SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission
May 31, 1995 File No. 0-14786
AUTOINFO, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-2867481
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1600 Route 208, Fair Lawn, New Jersey 07410
(Address of Principal Executive Officer) (Zip Code)
(Registrant's telephone number,
including area code) (201) 703-0500
Securities registered under Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO _____
As of August 17, 1995, the Registrant had outstanding 7,757,752 shares of
Common Stock.
The aggregate market value of the Registrant's Common Stock held by
nonaffiliates as of August 17, 1995 was approximately $22,333,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III Portions of the Registrant's annual proxy statement are incorporated by
reference.
Part IV Certain exhibits listed in response to Item 14(a)(3) have been included
in prior filings made by the Registrant under the Securities Act of
1933 and the Securities Exchange Act of 1934.
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PART I
Item 1: BUSINESS
General
During fiscal year 1995 and subsequent to its fiscal year end, AutoInfo,
Inc. (the "Company") sold substantially all of its operating assets. As a
result, the Company's sole remaining operating business provides long distance
telephone communications services. The long distance telephone communication
service is marketed to over 2,000 customers through an independent commissioned
sales force currently comprised of approximately 30 members. In addition, the
Company is actively seeking out and evaluating acquisition candidates and
expansion opportunities.
On April 1, 1995, the Company sold its Orion Network (a communication and
trading network for the automobile parts salvage industry based principally on
satellite telecommunications technology), Compass Network (a communication and
trading network for the automobile parts salvage industry based principally on
voice communications technology), Checkmate Computer Systems (a computer
inventory management system for the automobile parts salvage industry), and
Insurance Parts Locator (an information database service on the availability of
recycled automotive parts provided to automobile insurers) businesses to ADP
Claims Solutions Group, Inc. ("ADP") for $30,350,000 in cash.
The Company has a preferred stock investment in ComputerLogic, Inc., a
provider of management information systems to the automotive collision and parts
industry, convertible at the Company's option into 38% of its outstanding
capital stock as well as an option to acquire the balance of the outstanding
capital stock based upon a formularized valuation. As a result of the sale of
the Company's businesses providing computerization and communications services
to the automotive industry, and due to the lack of synergistic strategic
opportunities, the Company has no intention of exercising its option and has
written-off this investment totalling $1,804,000, including unpaid fees and
preferred stock dividends of $155,000.
Subsequent to the fiscal year end, on July 20, 1995, the Company sold its
Insurance Inspection Services business, a provider of photo inspection services
to the automotive casualty insurance industry, for $3,750,000 in cash.
Competition
The Company competes with numerous companies that provide long distance
telephone communication services on the basis of price and service.
Patents, Trademarks and Copyrights
"AUTOINFO" is a registered trademark and service mark of the Company.
Employees
The Company currently has 7 full-time employees. None of the Company's
employees are represented by a labor union. The Company considers its
relationship with its employees to be good.
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Directors and Executive Officers
The following table provides certain information with respect to the
directors and executive officers of the Company:
Name Age Position
---- --- --------
Andrew Gaspar 47 Director, Chairman of the Board
Scott Zecher 36 Director, President, Chief Operating Officer
William Wunderlich 47 Chief Financial Officer, Secretary, Treasurer
Jason Bacher 57 Director
Robert Fagenson 46 Director
Howard Nusbaum 47 Director
Jerome Stengel 58 Director
Directors of the Company are elected annually by the stockholders of the
Company to serve one year terms and until their successors have been elected and
qualified. All officers serve at the discretion of the Board of Directors. No
director or executive officer has any family relationship with any other
director or executive officer.
ANDREW GASPAR, age 47, was named Chairman of the Board on March 29,
1995. Mr. Gaspar has, since March 1991, been President of the general partner of
R.S. Lauder, Gaspar & Co. and Vice-Chairman of The Central European Development
Corporation, venture capital firms conducting business in the United States and
Eastern Europe. Prior thereto, Mr. Gaspar was a Managing Director of E.M.
Warburg Pincus & Co., a venture banking and investment advisory firm, a position
he held from 1982 through March 1991. He holds a B.S. degree from Columbia
University, an M.S. degree from Northeastern University and an M.B.A. degree
from Harvard Business School. He has been a director of the Company since 1978.
SCOTT ZECHER, age 36, joined the Company in January 1984 and was named its
President and Chief Operating Officer in January 1993. Prior to becoming
President, he held the position of Executive Vice President and Chief Financial
Officer. He became a director of the Company in 1989. From 1980 to 1984, he was
with the accounting firm of KPMG Peat Marwick. Mr. Zecher is a Certified Public
Accountant with a B.A. degree in Accounting and Economics from the City
University of New York at Queens College.
WILLIAM WUNDERLICH, age 47, joined the Company in October 1992 as its Vice
President-Finance and became Chief Financial Officer in January 1993. From 1990
to 1992, he served as Vice President of Goldstein Affiliates, Inc., a public
insurance adjusting company. From 1981 to 1990, he served as Executive Vice
President, Chief Financial Officer and a Director of Novo Corporation, a
manufacturer of consumer products. Mr. Wunderlich is a Certified Public
Accountant with a B.A. degree in Accounting and Economics from the City
University of New York at Queens College.
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JASON BACHER, age 57, has been a Director of the Company since its
inception in 1976. From its inception in 1976 through March 29, 1995, Mr. Bacher
was Chairman of the Board and the Chief Executive Officer of the Company. Mr.
Bacher has been associated with the automobile salvage industry since 1961 as a
principal of Bacher Tire Company, Inc., an automobile recycler located in the
New York metropolitan area. In connection with the sale by the Company of a
substantial portion of its operating assets to ADP on April 1, 1995, Mr. Bacher
became an employee of ADP.
ROBERT FAGENSON, age 46, has been an officer and director of Fagenson &
Co., Inc., a registered broker-dealer, for more than five years. Mr. Fagenson is
a member of the Board of Directors of the New York Stock Exchange. Since April
1983, Mr. Fagenson has also served as the Secretary and a director of Starr
Securities, Inc., a registered broker-dealer, which was the underwriter of the
Company's initial public offering in May 1986. Mr. Fagenson has been a director
of the Company since June 1986. Mr. Fagenson is also a director of Healthy
Planets Products, Inc., Microtel Franchise and Development Corp., and Rentway,
Inc. Mr. Fagenson has a B.S. degree in Business Administration from Syracuse
University.
HOWARD NUSBAUM, age 47, has been a director of the Company from its
inception in 1976. Mr. Nusbaum, who earned a B.A. degree from Brooklyn College,
has been a consultant to the automobile recycling industry since 1976.
JEROME STENGEL, age 58, has been a Vice President, Treasurer and Chief
Financial Officer of Genovese Drug Stores, Inc., an American Stock Exchange
company, for more than five years. Mr. Stengel is a Certified Public Accountant
with a B.B.A. degree from the City University of New York. He has been a
director of the Company since 1987.
Item 2: PROPERTIES
The Company maintains an operational facility of approximately 800 square
feet at 6818 Grover St., Omaha, Nebraska. The lease for such facility runs
through June 1996 at an annual rental of $10,000. AutoInfo Insurance Inspection
Services, which was sold on July 20, 1995, rents approximately 5,100 square feet
of space at 1600 Route 208, Fair Lawn, New Jersey. The lease runs through May
1997 at an annual rental of approximately $76,000. The Company intends to sublet
this space. The Company rents approximately 2,900 square feet of space at 1600
Route 208, Fair Lawn, New Jersey where it maintains its executive offices. The
lease runs through November 1997 at an annual rental of approximately $44,000,
subject to certain rent escalation provisions. The Company believes that its
present facilities are suitable and adequate for its reasonably foreseeable
growth.
Item 3: LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings other than ordinary
routine litigation incidental to its business.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the stockholders of the Company was held on March 30,
1995 in New York, New York, pursuant to notice. At such meeting, the
stockholders approved the sale of certain of the assets of the Company,
comprised of all of the operating assets relating to its Orion Network, Compass
Network, Checkmate Computer Systems and Insurance Parts Locator businesses, to
ADP Claims Solutions Group, Inc., a wholly-owned subsidiary of Automatic Data
Processing, Inc., for $30,350,000 in cash.
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PART II
Item 5: PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and is
quoted through the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the National Market System under the symbol AUTO.
The following table sets forth, for the periods indicated, the high and low
closing bid quotations per share for the Company's Common Stock as reported by
NASDAQ.
High Low
---- ---
Fiscal year ended May 31, 1993
First quarter ..................................... 4 3/8 3 1/4
Second quarter .................................... 3 7/8 3
Third quarter ..................................... 5 3 3/4
Fourth quarter .................................... 4 1/8 3 1/2
Fiscal year ended May 31, 1994
First quarter ..................................... 4 3 11/16
Second quarter .................................... 4 5/8 3 1/4
Third quarter ..................................... 4 5/8 3 7/8
Fourth quarter .................................... 4 1/8 3 5/8
Fiscal year ended May 31, 1995
First quarter ..................................... 4 2 3/4
Second quarter .................................... 3 1/8 2 1/2
Third quarter ..................................... 3 1/2 3 3/16
Fourth quarter .................................... 3 59/64 3 1/4
As of August 8, 1995, the closing bid price per share for the Company's
Common Stock, as reported by NASDAQ was $3.125. As of August 8, 1995, the
Company had approximately 400 stockholders of record.
Dividend Policy
The Company has never declared or paid a cash dividend on its Common
Stock. It has been the policy of the Company's Board of Directors to retain all
available funds to finance the development and growth of the Company's business.
The payment of cash dividends in the future will be dependent upon the earnings
and financial requirements of the Company and other factors deemed relevant by
the Board of Directors.
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Item 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of selected consolidated financial data
relating to the Company. This summary has been restated to present the
businesses sold as discontinued operations.
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------------------
(In Thousands, Except Per Share Data)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 4,798 $ 4,196 $ 4,414 $ 1,825 $ 192
Loss from continuing
operations before
income tax benefit (2,809) (317) (494) (590) (431)
Benefit from income
taxes (635) (98) (176) (173) (36)
Loss from continuing
operations (2,174) (219) (318) (417) (395)
Income from discontinued
operations 1,615 2,239 2,054 1,638 2,798
Gain on sale of discontinued
operations 8,885 - - - -
Net income 8,326 2,021 1,736 1,221 2,403
Net income (loss) per share:
From continuing operations (.29) (.03) (.04) (.05) (.06)
From discontinued operations .22 .30 .28 .22 .39
From gain on sale of
discontinued operations 1.19 - - - -
----- ------ ------ ------ ------
Net income per share 1.12 .27 .24 .17 .33
----- ------ ------ ------ ------
Balance Sheet Data:
Total assets $42,357 $26,387 $19,975 $18,611 $17,430
Working capital 31,304 20,531 4,195 3,199 6,868
Long-term debt 4,000 4,161 0 215 724
Retained earnings
(accumulated deficit) 13,199 4,873 2,852 1,116 (105)
Stockholders' equity 30,121 20,857 18,625 16,872 15,435
</TABLE>
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Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company's working capital was $31.3 million and liquid assets amounted
to $38.8 million as of May 31, 1995. The Company has sufficient liquid assets to
meet its short and long term capital requirements.
The total amount of debt outstanding as of May 31, 1995 was $4,161,000, of
which $161,000 is due in less than one year. This debt primarily relates to the
$4 million of 7.55% subordinated noted issued by the Company in January 1994.
The Company has adequate resources to meet these obligations.
Subsequent to the close of the year ended May 31, 1995, the Company
received cash of $3,750,000 in connection with the sale of certain operating
assets of its insurance inspection services division business. Any gain or loss
on the sale as well as the resulting income tax provision or benefit is not
expected to be material. (See Note 12 to the Consolidated Financial Statements.)
Inflation and changing prices had no material impact on revenues or the
results of operations for the year ended May 31, 1995. There are no trends or
commitments which may have an impact on the Company's liquidity.
Accounts receivable decreased $238,860 as of May 31, 1995 compared with
May 31, 1994. The decrease is attributable to the write-off of dividends and
fees receivable relating to the Company's investment in Preferred Stock (See
Note 6).
Income taxes payable increased by $7,059,396 primarily related to taxes
due on the gain on sale of assets of discontinued operations.
Results of Operations
On April 1, 1995, the Company consummated the sale of certain assets, net
of certain liabilities, constituting the operating assets of the Orion Network,
Compass Network, Checkmate Computer Systems, and Insurance Parts Locator
businesses. The Results of Operations of these businesses have been classified
as discontinued operations. The Company's continuing operations consist of its
insurance inspection services and long distance services businesses. Except as
otherwise noted, the following discussion of the results of operations is with
respect to the Company's continuing operations.
YEARS ENDED MAY 31, 1995 AND 1994
Revenues
For the years ended May 31, 1995 and 1994, the Company's revenues were
derived from the sale of insurance inspection services (79% and 58%,
respectively) and the sale of long distance telephone services (21% and 42%,
respectively). Total revenues for the year ended May 31, 1995 were $4,797,531,
an increase of 14% or $601,831 over total revenues of $4,195,700 for the prior
year. Revenues from the Company's insurance inspection services business
increased by $1,373,000 due to the acquisitions consummated in the fourth
quarter of the prior fiscal year. This increase was offset by a decline in
revenue of $723,000 in the Company's telephone reseller division due primarily
to reduced network usage levels and volume rebates from AT&T ($200,000) received
in the prior fiscal year in connection with the achievement of certain network
usage levels.
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Operating Expenses
System and support costs for the year ended May 31, 1995 increased by 68%
to $1,992,881 from $1,187,499 for the prior year. The increase was primarily
related to the increase in revenue of the Company's insurance inspection
services business.
Salaries and employee benefit expenses for the year ended May 31, 1995
increased by 10% to $2,057,496 from $1,874,052 for the prior year. The increase
was primarily related to the increase in revenue of the Company's insurance
inspection services business.
Selling and administrative expenses for the year ended May 31, 1995
decreased by 8% to $1,657,672 from $1,530,514 for the prior year. The decrease
was related to the reduction of selling expenses directly related to the decline
in revenues in the Company's Telephone Reseller Division.
Depreciation and amortization expense for the year ended May 31, 1995
increased by 66% to $413,926 from $249,759 for the prior year. The increase was
primarily due to depreciation and amortization of acquisition costs associated
with the Company's insurance inspection services business.
Other (Income) Expenses
Interest income was $568,449, an increase of $409,155 over $159,294 for
the prior year period. This was directly attributable to the investment of the
proceeds of the $4,000,000 subordinated notes issued by the Company in January
1994 and the proceeds from the sale of assets of $30,350,000 in April 1995.
Dividend income was $0 as compared with $115,258 for the prior year. This
decrease is directly related to the write-off of the Company's Preferred Stock
investment.
Interest expense was $315,908, an increase of $184,821 over $131,087 for
the prior year. This was directly related to the $4,000,000 subordinated notes
issued by the Company in January 1994 and notes payable issued in connection
with an acquisition in January 1994.
Preferred stock investment write-off was $1,804,256. As a result of the
sale of the Company's businesses providing computerization and communication
services to the automotive industry, the lack of synergistic business
opportunity and the inability to remit management fees and preferred stock
dividends as they became due, the Company has written off its preferred stock
investment in ComputerLogic, Inc. (See Note 6 to the Consolidated Financial
Statements.)
Minority interest in net loss of partnership was $67,133 compared with
$185,923 for the prior year. The Company acquired the minority interest in
September 1994.
Loss from Continuing Operations and Income Tax Benefit
Loss from continuing operations before taxes for the year ended May 31,
1995 was $2,809,026 compared to $316,736 in the prior year, an increase of
$2,492,290. This increase is attributable to the write-off of the Company's
Preferred Stock investment ($1,804,000), the reduction in the minority interest
in the net loss associated with the Company's insurance service business
($119,000), the increase in depreciation and amortization of acquisition costs
($114,000), and the impact of the decline in revenue in the Company's Telephone
Reseller Division.
The income tax benefit for the year ended May 31, 1995 was $634,623, or
22.6% of the loss before income taxes compared to $98,171, or 31.0% in the prior
year. The decrease in percentage was the result of the write-off of the
Company's Preferred Stock investment with no current tax benefit. The net loss
from continuing operations was $2,174,403 for the year ended May 31, 1995 an
increase of $1,955,838 as compared to $218,565 in the prior year.
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Income From Discontinued Operations
Income from discontinued operations for the year ended May 31, 1995 was
$1,614,936 as compared to $2,239,313 in the prior year, a decrease of $624,377.
The income for fiscal year 1995 reflects the ten month period up to the date of
sale. In addition, the decrease was caused by lower margins on the sale of
computer systems ($200,000) and the impact of reduced revenues from the sale of
automotive supplies ($60,000).
Gain on Sale of Discontinued Operations
The gain on the sale of discontinued operations for the year ended May 31,
1995 relates solely to the sale of the operating assets of the Company's Orion
Network, Compass Network, Checkmate Computer Systems and Insurance Parts Locator
businesses on April 1, 1995 to ADP Claims Solutions Group, Inc. The gross
proceeds of $30,350,000 in cash resulted in a gain of $8,885,688 after
applicable taxes of $7,658,641.
Years Ended May 31, 1994 and 1993
For the years ended May 31, 1994 and 1993, the Company's revenues were
derived from the sale of insurance inspection services (58% in both years) and
the sale of long distance telephone services (42% in both years). Total revenues
for the year ended May 31, 1994 were $4,195,700, a decrease of 5%, or $218,181
over total revenues of $4,413,881 for the prior year.
Operating Expenses
System and support costs for the year ended May 31, 1994 decreased by 20%
to $1,187,499 from $1,477,639 for the prior year. The decrease was primarily
related to the elimination of site costs for a portion of photo inspection
services.
Salaries and employee benefit expenses for the year ended May 31, 1994
increased by 13% to $1,874,052 from $1,657,201 for the prior year. The increase
was principally attributable to the increase in revenue of the Company's
insurance inspection services business.
Selling and administrative expenses for the year ended May 31, 1994
decreased by 20% to $1,530,514 from $1,914,869 for the prior year. These
decreases were directly attributable to reduced selling costs associated with
the reduced revenues in the Company's telephone reseller division.
Depreciation and amortization expense for the year ended May 31, 1994
increased by 38% to $249,759 from $181,423 for the prior year period. This was
due to depreciation and amortization of acquisition costs associated with the
insurance inspection services business.
Other (Income) Expenses
Interest expense was $131,087, an increase of $110,669 over $20,418 for
the prior year period. This was directly related to the $4,000,000 subordinated
notes issued by the Company in January 1994 and notes payable issued in
connection with an acquisition in January 1994.
Interest income was $159,294, an increase of $80,657 over $78,637 for the
prior year period. This was directly attributable to the investment of the
proceeds of the $4,000,000 subordinated notes issued by the Company in January
1994.
Minority interest in net loss of partnership was $185,923, an increase of
$36,110 over $149,813 for the prior year period. This increase was directly
related to the increase in the operations in the Company's insurance inspection
services business.
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Loss from Continuing Operations and Income Tax Benefit
Loss from continuing operations before taxes for the year ended May 31,
1994 was $316,736 compared to $493,961 in the prior year, a decrease of
$177,225. This decrease is attributable to increased profit in the Company's
telephone reseller division.
The income tax benefit for the year ended May 31, 1994 was $98,171, or
31.0% of the loss before income taxes compared to $176,200, or 35.7% in the
prior year. The decrease in percentage was the result of credits relating to
amendments to and refunds from the prior year.
Income from Discontinued Operations
Income from discontinued operations for the year ended May 31, 1994 was
$2,239,313 as compared to $2,053,959 in the prior year, an increase of $185,354.
The increase was caused by an increase in revenues in the satellite and voice
communications networks of $760,000.
Trends and Uncertainties
During the year ended May 31, 1995, increased competition had an adverse
impact on the sale of computer systems and the results of operations.
