capital expenditures and
meet its other short-term and longer-term liquidity needs at least through the
end of Fiscal 2001.
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Inflation. Hahn does not believe that its operations have been
materially affected by inflation. In general, Hahn has been able to pass on to
its customers any increases in the cost of its inventory.
Seasonality. Hahn's business is somewhat seasonal in nature, primarily
as a result of the impact of weather conditions on the demand for automotive
aftermarket products. Historically, Hahn's net sales and gross profits have been
higher in the second half of each fiscal year than in the first half.
Quantitative And Qualitative Disclosure About Market Risks. Hahn's
credit facility and other financial obligations at March 31, 2001 are sensitive
to changes in interest rates. At March 31, 2001, approximately 85.0% of Hahn's
debt and capital lease obligations are subject to changes in market interest
rates and are sensitive to those changes. Hahn currently has no derivative
instruments to offset the risk of interest rate changes. Hahn's weighted average
of interest rates on the total debt outstanding as of March 31, 2001 was 8.55%.
MARKET PRICES OF AND DIVIDENDS ON THE COMMON STOCK
Until July 28, 1999, the common stock of Hahn traded on the Nasdaq National
Market under the symbol "Hahn". Since July 29, 1999, the common stock of Hahn
has traded on the Nasdaq SmallCap Market under the symbol "HAHN" (except for the
period from April 3, 2001 until June 11, 2001, during which it traded under the
symbols "HAHNC" and "HAHCD") The following table shows the range of high and low
sales prices (rounded to the nearest cent) of the common stock for the periods
indicated based upon information supplied by the Nasdaq system. Prices represent
quotations between dealers without adjustments for retail mark-ups, mark-downs
or commissions, and may not represent actual transactions.
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- --- ---- --- ---- --- ---- ---
1st Quarter $3.37 $1.13 $7.41 $3.00 16.31 $6.00 21.38 17.00 25.96 23.08 21.00 21.94
2nd Quarter $3.75 $1.50 $6.75 $3.19 $8.44 $6.00 18.00 15.00 25.96 21.64 26.25 17.25
3rd Quarter --- --- $4.03 $1.69 $5.63 $1.50 17.25 16.50 27.00 20.25 28.50 23.38
4th Quarter --- --- $4.13 $2.25 18.75 $3.00 1.650 15.75 21.00 18.00 27.75 24.00
Hahn announced the Glick buy-out group acquisition proposal through a press
release which it issued after the close of trading on the Nasdaq SmallCap Market
on January 19, 2001. The closing price of the common stock on the Nasdaq
SmallCap Market on January 18, 2001 was $1.875 per share. On April 6, 2001, the
last business day before public announcement that the merger agreement had been
entered into, the closing price of the common stock on the Nasdaq SmallCap
Market was $2.43. YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR YOUR
SHARES OF COMMON STOCK.
Hahn has not paid any cash dividends on the common stock in the past, and
has no present intentions of paying cash dividends on the common stock in the
foreseeable future. In addition, payment of dividends by Hahn is subject to
restrictions under Hahn's existing loan and security agreement, and under the
merger agreement, Hahn has agreed not to pay any dividends on the common stock
prior to the effective time of the merger.
Nasdaq has required that Hahn achieve a $1.00 minimum bid price no later
than May 14, 2001 and maintain it for 10 consecutive trading days, thereafter.
On June 1, 2001, Nasdaq notified Hahn that it had met the minimum bid continued
listing requirement.
DIRECTORS AND EXECUTIVE OFFICERS
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The following persons are Hahn's executive officers and directors:
Name Age Position
---- --- --------
Eli N. Futerman 42 Chief Executive Officer and President
Daniel J. Chessin 39 Executive Vice President and Secretary
Daniel R. McDonald 50 Vice President - General Counsel
Albert J. Van Erp 63 Vice President - Finance
Timothy Vergo 51 Vice President - Wholesale Operations
Stephen B. Ashley 60 Director
William A. Buckingham 58 Director
Gordon E. Forth 39 Director
Nathan Lewinger 56 Director
E. Philip Saunders 63 Director
Eli N. Futerman has been President of Hahn since May, 1992. In January,
1999 he assumed the additional responsibility of Chief Executive Officer. Prior
to that time, he held various offices with Hahn, including Vice President and
Secretary, since beginning employment with Hahn in June, 1980. From November,
1993, Mr. Futerman served as President and as the Chief Executive Officer
respectively of Hahn's wholly owned subsidiary Autoworks, Inc. which filed for
protection under Chapter 11 of the Bankruptcy Code in July, 1997 and which had
its plan of reorganization approved by the Bankruptcy Court in November, 1999.
