MOTOR CLUB OF AMERICA
95 ROUTE 17 SOUTH
PARAMUS, NEW JERSEY 07653
[LOGO]
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 9, 1999
------------
To The Holders of Common Stock of Motor Club of America:
Notice is Hereby Given that the Annual Meeting of Stockholders of Motor
Club of America (the Company) will be held at the Marriott at Glenpointe Hotel,
100 Frank W. Burr Boulevard, Teaneck, New Jersey, on Wednesday, June 9, 1999, at
10:00 o'clock A.M. (New Jersey Time), for the following purposes:
1. To elect eight (8) directors of the Company to hold office until
the 2000 Annual Meeting of Stockholders and until their successors shall
have been duly elected and qualified;
2. To approve the 1999 Stock Option Plan;
3. To amend Article FOURTH of the Restated and Amended Certificate
of Incorporation of the Company to add 10,000,000 shares of undesignated
preferred stock to the shares of capital stock the Company is authorized
to issue; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 29,
1999, as the record date for the determination of the holders of Common Stock
entitled to notice of and to vote at the meeting.
If you cannot be present in person, your management would greatly
appreciate your filling in, signing and returning the enclosed proxy, in the
envelope provided for the purpose, in time to arrive no later than June 8, 1999.
Any proxy not received by that date may arrive too late to be voted at the
meeting.
By Order of the Board of Directors
Peter K. Barbano
Secretary
Dated: Paramus, New Jersey
May 6, 1999
<PAGE>
MOTOR CLUB OF AMERICA
95 ROUTE 17 SOUTH
PARAMUS, NEW JERSEY 07653
---------------
PROXY STATEMENT
---------------
Annual Meeting of Stockholders
June 9, 1999
------------
This statement is furnished in connection with the solicitation of proxies
by the management of Motor Club of America for use at the 1999 Annual Meeting of
Stockholders to be held on June 9, 1999, and at any and all adjournments
thereof. The Board of Directors has selected the close of business on April 29,
1999 as the record date, for purposes of determining shareholders entitled to
notice of, and entitled to vote at the Annual Meeting, and this proxy statement
is being mailed to such shareholders on or about May 6, 1999. On the record
date, there were 2,116,429 shares of Common Stock of the Company outstanding,
all of the par value of $.50 per share and each entitled to one vote on any
matter to be voted on at the meeting.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is present at the
meeting.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the meeting, the shares represented thereby will be voted. The
attendance at the meeting by any stockholder who has previously given a proxy
will not have the effect of revoking the proxy; however, any such stockholder
may vote in person by delivering written notice of revocation of the proxy to
the Secretary of the Company prior to the exercise of the proxy.
Election of Directors
At the meeting eight directors are to be elected to hold office until the
2000 Annual Meeting of Stockholders, and until their successors have been duly
elected and qualified. It is the intention of the persons named in the enclosed
form of proxy to vote the shares represented thereby for the election of the
following nominees as directors of the Company. Each of the nominees is a member
of the Board of Directors of the Company. The principal occupations of Messrs.
Galatin, Fried, Lobeck, McWhorter, McWhorter, Jr. and Swanner for the last five
years appear below; Messrs. Gilbert and Haveron devote substantially all of
their business time to the affairs of the Company or one or more other companies
in the Motor Club of America Group, and have been active in the business of one
or more companies in the Motor Club of America Group for more than five years.
Should any of these nominees be unable or unwilling to accept nomination or
election for any presently unknown reason, it is the intention of the persons
named in this proxy to vote for such other person or persons as the management
of the Company may nominate.
<PAGE>
<TABLE>
<CAPTION>
Common Stock of the
Company Owned
Beneficially at
Years in Which March 31, 1999
Nominee ---------------------------
Has Served
as Director of Number
This Company of Percent
Name and Age Principal Occupations (Inclusive)(A) Shares(B)(C) of Class (C)
- ----------------------------- --------------------------------------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Archer McWhorter, 77(D) Chairman of the Board of Directors of 1986-1999 301,635 14.15
Companies in the Motor Club of America Group;
from 1995 to March 1997, Director of National
Car Rental Systems, Inc. and affiliated
corporations, a car rental enterprise
("NCR"); from 1995 to February 1997,
one-third owner of Santa Ana Holdings, Inc.