Item 8: Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this
Report beginning on page F-1.
Item 9: Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10: Directors and Executive Officers of the Registrant
Item 11: Executive Compensation
Item 12: Security Ownership of Certain Beneficial Owners and Management
Item 13: Certain Relationships and Related Transactions
Pursuant to General Instruction G, the information required by Part III
shall be incorporated by reference from the Registrant's definitive proxy
statement for the fiscal year ended May 31, 1995 which is to be filed with the
Commission.
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PART IV
Item 14: Exhibits, Financial Statements and Reports on Form 8-K
Financial Statements
The financial statements listed in the accompanying index to financial
statements on Page F-1 are filed as part of this report.
Exhibits
The Exhibits listed below are filed as part of this Report.
No. 2A Agreement and Plan of Merger between AutoInfo, Inc. (New York) and
AutoInfo, Inc. (Delaware), January 20, 1987. (2)
No. 3A Certificate of Incorporation of the Company. (3)
No. 3B Amended and restated By-Laws of the Company. (11)
No. 4A Specimen Stock Certificate. (4)
No. 4B Form of Warrant Agreement and form of Warrant issued to Starr
Securities, Inc., Martin Vegh and Robert Fagenson, May 20, 1986. (1)
No. 4C Rights Agreement, dated as of March 30, 1995, between AutoInfo, Inc.
and American Stock Transfer & Trust Company, as Rights Agent.(5)
No. 9A Settlement Agreement, dated June 22, 1995, between AutoInfo, Inc.
and Ryback Management Corporation, et al.*
No. 10A 1985 Stock Option Plan. (1)
No. 10B 1986 Stock Option Plan. (3)
No. 10C 1989 Stock Option Plan. (7)
No. 10D 1992 Stock Option Plan. (10)
No. 10E Employment Agreement between AutoInfo, Inc. and Scott Zecher dated
as of January 1, 1994, as amended by Agreement dated April 10,
1995.*
No. 10F Supplemental Employment Agreement between AutoInfo, Inc. and Scott
Zecher dated as of April 10, 1995.*
No. 10G Employment Agreement between AutoInfo, Inc. and William Wunderlich
dated as of April 10, 1995.*
No. 10H Supplemental Employment Agreement between AutoInfo, Inc. and William
Wunderlich dated as of April 10, 1995.*
No. 10I Form of AutoInfo, Inc. Employee Protection Trust Agreement dated
August 17, 1995.*
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No. 10J Form of Restricted Stock Grant Agreement between AutoInfo, Inc. and
certain executive officers, directors and consultants. (4)
No. 10K Series A Convertible Preferred Stock Purchase Agreement dated as of
December 19, 1991 between ComputerLogic, Inc., Richard A. Palmer and
AutoInfo, Inc. (8)
No. 10L Series B Preferred Stock Purchase Option Agreement dated as of
December 19, 1991 between ComputerLogic, Inc., Richard A. Palmer and
AutoInfo, Inc. (8)
No. 10M Outstanding Stock Purchase Option Agreement dated as of December 19,
1991 between ComputerLogic, Inc., Richard Palmer and AutoInfo, Inc.
(8)
No. 10N Note Agreement dated January 10, 1994 between AutoInfo, Inc. and
certain investors with respect to issuance of $4 million of 7.55%
Subordinated Notes due January 9, 2000 and 533,333 Common Stock
Purchase Warrants.(6)
No. 10O Asset Purchase Agreement dated January 31, 1995 between ADP Claims
Solutions Group, Inc. and AutoInfo, Inc.(9)
No. 10P Promissory Note and Security and Pledge Agreement dated April 28,
1995 between AutoInfo, Inc. and Scott Zecher.*
No. 11A Calculation of earnings per share.*
No. 23A Consent of Arthur Andersen LLP, independent public accountants.*
--------------------------------
*Filed as an Exhibit hereto.
(1) This Exhibit was filed as an Exhibit to the Company's Registration
Statement on Form S-18 (File No. 33-3526-NY) and is incorporated herein
by reference.
(2) This Exhibit was filed as an Exhibit to the Company's Current Report on
Form 8-K dated January 6, 1987 and is incorporated herein by reference.
(3) These Exhibits were filed as Exhibits to the Company's definitive proxy
statement dated October 20, 1986 and are incorporated herein by
reference.
(4) These Exhibits were filed as Exhibits to the Company's Registration
Statement on Form S-1 (File No. 33-15465) and are incorporated herein by
reference.
(5) This Exhibit was filed as an Exhibit to the Company's Registration
Statement on Form 8-A filed April 13, 1995, and is incorporated herein by
reference.
(6) This Exhibit was filed as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended May 31, 1994 and is incorporated herein by
reference.
(7) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated September 25, 1989 and is incorporated herein by
reference.
(8) These Exhibits were filed as Exhibits to the Company's Current Report on
Form 8-K dated December 19, 1991 and are incorporated herein by
reference.
(9) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated March 1, 1995 and is incorporated herein by reference.
(10) This Exhibit was filed as an Exhibit to the Company's definitive proxy
statement dated October 2, 1992 and is incorporated herein by reference.
(11) This Exhibit was filed as an Exhibit to the Company's Current Report on
Form 8-K dated March 30, 1995 and is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d), the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
August 17, 1994 on its behalf by the undersigned, thereunto duly authorized.
AUTOINFO, INC.
By:_________________________________
Scott Zecher, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated.
________________________ Director and Chairman August , 1995
Andrew Gaspar
________________________ Director, President and August , 1995
Scott Zecher Chief Operating Officer
________________________ Chief Financial Officer, August , 1995
William Wunderlich Secretary and Treasurer
________________________ Director August , 1995
Jason Bacher
________________________ Director August , 1995
Robert Fagenson
________________________ Director August , 1995
Howard Nusbaum
________________________ Director August , 1995
Jerome Stengel
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AUTOINFO, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants......................... F-2
Consolidated Balance Sheets - as of May 31, 1995 and 1994........ F-3
Consolidated Statements of Operations for the Years
Ended May 31, 1995, 1994 and 1993................................ F-4
Consolidated Statements of Stockholders' Equity for
the Years Ended May 31, 1995, 1994 and 1993...................... F-5
Consolidated Statements of Cash Flows for the Years
Ended May 31, 1995, 1994 and 1994................................ F-6
Notes to Consolidated Financial Statements....................... F-7
Information required by schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial
statements or notes thereto.
F-1
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AutoInfo, Inc.:
We have audited the accompanying consolidated balance sheets of AutoInfo, Inc.
(a Delaware corporation) and subsidiaries as of May 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended May 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AutoInfo, Inc. and subsidiaries
as of May 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended May 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
July 11, 1995
F-2
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 1995 AND 1994
ASSETS 1995 1994
---- ----
Current assets:
Cash $ 521,868 $ 445,484
Short-term investments 38,314,489 7,063,691
Accounts receivable, net of allowance for
doubtful accounts (May 31, 1995 - $63,772;
May 31, 1994 - $113,504) 583,975 822,835
Net book value of assets of discontinued
operations (Note 3) - 13,453,483
Other current assets 120,074 114,502
----------- -----------
Total current assets 39,540,406 21,899,995
Property, equipment and furniture (at cost), net
of accumulated depreciation (May 31, 1995 -
$1,263,765; May 31, 1994 - $1,006,152) 692,784 595,290
Goodwill and other intangibles,
net of accumulated amortization (May 31, 1995 -
$286,490; May 31, 1994 - $130,179) 1,766,503 1,936,062
Investment, at cost - 1,637,199
Other assets 357,406 318,878
----------- -----------
$42,357,099 $26,387,424
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 160,869 $ 623,096
Accounts payable 400,544 291,312
Income taxes payable 7,131,543 72,147
Accrued liabilities 543,357 382,902
----------- -----------
Total current liabilities 8,236,313 1,369,457
----------- -----------
Long-term debt 4,000,000 4,160,869
----------- -----------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common Stock - authorized 20,000,000 shares $.01
par value; issued and outstanding - 7,756,252
at May 31, 1995 and 7,253,286 at May 31, 1994 77,563 72,533
Additional paid-in capital 17,725,267 16,344,194
Officer note receivable (Note 10) (466,797) -
Deferred compensation under stock bonus plan (414,686) (432,847)
Retained earnings 13,199,439 4,873,218
----------- -----------
Total stockholders' equity 30,120,786 20,857,098
----------- -----------
$42,357,099 $26,387,424
=========== ===========
See Accompanying Notes To Consolidated Financial Statements
F-3
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
REVENUES $4,797,531 $4,195,700 $4,413,881
---------- ---------- ----------
Operating expenses:
System and support costs 1,992,881 1,187,499 1,477,639
Salaries and employee benefits 2,057,496 1,874,052 1,657,201
Selling, general and administrative 1,657,672 1,530,514 1,914,869
Depreciation and amortization 413,926 249,759 181,423
---------- ---------- ----------
Total operating expenses 6,121,975 4,841,824 5,231,132
---------- ---------- ----------
Loss from operations (1,324,444) (646,124) (817,251)
---------- ---------- ----------
Other (income) expenses:
Interest income (568,449) (159,294) (78,637)
Dividend income - (115,258) (115,258)
Interest expense 315,908 131,087 20,418
Preferred stock investment write-off 1,804,256 - -
Minority interest in net loss of partnership (67,133) (185,923) (149,813)
---------- ---------- ----------
Total other (income) expenses 1,484,582 (329,388) (323,290)
---------- ---------- ----------
Loss from continuing operations
before income tax benefit (2,809,026) (316,736) (493,961)
Income tax benefit (634,623) (98,171) (176,200)
---------- ---------- ----------
Loss from continuing operations (2,174,403) (218,565) (317,761)
Income from discontinued operations,
net of income taxes of $804,878,
$1,005,814 and $1,138,931, respectively
(Note 3) 1,614,936 2,239,313 2,053,959
Gain on sale of discontinued operations, net
of income taxes of $7,658,641 (Note 3) 8,885,688 - -
---------- ---------- ----------
Net income $8,326,221 $2,020,748 $1,736,198
========== ========== ==========
Per share data:
Loss from continuing operations ($.29) ($.03) ($.04)
Income from discontinued operations .22 .30 .28
Gain on sale of discontinued operations 1.19 - -
---------- ---------- ----------
Net income per share $1.12 $.27 $.24
========== ========== ==========
Weighted average number of common and
common equivalent shares 7,410,548 7,416,721 7,342,044
--------- --------- ---------
See Accompanying Notes To Consolidated Financial Statements
F-4
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Shares of Deferred
Common Additional Officer Compensation
Stock Common Paid-In Note Under Stock Retained
Outstanding Stock Capital Receivable Bonus Plan Earnings
----------- ----- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 1, 1992 7,119,336 $71,193 $16,118,428 $ - $(434,201) $1,116,272
Amortization of
Deferred Compensation - - - - 17,083 -
Net Income - - - - - 1,736,198
--------- ------- ----------- --------- --------- -----------
Balance, May 31, 1993 7,119,336 71,193 16,118,428 - (417,118) 2,852,470
Common Stock Pursuant
to Stock Bonus Plan 15,000 150 32,662 - (32,812) -
Exercise of Stock
Option 118,950 1,190 193,104 - - -
Amortization of Deferred
Compensation - - - 17,083 -
Net Income - - - - - 2,020,748
--------- ------- ----------- --------- --------- -----------
Balance, May 31, 1994 7,253,286 72,533 16,344,194 - (432,847) 4,873,218
Exercise of Stock
Options 502,966 5,030 1,234,365 - - -
Amortization of Deferred
Compensation - - - - 18,161 -
Acceleration of Vesting
Rights of Employee
Stock Options - - 146,708 - - -
Loan to Officer for
the Exercise of Stock
Options (466,797)
Net Income - - - - - 8,326,221
--------- ------- ----------- --------- --------- -----------
Balance, May 31, 1995 7,756,252 $77,563 $17,725,267 $(466,797) $(414,686) $13,199,439
========= ======= =========== ========= ========= ===========
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
F-5
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1995, 1994 AND 1994
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 8,326,221 $2,020,748 $ 1,736,198
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization expenses 413,926 249,759 181,423
Amortization of deferred compensation 18,161 17,083 17,083
Gain on sale of discontinued operations (16,544,329) - -
Preferred stock investment write-off 1,637,199 - -
Changes in assets and liabilities:
Accounts receivable, net 238,860 (253,901) (95,223)
Other current assets (5,572) 135,957 (4,454)
Other assets (38,528) (255,018) 17,911
Income taxes payable 7,059,396 5,468 (85,316)
Accounts payable and accrued liabilities 269,687 287,006 27,902
--------- --------- ----------
Net cash provided by continuing operations 1,375,021 2,207,102 1,795,524
--------- --------- ----------
Net cash provided by discontinued operations
and non-cash charges (205,480) (965,257) (403,060)
--------- --------- ----------
Cash Flows from Investing Activities:
Proceeds from the sale of discontinued
operations 30,350,000 - -
Officer note receivable (466,797) - -
Acquisitions - (948,639) -
Capital expenditures (341,861) (173,635) (81,595)
Purchases of short-term investments (31,250,798) (3,743,031) (810,012)
---------- --------- ----------
Net cash (used for) investing activities (1,709,456) (4,865,305) (891,607)
--------- --------- ----------
Cash Flows from Financing Activities:
Issuance of notes - 4,000,000 -
Reduction of borrowings (623,096) (277,406) (536,020)
Exercise of stock options 1,239,395 194,294 -
--------- --------- ----------
Net cash provided by (used for)
financing activities 616,299 3,916,888 (536,020)
--------- --------- ----------
Net increase (decrease) in cash 76,384 293,428 (35,163)
Cash at beginning of year 445,484 152,056 187,219
--------- --------- ----------
Cash at end of year $ 521,868 $ 445,484 $ 152,056
========= ========= ==========
</TABLE>
--------------------------
Supplemental Disclosures of Non-cash Investing and Financing Activities: In
connection with acquisitions during the year ended May 31, 1994, the Company
entered into Notes payable of $844,759.
See Accompanying Notes To Consolidated Financial Statements
F-6
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Note 1 - Business and summary of significant accounting policies
Business
During fiscal year 1995 and subsequent to its fiscal year end, AutoInfo, Inc.
and subsidiaries (the "Company") sold substantially all of its operating assets.
As a result, the Company's sole remaining operating business provides long
distance telephone communications services. The Company is actively seeking out
and evaluating acquisition candidates and expansion opportunities.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue from insurance inspection services and long
distance telephone communications services as services are rendered.
Short-term Investments
Short-term investments include common stock and bond funds, money market
instruments and municipal bonds. Investments are carried at cost which
approximates market value. (See Note 4).
Property, Equipment and Furniture
Depreciation of equipment and furniture is provided on the straight-line method
over the estimated useful lives of the related assets which range from three to
five years.
Goodwill and Other Intangibles
The excess of cost over the fair value of net assets acquired is allocated to
goodwill and other intangibles and is being amortized using the straight-line
method over periods of up to twenty years. The Company evaluates the carrying
value of goodwill, and the remaining amortization periods based upon the
projected discounted cash flows of the operations of the acquired entities.
Based upon these evaluations to date, no impairment of goodwill exists at May
31, 1995.
Net Income Per Share
Net income per share of common stock is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. The net income per share and the weighted average number of common and
common equivalent shares represent primary earnings per share data. Fully
diluted earnings per share is not presented since its effect is not significant.
F-7
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Income Taxes
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" which
requires the use of the liability method of accounting for income taxes. Under
this method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted Statutory Tax Rates to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities. Deferred income taxes have not been provided for as the
effect of temporary differences between the financial reporting basis and the
tax basis of the Company's assets and liabilities are immaterial.
Note 2 - Business Acquisitions
In January and April 1994, the Company acquired the automotive photo inspection
business of D.B. Kelley Associates, Inc., and Equifax Services, Inc.,
respectively. The aggregate purchase price consisted of approximately $1,500,000
in cash and notes. The results of operations of these businesses have been
consolidated with the Company since January 31, 1994 and April 16, 1994,
respectively.
The acquisitions have been accounted for under the purchase method of accounting
and, accordingly, the purchase price was allocated to assets acquired based upon
their estimated fair market value at the date of acquisition. The excess of the
purchase price over the fair market value of net assets acquired has been
recorded as goodwill.
Note 3 - Discontinued Operations
On April 1, 1995, the Company sold the assets relating to its Orion Network,
Compass Network, Checkmate Computer Systems, and Insurance Parts Locator
businesses to ADP Claims Solutions Group, Inc., for $30,350,000 in cash. The
gain on the sale was $8,885,688 after applicable taxes of $7,658,641. Prior
years have been restated to present the businesses sold as discontinued
operations.
Summarized results of operations and financial position data of the discontinued
operations were as follows:
Years Ended May 31,
--------------------------------------
1995 1994 1993
---- ---- ----
Results of Operations:
Revenues $13,723,654 $16,371,697 $14,882,694
Income from operations 2,414,895 3,243,901 3,213,162
Income before income taxes 2,419,814 3,245,127 3,192,890
Income taxes 804,878 1,005,814 1,138,931
Net income from discontinued
operations 1,614,936 2,239,313 2,053,959
========== ========== ==========
As of May 31, 1994
------------------
Balance Sheet:
Current Assets $ 1,986,675
Net property, equipment and furniture 3,196,789
Net goodwill and other intangibles 8,793,627
Net license costs 273,492
Other Assets 100,000
Current liabilities (897,100)
----------
Net book value of assets of discontinued
operations $13,453,483
==========
F-8
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Note 4 - Short-Term Investments
Effective June 1, 1994, the Company, as required, adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". This
pronouncement establishes the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities. This statement supersedes Statement No. 12 "Accounting for
Certain Marketable Securities". The effect of the adoption of this pronouncement
was not material.
In connection with the adoption of SFAS No. 115, debt and equity securities used
as part of the Company's investment management that may be sold in response to
cash needs, changes in interest rates, and other factors have been classified as
securities available for sale. Such securities are reported at cost which
approximates fair value and have maturities of less than one year and included
common stock and bond funds ($3,520,041 as of May 31, 1995 and $3,577,584 as of
May 31, 1994), money market instruments ($3,159,808 as of May 31, 1995 and
$1,786,107 as of May 31, 1994) and municipal bonds ($31,634,640 as of May 31,
1995 and $1,700.000 as of May 31, 1994). As of May 31, 1995 unrealized gains and
losses were not material. Unrealized gains and losses, if material, would be
excluded from earnings and reported as a separate component of stockholders'
equity (on an after tax basis). During the years ended May 31, 1995 and 1994,
gains or losses arising from the disposition of marketable securities were not
material. Gains and losses on disposition of securities are recognized on the
specific identification method in the period in which they occur.
Note 5 - Accrued Liabilities
The components of accrued liabilities at May 31 were as follows:
1995 1994
---- ----
Payroll and related costs $ 76,856 $116,526
Professional Fees 196,431 29,500
Interest 126,243 118,693
Other 143,827 118,183
-------- --------
$543,357 $382,902
======== ========
Note 6 - Investment
In December 1991, the Company acquired a Preferred Stock Investment (3,293
shares of $500 par value, 7% cumulative convertible preferred stock) in
ComputerLogic, Inc., a Georgia Corporation, which offers computer based products
to the automobile parts and repair industries. The Preferred Stock elects not
less than 40% of the ComputerLogic board of directors. The Company's Preferred
Stock Investment is convertible into 38% of the outstanding capital stock of
ComputerLogic, Inc. The Company also has the option to increase its investment
for additional consideration as described in the purchase agreement. The
purchase price consisted of cash of $1,250,000 and 101,667 shares of the
Company's Common Stock. The investment was being carried at the lower of cost or
net realizable value.
