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:
|_| Preliminary Proxy Statement |_| Confidential, For Use
of the Commission
Only (as permitted by
Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-(11(c) or Rule 14a-12
HOMETOWN AUTO RETAILERS, INC.
(Name of Registrant as Specified in Its 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-6(i)(4) and 011.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
HOMETOWN AUTO RETAILERS, INC.
Notice of Annual Meeting of Stockholders
To Be Held On August 7, 2003 at 10:00 A.M.
TO THE STOCKHOLDERS OF HOMETOWN AUTO RETAILERS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hometown
Auto Retailers, Inc. ("Hometown") will be held at the Hilton of Southbury, 1284
Strongtown Road, Southbury, Connecticut 06488, on Thursday, August 7, 2003 at
10:00 A.M., Eastern Standard Time, for the following purposes:
1. To elect seven directors for one-year terms or until their
successors shall have been duly elected and qualified.
2. To ratify the selection of BDO Seidman LLP as independent auditors
for the year ending December 31, 2003.
3. To transact such other business as may properly be brought before
the meeting or any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on June 26, 2003 as
the record date for the determination of the stockholders entitled to notice of
and to vote at this meeting and at any adjournment or postponements thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles F. Schwartz
----------------------------------------
Charles F. Schwartz, Chief Financial
Officer and Secretary
Dated: Watertown, Connecticut
June 26, 2003
--------------------------------------------------------------------
IMPORTANT: Whether or not you expect to attend in person, please complete,
sign, date, and return the enclosed Proxy at your earliest
convenience. This will ensure the presence of a quorum at the
meeting. Promptly signing, dating, and returning the Proxy will save
Hometown the expense and extra work of additional solicitation. An
addressed envelope for which no postage is required has been
enclosed for that purpose. Sending in your Proxy will not prevent
you from voting your stock at the meeting if you desire to do so, as
your Proxy is revocable at your option.
--------------------------------------------------------------------
HOMETOWN AUTO RETAILERS, INC.
----------
PROXY STATEMENT
----------
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 7, 2003
This Statement is furnished to the stockholders of Hometown Auto
Retailers, Inc., a Delaware corporation ("Hometown"), in connection with the
solicitation by the Board of Directors of proxies to be used at the 2003 Annual
Meeting of Stockholders of Hometown to be held at the Hilton of Southbury, 1284
Strongtown Road, Southbury, Connecticut 06488, on Thursday, August 7, 2003 at
10:00 A.M., Eastern Standard Time, and at any adjournments thereof. The
approximate date on which this Statement and the accompanying proxy will be
mailed to stockholders is July 1, 2003.
THE VOTING AND VOTE REQUIRED
On the record date for the meeting, the close of business on June 26, 2003
(the "Record Date"), there were outstanding 3,564,605 shares of Class A common
stock, par value $.001 per share, each of which will be entitled to one vote,
and there were outstanding 3,610,500 shares of Class B common stock, par value
$.001 per share, each of which will be entitled to ten votes. Shares represented
by each properly executed, unrevoked proxy received in time for the meeting will
be voted as specified.
Directors are elected by a plurality of the votes cast at the meeting. In
the case of election of directors, shares represented by a proxy which are
marked "WITHHOLD" to vote for all seven nominees will not be counted in
determining whether a plurality vote has been received for the election of
directors. Ratification of selection of auditors requires a majority of votes
cast at the meeting provided a quorum is present.
All shares represented by valid proxies will be voted in accordance with
the instructions contained therein. If the proxy does not specify how the shares
are to be voted, they will be voted in accordance with the recommendations of
the Board of Directors. A proxy may be revoked by the stockholder giving the
proxy at any time before it is voted by delivering oral or written notice to the
Chief Financial Officer of Hometown at or prior to the meeting, and a prior
proxy is automatically revoked by a stockholder giving a subsequent proxy or
attending and voting at the meeting. Attendance at the meeting in and of itself
does not revoke a prior proxy.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
At this meeting seven directors are to be elected to serve for one-year
terms, each to hold office until his successor is duly elected and qualified. It
is not contemplated that any nominee will be unable to serve as a director, but
if such contingency should occur prior to the meeting, the persons named as
proxies in the enclosed proxy or their substitutes will have the right to vote
for substitute nominees. The nominees were selected by the Board of Directors of
Hometown and are all currently directors except for Mr. Dzinski who has been
nominated to become a director at the 2003 Annual Meeting of Stockholders.
Certain information with respect to each nominee is stated below.
Directors Nominated for One-Year Terms:
Name Age Position with Hometown Director Since
- ---- --- ---------------------- --------------
Corey E. Shaker 46 President, Chief Executive Officer and 1997
Director
William C. Muller Jr. 51 Regional Vice President - South 1997
Division and Director
Joseph Shaker 35 Regional Vice President - East 1997
Division and Director
H. Dennis Lauzon 54 Director 2002
Timothy C. Moynahan * 63 Director 2002
Steven A. Fournier * 48 Director 2002
Bernard J. Dzinski Jr. ** 39 Director To be elected
- ----------
* Member of Audit and Compensation Committees
** Expected to become a member of Audit and Compensation Committees upon
election.
Corey E. Shaker was named President and Chief Operating Officer on
February 7, 2000, and added the title of Chief Executive Officer on August 29,
2000. In addition, he was Vice President-Connecticut Operations since October 1,
1997 and was in charge of Hometown's Company-wide sales training efforts. Prior
to that, from 1989 he was Chief Operating Officer and General Manager of Family
Ford Inc. where he was responsible for all aspects of its operations. He is a
past member of NADA Ford F01 20 group. He was awarded the Lincoln Mercury
Salesperson of the Nation award in 1980 and is a three-time winner of the
Lincoln Mercury Inner Circle award. He is also a first cousin to Steven Shaker,
the Regional VP - North Division, and Joseph Shaker, the Regional VP - East
Division and director of Hometown. He holds a B.S. in Business Administration
from Providence College.
William C. Muller Jr. has been Regional Vice President - South Division
since March 2000. Mr. Muller has been Vice President-New Jersey Operations since
October 1, 1997. In addition, from 1980 he was the President of Muller Toyota,
Inc. and of Muller Chevrolet, Oldsmobile, Isuzu, Inc (both of which are
currently known as Muller Automotive Group, Inc. and Muller Chevrolet, Isuzu,
Inc., respectively.) Under his management, Muller Toyota has been: (a) a 13-time
recipient of Toyota's Prestigious President's Award, given to those dealers with
superior levels of customer satisfaction who also exceed capital standards and
have high market penetration and facilities that meet or exceed Toyota
standards; (b) a 13-time recipient of Toyota Parts Excellence Award; (c) a
9-time winner of the Toyota Service Excellence Award; and (d) a 3-time winner of
Toyota's Sales Excellence Award. He holds a B.A. degree from Fairleigh Dickinson
University.