Since its inception in May, 1999, Mr. Futerman has been the President of Hahn's
internet e-commerce auto parts business, iAutoparts.com(R). Mr. Futerman has
been a director of Hahn since September, 1979. Mr. Futerman is a member of the
board of directors and Treasurer of Aftermarket Auto Parts Alliance, Inc.
formerly Auto Value Associates, Inc., the programmed distribution group of which
Hahn is a member. Mr. Futerman is 42 years of age. Mr. Futerman is the
brother-in-law of Daniel J. Chessin.
Daniel J. Chessin has been Executive Vice President of Hahn since March,
1995, and Secretary and a director of Hahn since May, 1992. Prior to that time,
he held various offices with Hahn since beginning employment with Hahn in March,
1988. From November, 1993, Mr. Chessin served as Vice President and as Executive
Vice President of Hahn's wholly owned subsidiary Autoworks, Inc. which filed for
protection under Chapter 11 of the Bankruptcy Code in July, 1997 and which had
its plan of reorganization approved by the Bankruptcy Court in November, 1999.
Since May, 1999, Mr. Chessin has been Secretary of Hahn's internet e-commerce
auto parts business, iAutoparts.com(R). Prior to joining Hahn, Mr. Chessin was
engaged in the private practice of law. Mr. Chessin is a member of the Board of
Governors of the Car Care Council (a national association for automobile
maintenance awareness). Mr. Chessin is 39 years of age. Mr. Chessin is the
brother-in-law of Eli N. Futerman.
Albert J. Van Erp has been Vice President - Finance of Hahn since March
2001. From August 1998 to March 2001, he served as Vice President - Controller
of Hahn. From May, 1992 until August, 1998 he served as Vice President -
Finance. From December, 1985 to May, 1992, he served as Controller of Hahn. Mr.
Van Erp has over 35 years experience in corporate internal accounting. Mr. Van
Erp is 63 years of age.
Timothy Vergo has been Vice President - Wholesale Operations of Hahn since
May, 1992. From August, 1981 to May, 1992, he served as Director of Operations
of Hahn. Mr. Vergo is 51 years of age.
Daniel R. McDonald joined Hahn as Vice President - General Counsel in July,
1997. Prior to joining Hahn, 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 50
years of age.
Stephen B. Ashley has been a director of Hahn since May, 1992. Mr. Ashley
has been the Chairman and Chief Executive Officer of the Ashley Group since
September, 1996 (which includes related companies
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focused on management, brokerage, financing and investment in commercial and
multi-family real-estate), 600 Powers Building, 16 West Main Street, Rochester,
New York 14614. 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 (which engages in
dry food processing), the Federal National Mortgage Association, Inc. (Fannie
Mae), and the Exeter Fund, Inc. and Manning and Napier Insurance Fund, Inc.
(both of which are advisory firms to a family of mutual funds). In December,
2000 Mr. Ashley became a director of the High Falls Brewing Company and
President of The Genesee Corporation, which sold the High Falls Brewing Company
to a group of private investors. Mr. Ashley is 60 years of age.
E. Philip Saunders has been a director of Hahn since May, 1992. Mr.
Saunders is the former Chairman and Chief Executive Officer of Sugar Creek
Corp., 760 Brooks Avenue, Rochester, New York 14619, 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 has been Vice
Chairman of the Genesee Regional Bank (formerly the Lyndon Guaranty Bank) since
April, 1997. He has also been a member of the board of directors, since October,
1998, of American Rock Salt, LLC and in November, 2000, he was named Chief
Executive Officer of that entity. Mr. Saunders previously served as a director
of Truckstops of America, Inc. (a regional chain of truck stops) and of Ryder
Systems, Inc. (which engages mainly in the rental of vehicles) 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 63 years of age.