F-9
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
As a result of the sale of the Company's businesses providing computerization
and communications services to the automotive industry and the resulting lack of
synergistic business opportunities, the Company has no intention of exercising
its option to increase its investment. Additionally, ComputerLogic has been
unable to remit to the Company any management fees and certain preferred stock
dividends as they become due. The Company has therefore written off its
preferred stock investments totalling $1,804,256 which included unpaid
management fees and unpaid preferred stock dividends of $155,460 as of May 31,
1995.
Note 7 - Long-term Debt
Long-term debt consists of the following:
MAY 31,
----------------
1995 1994
---- ----
Subordinated notes due January 2000 payable in
equal annual installments in January 1998,
1999 and 2000 with interest at 7.55% paid
semi-annually $4,000,000 $4,000,000
Note payable to former owner of acquired
business, due in January 1996 with interest
at 4% payable in equal monthly installments 160,869 357,710
Debt incurred in connection with acquisition,
payable in equal installments in October 1994
and April 1995 - 426,255
--------- ---------
4,160,869 4,783,965
Less current portion of long-term debt 160,869 623,096
--------- ---------
Long-term debt $4,000,000 $4,160,869
--------- ---------
The Company paid interest of approximately $308,000, $14,000 and $48,000
during fiscal years 1995, 1994 and 1993, respectively.
The Company has an available unused line of credit in the amount of
$2,000,000 which expires on September 30, 1995.
F-10
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Note 8 - Income Taxes
For the years ended May 31, 1995, 1994 and 1993, the provision (benefit) for
income taxes consists of the following:
1995 1994 1993
---- ---- ----
Federal $ (611,690) $ (85,837) $ (161,428)
State (22,933) (12,334) (14,772)
--------- --------- ---------
Income tax benefit on loss
from continuing operations $ (634,623) $ (98,171) $ (176,200)
--------- --------- ---------
Income taxes on income from
discontinued operations:
Federal $ 884,452 $ 879,445 $1,043,434
State (79,574) 126,369 95,497
--------- --------- ---------
$ 804,878 $1,005,814 $1,138,931
--------- --------- ---------
Income taxes on gain on sale
of discontinued operations:
Federal $7,148,753 $ - $ -
State 509,888 - -
--------- --------- ---------
$7,658,641 $ - $ -
========= ========= =========
The following table reconciles the Company's effective income tax benefit on
loss from continuing operations to the Federal Statutory Rate for the years
ended May 31, 1995, 1994 and 1993:
1995 1994 1993
---- ---- ----
Federal Statutory Rate (34.0)% (34.0)% (34.0)%
Effect of:
State and local taxes, net
of federal benefit (.5) (3.9) (3.9)
Benefit from tax exempt
income (6.1) - -
Preferred stock investment
write-off 20.3 - -
Credits resulting from
amendments to and refunds
from prior year returns - 5.7 -
Other, net (2.3) 1.2 2.2
----- ----- -----
(22.6)% (31.0)% (35.7)%
===== ===== =====
The Company paid income taxes of approximately $884,000, $1,119,000 and
$1,178,000 during fiscal years 1995, 1994 and 1993, respectively.
F-11
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Note 9 - Commitments and Contingencies
Leases
The Company is obligated under noncancellable operating leases for premises and
equipment expiring at various dates through 1999. Future minimum lease payments
are $170,000, $148,000, $35,000 and $500 for each of the four year periods ended
May 31, 1999.
Lease expense for the years ended May 31, 1995, 1994 and 1993 was approximately
$384,000, $434,000 and $393,000, respectively.
401(k) Plan
The Company is obligated under its 401(k) Plan to match fifty percent of
employee contributions up to a maximum of three percent of eligible
compensation.
401(k) Plan expense for the years ended May 31, 1995, 1994 and 1993 was
approximately $72,000, $73,000 and $68,000, respectively.
Other Agreements
The Company has entered into supplemental employment agreements (the
"Supplemental Employment Agreements") with Messrs. Zecher and Wunderlich (the
"Covered Executives"), which provide that if there is a Change in Control of the
Company (as defined therein) during the Protected Period (described below), the
terms of the Supplemental Employment Agreements will supersede the Covered
Executives' existing employment agreements and will govern the terms of the
Covered Executives' employment following the Change in Control for a three-year
term, in the case of Mr. Zecher, and a two-year term, in the case of Mr.
Wunderlich (the "Employment Term").
The Supplemental Employment Agreements provide that during the Employment Term,
the Covered Executives will remain employed in their capacities with the Company
as of the Change in Control and will continue to receive an annual salary (the
"Base Salary") and benefits at least equal to that which they received prior to
the Change in Control and an annual bonus at least equal to the Covered
Executive's average annual bonus during the three years prior to the Change in
Control. The Supplemental Employment Agreements provide that if, during the
Employment Term, the Covered Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive either for Good Reason or
during the 60-day Window Period commencing on the anniversary of the Change in
Control (as each of the foregoing terms are defined in the applicable
Supplemental Employment Agreement), the Covered Executive would receive a
severance payment equal to the sum of his Base Salary and the higher of his
annual bonus for the then most recent year or his average annual bonus during
the three years preceding the Change in Control (the "Highest Annual Bonus")
multiplied by two, in the case of Mr. Zecher, and one and one-half, in the case
of Mr. Wunderlich. In addition, the restrictions on any stock-related incentive
awards held by the Covered Executive would lapse and he would be entitled to
continued coverage under the Company's life, health and disability benefits for
two years following termination of his employment (three years in the case of
Mr. Zecher) or until he receives similar benefits from a new employer. If Mr.
Zecher's employment is terminated (as described above) prior to April 10, 1996,
F-12
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
he would receive severance equal to three (rather than two) times his Base
Salary and Highest Annual Bonus. If Mr. Wunderlich's employment is terminated
(as described above) prior to October 10, 1995, he would receive severance equal
to two (rather than one and one-half) times his Base Salary and Highest Annual
Bonus. Mr. Zecher's Supplemental Employment Agreement also provides that if he
is subject to excise taxes under Section 4999 of the Internal Revenue Code on
any payments or benefits triggered by a Change in Control, he will be entitled
to receive an additional amount such that after the payment of all applicable
taxes, he will retain an amount equal to that which he would have retained
absent the excise taxes. In connection with the Supplemental Employment
Agreements, the Company also approved the creation of an Employment Protection
Trust Agreement which is a form of a grantor trust under which the assets of the
trust remain subject to the satisfaction of the general claims of the Company's
creditors, to provide for the payment of all benefits payable under the
Supplemental Employment Agreements.
Note 10 - Stockholders' Equity
Stock Bonus Plan
In January 1994, the Company issued 15,000 shares of Common Stock pursuant to a
restricted stock bonus plan to a Director. In June 1987 and November 1987, the
Company issued 410,000 shares of Common Stock pursuant to a restricted stock
bonus plan to key executives and consultants.
These shares will vest ratably every two years over a period of 30 years. The
unvested portion is subject, upon the occurrence of certain events, to either
forfeiture or accelerated vesting. Such shares are recorded at their estimated
fair market value as determined by the Board of Directors and are charged as
compensation expense ratably over the vesting period.
Warrants
In connection with the $4,000,000 7.55% subordinated long-term notes issued in
January 1994, the Company issued six year warrants to purchase 533,333 shares of
Common Stock at a per share price of $4.00. The Company has reserved 533,333
shares of Common Stock for issuance upon the exercise of these warrants. No such
warrants have been exercised to date.
In connection with a May 1986 public offering of Common Stock, the Company
issued warrants to the underwriter for the purchase of 96,000 shares of its
Common Stock at a per share price of $4.80. During fiscal 1992, 66,750 warrants
to purchase shares of the Company's Common Stock expired. The remaining 29,250
warrants are exercisable through May 1996. The Company has reserved 29,250
shares of Common Stock for issuance upon the exercise of these warrants.
Stock Option Plans
The Company has four stock option plans under which officers and other key
employees may acquire shares of Common Stock. Options have been granted at not
less than fair market value on the date of grant and expire ten years from that
date. Options are exercisable immediately after the granting date except where
exercise is otherwise limited at the time of granting.
F-13
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
Option information for the three year period ended May 31, 1995 is as follows:
Number of Option Price
Shares Per Share
--------- ------------
Outstanding at June 1, 1992 723,749 $1.625 to $4.125
Granted during the year 332,000 $3.00 to $3.50
Forfeited during the year (135,000) $3.50 to $4.125
------- --------------
Outstanding at May 31, 1993 920,749 $1.625 to $4.125
Granted during the year 165,000 $3.75 to $4.00
Exercised during the year (118,950) $1.625 to $1.75
Forfeited during the year (269,000) $3.00 to $4.00
------- -------------
Outstanding at May 31, 1994 697,799 $1.625 to $4.125
Granted during the year 270,000 $2.75 to $4.125
Exercised during the year (502,966) $1.625 to $3.375
Forfeited during the year ( 30,000) $3.00 to $3.75
------- -------------
Outstanding at May 31, 1995 434,833 $1.75 to $4.125
------- --------------
Options exercisable at May 31, 1995, 1994 and 1993 were 177,055, 380,799 and
477,082 shares, respectively. At May 31, 1995, 434,833 shares of the Company's
authorized Common Stock were reserved to cover future exercise of options, and
280,751 shares were available for future grants.
In connection with the sale of discontinued operations, the Company accelerated
the vesting provisions relating to outstanding options held by employees of the
businesses sold. As of May 31, 1995, the vesting of options to purchase 175,333
shares were accelerated resulting in a charge against the gain on sale of
discontinued operations of $146,708.
On April 10, 1995, an officer of the Company exercised options to acquire
216,799 shares. In connection with this exercise, the Company received a full
recourse, non-interest bearing note due in May 1996, secured by a pledge of the
acquired shares in the amount of $466,797.
Note 11 - Acquisition of Minority Interest
In September 1994, the Company acquired the minority interest in its insurance
inspection services business pursuant to a formularized valuation which resulted
in no additional consideration being due. Accordingly, there is no provision for
minority interest in net loss of partnership for any period subsequent to August
31, 1994.
Note 12 - Subsequent Event
In July 1995, the Company consummated the sale of certain assets net of certain
liabilities constituting the operating assets of its Insurance Inspection
Division for $3,750,000 in cash.
Revenues pertaining to this business segment included in the Consolidated
Statement of Operations were $3,767,103, $2,394,203 and $2,510,762 for the
fiscal years ended May 31, 1995, 1994 and 1993, respectively.
F-14
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995, 1994 AND 1993
The gain or loss on the sale of this segment, as well as the results of
operations for the period from June 1, 1995 through the date of sale, are
subject to the finalization of certain events relating to the transaction. The
Company does not expect any resulting gain or loss or the results of operations
for the period from June 1, 1995 through the date of sale to be material.
F-15
Exhibit 9.A
EXECUTION COPY
SETTLEMENT AGREEMENT dated as of June 22, 1995 between AutoInfo, Inc. (the
"Company"), Ryback Management Corporation ("Ryback"), Eric C. Ryback ("ER") and
Lawrence Callahan ("LC").
WHEREAS, on June 14, 1995, the Company commenced a lawsuit in United States
District Court for the District of Delaware against, among others, Ryback, ER
and LC (collectively, the "Ryback Defendants") alleging that the Ryback
Defendants violated Sections 13(d) and 13(g) of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"; the "Litigation") and the Company and
Ryback desire to settle the Litigation;
WHEREAS in consideration for agreeing to settle the Litigation, the Company
and Ryback have agreed to enter into and abide by the terms of this Agreement;
WHEREAS the Ryback Defendants deny all of the Company's allegations of
wrongful and/or unlawful conduct by the Ryback Defendants, including, but not
limited to, the allegations that the Ryback Defendants violated Sections 13(d)
and 13(g) of the Exchange Act, but wish to avoid the expense and distraction of
litigation;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereby agree as follows:
ARTICLE I
Representations
SECTION 1.1. Representations of the Company. The Company hereby represents
and warrants to Ryback that (i) the Company has the full legal right, power and
authority to enter into and perform this Agreement, (ii) the execution and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated herein have been duly authorized by the Company, and
(iii) this Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
SECTION 1.2. Representations of Ryback. Ryback hereby represents and
warrants to the Company that (i) Ryback has the full legal right, power and
authority to enter into and perform this Agreement, (ii) the execution and
delivery of this Agreement by Ryback and the consummation by Ryback of the
transactions contemplated herein have been duly authorized by Ryback, (iii) this
Agreement constitutes the legal, valid and binding obligation of Ryback
enforceable against Ryback in accordance with its terms, (iv) on the date
hereof, Ryback is the beneficial owner of 1,142,850 shares of the Company's
outstanding common stock (713,000 of which are owned by the Lindner Fund and
429,850 of which are owned by the Lindner Bulwark Fund) and neither Ryback nor
any affiliate or associate of Ryback beneficially owns or will own any other
securities of the Company or rights or interests in any such securities, and (v)
<PAGE>
Ryback does not have any agreements, arrangements or understandings with any
person regarding any possible stockholder proposal or proxy solicitation with
respect to the Company or with regard to the voting of any securities of the
Company.
SECTION 1.3. Representations of ER and LC. Each of ER and LC hereby
represents and warrants with respect to himself, individually and not jointly,
that on the date hereof, except with respect to the securities specified in
Section 1.2(iv) above, (i) neither ER nor LC beneficially own any outstanding
common stock of the Company or any other securities of the Company or any rights
or interest in any such securities and (ii) neither ER nor LC is a party to any
agreement, arrangement or understanding with any person regarding any possible
stockholder proposal or proxy solicitation with respect to the Company or with
regard to the voting of any securities of the Company.
ARTICLE II
Standstill, Transfers and Voting
SECTION 2.1. Standstill Provisions. (a) During the term of this Agreement,
unless specifically requested in writing in advance by the Board of Directors of
the Company (the "Board"), Ryback will not, and will cause its affiliates and
associates not to, alone or in concert with others (and neither Ryback nor any
affiliate or associate of Ryback will advise, assist or encourage others to),
directly or indirectly:
(i) by purchase or otherwise, acquire, or agree to acquire, ownership
(including, but not limited to, beneficial ownership) of any shares of Common
Stock of the Company, including securities convertible into Common Stock, or
direct or indirect rights or options to acquire such ownership;
(ii) make any public announcement with respect to, or submit any
proposal for, the acquisition of beneficial ownership of Common Stock (or
securities convertible into Common Stock or direct or indirect rights or options
to acquire such beneficial ownership), or for or with respect to any
extraordinary transaction or merger, consolidation, sale of substantial assets
or business combination involving the Company or any of its affiliates,
(iii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act) or become a "participant" in any "election contest" (as such terms
are defined or used in Rule 14a-11 under the Exchange Act) to vote, or seek to
advise or influence any person or entity with respect to the voting of, any
voting securities of the Company or any of its affiliates;
2
<PAGE>
(iv) form, join or in any way participate in a "group" (as such term
is used in Section 13d(3) of the Exchange Act) to take any action otherwise
prohibited by the terms of this Agreement;
(v) initiate or propose any stockholder proposals for submission to a
vote of stockholders, whether by action at a stockholder meeting or by written
consent, with respect to the Company or any of its affiliates or propose any
person for election to the Board of Directors or any of its affiliates or
propose the removal of any member of the Board of Directors or any of its
affiliates;
(vi) otherwise seek to control the management or policies of the
Company or any of its affiliates, including, without limitation, taking any
action to seek to obtain representation on the Board of Directors or any of its
affiliates;
(vii) institute, prosecute or pursue against the Company (or any of
its officers, directors, representatives, trustees, employees, attorneys,
advisors, agents, affiliates or associates) (a) any claim with respect to any
action hereafter duly approved the Company's Board of Directors or (b) any claim
on behalf of a class of the Company's security holders;
(viii) disclose to any third party, or make any filing under the
Exchange Act (including, without limitation, under Section 13(d) thereof)
disclosing, any intention, plan or arrangement inconsistent with the foregoing;
(ix) publicly oppose any duly authorized Board of Director action or
recommendation;
(x) initiate any communication with any customer or supplier of the
Company or any other person which does or is contemplating doing business or
entering into a transaction with the Company with a view interfering or
otherwise adversely affecting the relationship between the Company and or the
applicable customer, supplier or other person;
(xi) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing; or
(xii) request the Company (or its directors, officers, employees or
agents) to amend or waive any provision of this Agreement (including without
limitation this Section 2.1(a)) or otherwise seek any modification to or waiver
of any of the agreements or obligations of Ryback, or any of its affiliates or
associates, under this Agreement.
3
<PAGE>
SECTION 2.2. Transfers. (a) During the term of this Agreement, Ryback will
not and will cause its associates and affiliates not to, transfer, assign,
pledge, sell, hypothecate or otherwise dispose (a "disposition") of any capital
stock of the Company owned by it, except if all of the following conditions are
satisfied with respect to such disposition:
(i) the applicable disposition together with all other dispositions
for the account of Ryback and its associates and affiliates during the one month
period immediately preceding the date of such disposition does not exceed one
percent of the common stock outstanding of the Company, as shown on the most
recent applicable report or statement published by the Company;
(ii) such disposition shall be by means of a "broker's transaction"
within the meaning of rule 144(g) under the Securities Act of 1933, as amended;
and
(iii) with respect to any such disposition, the seller shall instruct
its broker that such broker shall make due inquiry and shall not make the
disposition to any person (including any agent of such person) if Ryback and/or
its affiliates or associates or such broker knows, or has reason to believe,
that such person, together with such persons, affiliates and associates, owns,
collectively (with its associates and affiliates), or, will own, collectively
(with its associates and affiliates), upon consummation of the disposition, 3%
or more of the outstanding common stock of the Company as shown on the most
recent applicable report or statement published by the Company.
Notwithstanding the foregoing, any disposition by the Lindner Bulwark Fund after
the second anniversary of this Agreement shall not require satisfaction of the
condition specified in clause (i) of this Section 2.2(a).
(b) Any transfer of shares of the Common Stock in violation of this Section
2.2 may be suspended on the books of the Company.
SECTION 2.3 Voting. With respect to each matter submitted to the
stockholders of the Company for a vote, during the term of this Agreement,
whether at a meeting or pursuant to any consent of shareholders, including,
without limitation, any matter submitted to the stockholders of the Company
relating to the election or removal of directors, Ryback agrees to, and agrees
to cause its affiliates and associates to, vote (whether by proxy or otherwise)
all shares of Common Stock owned by Ryback and/or any of its affiliates and
associates in accordance with the applicable duly authorized recommendation of
the Board of Directors; provided, however, that, with respect to any
recommendation relating to the election or removal of directors, if, assuming
such recommendation were adopted by the stockholders of the Company, less than a
majority of all directors constituting the Board would be "outside directors",
as defined in Section 4.9, Ryback and its associates and affiliates shall vote
4
<PAGE>
their shares in the same proportion as the votes of all other outstanding voting
securities of the Company voting on such applicable matter.
ARTICLE III
Dismissal of Litigation and Releases
SECTION 3.1. Dismissal of Lititgation. AutoInfo, Inc. shall, as soon as
practicable, dismiss without prejudice, the Litigation against the Ryback
Defendants and shall withdraw all of its outstanding discovery requests to the
Ryback Defendants including the First Request for Production of Documents dated
June 15, 1995, the First Set of Interrogatories dated June 15, 1995 and the
First Notice of Depositions dated June 19, 1995.
SECTION 3.2. Release of Ryback Defendants. Subject to Section 3.4, the
Company hereby forever releases, discharges and acquits the Ryback Defendants
and each of their past, present or future parent and subsidiary corporations,
affiliates, stockholders, agents, successors, assigns, directors, employees,
representatives, attorneys, spouses, marital communities, next of kin, heirs,
executors and administrators from and against any and all claims, demands,
judgments, actions and causes of actions, suits, debts, dues, sums of money,
accounts, reckoning, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
extents, executions, claims and demands whatsoever in law, admiralty or equity,
which AutoInfo, Inc. and/or any of its parent companies, subsidiaries, heirs,
executors, administrators, successors, agents, affiliates and assigns ever had,
now have or hereafter can, shall or may have against the Ryback Defendants, for,
upon, or by reason of any matter, cause or thing whatsoever from the beginning
of the world to the date of this Agreement.