Joseph Shaker has been Regional Vice President - East Division since 2002.
He was President and Chief Operating Officer of Hometown from October 1, 1997 to
February 7, 2000. In addition, from 1991 he was the Chief Operating Officer of
Shaker's Lincoln Mercury, Shaker's Jeep Eagle and Lincoln
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Mercury Autocare in Connecticut. In 1992, at the request of Ford Motor Company,
he developed the pilot free-standing neighborhood Autocare Center which has
become the model for free-standing neighborhood auto maintenance centers
established by Ford Motor with certain of its other dealers. He also started
Shaker's Lincoln Mercury limousine department in 1992 and has been responsible
for its growth and implementation. He is a Member of the Executive Committee of
the NADA 20 Group. He is the brother of Steven Shaker, the Regional VP - North
Division, and a first cousin of Corey Shaker, the Chief Executive Officer and a
director of Hometown. He holds a B.S. (Management) degree from Bentley College.
H. Dennis Lauzon has been the President and owner of Parkway Toyota since
1978. Mr. Lauzon is on the Toyota Dealers Advertising Board as well as the
Dealer Council. He is also on the board of Trustees for Hackensack University
Medical Center. Mr. Lauzon attended Fairleigh Dickinson University.
Timothy C. Moynahan has been a founding partner in the law firm Moynahan,
Minnella, Broderick and Tindall since 1974. Mr. Moynahan is a director of The
Institute of Human Virology, at the University of Maryland School of Medicine.
He is also the President of the Connecticut Chapter of the Ireland Chamber of
Commerce, a non-profit organization which promotes economic relationships
between the United States and Ireland and is Vice-President of the Paula A.
Moynahan Skin Care Company, a manufacturer of skin care products. Mr. Moynahan
holds a BS degree in History from Providence College and a JD degree from
Catholic University School of Law.
Steven A. Fournier has been the President and Chief Executive Officer of
Gar-Kenyon Technologies, LLC, a manufacturer of hydraulic aerospace components,
since December 2001. He previously was President and Chief Operating Officer of
Matthews Ventures, a diversified holding company, from 1992. Mr. Fournier
currently serves as Director, Treasurer, and member of the executive committee
of the Greater New Haven Chamber of Commerce. Mr. Fournier received a Bachelor
of Science Degree in Accounting from Bentley College in 1975 and is a Certified
Public Accountant.
Bernard J. Dzinski Jr. has been a partner with Charles Heaven & Co., CPA's
since 2000 and was a manager since 1990. He currently serves on the Board of
Directors of the Waterbury Rotary Club. Mr. Dzinski received a Bachelor of
Science in Accounting from Providence College in 1985 and is a Certified Public
Accountant.
The Board Recommends A Vote FOR The Election Of Each Of The Nominees.
Committees of the Board of Directors
During the last fiscal year, Hometown's Board of Directors held 15
meetings. Hometown's Board of Directors has established audit and compensation
committees, whose members are composed of two non-employee directors: Messrs.
Moynahan and Fournier. It is anticipated that Mr. Dzinski will be appointed to
the audit and compensation committees. It is the intention of Hometown to
appoint only independent directors to the Audit and Compensation Committees.
Hometown's Board of Directors has adopted a written charter for the Audit
Committee, which is attached hereto as an Appendix. The Audit Committee meets
with management and Hometown's independent public accountants to determine the
adequacy of internal controls and other financial reporting matters. The Audit
Committee met with the auditors to review the planned scope and the results of
the audit. The members of the Audit Committee consist of Messrs. Moynahan and
Fournier, both of who are independent (as defined in Rule 4200(a)(14) of the
National Association of Securities Dealers'.) The Audit Committee met 7 times in
fiscal year 2002. (See also "Audit Committee Report," below.)
The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of Hometown, reviews
general policy matters relating to compensation and benefits of employees of
Hometown and administers the issuance of stock options and
3
discretionary cash bonuses to Hometown's officers, employees, directors and
consultants. The Compensation Committee met 2 times in fiscal year 2002. The
report of the Compensation Committee appears below.
All directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of all committees of the Board on
which that director served during the full fiscal year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Leases
Hometown has leased from various affiliates the premises occupied by
certain of its dealerships. Each of the governing leases became effective as of
the closing of the initial public offering, has a term expiring in 2013, is on a
triple net basis and provides for a consumer price index ("CPI") increase to the
base rent for the five-year periods commencing January 1, 2004 and 2009.
Hometown believes that each lease was at their fair market value at inception.
Hometown leases, for an initial annual base rental of $240,000, the
premises occupied by its Lincoln Mercury dealership in Watertown, Connecticut,
and for an initial base rental of $240,000 and $72,000 respectively, the
premises occupied by the Family Ford and Shaker Jeep/Eagle dealerships in
Waterbury, CT from Shaker Enterprises, a Connecticut general partnership whose
seven partners include Joseph Shaker, Corey E. Shaker, Steven Shaker and Janet
Shaker. Corey E. Shaker is the CEO, Director and a principal stockholder of
Hometown. Steven Shaker is the Regional Vice President - North Division and a
principal stockholder of Hometown. Joseph Shaker is the Regional Vice President
- - East Division, Director and a principal stockholder of Hometown. Janet Shaker
is an employee and a principal stockholder of Hometown.
Hometown leases, for an initial annual base rental of $360,000 and
$396,000 respectively the premises occupied by its Toyota ("Toyota") dealership
in Clinton, New Jersey and its Chevrolet/Oldsmobile ("Chevy") dealership in
Stewartsville, New Jersey from Rellum Realty Company, a New Jersey general
partnership, whose partners are William C. Muller Jr. and his spouse, Michele
Muller. William C. Muller Jr. is Regional Vice President-South Division,
director and a principal stockholder of Hometown. The Toyota and Chevy leases
are treated as capital leases. In connection with the acquisition in 1999 of
real estate used by Baystate Lincoln Mercury, Hometown guaranteed the mortgage
debt of Rellum Realty Company. The 1999 guaranty was given in substitution for a
February 1998 guaranty of that debt by the Muller Group, a subsidiary of
Hometown. As of December 31, 2002 the mortgage debt balance is $4.9 million.