William A. Buckingham has been a director of Hahn since November, 1997 and
is currently a consultant in the private sector at 24 Berkley Street, Rochester,
New York 14607. 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 and as a Director and member of the
Management Continuity Committee of The Genesee Corporation (which engages in dry
food processing). Mr. Buckingham is 58 years of age.
Nathan Lewinger is a private investor whose investments include real estate
and high tech companies. His business address is c/o Usave Express, 2627 Ives
Dairy Road, Suite 100, Aventura, Florida 33180. From 1976 until 1988 Mr.
Lewinger served as President of Pennant Products Inc. (a manufacturer of bakery
ingredients) until Pennant Products was sold in 1988 to Unilever Corporation.
From 1988 to 1990 Mr. Lewinger served as President of the Bakery Division of Van
Den Burgh Foods (a division of Unilever) and from 1990 to 1993 he was a
consultant to Unilever Corporation. He currently serves on the Board of EKMS, an
intellectual property consulting firm in Cambridge, Massachusetts. Mr. Lewinger
is 56 years of age.
Gordon E. Forth served as a director of Hahn from May, 1992, to June, 1997.
Mr. Forth rejoined Hahn's board of directors in March, 2000. Mr. Forth is a
partner of Woods Oviatt Gilman LLP, a Rochester, New York based law firm, where
he has practiced law since 1987. His business address is Woods Oviatt Gilman
LLP, 700 Crossroads Building, Rochester, New York 14614. Mr. Forth also serves
as corporate secretary for Zapata Corporation, a holding company, and Zap.Com
Corporation, which until January 2001 was an internet advertising and e-commerce
networking company. Woods Oviatt provides legal services to Hahn. Mr. Forth is
39 years of age.
Hahn, and to its knowledge, the directors and officers thereof, and
Futerman, Chessin, Glick and HAW Acquisition, have not, during the last five
years, been convicted in a criminal proceeding (excluding
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traffic violations or similar misdemeanors) and were not a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction, as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of these laws.
All filing persons and directors and officers of Hahn, Glick and HAW
Acquisition are citizens of the United States.
Stock Ownership
The following table sets forth the number of shares of common stock
beneficially owned at April 30, 2001 by (i) each director, (ii) each executive
officer, (iii) by all directors and executive officers of Hahn as a group and
(iv) each person or other entity known by Hahn to beneficially own more than 5%
of the outstanding common stock.
Amount and Nature of
Director, Nominee or Group Beneficial Ownership (1) Percent of Class 6
- -------------------------- --------------------- -----------------
Eli N. Futerman, 974,520(2) 61.0
President, Chief Executive
Officer and Director
Daniel J. Chessin, 48,184(3) 3.0
Executive Vice President,
Secretary and Director
Stephen B. Ashley, 4,783 *
Director
William A. Buckingham, 3,334 *
Director
Gordon E. Forth, 1,667 *
Director
Nathan Lewinger, 1,667 *
Director
E. Philip Saunders, 4,249(4) *
Director
Albert J. Van Erp, 14,506(4) *
Vice President - Finance
Timothy Vergo, 17,039(4) 1.1
Vice President-Wholesale Operations
All Directors and Named Executive Officers
of Hahn as a Group (9 persons) 1,069,949(5) 64.3
- ------------------
*Indicates the number of shares constitutes less than 1% of the outstanding
common stock.
(1) Unless otherwise indicated, the persons included in the table have sole
voting and sole investment power with respect to the shares owned by
him. Shares of common stock subject to options that are either
currently exercisable or exercisable with Hahn within 60 days of April
30, 2001 are deemed to be outstanding and to be beneficially owned by
the option holder for purposes of computing
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the percentage of ownership of the option holder. These shares,
however, are not treated as outstanding for purposes of computing the
percentage ownership of any other person.
(2) Includes 4,775 shares owned by Mr. Futerman's immediate family and
15,561 shares which may be purchased by Mr. Futerman pursuant to stock
options that are currently exercisable. Also includes 789,426 shares
over which Mr. Futerman has voting and investment control as the
executor of Michael Futerman's Estate and trustee of the Michael
Futerman Living Trust and voting and investment control over 59,987
shares in the name of Sara Futerman. Under Michael Futerman's will and
Living Trust, his shares have been distributed to a marital trust under
the Living Trust, for the benefit of Michael Futerman's wife, Sara
Futerman. Eli N. Futerman will continue to have voting and investment
control over these shares as trustee of the marital trust. Mr. Futerman
disclaims beneficial ownership of shares not held of record by him,
individually, as executor or as trustee.