SECTION 3.3. Release of the Company. The Ryback Defendants, individually
and jointly, hereby forever release, discharge and acquit AutoInfo, Inc. and its
past, present and future parent and subsidiary corporations, affiliates, agents,
successors, assigns, directors, employees, representatives, attorneys, spouses,
marital communities, next of kin, heirs, executors and administrators from and
against any and all claims, demands, judgments, actions and causes of action,
suits, debts, dues, sums of money, accounts, reckoning, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims and
demands whatsoever, in law, admiralty or equity, which any of the Ryback
Defendants, and/or any of their parent companies, subsidiaries, officers,
directors, employees, heirs, executors, administrators, successors, agents,
affiliates and assigns ever had, now have or hereafter can, shall or may have
against AutoInfo, Inc. for, upon, or by reason of any matter, cause or thing
5
<PAGE>
whatsoever from the beginning of the world to the date of this Agreement.
SECTION 3.4. Non Released Claims. It is further agreed and understood that
(a) the above general release does not pertain to, or affect, the parties'
obligations and rights under this Agreement and that all parties reserve all
rights to enforce the obligations set forth in this Agreement and (b) that
should any part of this Agreement be preliminarily or permanently adjudicated to
be invalid by any court or, in the event Ryback shall fail to comply with the
provisions of this Agreement for any reason whatsoever, the releases contained
herein shall be deemed null and void.
ARTICLE IV
Miscellaneous
SECTION 4.1. Fees and Expenses. Each party hereto shall pay the fees and
expenses of its investment banking advisors, attorneys, accountants and other
advisors, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
SECTION 4.2. Severability. Except as provided in Section 3.4 above, if any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect.
SECTION 4.3. Legend. Ryback will, and will cause its affiliates and
associates to, present or cause to be presented promptly all certificates, to
the extent such certificates are in existence on the date hereof or from time to
time, evidencing shares of Common Stock owned by Ryback and/or its affiliates
and associates for the placement thereon of the following legend, which legend
will remain on such certificates until such time as the shares represented by
such certificates are no longer subject to the restrictions of this Agreement:
THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE SETTLEMENT AGREEMENT
DATED AS OF JUNE 22, 1995, AMONG THE ISSUER AND RYBACK MANAGEMENT
CORPORATION AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SUCH SETTLEMENT AGREEMENT IS ON FILE AT THE OFFICE OF
THE CORPORATE SECRETARY OF THE ISSUER AND WILL BE FURNISHED TO ANY PERSON
UPON REQUEST.
6
<PAGE>
SECTION 4.4. Specific Enforcement; No Right to Terminate; Consent to
Jurisdiction. (a) The Company, ER, LC and Ryback acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they may
be entitled by law or equity.
(b) The parties hereto further agree that they shall not be permitted or
have the right to terminate or suspend performance of any provision of this
Agreement, it being agreed that all provisions of this Agreement shall continue
and be specifically enforceable in all events and under all circumstances
regardless of any events, occurrences, actions or omissions before or after the
date hereof. In furtherance of the foregoing, the parties hereto agree that they
shall not be permitted to, and shall not, bring any claim seeking to terminate
or suspend performance of any provision of this Agreement or seeking any
determination that any provision of this Agreement (including, without
limitation, this Section 4.4) is invalid, inapplicable or unenforceable.
(c) Each of the parties hereto irrevocably and unconditionally submits to
the exclusive jurisdiction of (a) the Chancery Court of the State of Delaware,
New Castle County, (b) the Superior Court of the State of Delaware, New Castle
County, and (c) the United States District Court for the District of Delaware,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties hereto
agrees to commence any action, suit or proceeding relating hereto in the
Chancery Court of the State of Delaware, New Castle County, or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, either in the Superior Court of the State of Delaware, New Castle
County or in the United States District Court for the District of Delaware. Each
party hereto further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
below shall be effective service of process for any action, suit or proceeding
brought in any such court with respect to any matters to which it has submitted
to jurisdiction in this Section 4.4(c). Each party hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Chancery Court of the State of Delaware, New Castle County,
(ii) the Superior Court of the State of Delaware, New Castle County, or (iii)
the United States District Court for the District of Delaware, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
7
<PAGE>
SECTION 4.5. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and this
Agreement may be amended only by an agreement in writing executed by the parties
hereto.
SECTION 4.6. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
when personally delivered or delivered by telex (with correct answer-back
received) or telecopy on a business day during normal business hours at the
address or number designated below or (b) on the business day following the date
of mailing by overnight courier, fully prepaid, addressed to such address,
whichever shall first occur. The addresses for such communications shall be:
If to the Company:
AutoInfo, Inc.
1600 Route 208
Fair Lawn, New Jersey 07410
Attn.: Scott Zecher
Facsimile: (201) 703-0500
Confirmation: (201) 703-1777
with a copy to:
Dreyer and Traub LLP
101 Park Avenue
New York, New York 10178
Attn.: Kenneth S. Rose, Esq.
Facsimile: (212) 984-6262
Confirmation: (212) 984-6126
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn.: Douglas Flaum, Esq.
Facsimile: (212) 859-8259
Confirmation: (212) 859-4000
8
<PAGE>
If to Ryback, ER or LC:
Ryback Management Corporation
7711 Carondelet Avenue, Suite 700
St. Louis, Missouri 63105
Attn: Lawrence Callahan
Facsimile: (314) 727-3866
Confirmation: (314) 727-5305 (x219)
with a copy to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Attn.: Paul R. Rentenbach
Facsimile: (313) 568-6832
Confirmation: (313) 568-6973
Any party hereto may from time to time change its address for notices under this
Section 4.6 by giving at least 10 days' notice of such changed address to the
other parties hereto.
SECTION 4.7. Waivers. No waiver by either party of any breach of any
provision hereof shall be deemed to be a continuing waiver in the future thereof
or a waiver of any other provision hereof; nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
SECTION 4.8. Certain Understandings. The Company understands and agrees
that this Settlement Agreement and the consideration given in exchange therefor
by the Ryback Defendants do not constitute and are not to be construed as an
admission of liability or wrongdoing of any kind on the part of the Ryback
Defendants, by whom all liability and wrongdoing are denied.
SECTION 4.9. Construction. The headings of the Articles, Sections and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to effect the construction
hereof. All section and article references are to this Agreement, unless
otherwise expressly provided. As used in this Agreement (i) "hereof",
"hereunder", "herein" and words of like impact shall be deemed to refer to this
Agreement in its entirety and not just a particular section of this agreement,
(ii) "beneficially own" shall have the meaning of such term within Rule 13d-3
(as such rule is currently in effect) under the Exchange Act, (iii) "affiliate"
9
<PAGE>
and "associate" shall each have the meaning of such terms within Rule 12b-2 (as
such rule is currently in effect) under the Exchange Act, and (iv) "outside
director" shall mean a director who is not also an officer and/or employee of
the Company.
SECTION 4.10. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and legal
representatives. No party hereto shall assign this Agreement or any rights
hereunder without the prior written consent of the other parties hereto.
SECTION 4.11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without regard to the principles of conflict of laws.
SECTION 4.12. Termination. This Agreement shall terminate on the fifth
anniversary of the date hereof.
SECTION 4.13. Counterparts. This Agreement may be executed in counterparts
each of which shall be deemed an original and, all of which, when taken
together, shall constitute one Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or have
caused this Agreement to be duly executed by their respective authorized
officers as of the date hereof.
AUTOINFO, INC.
By: /s/ Scott Zecher
------------------------------------
Name: Scott Zecher
Title: President and Chief Operating
Officer
RYBACK MANAGEMENT CORPORATION
By: /s/
------------------------------------
Name:
Title:
/s/ Eric C. Ryback
------------------------------------
Eric C. Ryback
/s/ Lawrence Callahan
------------------------------------
Lawrence Callahan
11
<PAGE>
Approved as to Form Only
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Paul Reinstein
---------------------------------------
Paul Reinstein
Counsel for AutoInfo, Inc.
Dykema Gossett
By: /s/ Derek I. Meier
---------------------------------------
Derek I. Meier
Counsel for Ryback Management
Corporation, Eric E. Ryback and Lawrence Callahan
12
[AutoInfo Logo]
April 10, 1995
Mr. Scott Zecher
1341 Hudson Road
Teaneck, New Jersey 07666
Re: Employment Agreement dated January 1, 1994
Dear Scott:
Reference is made to the Employment Agreement dated as of January 1, 1994
by and between AutoInfo, Inc. (the "Company") and you (the "Agreement").
On April 10, 1995 the Compensation Committee of The Board of Directors of
the Company by unanimous approval made the following amendments to the
Agreement:
1. The term of the Agreement has been extended through and including
April 30, 1998 and paragraph 3 of the Agreement is hereby amended
accordingly;
2. Your salary shall be at the rate of $150,000 per year and paragraph 4
of the Agreement is hereby amended accordingly; and
3. For the twelve month period commencing on the date hereof, you shall
be entitled to a bonus in the amount of $100,000 payable in two equal
installments. Paragraph 5 of the Agreement is hereby amended
accordingly; provided, however, that at the end of such twelve month
period the existing provisions of paragraph 5 shall continue in full
force and effect.
All of the other terms and conditions of the Agreement shall remain in full
force and effect and shall not be effected by this amendment.
By Order of the Board of Directors
/s/ Andrew Gaspar
------------------------------------
Andrew Gaspar, Chairman of the Board
AGREED TO ACCEPTED:
/s/ Scott Zecher
-------------------
Scott Zecher
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 1, 1994 by and between AutoInfo, Inc., a
Delaware corporation ("Auto") and Scott Zecher residing at 1341 Hudson Road,
Teaneck, New Jersey 07666 ("Zecher").
WHEREAS, Zecher is currently the President and Chief Operating Officer of
Auto; and
WHEREAS, the Company desires to assure itself of the benefit of Zecher's
services and experience for a period of time; and
WHEREAS, Zecher is willing to enter into an agreement to that end with the
Company upon the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Employment. Auto hereby employs Zecher as its President and Chief
Operating Officer and Zecher hereby accepts such employment and agrees to
perform his duties and responsibilities hereunder in accordance with the terms
and conditions hereinafter set forth.
2. Duties and Responsibilities. Zecher shall be the President and Chief
Operating Officer of Auto during the Employment Term (as defined below), with
full authority with respect to all operations of Auto. Zecher shall report to
and be subject to the direction of the Chairman of the Board ("Chairman") and
Board of Directors (the "Board") of Auto and Zecher shall perform such duties as
may be assigned to him from time to time by the Chairman or the Board; provided,
that such duties shall be of a nature consistent with the dignity and authority
of the positions of President and Chief Operating Officer. During the Employment
Term Zecher shall, subject to the Company's vacation policy, devote
substantially all of his normal business time and attention to the businesses of
Auto and its subsidiaries and affiliates and shall perform such duties in a
diligent, trustworthy, loyal, businesslike and efficient manner, all for the
purpose of advancing the business of Auto and its subsidiaries and affiliates.
<PAGE>
Nothing contained in this Agreement shall be deemed to prohibit Zecher from
devoting a nominal amount of his time to his (and his family's) personal
investments, provided, however, that, in case of conflict, the performance of
Zecher's duties under this Agreement shall take precedence over his activities
with respect to such investments.
3. Term. The Term of this Agreement shall commence on the date hereof and
shall continue until July 31, 1997, unless terminated prior thereto in
accordance with the terms and provisions hereof (the "Employment Term").
4. Compensation. Auto shall pay to Zecher a salary at the rate of $144,000
per year, payable in such manner as Auto shall determine, but in no event any
less often than monthly, less withholding required by law and other deductions
agreed to by Zecher. Zecher's annual salary may be increased during the
Employment Term in the sole discretion of the Board.
5. Bonus. In addition to the compensation provided for in Paragraph 4 of
this Agreement, Zecher shall during the Employment Term participate in the
Company's then existing and effective profit sharing and bonus plans.
Furthermore Zecher shall receive such other bonuses as determined in the sole
discretion of the Board. Any bonuses shall be paid in such manner as the parties
mutually agree.
6. Principal Office Without Zecher's consent, Auto shall not require Zecher
to maintain his principal office in any location other than the Northern New
Jersey area.
7. Expenses and Benefits.
(a) Auto shall, consistent with Auto's policy of reporting and
reimbursement of business expenses, reimburse Zecher for such other ordinary and
necessary entertainment and business related expenses as shall be incurred by
Zecher in the course of the performance of his duties under this Agreement.
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<PAGE>
(b) Auto recognizes that Zecher will be required to incur significant
travel in rendering services to Auto hereunder and in connection therewith Auto
shall during the Employment Term provide Zecher with an automobile (which Auto
at its option may either purchase or lease in its or Zecher's name) which the
parties agree shall be an automobile of Zecher's reasonable choice and Auto
shall pay all of the expenses associated with the operation of such automobile
including, without limitation, maintenance, fuel, repair and insurance costs.
Zecher shall have the right upon termination of this Agreement to have any
automobile lease assigned to him upon his assumption of the obligations
thereunder.
(c) Zecher shall be entitled to participate, to the extent he qualifies, in
such life insurance, hospitalization, disability and other medical insurance
plans or programs as are generally made available to executive officers of Auto
which shall be consistent with the programs and benefits currently offered to
Zecher.
8. Termination.
(a) Auto shall have the right to terminate this Agreement for disability in
the event Zecher suffers any illness or incapacity of such character as to
substantially disable him from performing his duties hereunder for a period of
more than one hundred and eighty (180) consecutive days in any one calendar year
upon Auto giving at least thirty (30) days written notice of its intention to so
terminate. If Zecher shall resume his duties hereunder within thirty (30) days
following the receipt of such notice and shall perform such duties for forty
(40) days of the next sixty (60) consecutive days thereafter, the Employment
Term shall continue without interruption and such notice of intention to
terminate shall have no further force or validity.
(b) This Agreement shall terminate upon the death of Zecher, except that
Zecher's salary shall be payable to his estate for one hundred eighty (180) days
thereafter, together with all accrued bonuses and outstanding unreimbursed
expenses.
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(c) Auto may terminate this Agreement at any time with Reasonable Cause
upon five (5) days written notice to Zecher. "Reasonable Cause" means (i)
conviction of a crime involving moral turpitude; (ii) Zecher having engaged in
any activity in competition with Auto, without Auto's consent; (iii) Zecher
having divulged any secret or confidential information of a material nature
belonging to Auto, without Auto's consent, except as required by law; (iv)
Zecher's dishonesty or misconduct that is damaging or detrimental to Auto in any
material respect; or (v) Zecher's breach of any material term of this Agreement;
provided, however, that notice under this provision shall not be effective
unless Zecher shall have first received written notice from Auto of the specific
acts or omissions alleged to constitute a breach of any material term of this
Agreement, and such breach continues unremedied for a period of fifteen (15)
days after such notice.
(d) If either (i) a third person, including a "group" as defined in Section
13(d) (3) of the Securities Exchange Act of 1934, becomes the beneficial owner
of shares of Auto having 25% or more of the total number of votes that may be
cast for the election of directors of Auto or (ii) as the result of, or in
connection with, any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were directors of Auto
before the Transaction shall cease to constitute a majority of the Board or the
Board of Directors of any successor to Auto; then and in such event for a period
of one hundred and twenty (120) days following the occurrence of such an event
Zecher may elect to terminate this Agreement upon five (5) days prior written
notice to Auto and upon such termination Zecher shall be entitled to receive, in
addition to any other payments due to Zecher pursuant to this Agreement, a
severance payment equal to the greater of (a) $250,000, or (b) the compensation
due to Zecher for the balance of the Employment Term. Upon the occurrence of a
Transaction, the Company will cause to be placed in escrow with Dreyer and Traub
an amount sufficient to cover the Company's obligations to Zecher under this
paragraph 8(d) (the "Escrow"). The Escrow, or any applicable portion thereof,
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will be distributed to Zecher upon his election to terminate this Agreement as
provided for hereinabove. Any balance of the Escrow will be returned to the
Company.
9. Non-Competition. Zecher covenants and agrees that during his employment
hereunder and for a period of two years after his employment hereunder is
terminated, he will not, without the prior written consent of Auto, (a) compete
with the business of Auto or any of its subsidiaries or affiliates and, in
particular, he will not without such consent, directly or indirectly, own,
manage, operate, finance, join, control or participate in the ownership,
management, operation, financing or control of, or be connected as a director,
officer, employee, partner, consultant or agent with, any business in
competition with or similar to the business of Auto or any of its subsidiaries
or affiliates; provided, however, that Zecher may own up to two percent of the
capital stock of any publicly traded corporation in competition with the
business of Auto or any of its subsidiaries or affiliates if the fair market
value of such corporation's outstanding capital stock exceeds $100 million, and
(b) divert, take away, interfere with or attempt to take away any present or
former employee or customer of Auto or any of its subsidiaries or affiliates.
The provisions of this Section 9 shall no longer be applicable if Zecher's
employment is terminated by Auto (other than for cause) or by Zecher pursuant to
the provisions of Section 8(d) hereof during the Employment Term. In the event
that the provisions of this Section 9 should ever be deemed to exceed the time
or geographic limitations or any other limitations permitted by applicable law,
then such provisions shall be deemed reformed to the maximum permitted by
applicable law. Zecher acknowledges and agrees that the foregoing covenant is an
essential element of this Agreement and that, but for the agreement of Zecher to
comply with the covenant, the Company would not have entered into this
Agreement, and that the remedy at law for any breach of the covenant will be
inadequate and the Company, in addition to any other relief available to it,
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
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10. Confidential Information. Zecher recognizes and acknowledges that the
customer lists, patents, inventions, copyrights, methods of doing business,
trade secrets and proprietary information of Auto including, without limitation,
as the same may exist from time to time, are valuable, special and unique assets
of the business of Auto. Except in the ordinary course of business or as
required by law, Zecher shall not, during or after the Employment Term, disclose
any such list of customers or any part thereof, any such patents, inventions,
copyrights, methods of doing business, trade secrets or proprietary information
which are not otherwise in the public domain to any person, firm, corporation or
other entity for any reason whatsoever. In addition, Zecher specifically
acknowledges and agrees that the remedy at law for any breach of the foregoing
shall be inadequate and that AutoInfo and the Company, in addition to any other
relief available to them, shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damage.
11. COBRA. In the event of Zecher's death during the term of this
Agreement, Auto shall make all COBRA medical premium payments for Zecher's
family for the three year period following his death.
12. Opportunities. During his employment with Auto, Zecher shall not take
any action which might divert from Auto or any of its subsidiaries or affiliates
any opportunity which would be within the scope of any of the present or future
businesses of Auto or any of its subsidiaries or affiliates.
13. Contents of Agreement, Parties in Interest, Assignment, etc. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Zecher hereunder which are of a
personal nature shall neither be assigned nor transferred in whole or in party
by Zecher. This Agreement shall not be amended except by a written instrument
duly executed by Auto and Zecher.
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14. Severability. If any term or provision of this Agreement shall be held
to be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extend of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
15. Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to Auto
addressed to: AutoInfo, Inc.
1600 Route 208
Fair Lawn, New Jersey 07410
Attn: President
with a copy to: Dreyer and Traub
101 Park Avenue
New York, New York 10178
Attn: Kenneth S. Rose, Esq.
If to Zecher
addressed to: Scott Zecher
1341 Hudson Road
Teaneck, N.J. 07666
or at such other address as the one party shall specify to the other party in
writing.
16. Counterparts and Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all which
together shall constitute one and the same instrument. All headings are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
17. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New Jersey.