Hometown makes annual lease payments of $756,000 to the landlord. The annual
mortgage payments made by the landlord total approximately $774,000. The
mortgage matures March 2013.
Hometown leases, for an initial annual base rental of $360,000 the
premises occupied by its Lincoln Mercury dealership in Emerson, New Jersey from
Salvatore A. Vergopia and his wife. Mr. Vergopia is a director for the term
which will expire at the 2003 annual meeting of stockholders, and he is a
principal stockholder of Hometown.
4
Legal Proceedings
In May 2001, Hometown's wholly-owned subsidiary Morristown Auto Sales,
Inc. ("Morristown") assigned to Crestmont MM, L.P. (the "Assignee") the lease
for the premises, where it was operating its Lincoln Mercury dealership in
Morristown, New Jersey. On or about July 12, 2002, Morristown received notice
from the landlord that the Assignee had not paid the required monthly rent,
maintained the premises in accordance with the lease, nor provided the required
insurance for the premises. In September 2002, Hometown received notice of a
complaint filed by the landlord against Hometown, Morristown and certain former
officers seeking payment of rent and other obligations through June 2005. In
October 2002, Morristown filed a complaint against the Assignee to recover any
potential damages from the Assignee as provided under the lease assignment. The
Assignee has made a claim against Hometown for breach of the assignment
agreement and misrepresentation of the use of the subject property. The Assignee
has also brought a claim against Morristown's president, Hometown's Chief
Executive Officer, for misrepresentation. Total anticipated costs for the
remainder of the lease term, through June 2005, is $540,000 for rent plus
certain other costs. Hometown believes it has meritorious defenses to the claim
and counterclaim and intends to vigorously defend this action. In fact the
landlord has leased the premises for the period January 29, 2003 through January
29, 2004 for a total of $120,000, to another tenant thereby significantly
reducing Morristown's exposure to a damages judgment for lost rent. Hometown
does not believe that the eventual outcome of the case will have a material
adverse effect on Hometown's consolidated financial position or results of
operations.
In July 2002, Hometown received notice of a complaint filed by the Trust
Company of New Jersey ("Trust Company") for payment under certain guaranty
agreements allegedly made by Hometown's wholly-owned subsidiary Westwood Lincoln
Mercury Sales, Inc. ("Westwood") in favor of Trust Company in connection with a
sale of vehicles in 1998. Trust Company is seeking approximately $390,000 plus
other costs. Hometown does not believe that Westwood has any obligations under
the guaranty agreements due to certain actions taken by Trust Company in
relation to the underlying debt, the debtor and other guarantors. Hometown
believes it has meritorious defenses and intends to vigorously defend this
action. Hometown does not believe that the eventual outcome of the case will
have a material adverse effect on Hometown's consolidated financial position or
results of operations.
On or about February 7, 2001, Salvatore A. Vergopia and Edward A.
Vergopia, directors for the term ending at the 2003 Annual Meeting of
Stockholders, and formerly executive officers of Hometown, and Janet Vergopia,
the wife of Salvatore A. Vergopia (the "Vergopias") filed a complaint in the
Superior Court of New Jersey in Bergen County, against Hometown, its officers
and directors, certain holders of its Class B common stock, and certain other
unnamed persons, alleging breach of two employment agreements, wrongful
termination of employment, breach of a stockholders' agreement and certain other
wrongful conduct, including age discrimination and breach of fiduciary duty. The
Vergopias are seeking back pay, front pay, compensatory, consequential and
punitive damages, for an unspecified amount as well as, reinstatement,
injunctive and other legal and equitable relief. Salvatore A. Vergopia and
Edward A. Vergopia have also commenced a second action for defamation against
Hometown and its Chief Executive Officer, which has been consolidated with the
action initially filed.
We have retained litigation counsel to represent us in this action. A
motion has been granted such that only a single shareholder remains as an
individual shareholder defendant. Also, Hometown has filed counterclaims to
recover damages associated with the Vergopia's breaches of certain agreements,
as well as breaches of their fiduciary duties. Discovery is proceeding in this
action.
We believe that the Vergopias commenced this action in response to our
dismissal of both Salvatore A. Vergopia and Edward A. Vergopia from their
officerships and employment positions with us. We believe we have meritorious
defenses and are vigorously defending this action. Hometown does not
5
believe that the eventual outcome of the case will have a material adverse
effect on Hometown's consolidated financial position or results of operations.
Universal Underwriters Group ("Universal"), Hometown's insurance provider,
commenced a lawsuit against The Chubb Group of Insurance Companies ("Chubb"),
Hometown's Director and Officer Liability Insurance provider, Hometown, certain
officers, directors and shareholders of Hometown and the Vergopias seeking a
declaration of its coverage obligations with respect to the suit brought by the
Vergopias discussed above. The suit has been consolidated with the suit brought
by the Vergopia's for discovery and case management purposes. Universal
originally acknowledged its obligation to defend and indemnify Hometown against
the Vergopia's claims and engaged separate counsel to represent Hometown and its
directors. Universal is now seeking to limit its obligations under the
comprehensive insurance policy as well as require Chubb, to share in defense and
indemnity obligations. Hometown originally commenced an action seeking
affirmative declaration of its rights under its policy with Universal, but
allowed this action to be stayed pending a resolution of the action brought by
Universal. Hometown has brought counterclaims against Universal and a
cross-claim for declaratory judgment against Chubb. Hometown maintains that the
insurers are obligated to defend and indemnify on all claims brought by the
Vergopias. Discovery is ongoing on this matter. Hometown believes it has
meritorious claims and is vigorously defending this action and prosecuting its
counterclaims and cross-claims. Hometown does not believe that the eventual
outcome of the case will have a material adverse effect on Hometown's
consolidated financial position or results of operations.
6
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL
HOLDERS
The following Summary Compensation Table sets forth all compensation
earned in all capacities, during the fiscal year ended December 31, 2002, 2001
and 2000 by (i) Hometown's Chief Executive Officer and (ii) the four most highly
compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the 2002 fiscal year and whose salary, exceeded
$100,000 (collectively, the "Named Executive Officers").