(3) Includes 24,136 shares owned jointly of record by Mr. and Mrs. Chessin,
20,384 shares which may be purchased by Mr. Chessin pursuant to stock
options that are currently exercisable and 3,664 shares controlled by
Mrs. Chessin as custodian for their minor children. Mr. Chessin
disclaims beneficial ownership over all shares owned by his immediate
family members.
(4) Includes shares issuable upon exercise of stock options presently
exercisable as follows: Stephen B. Ashley, 4,250 shares; William A.
Buckingham, 2,667 shares; Gordon E. Forth, 1,667; Nathan Lewinger,
1,667; E. Philip Saunders, 4,250 shares; Timothy Vergo, 17,039 shares;
and Albert J. Van Erp, 14,506 shares.
(5) Includes 81,991 shares issuable upon exercise of stock options
presently exercisable.
(6) The percentages in this column have been calculated on the basis of the
1,581,671 shares outstanding on April 30, 2001, plus the number of
shares of common stock deemed outstanding pursuant to SEC Rule
13d-3(d)(1).
INFORMATION REGARDING GLICK AND HAW ACQUISITION
GLICK, LLC
Glick is a Nevada limited liability company organized on April 27,
2001, by Futerman, Chessin and certain other family members for the purpose of
effecting the merger. Futerman, Chessin and certain other family members are the
only members of Glick. Glick is a holding entity that has no material assets
other than the shares of HAW Acquisition. Glick is a party to a Contribution and
Voting Agreement dated as of May 11, 2001 with Futerman, Chessin and certain
other family members, whereby those individuals have agreed to contribute their
shares of Hahn common stock to Glick on or before the merger so that at the
effective time of the merger, Glick will hold 1,011,553 shares of Hahn common
stock, or approximately 64% of Hahn's outstanding common stock. The other
members of the Glick buy-out group are the Michael Futerman Living Trust, the
Estate of Michael Futerman, Sara Futerman, Peggy Futerman, Rina Chessin, Daphne
Futerman and Ira Jevotovsky. Eli Futerman, Rina Chessin and Daphne Futerman are
the children of Michael Futerman (deceased) and Sara Futerman. Daniel Chessin is
the husband of Rina Chessin. Ira Jevotovsky is the husband of Daphne Futerman.
Peggy Futerman is the wife of Eli Futerman. Except in connection with entering
into the merger agreement and carrying out the transactions contemplated by the
merger agreement, including the organization of HAW Acquisition and the
execution and delivery of the Contribution and Voting Agreement, Glick has not
engaged in any activities since its organization. Futerman and Chessin are
managers of Glick and, together, hold 100% of the voting control of Glick. The
address of Glick is c/o Eli N. Futerman and Daniel J. Chessin, 415 West Main
Street, Rochester, New York 14608, and its telephone number is (716) 235-1595.
HAW ACQUISITION
HAW Acquisition is a New York corporation organized on April 5, 2001 by
Futerman and Chessin for the purpose of effecting the merger. The only
shareholder of HAW Acquisition is Glick. If the merger is consummated, at the
effective time of the merger, HAW Acquisition will be merged with and into Hahn,
with Hahn as the surviving corporation following the merger. HAW Acquisition has
no material assets and has not engaged in any activities except in connection
with entering into the merger agreement and carrying out the transactions
contemplated by the merger agreement. Futerman and Chessin are Co-Presidents of
HAW Acquisition, and are its only directors. The address of HAW Acquisition is
c/o Eli N. Futerman and Daniel J. Chessin, 415 West Main Street, Rochester, New
York 14608, and its telephone number is (716) 235-1595.
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RECENT STOCK PURCHASES
In May 2000, Eli N. Futerman, as trustee of the Michael Futerman Living
Trust, purchased 80,024 shares of Hahn common stock from David M. Appelbaum in a
for $660,203.50 at a price of $8.25 per share in a private transaction. This
represents a substantial premium over the price to be paid in the merger. This
transaction was in connection with the settlement of a dispute between Mr.
Appelbaum and Mr. Futerman. Also in connection with the transaction, Mr.