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18. Arbitration. Any disputes arising hereunder shall be submitted to
arbitration before a single arbitrator in New York City under the rules and
regulations of the American Arbitration Association. Any award in such
arbitration proceeding may be enforced in any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
AUTOINFO, INC.
By: /s/ Jason Bacher
----------------------
Jason Bacher, Chairman
of the Board
/s/ Scott Zecher
----------------------
Scott Zecher
8
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 10th day of April, 1995, by and
between AutoInfo, Inc. (the "Company"), and Scott Zecher (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits during the term of his employment
following a Change in Control, in the event his employment is terminated as a
result of, or in connection with, a Change in Control and to provide the
Executive with the Gross-Up Payment (as hereinafter defined).
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Employment Term. (a) The "Employment Term" shall commence on the first
date during the Protected Period (as defined in Section 1 (c) below) on which a
Change in Control occurs (the "Effective Date") and shall expire on the third
anniversary of the Effective Date; provided, however, that on each anniversary
of the Effective Date, the Employment Term shall automatically be extended for
one (1) year unless either the Company or the Executive shall have given written
notice to the other at least ninety (90) days prior thereto that the Employment
Term shall not be so extended.
(b) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to the Effective
Date and the Executive reasonably demonstrates that such termination (1) was at
the request of a Third Party (as hereinafter defined) who has effectuated a
Change in Control or (2) otherwise occurred in connection with, or in
anticipation of, a Change in Control, then for all purposes of this Agreement,
the Effective Date shall mean the date immediately prior to the date of such
termination of the Executive's employment.
(c) For purposes of this Agreement, the "Protected Period" shall be
the three (3) year period commencing on April 10, 1995; provided, however, that
the Protected Period shall be automatically extended for one (1) year on April
9, 1996 and on each April 9, thereafter unless the Company shall have given
written notice to the Executive at least ninety (90) days prior thereto that the
Protected Period shall not be so extended; and provided further, however, that
notwithstanding any such notice by the Company not to extend, the Protected
Period shall not end if prior to the expiration thereof any Third Party has
<PAGE>
indicated an intention or taken steps reasonably calculated to effect a Change
in Control, in which event the Protected Period shall end only after such Third
Party publicly announces that it has abandoned all efforts to effect a Change in
Control.
2. (a) Subject to the provisions of Section 8 hereof, the Company agrees to
continue to employ the Executive and the Executive agrees to remain in the
employ of the Company during the Employment Term. During the Employment Term,
the Executive shall be employed as the President and Chief Operating Officer of
the Company or in such other senior executive capacity as may be mutually agreed
to in writing by the parties. The Executive shall perform the duties, undertake
the responsibilities and exercise the authority customarily performed,
undertaken and exercised by persons situated in a similar executive capacity. He
shall also promote, by entertainment or otherwise, the business of the Company.
(b) During the Employment Term, excluding periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during usual business hours to the business and
affairs of the Company to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder. The Executive may (1) serve on corporate,
civil or charitable boards or committees, (2) manage personal investments and
(3) deliver lectures and teach at educational institutions, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities hereunder. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
3. Compensation.
(a) Base Salary. During the Employment Term, the Company agrees to pay
or cause to be paid to the Executive annual base salary at a rate at least equal
to the highest rate of the Executive's annual base salary as in effect at any
time within ninety (90) days preceding the Effective Date, and as may be
increased from time to time (hereinafter referred to as the "Base Salary"). Such
Base Salary shall be payable in accordance with the Company's customary
practices applicable to its executives.
(b) Annual Bonus. In addition to Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Term, an annual bonus
(the "Annual Bonus") in cash at least equal to the average of the annual bonus
paid or payable during the three full fiscal years ended prior to the Effective
Date (or such lesser period for which the annual bonuses were paid or payable to
the Executive) (the "Recent Average Bonus"). Each such Annual Bonus shall be
paid in two semi-annual payments no later than one month following each six and
twelve month anniversary hereunder, unless the Executive shall elect to defer
the receipt of such Annual Bonus.
4. Employee Benefits. During the Employment Term, the Executive shall be
entitled to participate in all employee benefit plans, practices and programs
maintained by the Company and made available to employees generally, including,
without limitation, all pension, retirement, profit sharing, savings, medical,
hospitalization, disability, dental, life or travel accident insurance benefit
plans. Unless otherwise provided herein, the compensation and benefits under,
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and the Executive's participation in, such plans, practices and programs shall
be on the same basis and terms as are applicable to employees of the Company
generally, but in no event on a basis less favorable in terms of benefit levels
and coverage than the most favorable of such plans, practices and programs
covering the Executive at any time within ninety (90) days preceding the
Effective Date, or if more favorable, at any time thereafter.
5. Executive Benefits. During the Employment Term, the Executive shall be
entitled to participate in all executive benefit or incentive compensation plans
maintained or established by the Company for the purpose of providing
compensation and/or benefits to executives of the Company. Unless otherwise
provided herein, the compensation and benefits under, and the Executive's
participation in, such plans shall be on the same basis and terms as other
similarly situated executives of the Company, but in no event on a basis less
favorable in terms of benefit levels or reward opportunities than the most
favorable benefit levels and reward opportunities applicable to the Executive at
any time within ninety (90) days preceding the Effective Date, or if more
favorable, at any time thereafter. No additional compensation provided under any
of such plans shall be deemed to modify or otherwise affect the terms of this
Agreement or any of the Executive's entitlements hereunder.
6. Other Benefits.
(a) Automobile. The Company recognizes that Employee will be required
to incur significant travel in rendering services to the Company hereunder and
in connection therewith the Company during the Employment Term shall provide
Employee with an automobile (which the Company at its option may either purchase
or lease in its or Employee's name) which the parties agree shall be an
automobile of the Employee's reasonable choice and the Company shall pay all of
the expenses associated with the operation of such automobile including, without
limitation, maintenance, fuel, repair and insurance costs.
(b) Expenses. The Executive shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company.
7. Vacation and Sick Leave. During the Employment Term, at such reasonable
times as the Board shall in its discretion permit, the Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, provided that:
(a) The Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board for similarly
situated executives of the Company; provided, however, that in no event shall
the Executive's annual vacation entitlement be less than five weeks per year.
(b) The Executive shall be entitled to sick leave (without loss of
pay) in accordance with the Company's policies as in effect from time to time.
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8. Termination. During the Employment Term, the Executive's employment
hereunder may be terminated under the following circumstances:
(a) Cause. The Company may terminate the Executive's employment for
"Cause." A termination of employment is for "Cause" if the Executive (1) has
been convicted of a felony or (2) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however that no termination of the Executive's employment shall be for
Cause as set forth in clause (2) above until (i) there shall have been delivered
to the Executive a copy of a written notice setting forth that the Executive was
guilty of the conduct set forth in clause (2) and specifying the particulars
thereof in detail, and (ii) the Executive shall have been provided an
opportunity to be heard by the Board (with the assistance of the Executive's
counsel if the Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "intentional" unless he has acted, or
failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Company.
Notwithstanding anything contained in this Agreement to the contrary, no failure
to perform by the Executive after a Notice of Termination is given by the
Executive shall constitute Cause for purposes of this Agreement.
(b) Disability. The Company may terminate the Executive's employment
after having established the Executive's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Executive's ability to substantially perform his duties under this Agreement
which continues for a period of at least one hundred eighty (180) consecutive
days. The Executive shall be entitled to the compensation and benefits provided
for under this Agreement for any period during Employment Term and prior to the
establishment of the Executive's Disability during which the Executive is unable
to work due to a physical or mental infirmity. Notwithstanding anything
contained in this Agreement to the contrary, until the Termination Date
specified in a Notice of Termination (as each term is hereinafter defined)
relating to the Executive's Disability, the Executive shall be entitled to
return to his position with the Company as set forth in this Agreement in which
event no Disability of the Executive will be deemed to have occurred.
(c) Good Reason. (1) The Executive may terminate his employment for
"Good Reason." For purposes of this Agreement, Good Reason shall mean the
occurrence after a Change in Control of any of the events or conditions
described in Subsections (i) through (viii) hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his status,
title, position or responsibilities as in effect immediately prior thereto; the
assignment to the Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with his status, title,
position or responsibilities; or any removal of the Executive from or failure to
reappoint or reelect him to any of such offices or positions, except in
connection with the termination of his employment for Disability, Cause, as a
result of his death or by the Executive other than for Good Reason;
(ii) a reduction in the Executive's Base Salary or any failure to
pay the Executive any compensation or benefits to which he is entitled within
five days of the date due;
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(iii) the Company's requiring the Executive to be based at any
place outside a 30-mile radius from Fair Lawn, New Jersey, except for reasonably
required travel on the Company's business which is not greater than such travel
requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in effect
(without reduction in benefit level, and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
immediately prior to the Effective Date, including, but not limited to, the
medical coverage afforded the Executive and his family, unless a substitute or
replacement plan has been implemented which provides substantially identical
compensation or benefits to the Executive;
(v) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company;
(vi) any material breach by the Company of any provision of this
Agreement;
(vii) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of Section 8(a); or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any successor or assign of the Company to
assume and agree to perform this Agreement, as contemplated in Section 13
hereof.
(2) Any event or condition described in Section 8(c)(1)(i) through
(viii) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a
Change in Control (a "Third Party"), or (B) otherwise arose in connection
with, or in anticipation of a Change in Control, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
(3) The Executive's right to terminate his employment pursuant to this
Section 8(c) shall not be affected by his incapacity due to physical or
mental illness.
(d) Voluntary Termination. The Executive may voluntarily terminate his
employment hereunder at any time.
9. Compensation Upon Termination. Upon termination of the Executive's
employment during the Employment Term, the Executive shall be entitled to the
following benefits:
(a) If the Executive's employment with the Company shall be terminated
(1) by the Company for Cause or Disability, (2) by reason of the Executive's
death, or (3) by the Executive other than for Good Reason or during the 60-day
period commencing on the first anniversary of the date of the Effective Date
(the "Window Period"), the Company shall pay the Executive all amounts earned or
accrued through the Termination Date but not paid as of the Termination Date,
including (i) Base Salary, (ii) reimbursement for reasonable and necessary
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expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay, and (iv) sick leave
(collectively, "Accrued Compensation"). In addition to the foregoing, if the
Executive's employment is terminated by the Company for Disability or by reason
of the Executive's death, the Company shall pay to the Executive or his
beneficiaries an amount equal to the "Pro Rata Bonus" (as hereinafter defined).
The "Pro Rata Bonus" is an amount equal to the "Highest Annual Bonus" (as
hereinafter defined) multiplied by a fraction the numerator of which is the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365. The "Highest Annual Bonus" is an amount equal to
the greater of (A) the Annual Bonus paid or payable, to the Executive (and
annualized for any fiscal year consisting of less than twelve full months or for
which the Executive has been employed for less than twelve full months) for the
most recently completed fiscal year during the Employment Term, if any, and (B)
the Recent Average Bonus. The Executive's entitlement to any other compensation
or benefits shall be determined in accordance with the Company's employee
benefit plans and other applicable programs and practices then in effect.
(b) If the Executive's employment with the Company shall be terminated
(other than by reason of death), (1) by the Company other than for Cause or
Disability, (2) by the Executive for Good Reason or (3) by the Executive for any
reason within the Window Period, the Executive shall be entitled to the
following:
(i) the Company shall pay the Executive all Accrued Compensation
and a Pro-Rata Bonus;
(ii) the Company shall pay the Executive as severance pay and in
lieu of any further compensation for periods subsequent to the Termination Date,
in a single payment an amount (the "Severance Amount") in cash equal to either
(y) if the Termination Date occurs on or before April 9, 1996, three times the
sum of (A) the Executive's Base Salary at the highest rate in effect at any time
subsequent to the 90th day prior to the Effective Date and (B) the Highest
Annual Bonus; or (z) if the Termination Date occurs on or after April 10, 1996,
two times the sum of (A) the Executive's Base Salary at the highest rate in
effect at any time subsequent to the 90th day prior to the Effective Date and
(B) the Highest Annual Bonus;
(iii) for 36 months (the "Continuation Period"), the Company
shall at its expense continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental and
hospitalization benefits provided (x) to the Executive at any time during the
90-day period prior to the Effective Date or at any time thereafter or (y) to
other similarly situated executives who continue in the employ of the Company
during the Continuation Period. The coverage and benefits (including deductibles
and costs) provided in this Section 9(b)(iii) during the Continuation Period
shall be no less favorable to the Executive and his dependents and
beneficiaries, than the most favorable of such coverages and benefits during any
of the periods referred to in clauses (x) and (y) above. The Company's
obligation hereunder with respect to the foregoing benefits shall be limited to
the extent that the Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce the coverage of
any benefits it is required to provide the Executive hereunder so long as the
aggregate coverages and benefits of the combined benefit plans is no less
favorable to the Executive than the coverages and benefits required to be
provided hereunder. This Subsection (iii) shall not be interpreted so as to
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limit any benefits to which the Executive, his dependents or beneficiaries may
be entitled under any of the Company's employee benefit plans, programs or
practices following the Executive's termination of employment, including without
limitation, retiree medical and life insurance benefits;
(iv) (A) the restrictions on any outstanding incentive awards
(including restricted stock and stock options) granted to the Executive under
the Company's Stock Option Plans or under any other incentive plan or
arrangement shall lapse and such incentive award shall become 100% vested, all
stock options and stock appreciation rights granted to the Executive shall
become immediately exercisable and shall become 100% vested, and all performance
units granted to the Executive shall become 100% vested and (B) the Executive
shall have the right to require the Company to purchase, for cash, any shares of
unrestricted stock or shares purchased upon exercise of any options, at a price
equal to the fair market value of such shares on the date of purchase by the
Company.
(v) during the Continuation Period, the Company shall at its
expense continue to provide the Executive with an automobile as provided for in
Section 6(a).
(c) The amounts provided for in Sections 9(a) and 9(b)(i) and (ii)
shall be paid within five days after the Executive's Termination Date.
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 9(b)(iii).
(e) The severance pay and benefits provided for in Sections 9(a) and
9(b)(i) and (ii) shall be in lieu of any other severance pay to which the
Executive may be entitled under any Company severance plan, program or
arrangement or pursuant to the Employment Agreement dated January 1, 1994, as
amended, between the Company and the Executive.
10. Definitions.
(a) Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent
(30%) or more of the combined voting power of the Company's then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an employee benefit plan (or
a trust forming a part thereof) maintained by (A) the Company or (B) any
corporation or other Person of which a majority of its voting power or its
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voting equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary") (ii) the Company or its Subsidiaries, or (iii) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined); and
(2) The individuals who, as of April 10, 1995 are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the members of the Board; provided, however, that if the
election, or nomination for election by the Company's common stockholders,
of any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the Incumbent Board if
such individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the Company where:
(A) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or
indirectly immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the combined
voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the
Surviving Corporation, or a corporation beneficially directly or
indirectly owning a majority of the Voting Securities of the
Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming
a part thereof) maintained by the Company, the Surviving
Corporation, or any Subsidiary, or (iv) any Person who,
immediately prior to such merger, consolidation or reorganization
had Beneficial Ownership of thirty percent (30%) or more of the
-8-
<PAGE>
then outstanding Voting Securities), has Beneficial Ownership of
thirty percent (30%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities.
(ii) A complete liquidation or dissolution of the Company; or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
(4) Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of
the acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner
of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
(b) Notice of Termination. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which indicates the specific termination
provision in this Agreement, if any, relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. Any
purported termination by the Company or by the Executive shall be communicated
by written Notice of Termination to the other. For purposes of this Agreement,
no such purported termination of employment shall be effective without such
Notice of Termination.
(c) Termination Date. Etc. For purposes of this Agreement,
"Termination Date" shall mean in the case of the Executive's death, his date of
death, or in all other cases, the date specified in the Notice of Termination
subject to the following:
(1) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice
of Termination is given to the Executive, provided that in the case of
Disability the Executive shall not have returned to the full-time
performance of his duties during such period of at least thirty (30)
days; and
(2) If the Executive's employment is terminated for Good
Reason or during a Window Period Termination, the date specified in the
Notice of Termination shall not be more than sixty (60) days from the
date the Notice of Termination is given to the Company.
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<PAGE>
11. Excise Tax Payments.
(a) In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or a change in
ownership or effective control of the Company or of a substantial portion of its
assets (a "Payment" or "Payments"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties, other than interest
and penalties imposed by reason of the Executive's failure to file timely a tax
return or pay taxes shown due on his return, imposed with respect to such taxes
and the Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such Gross-Up Payment
shall be made at the Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Executive which is designated as one of
the five largest accounting firms in the United States (the "Accounting Firm").
The Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the Company
and the Executive within five days of the Termination Date, if applicable, or
such other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the
Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable
by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to any such Payment or Payments. Within ten
days of the delivery of the Determination to the Executive, the Executive shall
have the right to dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 11(b) shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. The existence of the Dispute shall not in any way affect
the Executive's right to receive the Gross-Up Payment in accordance with the
Determination. Upon the final resolution of a Dispute, the Company shall
promptly pay to the Executive any additional amount required by such resolution.
If there is no Dispute, the Determination shall be binding, final and conclusive
upon the Company and the Executive subject to the application of Section 11(c)
below.
(c) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments.
12. Unauthorized Disclosure. During the period that the Executive is
actively employed by the Company, the Executive shall not make any Unauthorized
Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean
disclosure by the Executive without the consent of the Board (other than
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<PAGE>
pursuant to a court order) to any person, other than an employee or director of
the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company or as may be legally required, of any material
confidential information obtained by the Executive while in the employ of the
Company (including any material confidential information with respect to any of
the Company's customers or methods of distribution) the disclosure of which is
demonstrably and materially injurious to the Company; provided, however, that
such term shall not include the use or disclosure by the Executive, without
consent, of any information known generally to the public (other than as a
result of disclosure by him in violation of this Section 12) or any information
not otherwise considered confidential and material by a reasonable person
engaged in the same business as that conducted by the Company.
13. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall require
any successor or assign to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The term
"Company" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other
entity' acquiring all or substantially all the assets and business of the
Company (including this Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
14. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Executive is
or may be entitled to receive benefits, or (c) the Executive's hearing before
the Board as contemplated in Section 8(a) of this Agreement; provided, however,
that the circumstances set forth in clauses (a) and (b) (other than as a result
of the Executive's termination of employment under circumstances described in
Section l(a)) occurred on or after a Change in Control.
15. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
-11-
<PAGE>
16. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other agreements
with the Company or any of its subsidiaries. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any of its subsidiaries shall be payable in accordance
with such plan or program, except as explicitly modified by this Agreement.
17. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other right which
the Company may have against the Executive or others.
18. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of law principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in New Castle county of the State of Delaware.
20. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
21. No Guaranteed Employment. The Executive and the Company acknowledge
that, except as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by the
Company is "at will" and, prior to the Effective Date, may be terminated by
either the Executive or the Company at any time. Moreover, if prior to the
Effective Date, the Executive's employment with the Company terminates, the
Executive shall have no further rights under this Agreement.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
AUTOINFO, INC.
By: /s/ Andrew Gaspar
-------------------------------
Andrew Gaspar, Chairman of the
Board of Directors
ATTEST:
/s/ William Wunderlich
------------------------------
Secretary
/s/ Scott Zecher
-------------------------------
Scott Zecher
-13-
EMPLOYMENT AGREEMENT
AGREEMENT dated as of April 10, 1995 by and between AutoInfo, Inc., a
Delaware corporation ("Auto") and William Wunderlich residing at 14 Frost Pond
Road, Stanford, Connecticut 06903 ("Wunderlich").
WHEREAS, Wunderlich is currently the Chief Financial Officer of Auto; and
WHEREAS, the Company desires to assure itself of the benefit of
Wunderlich's services and experience for a period of time; and
WHEREAS, Wunderlich is willing to enter into an agreement to that end with
the Company upon the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Employment. Auto hereby employs Wunderlich as its Chief Financial
Officer and Wunderlich hereby accepts such employment and agrees to perform his
duties and responsibilities hereunder in accordance with the terms and
conditions hereinafter set forth.