COMPENSATION TABLE
- --------------------------------------------------------------------------------------------
Annual Compensation
------------------------------------------------------------------
Fiscal Annual
Name and Principal Year Bonus Option
Position Compensation $ Salary (1) Other Grants
- -------- ------------- -------- -----
Corey E. Shaker, 2002 250,000 -- 6,840 50,000
President and Chief 2001 250,000(2) -- 7,000 50,000
Executive Officer 2000 200,000 -- 7,000 --
William C. Muller, Jr. 2002 200,000 101,844 9,673 --
Regional Vice 2001 200,000 130,372 -- 30,000
President-South 2000 200,000 -- -- --
Division
Steven Shaker, 2002 125,000 1,325 2,600 --
Regional Vice 2001 118,600 10,000 2,600 30,000
President-North 2000 110,000 -- 3,000 --
Division
Joseph Shaker, 2002(3) 196,350 -- 8,000 --
Regional Vice
President-East
Division
Charles F. Schwartz, 2002(4) 160,000 20,000 1,749 --
Chief Financial
Officer and
Secretary
- ----------
(1) The amounts shown are cash bonuses earned in the specified year. A portion
of these bonuses may be paid in the first quarter of the following year.
(2) Includes amounts paid after year-end.
(3) Named Regional Vice President-East Division in 2002. Includes compensation
for entire year.
(4) Has been Chief Financial Officer since January 2002.
7
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Number of Percent of Annual Rates of Stock
Shares Total Options Price Appreciation for
Underlying Granted to Option
Options Employees in Exercise Term(2)
Granted(#) Fiscal Year Price Expiration -------
Name (1) 2002 ($/Share) Date 5% 10%
---- --- ---- --------- ---- -- ---
Corey E. Shaker 50,000 100% $0.48 April 2007 $6,631 $14,652
(1) The options vest with respect to one-third of the shares of Common Stock
covered by the options on each of the first, second and third anniversary
of the Option Grant Date, April 29, 2002.
(2) Potential realizable values are net of exercise price but before taxes,
and are based on the assumption that the Common Stock of Hometown
appreciates at the annual rate shown (compounded annually) from the date
of grant until the expiration date of the respective options. All the
options issued in 2002 were issued at the market price at the date of
issuance. These numbers are calculated based on Securities and Exchange
Commission requirements and do not reflect Hometown's projection or
estimate of future stock price growth. Actual gains, if any, on stock
option exercises are dependent on the future financial performance of
Hometown, overall market conditions and the option holder's continued
employment through the vesting period. This table does not take into
account any appreciation in the price of the Common Stock from the date of
grant to the date of this Proxy Statement.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table summarizes options exercised during fiscal 2002 and
presents the value of unexercised options held by the Named Executive Officers
at fiscal year end:
Number of Securities Value of
Underlying Unexercised In-the-
Unexercised Options Money Options at
Acquired at Fiscal Year-End Fiscal Year-End
on Value Exercisable (E) Exercisable (E)
Name Exercise Realized Unexercisable (U) Unexercisable (U)
- ---- -------- -------- ----------------- -----------------
Corey E. Shaker -- -- 83,166 E --
President and Chief 83,334 U
Executive Officer
William C. Muller, Jr. -- -- 30,000 E --
Regional Vice 20,000 U
President - South
Steven Shaker -- -- 20,000 E --
Regional Vice 20,000 U
President - North
Joseph Shaker, -- -- 36,500 E --
Regional Vice
President-East
Charles F. Schwartz, -- -- 16,666 E --
Chief Financial 33,334 U
Officer and Secretary
In general, the option agreements shall be exercisable only so long as the
Optionee shall continue to be an employee of Hometown and within the thirty-day
period after the date of termination of his employment to the extent it was
exercisable on the day prior to the date of termination. In the event the
Optionee is unable to continue his employment with Hometown as a result of his
total and permanent disability, he may, but only within three (3) months from
the date of disability, exercise the option to the extent he was entitled to
exercise it at the date of such disability. In the event of death of the
Optionee, the option may be exercised, at any time within twelve (12) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise this option by bequest or inheritance, but only
to the extent of the right that would have accrued had the Optionee continued
living one (1) month after the date of death, provided that at the time of his
death the Optionee is an employee of Hometown and shall have been in Continuous
Status (as defined in Hometown's Stock Option Plan) as an employee from the date
hereof; or within thirty (30) days after the termination of Continuous Status as
an employee, the option may be exercised, at any time within three (3) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
9
Employment Contracts
In April 1998, Hometown entered into five-year employment agreements,
effective as of the closing of Hometown's initial public offering in July 1998,
with Corey E. Shaker, William C. Muller, Jr., Joseph Shaker and Steven Shaker.
The agreement for Corey E. Shaker provides for an annual base salary of
$200,000, which increased to $250,000 in 2001. The agreement for William C.
Muller provides for an annual base salary of $200,000, which increased to
$215,000 in 2003. The agreement for Joseph Shaker provides for an annual base
salary of $200,000 and the agreement for Steven Shaker provides for an annual
base salary of $100,000, which increased to $125,000 in 2001.
Each agreement also provides for participation by the employee in all
executive benefit plans and, if employment is terminated without cause (as
defined in the agreement), payment of an amount equal to the salary which would
have been payable over the unexpired term of his employment agreement.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
None of the directors serving on the Compensation Committee are employees
or officers of Hometown. No director or executive officer of Hometown is a
director or executive officer of any other corporation that has a director or
executive officer who is also a director of Hometown.
1998 Stock Option Plan
In February 1998, as further amended in August 2002, in order to attract
and retain persons necessary for the success of Hometown, Hometown adopted its
1998 Stock Option Plan (the "Stock Option Plan") covering up to 830,000 shares
of Class A Common Stock. Pursuant to the Stock Option Plan officers, directors
and key employees of Hometown and consultants to Hometown are eligible to
receive incentive and/or non-incentive stock options. The Board of Directors
will administer the Stock Option Plan, which expires in January 2008, or a
committee designated by the Board of Directors. The selection of participants,
allotment of shares, determination of price and other conditions relating to the
purchase of options will be determined by the Board of Directors, or a committee
thereof, in its sole discretion. Stock options granted under the Stock Option
Plan are exercisable for a period of up to 10 years from the date of grant at an
exercise price which is not less than the fair market value of the Common Stock
on the date of the grant, except that the term of an incentive stock option
granted under the Stock Option Plan to a stockholder owning more than 10% of the
outstanding Common Stock may not exceed five years and its exercise price may
not be less than 110% of the fair market value of the Common Stock on the date
of the grant. For grants to the Named Executive Officers see the chart above
titled "AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES."