Futerman transferred to Mr. Appelbaum his interest in FCA Associates, a real
estate partnership, and Mr. Appelbaum resigned his position with Hahn. In the
opinion of Mr. Futerman and Glick, this purchase price substantially exceeded
the fair value of the shares of common stock acquired. See "Interest Of Certain
Other Persons in the Merger and Hahn -- Certain Other Transactions".
The table below sets forth information regarding open-market purchases by
Mr. Futerman of common stock since April 30, 1999, including the number of
shares purchased, the range of prices paid and the average purchase price during
each quarterly period presented. We have not presented quarterly periods in
which no purchases were made.
PRICE AVERAGE
NAME DATE NO. OF SHARES RANGE PURCHASE PRICE
- ---- ---- ------------- ----- --------------
Eli N. Futerman
4th Quarter 2000 49,700(1) $2.75 - $3.75 $3.18
- ------------------
(1) Shares purchased by the Michael Futerman Living Trust, of which Eli N.
Futerman is trustee, and over which shares Eli N. Futerman has sole
investment and voting control.
CONTRIBUTION AND VOTING AGREEMENT
Glick, Futerman, Chessin and certain other family members have entered into
a contribution and voting agreement dated as of May 11, 2001, in which they have
agreed to vote their respective shares of common stock in favor of the merger
and the merger agreement at the special meeting or any adjournment thereof. The
agreement also provides that the individual parties to the agreement will
contribute their shares of common stock to Glick in exchange for membership
interests in Glick in relative proportion to the shares they have contributed.
The agreement further provides that, until the merger is consummated or the
merger agreement is terminated in accordance with its terms the individual
parties to the agreement will not sell, transfer, pledge, assign or otherwise
dispose of their shares to any person other than to Glick or its designee.
INDEPENDENT AUDITORS
The consolidated balance sheets as of September 30, 1999 and September 30,
2000, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three fiscal years ending September 30, 1998,
1999 and 2000, appearing at the end of this proxy statement have been audited by
PricewaterhouseCoopers LLP, independent auditors, as stated in their report. A
representative of PricewaterhouseCoopers LLP will be at the special meeting to
answer appropriate questions from shareholders and will have the opportunity to
make a statement if so desired.
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SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy statement and form of
proxy for the next special meeting of shareholders must be received by Hahn at
its executive offices on or before September 30, 2001.
Daniel J. Chessin,
Executive Vice President
and Secretary
Rochester, New York
____ __, 2001
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APPENDIX B
EMPIRE VALUATION CONSULTANTS
PRIVATE & CONFIDENTIAL
May 16, 2001
Board of Directors of Hahn Automotive Warehouse, Inc.
Attention: William Buckingham, Director
Hahn Automotive Warehouse, Inc.
415 West Main Street
Rochester, New York 14608
Dear Sirs:
You, as the Board of Directors ("Board") of Hahn Automotive Warehouse, Inc.
("HAHN" or the "Company"), have asked Empire Valuation Consultants, Inc.
("Empire") to render our opinion to the Board as to whether the $3.00 per share
cash consideration (the "Merger Consideration") to be paid by HAW Acquisition
Corp. ("Acquisition Corp.") upon its proposed merger into HAHN is fair from a
financial point of view to the holders of HAHN Common Stock not held by the
Continuing Shareholders. Capitalized terms defined in the proposed Agreement and
Plan of Merger dated April 6, 2001 ("Merger Agreement") and used herein shall
have the same meanings as set forth in the Merger Agreement unless otherwise
specifically defined herein. Acquisition Corp. is a wholly owned subsidiary of
Glick LLC ("Holding Corp."), successor in interest to PERD Holding Corp. This
opinion supersedes and replaces in its entirety the opinion dated April 6, 2001.
As a result of the Merger, the Acquisition Corp. will be merged with and into
the Company. Following the Merger the separate corporate existence of the
Acquisition Corp. shall cease and HAHN shall continue as the surviving
corporation as a wholly owned subsidiary of Holding Corp. The outstanding common
shares held by HAHN shareholders just prior to the Merger excluding the shares
held by the Continuing Shareholders ("Acquired Shares"), shall, by virtue of the
Merger, be converted into the right to receive the Merger Consideration.