2. Duties and Responsibilities. Wunderlich shall be the Chief Financial
Officer of Auto during the Employment Term (as defined below). Wunderlich shall
report to and be subject to the direction of the President and Board of
Directors (the "Board") of Auto and Wunderlich shall perform such duties as may
be assigned to him from time to time by the President or the Board; provided,
that such duties shall be of a nature consistent with the dignity and authority
of the positions of Chief Financial Officer. During the Employment Term
Wunderlich shall, subject to the Company's vacation policy, devote substantially
all of his normal business time and attention to the businesses of Auto and its
subsidiaries and affiliates and shall perform such duties in a diligent,
trustworthy, loyal, businesslike and efficient manner, all for the purpose of
advancing the business of Auto and its subsidiaries and affiliates. Nothing
contained in this Agreement shall be deemed to prohibit Wunderlich from devoting
a nominal amount of his time to his (and his family's) personal investments,
<PAGE>
provided, however, that, in case of conflict, the performance of Wunderlich's
duties under this Agreement shall take precedence over his activities with
respect to such investments.
3. Term. The Term of this Agreement shall commence on the date hereof and
shall continue until April 30, 1997, unless terminated prior thereto in
accordance with the terms and provisions hereof (the "Employment Term").
4. Compensation. Auto shall pay to Wunderlich a salary at the rate of
$120,000 per year, payable in such manner as Auto shall determine, but in no
event any less often than monthly, less withholding required by law and other
deductions agreed to by Wunderlich. Wunderlich's annual salary may be increased
during the Employment Term in the sole discretion of the Board.
5. Bonus. In addition to the compensation provided for in Paragraph 4 of
this Agreement, Wunderlich shall during the Employment Term participate in the
Company's then existing and effective profit sharing and bonus plans.
Furthermore Wunderlich shall receive such other bonuses as determined in the
sole discretion of the Board. Any bonuses shall be paid in such manner as the
parties mutually agree. During the year ending April 30, 1996, Wunderlich shall
be entitled to receive, in semi-annual payments, a bonus in the amount of
$30,000.
6. Principal Office. Without Wunderlich's consent, Auto shall not require
Wunderlich to maintain his principal office in any location other than the
Northern New Jersey area.
7. Expenses and Benefits.
(a) Auto shall, consistent with Auto's policy of reporting and
reimbursement of business expenses, reimburse Wunderlich for such other ordinary
and necessary entertainment and business related expenses as shall be incurred
by Wunderlich in the course of the performance of his duties under this
Agreement.
(b) Auto recognizes that Wunderlich will be required to incur significant
travel in rendering services to Auto hereunder and in connection therewith Auto
shall during the Employment Term provide Wunderlich with a automobile allowance
of $750 per month which the parties agree shall be used to pay all of the
2
<PAGE>
expenses associated with the operation of an automobile including, without
limitation, maintenance, repair and insurance costs.
(c) Wunderlich shall be entitled to participate, to the extent he
qualifies, in such life insurance, hospitalization, disability and other medical
insurance plans or programs as are generally made available to executive
officers of Auto which shall be consistent with the programs and benefits
currently offered to Wunderlich.
8. Termination.
(a) Auto shall have the right to terminate this Agreement for disability in
the event Wunderlich suffers any illness or incapacity of such character as to
substantially disable him from performing his duties hereunder for a period of
more than one hundred and eighty (180) consecutive days in any one calendar year
upon Auto giving at least thirty (30) days written notice of its intention to so
terminate. If Wunderlich shall resume his duties hereunder within thirty (30)
days following the receipt of such notice and shall perform such duties for
forty (40) days of the next sixty (60) consecutive days thereafter, the
Employment Term shall continue without interruption and such notice of intention
to terminate shall have no further force or validity.
(b) This Agreement shall terminate upon the death of Wunderlich, except
that Wunderlich's salary shall be payable to his estate for one hundred eighty
(180) days thereafter, together with all accrued bonuses and outstanding
unreimbursed expenses.
(c) Auto may terminate this Agreement at any time with Reasonable Cause
upon five (5) days written notice to Wunderlich. "Reasonable Cause" means (i)
conviction of a crime involving moral turpitude; (ii) Wunderlich having engaged
in any activity in competition with Auto, without Auto's consent; (iii)
Wunderlich having divulged any secret or confidential information of a material
nature belonging to Auto, without Auto's consent, except as required by law;
(iv) Wunderlich's dishonesty or misconduct that is damaging or detrimental to
Auto in any material respect; or (v) Wunderlich's breach of any material term of
this Agreement; provided, however, that notice under this provision shall not be
effective unless Wunderlich shall have first received written notice from Auto
3
<PAGE>
of the specific acts or omissions alleged to constitute a breach of any material
term of this Agreement, and such breach continues unremedied for a period of
fifteen (15) days after such notice.
(d) If either (i) a third person, including a "group" as defined in Section
13(d) (3) of the Securities Exchange Act of 1934, becomes the beneficial owner
of shares of Auto having 25% or more of the total number of votes that may be
cast for the election of directors of Auto or (ii) as the result of, or in
connection with, any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were directors of Auto
before the Transaction shall cease to constitute a majority of the Board or the
Board of Directors of any successor to Auto; then and in such event for a period
of one hundred and twenty (120) days following the occurrence of such an event
Wunderlich may elect to terminate this Agreement upon five (5) days prior
written notice to Auto and upon such termination Wunderlich shall be entitled to
receive, in addition to any other payments due to Wunderlich pursuant to this
Agreement, a severance payment equal to the greater of (a) $150,000, or (b) the
compensation due to Wunderlich for the balance of the Employment Term. Upon the
occurrence of a Transaction, the Company will cause to be placed in escrow with
Dreyer and Traub an amount sufficient to cover the Company's obligations to
Wunderlich under this paragraph 8(d) (the"Escrow"). The Escrow, or any
applicable portion thereof, will be distributed to Wunderlich upon his election
to terminate this Agreement as provided for hereinabove. Any balance of the
Escrow will be returned to the Company.
9. Non-Competition. Wunderlich covenants and agrees that during his
employment hereunder and for a period of two years after his employment
hereunder is terminated, he will not, without the prior written consent of Auto,
(a) compete with the business of Auto or any of its subsidiaries or affiliates
and, in particular, he will not without such consent, directly or indirectly,
own, manage, operate, finance, join, control or participate in the ownership,
management, operation, financing or control of, or be connected as a director,
officer, employee, partner, consultant or agent with, any business in
competition with or similar to the business of Auto or any of its subsidiaries
or affiliates; provided, however, that Wunderlich may own up to two percent of
4
<PAGE>
the capital stock of any publicly traded corporation in competition with the
business of Auto or any of its subsidiaries or affiliates if the fair market
value of such corporation's outstanding capital stock exceeds $100 million, and
(b) divert, take away, interfere with or attempt to take away any present or
former employee or customer of Auto or any of its subsidiaries or affiliates.
The provisions of this Section 9 shall no longer be applicable if Wunderlich's
employment is terminated by Auto (other than for cause) or by Wunderlich
pursuant to the provisions of Section 8(d) hereof during the Employment Term. In
the event that the provisions of this Section 9 should ever be deemed to exceed
the time or geographic limitations or any other limitations permitted by
applicable law, then such provisions shall be deemed reformed to the maximum
permitted by applicable law. Wunderlich acknowledges and agrees that the
foregoing covenant is an essential element of this Agreement and that, but for
the agreement of Wunderlich to comply with the covenant, the Company would not
have entered into this Agreement, and that the remedy at law for any breach of
the covenant will be inadequate and the Company, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damage.
10. Confidential Information. Wunderlich recognizes and acknowledges that
the customer lists, patents, inventions, copyrights, methods of doing business,
trade secrets and proprietary information of Auto including, without limitation,
as the same may exist from time to time, are valuable, special and unique assets
of the business of Auto. Except in the ordinary course of business or as
required by law, Wunderlich shall not, during or after the Employment Term,
disclose any such list of customers or any part thereof, any such patents,
inventions, copyrights, methods of doing business, trade secrets or proprietary
information which are not otherwise in the public domain to any person, firm,
corporation or other entity for any reason whatsoever. In addition, Wunderlich
specifically acknowledges and agrees that the remedy at law for any breach of
the foregoing shall be inadequate and that AutoInfo and the Company, in addition
to any other relief available to them, shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damage.
5
<PAGE>
11. COBRA. In the event of Wunderlich's death during the term of this
Agreement, Auto shall make all COBRA medical premium payments for Wunderlich's
family for the three year period following his death.
12. Opportunities. During his employment with Auto, Wunderlich shall not
take any action which might divert from Auto or any of its subsidiaries or
affiliates any opportunity which would be within the scope of any of the present
or future businesses of Auto or any of its subsidiaries or affiliates.
13. Contents of Agreement, Parties in Interest, Assignment, etc. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Wunderlich hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in party
by Wunderlich. This Agreement shall not be amended except by a written
instrument duly executed by Auto and Wunderlich.
14. Severability. If any term or provision of this Agreement shall be held
to be invalid or unenforceable for any reason, such term or provision shall be
ineffective to the extend of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
15. Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to Auto
addressed to: AutoInfo, Inc.
1600 Route 208
Fair Lawn, New Jersey 07410
Attn: President
6
<PAGE>
with a copy to: Dreyer and Traub
101 Park Avenue
New York, New York 10178
Attn: Kenneth S. Rose, Esq.
If to Wunderlich
addressed to: William Wunderlich
14 Frost Pond Road
Stanford, Connecticut 06903
or at such other address as the one party shall specify to the other party in
writing.
16. Counterparts and Headings. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all which
together shall constitute one and the same instrument. All headings are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
17. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New Jersey.
18. Arbitration. Any disputes arising hereunder shall be submitted to
arbitration before a single arbitrator in New York City under the rules and
regulations of the American Arbitration Association. Any award in such
arbitration proceeding may be enforced in any court of competent jurisdiction.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
AUTOINFO, INC.
By: /s/ Andrew Gaspar
-----------------------
Andrew Gaspar, Chairman
of the Board
/s/ William Wunderlich
-----------------------
William Wunderlich
8
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 10th day of April, 1995, by and
between AutoInfo, Inc. (the "Company"), and William Wunderlich (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure his continued dedication and efforts in such event without undue concern
for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits during the term of his employment
following a Change in Control, in the event his employment is terminated as a
result of, or in connection with, a Change in Control.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Employment Term. (a) The "Employment Term" shall commence on the first
date during the Protected Period (as defined in Section 1 (c) below) on which a
Change in Control occurs (the "Effective Date") and shall expire on the second
anniversary of the Effective Date; provided, however, that on each anniversary
of the Effective Date, the Employment Term shall automatically be extended for
one (1) year unless either the Company or the Executive shall have given written
notice to the other at least ninety (90) days prior thereto that the Employment
Term shall not be so extended.
(b) Notwithstanding anything contained in this Agreement to the contrary,
if the Executive's employment is terminated prior to the Effective Date and the
Executive reasonably demonstrates that such termination (1) was at the request
of a Third Party (as hereinafter defined) who has effectuated a Change in
Control or (2) otherwise occurred in connection with, or in anticipation of, a
Change in Control, then for all purposes of this Agreement, the Effective Date
shall mean the date immediately prior to the date of such termination of the
Executive's employment.
(c) For purposes of this Agreement, the "Protected Period" shall be the two
(2) year period commencing on April 10, 1995; provided, however, that the
Protected Period shall be automatically extended for one (1) year on April 9,
1996 and on each April 9, thereafter unless the Company shall have given written
notice to the Executive at least ninety (90) days prior thereto that the
Protected Period shall not be so extended; and provided further, however, that
notwithstanding any such notice by the Company not to extend, the Protected
Period shall not end if prior to the expiration thereof any Third Party has
indicated an intention or taken steps reasonably calculated to effect a Change
in Control, in which event the Protected Period shall end only after such Third
Party publicly announces that it has abandoned all efforts to effect a Change in
Control.
<PAGE>
2. (a) Subject to the provisions of Section 8 hereof, the Company agrees to
continue to employ the Executive and the Executive agrees to remain in the
employ of the Company during the Employment Term. During the Employment Term,
the Executive shall be employed as the Chief Financial Officer of the Company or
in such other senior executive capacity as may be mutually agreed to in writing
by the parties. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily performed, undertaken
and exercised by persons situated in a similar executive capacity. He shall also
promote, by entertainment or otherwise, the business of the Company.
(b) During the Employment Term, excluding periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during usual business hours to the business and
affairs of the Company to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder. The Executive may (1) serve on corporate,
civil or charitable boards or committees, (2) manage personal investments and
(3) deliver lectures and teach at educational institutions, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities hereunder. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
3. Compensation.
(a) Base Salary. During the Employment Term, the Company agrees to pay or
cause to be paid to the Executive annual base salary at a rate at least equal to
the highest rate of the Executive's annual base salary as in effect at any time
within ninety (90) days preceding the Effective Date, and as may be increased
from time to time (hereinafter referred to as the "Base Salary"). Such Base
Salary shall be payable in accordance with the Company's customary practices
applicable to its executives.
(b) Annual Bonus. In addition to Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Term, an annual bonus
(the "Annual Bonus") in cash at least equal to the average of the annual bonus
paid or payable during the three full fiscal years ended prior to the Effective
Date (or such lesser period for which the annual bonuses were paid or payable to
the Executive) (the "Recent Average Bonus"). Each such Annual Bonus shall be
paid in two semi-anual payments no later than one month following each six and
twelve month anniversary hereunder, unless the Executive shall elect to defer
the receipt of such Annual Bonus.
4. Employee Benefits. During the Employment Term, the Executive shall be
entitled to participate in all employee benefit plans, practices and programs
maintained by the Company and made available to employees generally, including,
without limitation, all pension, retirement, profit sharing, savings, medical,
hospitalization, disability, dental, life or travel accident insurance benefit
plans. Unless otherwise provided herein, the compensation and benefits under,
and the Executive's participation in, such plans, practices and programs shall
be on the same basis and terms as are applicable to employees of the Company
generally, but in no event on a basis less favorable in terms of benefit levels
and coverage than the most favorable of such plans, practices and programs
covering the Executive at any time within ninety (90) days preceding the
Effective Date, or if more favorable, at any time thereafter.
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5. Executive Benefits. During the Employment Term, the Executive shall be
entitled to participate in all executive benefit or incentive compensation plans
maintained or established by the Company for the purpose of providing
compensation and/or benefits to executives of the Company. Unless otherwise
provided herein, the compensation and benefits under, and the Executive's
participation in, such plans shall be on the same basis and terms as other
similarly situated executives of the Company, but in no event on a basis less
favorable in terms of benefit levels or reward opportunities than the most
favorable benefit levels and reward opportunities applicable to the Executive at
any time within ninety (90) days preceding the Effective Date, or if more
favorable, at any time thereafter. No additional compensation provided under any
of such plans shall be deemed to modify or otherwise affect the terms of this
Agreement or any of the Executive's entitlements hereunder.
6. Other Benefits.
(a) Automobile. The Company recognizes that Employee will be required to
incur significant travel in rendering services to the Company hereunder and in
connection therewith the Company during the Employment Term shall provide
Employee with a monthly automobile allowance of $750.00 which the parties agree
shall pay all expenses associated with the operation of an automobile including,
without limitation, maintenance, repair and insurance costs.
(b) Expenses. The Executive shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company.
7. Vacation and Sick Leave. During the Employment Term, at such reasonable
times as the Board shall in its discretion permit, the Executive shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment under this Agreement, provided that:
(a) The Executive shall be entitled to annual vacation in accordance with
the policies as periodically established by the Board for similarly situated
executives of the Company; provided, however, that in no event shall the
Executive's annual vacation entitlement be less than four weeks per year.
(b) The Executive shall be entitled to sick leave (without loss of pay) in
accordance with the Company's policies as in effect from time to time.
8. Termination. During the Employment Term, the Executive's employment
hereunder may be terminated under the following circumstances:
(a) Cause. The Company may terminate the Executive's employment for
"Cause." A termination of employment is for "Cause" if the Executive (1) has
been convicted of a felony or (2) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise;
provided, however that no termination of the Executive's employment shall be for
Cause as set forth in clause (2) above until (i) there shall have been delivered
to the Executive a copy of a written notice setting forth that the Executive was
guilty of the conduct set forth in clause (2) and specifying the particulars
thereof in detail, and (ii) the Executive shall have been provided an
opportunity to be heard by the Board (with the assistance of the Executive's
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counsel if the Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "intentional" unless he has acted, or
failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Company.
Notwithstanding anything contained in this Agreement to the contrary, no failure
to perform by the Executive after a Notice of Termination is given by the
Executive shall constitute Cause for purposes of this Agreement.
(b) Disability. The Company may terminate the Executive's employment after
having established the Executive's Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity which impairs the Executive's
ability to substantially perform his duties under this Agreement which continues
for a period of at least one hundred eighty (180) consecutive days. The
Executive shall be entitled to the compensation and benefits provided for under
this Agreement for any period during Employment Term and prior to the
establishment of the Executive's Disability during which the Executive is unable
to work due to a physical or mental infirmity. Notwithstanding anything
contained in this Agreement to the contrary, until the Termination Date
specified in a Notice of Termination (as each term is hereinafter defined)
relating to the Executive's Disability, the Executive shall be entitled to
return to his position with the Company as set forth in this Agreement in which
event no Disability of the Executive will be deemed to have occurred.
(c) Good Reason. (1) The Executive may terminate his employment for "Good
Reason." For purposes of this Agreement, Good Reason shall mean the occurrence
after a Change in Control of any of the events or conditions described in
Subsections (i) through (viii) hereof:
(i) a change in the Executive's status, title, position or responsibilities
(including reporting responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status, title, position or
responsibilities as in effect immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which, in the Executive's reasonable
judgment, are inconsistent with his status, title, position or responsibilities;
or any removal of the Executive from or failure to reappoint or reelect him to
any of such offices or positions, except in connection with the termination of
his employment for Disability, Cause, as a result of his death or by the
Executive other than for Good Reason;
(ii) a reduction in the Executive's Base Salary or any failure to pay the
Executive any compensation or benefits to which he is entitled within five days
of the date due;
(iii) the Company's requiring the Executive to be based at any place
outside a 30-mile radius from Fair Lawn, New Jersey, except for reasonably
required travel on the Company's business which is not greater than such travel
requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in effect (without
reduction in benefit level, and/or reward opportunities) any material
compensation or employee benefit plan in which the Executive was participating
immediately prior to the Effective Date, including, but not limited to, the
medical coverage afforded the Executive and his family, unless a substitute or
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replacement plan has been implemented which provides substantially identical
compensation or benefits to the Executive;
(v) the insolvency or the filing (by any party, including the Company) of a
petition for bankruptcy of the Company;
(vi) any material breach by the Company of any provision of this Agreement;
(vii) any purported termination of the Executive's employment for Cause by
the Company which does not comply with the terms of Section 8(a); or
(viii) the failure of the Company to obtain an agreement, satisfactory to
the Executive, from any successor or assign of the Company to assume and agree
to perform this Agreement, as contemplated in Section 13 hereof.
(2) Any event or condition described in Section 8(c)(1)(i) through (viii)
which occurs prior to a Change in Control but which the Executive reasonably
demonstrates (A) was at the request of a third party who has indicated an
intention or taken steps reasonably calculated to effect a Change in Control (a
"Third Party"), or (B) otherwise arose in connection with, or in anticipation of
a Change in Control, shall constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred prior to the Change in Control.
(3) The Executive's right to terminate his employment pursuant to this
Section 8(c) shall not be affected by his incapacity due to physical or mental
illness.
(d) Voluntary Termination. The Executive may voluntarily terminate his
employment hereunder at any time.