Employee Benefit Plan
In October 1999, Hometown amended and restated the E.R.R. Enterprises,
Inc. Profit Sharing/401(k) Plan, (the "Amended Plan") into the HOMETOWN AUTO
RETAILERS, INC. 401K Plan (the "Plan") effective October 1, 1999, for the
benefit of eligible employees, as defined. Participants may make voluntary
contributions of up to 15% of their compensation, subject to certain IRS
limitations. Hometown may make annual matching contributions to the Plan at its
discretion. No Contributions were made by Hometown to the Plan for the years
ended December 31, 2002, 2001 and 2000. Corey E. Shaker and Joseph Shaker are
the Trustees of the Plan.
Compensation of Directors
Each non-employee Director receives a fee of $1,000, for each meeting
attended in person and $250 for each meeting attended telephonically and
reimbursement for travel costs and other out-of-pocket expenses incurred in
attending each Directors' meeting. In addition, committee members receive $500
for each committee meeting attended in person, other than meeting directly
following or preceding Board meetings and $125 for each committee meeting
attended telephonically. In addition, each non-employee Director receives
options to purchase an additional 2,500 shares of Common Stock on the date of
10
Hometown's annual stockholders' meeting. Such options will have an exercise
price equal to the fair market value of the Common Stock on the date of grant
and will vest one-third upon grant and one-third on each of the first and second
anniversary of the date of grant.
Limitation of Directors' Liability and Indemnification
The Delaware General Corporation Law (the "DGCL") authorizes corporations
to limit or eliminate the personal liability of directors to corporations and
their shareholders for monetary damages for breach of directors' fiduciary duty
of care. Hometown's Certificate of Incorporation limits the liability of
Directors of Hometown to Hometown or its shareholders to the fullest extent
permitted by Delaware law.
Hometown's Certificate of Incorporation provides mandatory indemnification
rights to any officer or Director of Hometown who, by reason of the fact that he
or she is an officer or Director of Hometown, is involved in a legal proceeding
of any nature. Such indemnification rights include reimbursement for expenses
incurred by such officer or Director in advance of the final disposition of such
proceeding in accordance with the applicable provisions of the DGCL. Insofar as
indemnification for liabilities under the Securities Act may be provided to
officers and Directors or persons controlling Hometown, Hometown has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Except for the litigation described in Legal Proceedings above, there is
no pending litigation or proceeding involving a Director, officer, employee or
agent of Hometown in which indemnification by Hometown will be required or
permitted.
Report of the Compensation Committee on Executive Compensation
The primary purposes of the Compensation Committee are to establish and
maintain competitive, fair and equitable compensation practices designed to
attract and retain key management employees throughout the Corporation and to
establish appropriate incentives to motivate and reward key management employees
for achieving or exceeding established performance goals; and to oversee the
competency and qualifications of senior management personnel and the provisions
of senior management succession planning. The Compensation Committee is
responsible for a broad range of activities which include (i) recommending to
the full Board of Directors the salary(ies) of the Chairman of the Board, Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer after an
evaluation of market data, internal salary relationships as provided by the
Corporation's executive compensation professionals, and such other factors as
the Committee deems appropriate; (ii) recommending to the full Board of
Directors the salaries for other elected Corporate Officers and selected key
management employees after reviewing the recommendations made by the Chief
Executive Officer and the Chief Operating Officer; (iii) recommending to the
full Board of Directors the type of incentive plans, if any, which will be
offered to management employees; and (iv) administering the Corporation's 1998
Incentive Stock Option Plan, to include, after reviewing the recommendations of
the Chief Executive Officer and the Chief Operating Officer, determining the
employees to be eligible for plan participation.
Due to the existence of five-year employment agreements between Hometown
and certain of its key officers, which do not expire until July 2003, the scope
of the Compensation Committee's duties has been limited.
COMPENSATION COMMITTEE
Steven A. Fournier
Chairman
11
COMPARE CUMULATIVE TOTAL RETURN
AMONG HOMETOWN AUTO RETAILERS, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[LINE GRAPH OMITTED]
ASSUMES $100 INVESTED ON JULY 29, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2002
The above graph shows a comparison of cumulative total returns for Hometown, the
NASDAQ Market Index, and a Peer Group from Hometown's SIC Code Index from the
date of the initial public offering.
(1) The Peer Group Index includes the following companies: Asbury Automotive
Group, Auto Nation Inc., CarMax Inc., Group 1 Automotive, Inc., Lithia Motors
Inc., Major Automotive Companies, Inc., Motorcars Automotive Group, Rush
Enterprises, Inc., Sonic Automotive Inc. and United Auto Group, Inc.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Hometown
regarding the beneficial ownership of Common Stock as of May 23, 2003 by (i)
each person known to Hometown to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, (ii) each Director of Hometown, (iii) each
Named Executive Officer and (iv) all Directors, and Executive Officers of
Hometown as a group. Except as otherwise indicated, the persons or entities
listed below have sole voting and investment power with respect to all shares of
Common Stock owned by them.
A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this proxy statement
upon the exercise of options and warrants or conversion of convertible
securities. Each beneficial owner's percentage ownership is determined by
dividing the number of shares beneficially owned by that person by the total
number of shares beneficially owned, increased to reflect the shares underlying
the options, warrants and convertible securities that are held by such person,
but not held by any other person.
o As of May 23, 2003, the total number of shares outstanding is 7,175,105,
of which 3,564,605 shares are Class A common stock and 3,610,500 shares
are Class B common stock.
The total number of votes are based on the combined total of Class A and
Class B common stock beneficially owned by the beneficial owner. The voting
power percentage of each beneficial owner is determined by dividing the number
of votes held by that person by the total number of votes outstanding, increased
to reflect the number of votes of the shares underlying the options, warrants
and convertible securities that are held by such person, but not held by any
other person.
o As of May 23, 2003, the total number of votes outstanding is 39,669,605,
of which 3,564,605 votes are from Class A common stock outstanding and
36,105,000 votes are from Class B common stock outstanding;
o Class A common stock have one (1) vote per share; and
o Class B common stock have ten (10) votes per share.