- ----------------------------------------------------------------------------------------------
350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
82
Board of Directors of Hahn Automotive Warehouse, Inc.
May 16, 2001
Page 2
DUE DILIGENCE REVIEW PROCESS
In conducting our investigation and analysis, we have considered such financial
and other factors, as we deemed appropriate under the circumstances. We have,
among other things, done the following:
(1) Reviewed the Company's Securities and Exchange Commission ("SEC") filings
for 1996 through the present date, sourced through the SEC Edgar database
over the Internet or received directly from the Company. From this data,
we analyzed its historical business and financial information, selected
lease agreements, stock option plan and credit facility agreements, among
others;
(2) Reviewed the Going Private Proposal, dated January 16, 2001, issued by
Eli N. Futerman and Daniel J. Chessin, President and Chief Executive
Officer and Executive Vice President of the Company, respectively, to
HAHN's Board, and the related SEC Form 8-K filing dated January 19, 2001;
(3) On February 14, 2001, Empire was engaged by the Special Committee of
Independent Directors of HAHN to express our opinion as to the "fair
value" of HAHN's common stock and to evaluate the Going Private Proposal.
Empire evaluated HAHN from a market value, investment value and asset
value perspective and on March 14, 2001 and March 20, 2001 made
presentations of our analysis to HAHN's Special Committee of Independent
Directors.
(4) Reviewed the executed Letter of Intent, dated March 26, 2001, between
HAHN and Eli N. Futerman and Daniel J. Chessin, on behalf of themselves
and a group of related shareholders noted above as Continuing
Shareholders.
(5) Reviewed the Agreement and Plan of Merger by and between PERD
HOLDING CORP., HAW Acquisition Corp. and HAHN, dated April 6,
2001;
(6) Reviewed numerous internally prepared business and financial records,
documents, and memos of HAHN, including internal profit and loss
statements (plan versus actual) for the periods ended March 31, 2001 and
April 30, 2001;
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350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
83
Board of Directors of Hahn Automotive Warehouse, Inc.
May 16, 2001
Page 3
(7) Reviewed the Company's Restated Certificate of Incorporation, dated
January 19, 1993 and the Amended and Restated By-Laws attached to HAHN's
10Q for the quarter ending March 31, 1994;
(8) Visited HAHN's corporate office and held discussions with Daniel R.
McDonald and Albert J. Van Erp, Vice President & General Counsel and Vice
President and Controller, respectively, regarding its past financial
performance, its current, and planned operations, its financial
condition, and business prospects;
(9) Reviewed the historical stock prices and trading volumes of the Company's
Common Stock before and after the announcement of the Going Private
Proposal; and
(10) Considered such other information, financial studies, and analyses as we
deemed relevant, and performed such analyses, studies, and investigations
as we deemed appropriate.
LIMITATIONS
In rendering our opinion, Empire has relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information obtained by us from HAHN, from its financial and legal
advisors, and from public sources.
Our opinion is necessarily based upon economic, market, and other conditions as
in effect on, and the information made available to us as of, the date of this
letter. Our opinion is limited to the fairness of the Merger Consideration in
the Merger Agreement to the holders of Common Stock as of the date hereof, from
a financial point of view.
In arriving at our opinion, we did not physically inspect the Company's owned or
leased facilities nor were any current independent appraisals of these
facilities or the physical assets or liabilities of the Company obtained.
We have assumed that the final Merger Agreement and related documents will
contain text, terms, and data substantially similar to those upon which Empire
has relied.
OPINION
Based upon the foregoing, and in reliance thereon, it is our opinion, as
financial advisors to HAHN's Board, that the Merger Consideration in the
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350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380
84
Board of Directors of Hahn Automotive Warehouse, Inc.
May 16, 2001
Page 4
Merger Agreement is fair to the Non-Continuing Shareholders of HAHN's Common
Stock, from a financial point of view.
Respectfully submitted,
Empire Valuation Consultants, Inc.
/s/Terence L. Griswold
- -------------------------------
Terence L. Griswold, ASA
Principal
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350 Fifth Avenue, Suite 5513 New York, N.Y. 10118 (212) 714-0122 Fax: (212) 714-0124
3255 Brighton Henrietta T. L. Road Rochester, N.Y. 14623 (716) 475-9260 Fax: (716) 475-9380