9. Compensation Upon Termination. Upon termination of the Executive's
employment during the Employment Term, the Executive shall be entitled to the
following benefits:
(a) If the Executive's employment with the Company shall be terminated (1)
by the Company for Cause or Disability, (2) by reason of the Executive's death,
or (3) by the Executive other than for Good Reason or during the 60-day period
commencing on the first anniversary of the date of the Effective Date (the
"Window Period"), the Company shall pay the Executive all amounts earned or
accrued through the Termination Date but not paid as of the Termination Date,
including (i) Base Salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay, and (iv) sick leave
(collectively, "Accrued Compensation"). In addition to the foregoing, if the
Executive's employment is terminated by the Company for Disability or by reason
of the Executive's death, the Company shall pay to the Executive or his
beneficiaries an amount equal to the "Pro Rata Bonus" (as hereinafter defined).
The "Pro Rata Bonus" is an amount equal to the "Highest Annual Bonus" (as
hereinafter defined) multiplied by a fraction the numerator of which is the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365. The "Highest Annual Bonus" is an amount equal to
the greater of (A) the Annual Bonus paid or payable, to the Executive (and
annualized for any fiscal year consisting of less than twelve full months or for
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which the Executive has been employed for less than twelve full months) for the
most recently completed fiscal year during the Employment Term, if any, and (B)
the Recent Average Bonus. The Executive's entitlement to any other compensation
or benefits shall be determined in accordance with the Company's employee
benefit plans and other applicable programs and practices then in effect.
(b) If the Executive's employment with the Company shall be terminated
(other than by reason of death), (1) by the Company other than for Cause or
Disability, (2) by the Executive for Good Reason or (3) by the Executive for any
reason within the Window Period, the Executive shall be entitled to the
following:
(i) the Company shall pay the Executive all Accrued Compensation and a
Pro-Rata Bonus;
(ii) the Company shall pay the Executive as severance pay and in lieu of
any further compensation for periods subsequent to the Termination Date, in a
single payment an amount (the "Severance Amount") in cash equal to either (y) if
the Termination Date occurs on or before October 9, 1995, two times the sum of
(A) the Executive's Base Salary at the highest rate in effect at any time
subsequent to the 90th day prior to the Effective Date and (B) the Highest
Annual Bonus; or (z) if the Termination Date occurs on or after October 10,
1995, one and one-half times the sum of (A) the Executive's Base Salary at the
highest rate in effect at any time subsequent to the 90th day prior to the
Effective Date and (B) the Highest Annual Bonus;
(iii) for 24 months (the "Continuation Period"), the Company shall at its
expense continue on behalf of the Executive and his dependents and beneficiaries
the life insurance, disability, medical, dental and hospitalization benefits
provided (x) to the Executive at any time during the 90-day period prior to the
Effective Date or at any time thereafter or (y) to other similarly situated
executives who continue in the employ of the Company during the Continuation
Period. The coverage and benefits (including deductibles and costs) provided in
this Section 9(b)(iii) during the Continuation Period shall be no less favorable
to the Executive and his dependents and beneficiaries, than the most favorable
of such coverages and benefits during any of the periods referred to in clauses
(x) and (y) above. The Company's obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the Executive obtains any
such benefits pursuant to a subsequent employer's benefit plans, in which case
the Company may reduce the coverage of any benefits it is required to provide
the Executive hereunder so long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than the coverages
and benefits required to be provided hereunder. This Subsection (iii) shall not
be interpreted so as to limit any benefits to which the Executive, his
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits;
(iv) (A) the restrictions on any outstanding incentive awards (including
restricted stock and stock options) granted to the Executive under the Company's
Stock Option Plans or under any other incentive plan or arrangement (including
the Company's 401K Plan) shall lapse and such incentive award shall become 100%
vested, all stock options and stock appreciation rights granted to the Executive
shall become immediately exercisable and shall become 100% vested, and all
performance units granted to the Executive shall become 100% vested and (B) the
Executive shall have the right to require the Company to purchase, for cash, any
shares of unrestricted stock or shares purchased upon exercise of any options,
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at a price equal to the fair market value of such shares on the date of purchase
by the Company.
(v) during the Continuation Period, the Company shall at its expense
continue to provide the Executive with an automobile as provided for in Section
6(a).
(c) The amounts provided for in Sections 9(a) and 9(b)(i) and (ii) shall be
paid within five days after the Executive's Termination Date.
(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 9(b)(iii).
(e) The severance pay and benefits provided for in Sections 9(a) and
9(b)(i) and (ii) shall be in lieu of any other severance pay to which the
Executive may be entitled under any Company severance plan, program or
arrangement or pursuant to the Employment Agreement of even date herewith
between the Company and the Executive.
10. Definitions.
(a) Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(1) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of thirty percent (30%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a Change
in Control. A "Non-Control Acquisition" shall mean an acquisition by
(i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person of
which a majority of its voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary") (ii) the Company or its
Subsidiaries, or (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined); and
(2) The individuals who, as of April 10, 1995 are members of
the Board (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds of the members of the Board; provided, however,
that if the election, or nomination for election by the Company's
common stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent
Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange
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Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization
involving the Company, unless such merger, consolidation or
reorganization is a "Non-Control Transaction." A "Non-Control
Transaction" shall mean a merger, consolidation or
reorganization of the Company where:
(A) the stockholders of the Company,
immediately before such merger, consolidation or
reorganization, own directly or indirectly
immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the
combined voting power of the outstanding voting
securities of the corporation resulting from such
merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization, and
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for such merger,
consolidation or reorganization constitute at least
two-thirds of the members of the board of directors
of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving
Corporation, and
(C) no Person other than (i) the Company,
(ii) any Subsidiary, (iii) any employee benefit plan
(or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation, or any
Subsidiary, or (iv) any Person who, immediately prior
to such merger, consolidation or reorganization had
Beneficial Ownership of thirty percent (30%) or more
of the then outstanding Voting Securities), has
Beneficial Ownership of thirty percent (30%) or more
of the combined voting power of the Surviving
Corporation's then outstanding voting securities.
(ii) A complete liquidation or dissolution of the
Company; or
(iii) An agreement for the sale or other disposition
of all or substantially all of the assets of the Company to
any Person (other than a transfer to a Subsidiary).
(4) Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
then outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of
Voting Securities then outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Persons, provided that if a
Change in Control would occur (but for the operation of this
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sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities
which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in
Control shall occur.
(b) Notice of Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which indicates the specific termination
provision in this Agreement, if any, relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. Any
purported termination by the Company or by the Executive shall be communicated
by written Notice of Termination to the other. For purposes of this Agreement,
no such purported termination of employment shall be effective without such
Notice of Termination.
(c) Termination Date. Etc. For purposes of this Agreement, "Termination
Date" shall mean in the case of the Executive's death, his date of death, or in
all other cases, the date specified in the Notice of Termination subject to the
following:
(1) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice
of Termination is given to the Executive, provided that in the case of
Disability the Executive shall not have returned to the full-time
performance of his duties during such period of at least thirty (30)
days; and
(2) If the Executive's employment is terminated for Good
Reason or during a Window Period Termination, the date specified in the
Notice of Termination shall not be more than sixty (60) days from the
date the Notice of Termination is given to the Company.
11. Unauthorized Disclosure. During the period that the Executive is
actively employed by the Company, the Executive shall not make any Unauthorized
Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean
disclosure by the Executive without the consent of the Board (other than
pursuant to a court order) to any person, other than an employee or director of
the Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive of the Company or as may be legally required, of any material
confidential information obtained by the Executive while in the employ of the
Company (including any material confidential information with respect to any of
the Company's customers or methods of distribution) the disclosure of which is
demonstrably and materially injurious to the Company; provided, however, that
such term shall not include the use or disclosure by the Executive, without
consent, of any information known generally to the public (other than as a
result of disclosure by him in violation of this Section 11) or any information
not otherwise considered confidential and material by a reasonable person
engaged in the same business as that conducted by the Company.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall inure to the benefit of
the Company, its successors and assigns and the Company shall require any
successor or assign to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The term
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"Company" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other
entity' acquiring all or substantially all the assets and business of the
Company (including this Agreement) whether by operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
13. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Executive is
or may be entitled to receive benefits, or (c) the Executive's hearing before
the Board as contemplated in Section 8(a) of this Agreement; provided, however,
that the circumstances set forth in clauses (a) and (b) (other than as a result
of the Executive's termination of employment under circumstances described in
Section l(a)) occurred on or after a Change in Control.
14. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
15. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other agreements
with the Company or any of its subsidiaries. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company or any of its subsidiaries shall be payable in accordance
with such plan or program, except as explicitly modified by this Agreement.
16. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, defense, recoupment, or other right which
the Company may have against the Executive or others.
17. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
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party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
18. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the conflict of law principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in New Castle county of the State of Delaware.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. No Guaranteed Employment. The Executive and the Company acknowledge
that, except as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by the
Company is "at will" and, prior to the Effective Date, may be terminated by
either the Executive or the Company at any time. Moreover, if prior to the
Effective Date, the Executive's employment with the Company terminates, the
Executive shall have no further rights under this Agreement.
21. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
AUTOINFO, INC.
By: /s/ Andrew Gaspar
-----------------------
Andrew Gaspar, Chairman
of the Board of Directors
ATTEST:
/s/ Kenneth S. Rose
------------------------------
Assistant Secretary
/s/ William Wunderlich
-----------------------
William Wunderlich
11
Exhibit 10.I
AUTOINFO, INC. EMPLOYEE PROTECTION
TRUST AGREEMENT
(a) This Agreement made this ____ day of August 1995 by and between
AutoInfo, Inc. ("Company") and United Jersey Bank ("Trustee");
(b) WHEREAS, Company has entered into severance agreements or arrangements
(the "Agreement(s)") with certain of its employees (the "Employee(s)") as listed
in Appendix.
(c) WHEREAS, Company may incur liability under the terms of such
Agreement(s) with respect to the individuals participating in such Agreement(s).
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Employees in such manner and at
such times as specified in the Agreement(s);
(e) WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Agreement(s);
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment Of Trust
(a) Company hereby deposits with Trustee in trust $10, which shall become
the principal of the Trust to be held, administered and disposed of by Trustee
as provided in this Trust Agreement.
(b) Unless otherwise agreed in writing by all Employees, upon a Threatened
Change in Control or a Change in Control (each as such term is herein defined),
Company shall, as soon as possible, but in no event later than two business days
following the Threatened Change in Control or Change in Control, make a
contribution to the Trust in such amount as may be reflected in the Payment
Schedule attached hereto for the purposes of paying to the Employees the
benefits to which they are entitled pursuant to the Agreements (by way of
example, $1,991,534 if the date hereof also constituted the date of a Change in
Control); provided, however, that if such Threatened Change in Control or Change
in Control occurs on or after October 10, 1995, that portion of the contribution
to be allocated to Mr. Wunderlich shall be reduced by $76,087, and provided
further, that if such Threatened Change in Control or Change in Control occurs
<PAGE>
on or after April 10, 1996, that portion of the contribution to be allocated to
Mr. Zecher shall be reduced by an amount then to be determined as the amount by
which payments pursuant to Section 9(b)(ii) of his Agreement have been reduced
as of such date (based on certification from Company's accountants as to the
reduced obligation of Company under Mr. Zecher's Agreement).
(c) The Trust hereby established shall be irrevocable; provided, however
that, (i) in the event the Trust has been funded prior to October 9, 1995
pursuant to Section 1(b) hereof, at any time after October 9, 1995, Company may
withdraw from the principal of the Trust allocable to Mr. Wunderlich an amount
up to $76,087, provided that Mr. Wunderlich's Termination Date (as defined in
his Agreement) has not occurred on or prior to October 9, 1995, and (ii) in the
event the Trust has been funded prior to April 9, 1996 pursuant to Section 1(b)
hereof, at any time after April 9, 1996, Company may withdraw from the principal
of the Trust allocable to Mr. Zecher an amount then to be determined as the
amount by which payments pursuant to Section 9(b)(ii) of his Agreement have been
reduced as of April 10, 1996 (based on certification from Company's accountants
as to the reduced obligation of Company under Mr. Zecher's Agreement), provided
that Mr. Zecher's Termination Date (as defined in his Agreement) has not
occurred on or prior to April 9, 1996. Company shall indemnify and hold harmless
Trustee for any liability resulting from the withdrawal of funds by Company
pursuant to this Section 1(c).
(d) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(e) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Employees and general creditors as herein set forth.
Employees shall have no preferred claim on, or any beneficial ownership interest
in, any assets of the Trust. Any rights created under the Agreement(s) and this
Trust Agreement shall be mere unsecured contractual rights of Employees against
Company. Any assets held by the Trust will be subject to the claims of Company's
general creditors under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.
(f) Company, in its sole discretion, may at any time, or from time to time,
make additional deposits of cash in trust with Trustee to augment the principal
to be held, administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Employee shall have any right or duty to
compel such additional deposits.
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Section 2. Payments to Employees.
(a) Company has delivered to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Employee under the terms
of each Employee's Agreement, and such amounts shall be paid in cash to the
Employee by Trustee upon receipt of notice from the Employee as set forth in
Section 2(b) hereof. Except as otherwise provided herein, Trustee shall make
payments to the Employees in accordance with such Payment Schedule. Trustee
shall make provision for the reporting and withholding of any federal, state or
local taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Agreement(s) and shall pay amounts
withheld to the appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by Company.
(b) Upon receipt by Trustee of notice ("Employee Notice") delivered to
Trustee by an Employee stating that the conditions to the payment to such
Employee of amounts under his Agreement have been satisfied, specifying the
section of his Agreement pursuant to which payments are to be made and the
amounts to which the Employee is entitled, Trustee shall pay to such Employee
the benefits specified in the Employee Notice.
(c) Company may make payment of benefits directly to Employees as they
become due under the terms of the Agreement(s) and shall inform Trustee of such
payments upon the making of such payments. In addition, if the principal of the
Trust, and any earnings thereon, are not sufficient to make payments of benefits
in accordance with the terms of the Agreement(s), Company shall make the balance
of each such payment as it falls due. Trustee shall notify Company where
principal and earnings are not sufficient.
(d) Payments made by Trustee to an Employee pursuant to this Trust
Agreement shall be in satisfaction of Company's obligations as set forth in an
Employee Notice pursuant to which payments are being made.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
When Company is Insolvent.
(a) Trustee shall cease payment of benefits to Employees if Company is
Insolvent. Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) Company is unable to pay its debts as they become due, or (ii)
Company is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
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(1) The Board of Directors of Company shall have the duty to inform
Trustee in writing of Company's Insolvency. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and, pending
such determination, Trustee shall discontinue payment of benefits to Employees.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor alleging
that Company is Insolvent, Trustee shall have no duty to inquire whether Company
is Insolvent. Trustee may in all events rely on such evidence concerning
Company's solvency as may be furnished to Trustee and that provides Trustee with
a reasonable basis for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Employees and shall hold the assets of the
Trust for the benefit of Company's general creditors. Nothing in this Trust
Agreement shall in any way diminish any rights of Employees as general creditors
of the Company with respect to benefits due under the Agreement(s) or otherwise.
(4) Trustee shall resume the payment of benefits to Employees in
accordance with Section 2 of this Trust Agreement only after Trustee has
determined the Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Employees under the terms of the Agreement(s) for the period of such
discontinuance, less the aggregate amount of any payments made to Employees by
Company in lieu of the payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments to Company.
Except as provided in Sections 1(c), 3 and 6 hereof, Company shall have no
right or power to direct Trustee to return to Company or to divert to others any
of the Trust assets before all payment of benefits have been made to Employees
pursuant to the terms of the Agreement(s).
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<PAGE>
Section 5. Investment Authority.
(a) The Trust's assets shall be held, invested and reinvested by Trustee in
its discretion, subject to any investment guidelines provided to Trustee by the
Company's Chief Financial Officer or any person designated in writing by the
Chief Financial Officer (the "Investment Guidelines").
(b) During a Threatened Change in Control Period and following a Change in
Control, the Investment Guidelines may not be amended or modified without the
written consent of all Employees.
(c) In the exercise of its authority and discretion hereunder, and subject
to the Investment Guidelines, Trustee shall have from time to time and at any
time, the power:
(1) to invest and reinvest this Trust, without distinction between
principal and income, in shares of stock (whether common or preferred) or other
evidences of ownership, bonds, debentures, notes or other evidences of
indebtedness, unsecured or secured by mortgages on real or personal property
wherever situated (including any part interest in a bond and mortgage or note
and mortgage whether insured or uninsured), mutual funds and other property, or
part interest in property, real or personal, foreign or domestic, and in order
to reduce the rate of interest rate fluctuations, contracts, as either buyer or
seller, for the future delivery of United States Treasury securities and
comparable federal-government-backed securities;
(2) to sell, convey, redeem, exchange, grant options for the purchase
or exchange of, or otherwise dispose of, any real or personal property, at
public or private sale, for cash or upon credit, with or without security,
without obligation on the part of any person dealing with Trustee to see to the
application of the proceeds of or to inquire into the validity, expediency or
propriety of any such disposition;
(3) to exercise, personally or by general or limited proxy, the right
to vote any shares of stock, bonds or other securities held in this Trust, to
delegate discretionary voting power to trustees of a voting trust for any period
of time, and to exercise, personally or by power of attorney, any other right
appurtenant to any securities or other property of this Trust;
(4) to join in or oppose any reorganization, recapitalization,
consolidation, merger or liquidation, or any plan therefor, or any lease,
mortgage or sale of the property of any organization the securities of which are
held in this Trust; to pay from this Trust any assessments, charges or
compensation specified in any plan of reorganization, recapitalization,
consolidation, merger or liquidation; to deposit any property with any committee
or depository; and to retain any property allotted to this Trust in any
reorganization, recapitalization, consolidation, merger or liquidation;
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<PAGE>
(5) to exercise or sell any conversion or subscription or other rights
appurtenant to any stock, security or other property held in this Trust;
(6) to borrow from any lender (including Trustee in its individual
capacity) money, in any amount and upon any reasonable terms and conditions, for
purposes of this Agreement, and to pledge or mortgage any property held in this
Trust to secure the repayment of any such loan;
(7) to compromise, settle or arbitrate any claim, debt, or obligation
of or against this Trust; to enforce or abstain from enforcing any right, claim,
debt or obligation, and to abandon any property determined by it to be
worthless;
(8) to make loans of securities held in this Trust to registered
brokers and dealers upon such terms and conditions as are permitted by
applicable law and regulations, and in each instance to permit the securities so
lent to be registered in the name of the borrower or a nominee of the borrower,
provided that in each instance the loan is adequately secured and neither the
borrower nor any affiliate of the borrower has discretionary authority or
control with respect to the assets of this Trust involved in the transaction or
renders investment advice with respect to those assets; and
(9) to invest and reinvest any property in this Trust in any other
form or type of investment not specifically mentioned in this Section.
(d) In no event may Trustee invest in securities (including stock or rights
to acquire stock) or obligations issued by Company, other than a de minimis
amount held in common investment vehicles in which Trustee invests. Except as
provided in Section 5(b) hereof with respect to the amendment of the Investment
Guidelines following a Change in Control, all rights associated with assets of
the Trust shall be exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with any Employee.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be returned to Company.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within sixty (60) days following the close of each calendar
year and within sixty (60) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last preceding
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<PAGE>
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims; provided, however, that Trustee shall incur
no liability to any person for any action pursuant to a direction, request or
approval given by Company or an Employee which is contemplated by, and in
conformity with, the terms of the Agreement(s) or this Trust and is given in
writing by Company or an Employee. In the event of a dispute with respect to
this Trust Agreement between Company and any Employee or between Employees,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) For purposes of this Trust Agreement, if Trustee receives notification
in writing from Company or an Employee that a Change in Control or a Threatened
Change in Control has occurred, Trustee may rely on such notification; provided,
however, that the absence of such notification from Company or an Employee shall
not be construed for purposes of this Trust Agreement as meaning that a Change
in Control or a Threatened Change in Control has not occurred if in fact a
Change in Control or a Threatened Change in Control has occurred; and provided
further, that Trustee shall not be liable for any action taken or failure to
act, in either case which is consistent with such notification or lack of
notification.