% of
Common Stock % of Outstanding Equity Aggregate
Name of Beneficial Owner Beneficially Owned Owned voting
--------------------- ------------------------- Power of
Class Class Class Class all
A B A B Total Classes
------- --------- ----- ----- ----- ---------
Officers and Directors
Salvatore A. Vergopia -- 705,000 -- 19.53 9.83 17.77
Corey E. Shaker 236,714 265,080 6.37 7.34 6.85 7.25
William C. Muller, Jr 346,250 453,034 9.35 12.55 10.93 12.25
Edward A. Vergopia -- 235,000 -- 6.51 3.28 5.92
Steven Shaker 145,142 206,424 4.00 5.72 4.86 5.56
Joseph Shaker 184,326 321,812 5.07 8.91 6.98 8.56
Charles F. Schwartz 16,666 -- ** -- ** **
H. Dennis Lauzon 3,333 -- ** -- ** **
Timothy C. Moynahan 31,667 -- ** -- ** **
Steven A. Fournier 31,667 -- ** -- ** **
All Directors, and Executive
Officers as a group (10
persons) 995,765 2,186,350 24.42 60.56 41.39 56.89
5% Beneficial Owners
William C. Muller, Sr 288,000 308,718 7.86 8.55 8.20 8.49
** Ownership is less than 1%
13
Salvatore A. Vergopia has an address at 20 Bayberry Drive, Saddle River,
New Jersey 07458. His beneficial ownership of our Class B common stock includes
225,600 shares owned by his wife, Janet.
Edward A. Vergopia has an address at 4912 Pine Street Drive, Miami Beach,
Florida 33140.
Corey E. Shaker has an address at c/o Hometown Auto Retailers, Inc., 774
Straits Turnpike, Watertown Connecticut 06795. His beneficial ownership of our
common stock includes:
o 265,080 shares of Class B common stock, of which 15,980 shares are held by
the Edward Shaker Family Trust of which he is the Trustee and a
beneficiary;
o 84,500 shares of Class A common stock, including 72 shares (24 shares each
for his children, Lindsay, Kristen and Edward) of which he is custodian;
o Options exercisable within the next 60 days to purchase shares of Class A
common stock as follows:
o 36,500 shares at $9.00 per share;
o 30,000 shares at $3.00 per share;
o 16,667 shares at $2.25 per share;
o 16,667 shares at $1.25 per share;
o 16,666 shares at $0.48 per share;
o Warrants immediately exercisable to purchase 35,714 shares of Class A
common stock at $1.20 per share.
William C. Muller, Jr. has an address at c/o Muller Toyota Inc., Route 31,
PO Box J, Clinton, New Jersey 08809. His beneficial ownership of our common
stock includes:
o 453,034 shares of Class B common stock;
o 205,250 shares of Class A common stock;
o 1,000 shares of Class A common stock owned by his wife, Michele;
o Options exercisable within the next 60 days to purchase shares of Class A
common stock as follows:
o 20,000 shares at $9.00 per share;
o 10,000 shares at $2.25 per share;
o 10,000 shares at $1.25 per share;
o Warrants immediately exercisable to purchase 100,000 shares of Class A
common stock at $1.20 per share.
Steven Shaker has an address at c/o Family Ford, Inc., 1200 Wolcott
Street, Waterbury, Connecticut 06705. His beneficial ownership of our common
stock includes:
o 206,424 shares of Class B common stock;
o 79,428 shares of Class A common stock;
o Options exercisable within the next 60 days to purchase shares of Class A
common stock as follows:
o 10,000 shares at $9.00 per share;
o 10,000 shares at $2.25 per share;
o 10,000 shares at $1.25 per share;
o Warrants immediately exercisable to purchase 35,714 shares of Class A
common stock at $1.20 per share.
Joseph Shaker has an address at c/o Baystate Lincoln Mercury, 571
Worcester Road, Framingham, Massachusetts 01701. His beneficial ownership of our
common stock includes:
o 321,812 shares of Class B common stock of which 15,980 shares are held by
the Richard Shaker Family Trust which Mr. Shaker is the Trustee and a
beneficiary; and 40,000 shares are held by the Shaker Irrevocable Trust of
which Mr. Shaker is Trustee;
o 112,112 shares of Class A common stock;
o an option to purchase 36,500 shares of Class A common stock, exercisable
within the next 60 days at $9.00 per share; and
14
o Warrants immediately exercisable to purchase 35,714 shares of Class A
common stock at $1.20 per share.
Charles F. Schwartz has an address at c/o Hometown Auto Retailers, Inc.,
774 Straits Turnpike, Watertown Connecticut 06795. His beneficial ownership of
our common stock consist of an option to purchase 16,666 shares of Class A
common stock, exercisable within the next 60 days at $0.68 per share.
H. Dennis Lauzon has an address at 854 Sunset Avenue, Haworth, New Jersey
07641. His beneficial ownership of our common stock consist of an option to
purchase 3,333 shares of Class A common stock, exercisable within the next 60
days at $0.65 per share.
Timothy C. Moynahan has an address at 141 East Main Street, Waterbury,
Connecticut 06722. His beneficial ownership of our common stock consist of
options exercisable within the next 60 days to purchase shares of Class A common
stock as follows:
o 30,000 shares at $0.48 per share;
o 1,667 shares at $0.42 per share;
Steven A. Fournier has an address at 446 Blake Street, New Haven,
Connecticut 06510. His beneficial ownership of our common stock consist of
options exercisable within the next 60 days to purchase shares of Class A common
stock as follows:
o 30,000 shares at $0.58 per share;
o 1,667 shares at $0.42 per share;
William C. Muller, Sr. has an address at c/o Muller Toyota Inc., Route 31,
PO Box J, Clinton, New Jersey 08809. His beneficial ownership of our common
stock includes:
o 308,718 shares of Class B common stock;
o 188,000 shares of Class A common stock; and
o Warrants immediately exercisable to purchase 100,000 shares of Class A
common stock at $1.20 per share.
All shares and warrants are owned by The William C. Muller Revocable
Living Trust of which William C. Muller Sr. is Trustee. William C. Muller Sr. is
neither an officer nor director.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Hometown's
officers and directors, and persons who own more than ten-percent of a
registered class of Hometown's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish Hometown with copies of all Section 16(a) forms they
file.
To the best of Hometown's knowledge, based solely on review of the copies
of such forms furnished to Hometown, or written representations that no other
forms were required, Hometown believes that all Section 16(a) filing
requirements applicable with respect to all its current officers, directors and
ten percent shareholders have been complied with as of the filing date of this
proxy statement. However, Corey E. Shaker, William C. Muller, Jr., Steven A.
Fournier and Timothy C. Moynahan were late in filing one (1) Statement of
Changes in Beneficial Ownership on Form 4 during 2002 but have subsequently come
into compliance. With respect to any former directors, officers, and ten-percent
shareholders of Hometown, Hometown does not have any knowledge of any known
failures to comply with the filing requirements of Section 16(a).
15
Audit Committee Report
The Audit Committee has reviewed Hometown's audited statements for the
year ended December 31, 2002. In conjunction with its review, the Audit
Committee has met with the management of Hometown to discuss the audited
financial statements. In addition, Hometown has discussed with its independent
auditors, BDO Seidman LLP, the matters required pursuant to Statement on
Accounting Standards No. 61 and has received the written disclosures and the
letter from BDO Seidman LLP required by Independence Standards Board Standard
No. 1. The Audit Committee has also discussed with BDO Seidman LLP its
independence from management and Hometown. BDO Seidman LLP, has full and free
access to the Audit Committee.
Based on this review and discussion, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in
Hometown's Annual Report on Form 10-K for the fiscal year ended December 31,
2002 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE:
Timothy C. Moynahan
Steven A. Fournier
Audit Fees
The aggregate fees and expenses billed for the professional services
rendered by BDO Seidman LLP for the audit of Hometown's annual financial
statements included in Hometown's Form 10-K filing for fiscal year 2002 and the
reviews of Hometown's quarterly financial statements included in Hometown's
Second and Third Quarter Form 10-Q filings for fiscal year 2002 totaled
$108,000. The aggregate fees and expenses billed for the professional services
rendered by Arthur Andersen LLP for the review of Hometown's quarterly financial
statements included in Hometown's First Quarter Form 10-Q filing for fiscal year
2002 totaled $20,000.
The aggregate fees and expenses billed for the professional services
rendered by Arthur Andersen LLP for the audit of Hometown's annual financial
statements included in Hometown's Form 10-K filing for fiscal year 2001 and the
reviews of Hometown's quarterly financial statements included in Hometown's Form
10-Q filings for fiscal year 2001 totaled $185,000.
Financial Information System Design and Implementation Fees
Hometown did not incur any fees for professional services rendered by BDO
Seidman LLP in connection with information systems design and implementation
during the 2002 fiscal year.
Hometown did not incur any fees for professional services rendered by
Arthur Andersen LLP in connection with information systems design and
implementation during the 2001 fiscal year.
All Other Fees
Hometown incurred $5,500 in other fees for professional services rendered
by BDO Seidman LLP other than the services covered in the paragraph above titled
"Audit Fees".
Other than $4,500 in fees associated with Hometown's filing on Form S-3,
Hometown did not incur any other fees for professional services rendered by
Arthur Andersen LLP other than the services covered in the paragraph above
titled "Audit Fees".
16
Audit Committee Consideration
Hometown's Audit Committee has considered whether BDO Seidman LLP's
provision of the services which generated the Audit and Other Fees reported
above was compatible with maintaining BDO Seidman LLP's independence as
Hometown's principal independent accounting firm.
Work Performed by Principal Accountant's Full Time Permanent Employees
BDO Seidman LLP's services rendered in performing Hometown's audits for
fiscal year 2002 were performed by full time, permanent employees and partners
of BDO Seidman LLP. The report of BDO Seidman LLP with respect to Hometown's
financial statements appears in Hometown's annual report for the fiscal year
ended December 31, 2002. In response to our request, we have been advised by BDO
Seidman LLP that a representative of BDO Seidman LLP will be at the annual
meeting and will have an opportunity to make a statement if he or she desires to
do so and will be available to respond to appropriate questions.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected BDO Seidman LLP
as the independent public accountants of Hometown and its subsidiaries for 2003.
BDO Seidman LLP has served as the independent public accountants of Hometown
since July 2002. Although stockholder approval is not required, Hometown desires
to obtain from the stockholders an indication of their approval or disapproval
of the Audit Committee of the Board of Directors action in appointing BDO
Seidman LLP as the independent public accountants of Hometown and its
subsidiaries. If the stockholders do not ratify this appointment, such
appointment will be reconsidered by the Audit Committee and the Board of
Directors. The proxy will be voted as specified, and if no specification is
made, the proxy will be cast "For" this proposal.
On June 20, 2002, Hometown dismissed Arthur Andersen LLP as Hometown's
independent public accountants and on July 11, 2002 appointed BDO Seidman LLP as
Hometown's new independent public accountants for the fiscal year 2002. This
change was made upon the recommendation of the Audit Committee of Hometown's
Board of Directors and with the approval of Hometown's Board of Directors. The
decision to change independent public accountants was based on the continuing
uncertainty regarding Andersen's future.
Andersen's reports on Hometown's consolidated financial statements for the
years ended December 31, 2001 and December 31, 2000 (Restated) did not contain
an adverse opinion or disclaimer of opinion, nor were they qualified or modified
as to uncertainty, audit scope or accounting principles.
During the years ended December 31, 2001 and December 31, 2000 (Restated)
and through the date of Andersen's dismissal, there were no disagreements with
Andersen on any matter of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure which, if not resolved to Andersen's
satisfaction, would have caused them to make reference to the subject matter in
connection with their report on the Hometown's consolidated financial statements
for such years; and there were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K.
Hometown provided Andersen with a copy of the foregoing disclosures.
The Board Recommends A Vote FOR The Ratification of the Appointment of BDO
Seidman LLP for Fiscal Year 2003.
17
MISCELLANEOUS
Stockholder Proposals
Stockholder proposals intended to be presented at Hometown's 2004 Annual
Meeting must be received by Hometown for inclusion in Hometown's proxy statement
relating to that meeting not later than March 15, 2004. Such proposals should be
addressed to Charles F. Schwartz, Chief Financial Officer and Secretary,
Hometown Auto Retailers, Inc., 774 Straits Turnpike, Watertown, Connecticut,
06795.
Other Matters
Management knows of no other business which will be presented for
consideration at the Annual Meeting other than that stated in the notice of
meeting.
Solicitation Of Proxies
The cost of this proxy solicitation and any additional material relating
to the meeting which may be furnished to the stockholders will be borne by
Hometown. In addition, solicitation by telephone, telegraph or other means may
be made personally, without additional compensation, by officers, directors and
regular employees of Hometown. Hometown also will request brokers, dealers,
banks and voting trustees and their nominees holding shares of record but not
beneficially to forward proxy soliciting material to beneficial owners of such
shares, and Hometown, upon request, will reimburse them for their expenses in so
doing.