(c) If Trustee undertakes or defends any litigation arising in connection
with this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
(d) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(e) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
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<PAGE>
(f) Trustee shall have, without exclusion, all powers conferred on Trustees
by applicable law, unless expressly provided otherwise herein, provided,
however, that if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to a loan any person the proceeds of
any borrowing against such policy.
(g) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Fees and Expenses of Trustee.
Trustee shall receive from Company as compensation for its services as
Trustee such amounts as may, from time to time, be agreed upon in writing
between Company and Trustee. If Company does not pay such fees and expenses in a
reasonably timely manner, Trustee may obtain payment from the Trust.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective sixty (60) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on sixty (60) days' notice or upon
shorter notice accepted by Trustee; provided, however, that Trustee may not be
removed by Company during a Threatened Change in Control Period or during the
three-year period following a Change in Control without the written consent of
all Employees.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within sixty (60) days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date or resignation or
removal under paragraph(s) (a) or (b) of this Section 10. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
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<PAGE>
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trustee powers under state law, as
a successor to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, who shall have
all the rights and powers of the former Trustee, including ownership rights in
the Trust assets. The former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to evidence the
transfer.
(b) Notwithstanding the foregoing, if Trustee resigns or is removed in
accordance with Section 10(a) or (b) hereof during a Threatened Change in
Control Period or following a Change in Control, the appointment of a successor
Trustee shall be subject to the written consent of all Employees.
(c) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from
another past event, or any condition existing at the time it becomes successor
Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Agreement(s) or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which Employees are no
longer entitled to benefits pursuant to the terms of the Agreement(s). Upon
termination of the Trust any assets remaining in the Trust shall be returned to
Company.
(c) Upon written approval of Employees entitled to payment of benefits
pursuant to the terms of the Agreement(s), Company may terminate this Trust
prior to the time all benefit payments under the Agreement(s) have been made.
All assets in the Trust at termination shall be returned to Company.
(d) Notwithstanding Sections 12(a)-(c) hereof, no provision of this Trust
Agreement may be amended during a Threatened Change in Control Period or
following a Change in Control without the written consent of all Employees, and
no amendment of this Trust Agreement shall be effective without the written
consent of all Employees if any Employee reasonably demonstrates that such
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<PAGE>
amendment was at the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Employees under this Trust Agreement may not be
anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of New Jersey.
Section 14. Definitions.
(a) A "Change in Control" means the occurrence during the term of this
Trust Agreement of:
(1) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty percent (30%) or more of the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i)
an employee benefit plan (or a trust forming a part thereof) maintained by (A)
the Company or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (for purposes of this definition, a
"Subsidiary") (ii) the Company or its Subsidiaries, or (iii) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined);
(2) The individuals who, as of April 10, 1995 are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least two-thirds
of the members of the Board; provided, however, that if the election, or
nomination for election by the Company's common stockholders, of any new
director was approved by a vote of at least two-thirds of the Incumbent Board,
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<PAGE>
such new director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization is a
"Non-Control Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the Company where:
(A) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or reorganization, at
least fifty percent (50%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger, consolidation
or reorganization, and
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds
of the members of the board of directors of the Surviving Corporation,
or a corporation beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust forming a
part thereof) maintained by the Company, the Surviving Corporation, or
any Subsidiary, or (iv) any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of
thirty percent (30%) or more of the then outstanding Voting
Securities), has Beneficial Ownership of thirty percent (30%) or more
of the combined voting power of the Surviving Corporation's then
outstanding voting securities.
(ii) A complete liquidation or dissolution of the Company; or
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(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
(4) Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities then outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Persons, provided that if a Change in Control would occur (but for the operation
of this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which increases
the percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
(b) A "Threatened Change in Control" means the occurrence of any of the
following events (but no event other than the following events), except as
otherwise provided below:
(1) Any Person initiates a tender offer or exchange offer to acquire
securities of Company representing thirty percent (30%) or more of the combined
voting power of Company's then-outstanding securities, or
(2) Any Person solicits proxies for the election of directors within
any single twelve (12)-month period representing at least one third (rounded
down to the nearest whole number) of the number of directors then on the Board,
whose election or nomination is not approved by a majority of the Incumbent
Board then serving as members of the Board, or
(3) Any Person proposes the merger, consolidation, transfer, sale,
liquidation, or dissolution of Company.
Notwithstanding the foregoing, a Threatened Change in Control shall not be
deemed to occur pursuant to this Section 14(b) solely because of an acquisition,
proposal, or tender offer made or effected in connection with a Non-Control
Acquisition.
(c) A "Threatened Change in Control Period" means the period commencing on
the date that a Threatened Change in Control has occurred and ending upon the
earliest of:
(1) the date when the tender offer or exchange offer described in
Section 14(b)(1) is terminated without any securities described therein of
Company being purchased thereunder, or
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(2) the date when any Person described in Section 14(b)(2) fails to
effect the election within any single twelve (12)-month period of one third or
more of the number of directors then on the Board, whose election or nomination
is not approved by a majority of the Incumbent Board then serving as members of
the Board, or
(3) the date when the Person making the proposal described in Section
14(b)(3) publicly announces or informs Company in writing that such proposal has
been terminated or abandoned, or
(4) the date a Change in Control occurs.
Section 15. Effective Date.
This Trust Agreement shall be effective as of the day and year first above
written.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be executed as of the day and year first above written.
AUTOINFO, INC. UNITED JERSEY BANK
By:__________________________ By:__________________________
Title:_______________________ Title:_______________________
95972
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PAYMENT SCHEDULE
Scott Zecher
("Employee")
The following amounts have been or will be contributed to the AutoInfo,
Inc. Employee Protection Trust for the benefit of Employee and have initially
been or will be allocated for the payment of benefits as follows:
Item 1. $1,287,184 for payment in respect of benefits as provided in
Sections 9 and 11 of the Employee's Agreement in accordance with the
instructions set forth in an Employee Notice in accordance with
Section 2(b) of the Trust Agreement, provided that
(a) if such contribution is made on or after April 10, 1996, the
amount of contribution shall be reduced by, or
(b) if such contribution has been made (and if Mr. Zecher's
Termination Date (as defined in his Agreement) has not occurred on or
prior to April 9, 1996, Company may withdraw
an amount then to be determined as the amount by which payments
pursuant to Section 9(b)(ii) of his Agreement have been reduced as of
such date (based on certification from Company's accountants as to the
reduced obligation of Company under Mr. Zecher's Agreement); and
Item 2. $200,000 for payment in respect of benefits as provided in Section
14 of the Employee's Agreement in accordance with the instructions set
forth in an Employee Notice in accordance with Section 2(b) of the
Trust Agreement.
<PAGE>
PAYMENT SCHEDULE
William Wunderlich
("Employee")
The following amounts have been or will be contributed to the AutoInfo,
Inc. Employee Protection Trust for the benefit of Employee and have initially
been or will be allocated for the payment of benefits as follows:
Item 1. $304,350 for payment in respect of benefits as provided in Section
9 of the Employee's Agreement in accordance with the instructions set
forth in an Employee Notice in accordance with Section 2(b) of the
Trust Agreement, provided that
(a) if such contribution is made on or after October 10, 1995, the
amount of contribution shall be reduced by $76,087, or
(b) if such contribution has been made (and if Mr. Wunderlich's
Termination Date (as defined in his Agreement) has not occurred) on or
prior to October 9, 1995, then at any time after October 9, 1995,
Company may withdraw $76,087; and
Item 2. $200,000 for payment in respect of benefits as provided in Section
13 of the Employee's Agreement in accordance with the instructions set
forth in an Employee Notice in accordance with Section 2(b) of the
Trust Agreement.
<PAGE>
Appendix
Employment Agreement, dated as of April 10, 1995, by and between AutoInfo, Inc.
and William Wunderlich
Employment Agreement, dated as of April 10, 1995, by and between AutoInfo, Inc.
and Scott Zecher
PROMISSORY NOTE
THIS NOTE IS NON-NEGOTIABLE
$466,797.64 New York, New York
April 28, 1995
SCOTT ZECHER ("Zecher"), residing at 1341 Hudson Road, Teaneck, New Jersey
07666, FOR VALUE RECEIVED, hereby promises to pay to AUTOINFO, INC. a Delaware
corporation ("Noteholder"), at the offices of the Company at 1600 Route 208,
Fair Lawn, New Jersey 07410 (or such other address as is designated in writing
by the Noteholder) on May 31, 1996 (or such sooner time as provided below) the
principal amount of Four Hundred Sixty Six Thousand Seven Hundred Ninety Seven
and 64/100 ($466,797.64) Dollars in lawful money of the United States of America
without interest.
If this Promissory Note, or any payment hereunder, falls due on a Saturday,
Sunday or a New York public holiday, this Promissory Note shall fall due or such
payment shall be made on the next succeeding business days.
Zecher waives presentment for payment, demand, notice of nonpayment, notice
of protest and protest of this Promissory Note, and all of the notices not
expressly provided for herein in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Promissory Note.
This Promissory Note is not subject to setoff.
Upon the occurrence of any of the following specified Events of Default
(each an "Event of Default"):
1. Zecher pursuant to or within the meaning of Title 11, U.S. Code or any
similar federal or state law for the relief of debtors (a "Bankruptcy Law"):
A. commences a voluntary case or proceeding;
B. consents to the entry of an order for relief against it in an
involuntary case or proceeding;
C. consents to the appointment of a custodian, receiver or other
similar official for it or for all or substantially all of its
property; or
D. makes a general assignment for the benefit of its creditors.
THEN, AND IN ANY SUCH EVENT, AND AT ANY TIME THEREAFTER IF ANY EVENT OF DEFAULT
SHALL THEN BE CONTINUING, THE NOTEHOLDER BY WRITTEN NOTICE TO ZECHER, MAY
DECLARE THE PRINCIPAL OF THIS NOTE TO BE DUE, WHEREUPON THE SAME SHALL FORTHWITH
BECOME DUE AND PAYABLE.
-1-
<PAGE>
In the event that Zecher's employment by AutoInfo, Inc. is terminated,
voluntarily or involuntarily and with or without cause, the entire unpaid
principal amount of this Note may be declared due and payable by the Noteholder
upon one-hundred eighty (180) days written notice to Zecher.
This Promissory Note is the document referred to in the Security and Pledge
Agreement between Zecher and the Noteholder of even date herewith and is further
subject to the provisions thereof.
All notices provided for herein shall be deemed given if sent by certified
mail, return receipt requested, to the address of the party set forth above, or
to such other address as designated in writing to the other party.
/s/ Scott Zecher
------------------------
Scott Zecher
-2-
<PAGE>
SECURITY AND PLEDGE AGREEMENT
AGREEMENT, dated as of April 28, 1995 by and between Scott Zecher
("Zecher") and Autolnfo, Inc., a Delaware corporation ("Auto").
WHEREAS, Zecher has on the date hereof delivered to Auto a promissory note
in the principal amount of $466,797.64, a copy of which is annexed hereto as
Exhibit A (the "Note"), evidencing a loan in the principal amount of $466,797.64
from Auto to Zecher in connection with Zecher's exercise of options to acquire
Auto Common Stock; and
WHEREAS, Zecher has agreed to pledge his 216,799 shares of Auto Common
Stock issuable in connection with the option exercise (the "Shares") as security
for the repayment of the debt evidenced by the Note.
NOW, THEREFORE, the parties hereto agree as follows:
1. Security Interest in Pledged Shares.
(a) Zecher hereby grants to Auto, as collateral security for the
performance of his obligations under the Note, a security interest in
the Shares and all profits, dividends and other distributions with
respect to or other rights in connection with the Shares
(collectively, the "Collateral").
(c) Zecher hereby delivers transfers, conveys and assigns to, and pledges
and hypothecates with Auto the shares and certificate(s) representing
the Shares, accompanied by signature guaranteed stock power(s) duly
executed in blank in proper form for transfer.
2. Sale of Security in Satisfaction of Note.
In the event Zecher elects to repay the Note out of the proceeds of the
Shares he shall advise Auto to such effect in writing. Upon such event the
Shares shall be delivered to Dreyer and Traub, as escrow agent ("D&T"). D&T
<PAGE>
shall deliver the Shares to such selling broker as Zecher shall designate, upon
receipt in writing from such broker an undertaking that the net proceeds of the
sale of the Shares will be delivered to D&T, as escrow agent. Upon receipt of
such proceeds, D&T shall deliver to Auto a check in the amount of any unpaid
principal and accrued interest on the Note then due and payable plus any other
amount then due and owing from Zecher to Auto. The remainder, if any, shall be
paid by check to Zecher.
3. Rights and Remedies of Auto.
If at any time hereafter, Zecher shall fail to make payment when due under
the Note (an "Event of Default") and such Event of Default shall continue for a
period of fifteen days after written notice thereof to Zecher, then:
3.1 Voting Dividends, etc.
Auto shall have all voting and consensual powers pertaining to the Shares.
In order to permit Auto to exercise such voting or other powers, Zecher shall,
upon the written request of Auto, from time to time execute and deliver to Auto
appropriate proxies.
3.2 Registration in Name of Auto.
Auto shall have the right at any time and from time to time thereafter to
transfer any of the Shares into its name or the name of a nominee or nominees.
Nothing contained in this Section 3.2 shall deprive Zecher of any rights of
redemption provided by law.
3.3 Sale of Collateral.
In addition to any other rights and remedies which Auto may have, it may
immediately and without demand exercise any and all rights and remedies granted
to a secured party upon the occurrence of an Event of Default under the Uniform
Commercial Code.
<PAGE>
3.4 Duty with Respect to Collateral.
The duty of Auto and D&T with respect to the Collateral shall be solely to
use reasonable care in the physical custody and preservation thereof, and Auto
and D&T shall not be under any obligation to take any action in regard to the
Collateral or any part thereof, except as provided herein.
3.5 Application of Proceeds.
Auto shall apply the purchase price or other moneys collected, received or
held by it in respect of the Collateral in the following order: (a) to the
payment of all costs, expenses, liabilities and advances, including reasonable
attorneys' fees and disbursements, incurred or made by Auto in the protection,
exercise, or enforcement of its interests, rights, powers, or remedies hereunder
upon the occurrence of any Event of Default; (b) to the payment of the unpaid
principal of and accrued interest on the Note then due and payable; (c) to the
payment of any other amounts due from Zecher to Auto; and (d) the remainder, if
any, to Zecher.
3.6 Return of Collateral.
Auto shall return to Zecher all Collateral then held by it pursuant to this
Agreement and any transfer documents executed by Zecher with respect thereto, as
soon as there shall be no amounts unpaid or otherwise owing to Auto under the
Note or this Agreement. The Collateral so returned shall not, as the result of
any transaction entered into or action taken by Auto, be subject to any lien,
encumbrance, attachment or other state of facts which result in any diminution
of the title of Zecher therein, but shall otherwise be returned without recourse
upon or warranty by Auto.
4. Miscellaneous.
4.1 Auto Appointed Attorney-in-Fact.
Zecher hereby constitutes and appoints, effective as of the occurrence of
an Event of Default and while the same is continuing, Auto as attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument, including without limitation, financing
<PAGE>
statements and instruments of assignment in the ease of a sale of Collateral
upon default, which Auto may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
If Zecher shall fail to do any act or thing which it has covenanted to do
hereunder, Auto as attorney-in-fact or in its own right, may (but shall not be
obligated to) do the same or cause it to be done.
4.2 No Waiver, etc.
No action taken by Auto shall be deemed to constitute a waiver by Auto of
compliance by Zecher with any representation, warranty, covenant, or agreement
contained in this Agreement. No course of dealing between the parties hereto and
no failure or delay on the part of Auto in exercising any right, power, or
privilege hereunder shall operate as a waiver thereof, and no single or partial
exercise of any such right, power or privilege. The rights and remedies provided
in this Agreement are cumulative and are in addition to, and not exclusive of,
any other rights or remedies provided by law, in equity, by statute, or
otherwise. No notice to or demand on Zecher in any case shall entitle Zecher to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Auto to take any other or further action in
any circumstances without notice or demand. The waiver of a breach of any
provision of this Agreement or of an Event of Default shall not operate or be
construed as a waiver of any subsequent breach or Event of Default.
4.3 Notices.
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties hereto as follows: to Zecher at 1341
Hudson Road, Teaneck, New Jersey 07666; to Auto at 255 West Spring Valley
Avenue, Maywood, New Jersey 07607, Attn: Chairman; with a copy to Dreyer and
<PAGE>
Traub, 101 Park Avenue, New York, New York 10178, Attn: Kenneth S. Rose, Esq.
4.4 Severability.
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the remainder of this Agreement or
the reminder of such provision. If any provision of this Agreement is so broad
as to be unenforceable, such provision shall be interpreted to be only so broad
as is enforceable.
4.5 Section and Other Headings.
The section and other headings contained in this Agreement are for
reference purposes only and shall not be deemed to be a part of this Agreement
or to affect the meaning or interpretation of this Agreement.
4.6 Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall be deemed to
be one and the same instrument.
4.7 Choice of Law.
This agreement shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the
date first above written.
/s/ Scott Zecher
---------------------------------
Scott Zecher
AUTOINFO, INC.
By: /s/ William Wunderlich
---------------------------------
William Wunderlich, Chief Financial
Officer
Exhibit 11
AUTOINFO, INC.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
Years ended May 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary and Fully Diluted Earnings (Loss):
Loss from continuing operations $(2,174,403) $ (218,565) $ (317,761)
Income from discontinued operations 1,614,936 2,239,313 2,053,959
Gain on sale of discontinued operations 8,885,688 -- --
----------- ----------- -----------
Earnings from operations applicable
to Common Stock $ 8,326,221 $ 2,020,748 $ 1,736,198
----------- ----------- -----------
Shares:
Weighted average number of common
shares outstanding 7,307,657 7,177,564 7,119,336
Added shares issuable from assumed
exercise of options and warrant 102,891 239,157 222,708
----------- ----------- -----------
Weighted average number of common
shares as adjusted 7,410,548 7,416,721 7,342,044
----------- ----------- -----------
Primary and Fully Diluted Earnings (Loss):
From continuing operations $ (.29) $ (.03) $ (.04)
From discontinued operations .22 .30 .28
From gain on sale of discontinued
operations 1.19 -- --
----------- ----------- -----------
Earnings per common share $ 1.12 $ .27 $ .24
=========== =========== ===========
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into AutoInfo, Inc.'s previously filed
Registration Statement File No. 33-34442.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
August 22, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 521,868
<SECURITIES> 38,314,489
<RECEIVABLES> 647,747
<ALLOWANCES> (63,772)
<INVENTORY> 0
<CURRENT-ASSETS> 39,540,406
<PP&E> 1,956,549
<DEPRECIATION> (1,263,765)
<TOTAL-ASSETS> 42,357,099
<CURRENT-LIABILITIES> 963,702
<BONDS> 4,000,000
<COMMON> 77,563
0
0
<OTHER-SE> 30,043,223
<TOTAL-LIABILITY-AND-EQUITY> 42,357,099
<SALES> 4,797,531
<TOTAL-REVENUES> 4,797,531
<CGS> 0
<TOTAL-COSTS> 6,121,975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 315,908
<INCOME-PRETAX> (2,809,026)
<INCOME-TAX> (634,623)
<INCOME-CONTINUING> (2,174,403)
<DISCONTINUED> 10,500,624
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,326,221
<EPS-PRIMARY> 1.120
<EPS-DILUTED> 1.120
</TABLE>