Reports And Financial Statements
Hometown's Annual Report for the year ended 2002, including Audited
Financial Statements is included with this proxy material. The Financial
Statements contained in the Annual Report are incorporated by reference and are
part of this soliciting material.
A copy of Hometown's Annual Report to the Securities and Exchange
Commission on Form 10-K, without exhibits, will be provided without charge to
any stockholder submitting a written request. Such request should be addressed
to Charles F. Schwartz, Chief Financial Officer and Secretary, Hometown Auto
Retailers, Inc., 774 Straits Turnpike, Watertown, Connecticut, 06795.
EVERY STOCKHOLDER, WHETHER OR NOT HE OR SHE EXPECTS TO ATTEND THE ANNUAL
MEETING IN PERSON, IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Charles F. Schwartz
----------------------------------------
Charles F. Schwartz, Chief Financial
Officer and Secretary
Dated: Watertown, Connecticut
June 26, 2003
18
APPENDIX I (FORM OF PROXY)
HOMETOWN AUTO RETAILERS, INC.
P R O X Y
FOR ANNUAL MEETING OF THE STOCKHOLDERS
August 7, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Corey E. Shaker and Charles F. Schwartz, and
each of them, with full power of substitution, as proxies to vote the shares
which the undersigned is entitled to vote at the Annual Meeting of the
Stockholders of Hometown Auto Retailers, Inc. ("Hometown") to be held at the
Hilton of Southbury, 1284 Strongtown Road, Southbury, Connecticut 06488, on
Thursday, August 7, 2003 at 10:00 A.M., Eastern Daylight Time and at any
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of Hometown held or owned by the undersigned as indicated
on the proposals as more fully set forth in the Proxy Statement, and in their
discretion upon such other matters as may come before the meeting.
Please mark "X" your votes as indicated :
1) ELECTION OF DIRECTORS: Corey E. Shaker, William C. Muller, Jr., Joseph
Shaker, H. Dennis Lauzon, Timothy C. Moynahan, Steven A. Fournier and Bernard J.
Dzinski, Jr.
FOR election of all nominees |_|
WITHHOLD vote from all nominees |_|
FOR all nominees, |_|
EXCEPT for nominee(s) listed below from whom Vote is withheld.
___________________________________________
2) RATIFICATION of the Appointment of BDO Seidman LLP for Fiscal Year 2003.
FOR |_| AGAINST |_| ABSTAIN |_|
(Continued, and to be signed, on the Reverse Side)
- --------------------------------------------------------------------------------
FOLD HERE
II-1
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSAL.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
Dated: , 2003
________________________________________
Signature of Stockholder
________________________________________
Signature of Stockholder
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
IMPORTANT - PLEASE FILL IN, SIGN AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
II-2
APPENDIX II (AUDIT COMMITTEE CHARTER)
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. PURPOSE AND SCOPE
The primary purposes of the Audit Committee are, on behalf of the Board of
Directors and through the oversight of the independent auditors: (1) to obtain a
reasonable level of assurance that the Corporation's financial reports,
practices, procedures and controls are within acceptable limits of sound
practice and in accordance with the statutes, regulations, or statements of the
Financial Accounting Standards Board, the Securities and Exchange Commission,
the NASDAQ Stock Market and other relevant agencies and; and (2) to review such
reports, practices, procedures and controls at least annually and at such other
times if so desired by the Committee to gain insight as to the financial health
of the Corporation and important factors and trends related thereto and
compliance with the Corporation's practices for managing legal and regulatory
compliance.
The Board of Directors shall annually appoint an Audit Committee, which
shall consist of not less than three members of the Board of Directors. Members
may not be officers of the Corporation or any of its subsidiaries and also shall
be independent of management. At the time of appointment of the Committee, the
Directors shall designate one of the members of the Committee to be its
Chairman, to serve until a successor is designated. The Committee has the
authority to retain counsel and experts as deemed appropriate.
II. DUTIES AND RESPONSIBILITIES
The Audit Committee is responsible for a broad range of activities which
include:
o Recommend to the Board the selection, retention or termination of
the Corporation's independent public accountants.
o Discuss and approve the scope of professional services provided by
the independent public accountants and consider the possible effect
of the performance of such service on the independence of the public
accountants.
o Discuss and approve the arrangements (including the estimated fee)
and the proposed overall scope of the annual audit with management
and the independent public accountants.
o Review and concur in the appointment, replacement, reassignment, or
dismissal of the Corporation's Chief Financial Officer.
o Discuss matters of concern to the Audit Committee, the independent
public accountants or management relating to the annual financial
statements or other results of the audit.
o Consider and review with the independent public accountants and the
Corporation's Chief Financial Officer their options as to the
adequacy of the Corporation's system of internal accounting
controls.
o Review with management and the independent public accountants at the
completion of the annual examination:
>> The Corporation's annual financial statements and related
footnotes.
>> The independent public accountants' audit of the financial
statements and their report thereon.
>> The independent public accountants' management letter with
respect to the audit and proposals for changes emanating
therefrom.
II-3
>> Any significant changes required in the independent public
accountants' audit plan.
>> Any serious difficulties or disputes with management
encountered during the course of the audit.
>> Other matters related to the conduct of the audit which are to
be communicated to the Audit Committee under generally
accepted auditing standards.
Consider and review with management and the Corporation's Chief
Financial Officer:
>> The scope of the annual audit plan.
>> Significant findings during the year and management's
responses thereto.
>> Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information.
>> Any changes required in the planned scope of their audit plan.
o Review with the independent public accountants the methods of
establishing and monitoring the Corporation's policies to prohibit
unethical, questionable or illegal activities by employees of the
Corporation.
o Review with management and the independent public accountants the
anticipated effect of any material changes in accounting policies or
standards as well as any unusual or significant commitments or
contingent liabilities.
o Review, with the Corporation's counsel, any legal matters that could
have a significant impact on the Corporation's financial statements.
o Meet with the independent public accountants in separate executive
sessions to discuss any matters that the Audit Committee or the
independent public accountants believe should be discussed privately
with the Audit Committee.
The Audit Committee will perform such other functions as assigned by law,
the Corporation's charter or bylaws, or the Board of Directors.
III. OPERATING PROCEDURES
The operating procedures for this Committee with respect to meetings,
Notice of Meetings, Quorums and Manner of Acting, and Records shall be the
same as stipulated for the Board as spelled out in the Corporation's
By-laws.
IV. ACCOUNTABILITY
This Committee shall report to the Board of Directors at its next regular
meeting all such actions it has taken since the previous report.
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