("Santa Ana"), which exchanged its 90% stock
interest in NCR for stock in Republic
Industries, Inc. (now known as AutoNation,
Inc.); from February 1997 to February 1998,
consultant of NCR; President (to January
1996) of Acceptance, Inc., a finance company
Stephen A. Gilbert, 60(E) President and Chief Executive Officer of 1984-1999 32,375 1.52
Companies in the Motor Club of America Group
Robert S. Fried, 69(E) Retired Senior Vice President of Companies in 1956-1999 1,000 .05
The Motor Club of America Group
William E. Lobeck, Jr., 59 From March 1997, President and COO of the 1986-1999 289,601 13.59
Automotive Rental Group of AutoNation, Inc.;
from 1995 to May 1997, CEO, President and
Director of NCR; from 1995 to February 1997,
one-third owner of Santa Ana, which exchanged
its 90% stock interest in NCR for stock in
Republic Industries, Inc. (now known as
AutoNation, Inc.); President of The Numbered
Car Co., a car dealership
Alvin E. Swanner, 70 From 1995 to March 1997, Chairman of the 1986-1999 301,634 14.15
Board and Director of NCR; from 1995 to
February 1997, one-third owner of Santa Ana
which exchanged its 90% stock interest in NCR
for stock in Republic Industries, Inc. (now
known as AutoNation, Inc.); from February
1997 to February 1998, consultant of NCR;
President of Swanner & Associates, Inc.,
formerly a car rental company; President of
Chateau, Inc., a golf and country club, and
Chateau Development Company, Inc., a
development company; President of 135 St.
Charles, Inc., a hotel development company
Malcolm Galatin, 59 Professor of Economics, The City College of 1987-1999 -- --
The City University of New York
Patrick J. Haveron, 37 (E) Executive Vice President and Chief Financial 1994-1999 13,100 .61
Officer of Companies in the Motor Club of
America Group; Treasurer of Motor Club of
America Insurance Company and Preserver
Insurance Company
Archer McWhorter, Jr., 55 (D) Associate Professor, University of Houston 1998,1999 -- --
</TABLE>
2
<PAGE>
Following is stock ownership information of officers of the Company who are
listed in the compensation tables that follow, but who are not included in the
Director tabulations above.
<TABLE>
<CAPTION>
Common Stock of the
Company Owned Beneficially
at March 31, 1999
----------------------------
Number of Percent
Name Title Shares (B)(C) of Class (C)
- ----------------------- ------------------------------------ ------------ --------------
<S> <C> <C> <C>
Myron Rogow, 56 ...................... Vice President--Underwriting 5,000 .23
Charles Pelosi, 54 ................... Vice President--Information Services 8,500 .40
G. Bruce Patterson, 55 ............... Vice President--Marketing 8,500 .40
and Administration
</TABLE>
Following is stock ownership information by persons known to the Company to
be a beneficial owner of more than five percent of such stock.
<TABLE>
<CAPTION>
Name and Address
------------------
<S> <C> <C>
Archer McWhorter ....................................................... 301,635 14.15
1600 Smith Street
Houston, Texas 77002
William E. Lobeck, Jr. ................................................. 289,601 13.59
110 S.E. 6th Street
Fort Lauderdale, Florida 33301
Alvin E. Swanner ....................................................... 301,634 14.15
28 Chateau Haut Brion Street
Kenner, Louisiana 70065
Heartland Advisors, Inc. ............................................... 172,900 8.11
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
</TABLE>
Following is stock ownership information by all 13 directors and officers
of the Company as a group.
<TABLE>
<CAPTION>
Title of Class
----------------
<S> <C> <C>
Motor Club of America Common Stock (par value $.50 per share) .......... 964,790 45.26
</TABLE>
- ----------
(A) Includes years during any portion of which the nominee served as
director.
(B) As reported to the Company by the named persons. The nature of
beneficial ownership or shares shown in this Proxy Statement is sole
voting and investment power, except Mr. Archer McWhorter's shares are
owned by a family trust of which he is trustee, 2,000 of Mr. Lobeck's
shares are owned by two trusts of which he is trustee, and the shares
of Heartland Advisors, Inc. is based on a Schedule 13G dated January 28,
1999, which indicates sole dispositive power as to 172,900 shares but
only sole voting power as to 26,900 of such shares.
(C) Includes stock options for Common Stock which are currently exercisable
or exercisable within 60 days of March 31, 1999; for Mr. Gilbert 4,375
shares, for Mr. Haveron 3,750 shares, and for Messrs. Rogow, Pelosi and
Patterson 1,250 shares each.
(D) Archer McWhorter is the father of Archer McWhorter, Jr.
(E) Member of Finance Committee
One of the Company's insurance subsidiaries, MCA Insurance Company (MCAIC)
was declared insolvent on October 23, 1992 as a result of claims of Hurricane
Andrew, which struck the South of Florida coast on
August 24, 1992. The Company wrote off in 1992 its investment in MCAIC and its
subsidiaries, Property-Casualty Company of MCA and Fairmount Central Urban
Renewal Corporation. The directors and executive officers of the Company, with
the exception of Malcolm Galatin and Archer McWhorter, Jr., were directors and
executive officers of MCAIC.
3
<PAGE>
Committees of the Board
The Executive Committee serves as a policy-making and supervisory body for
all operations of the Company, has all the eligible powers of the Board of
Directors between meetings of the Board and also acts as the nominating
committee. Shareholders who wish to suggest nominees for director should write
to the Secretary of the Company at 95 Route 17 South, Paramus, New Jersey
07653-0931, stating in detail the qualifications of such persons for
consideration by the Committee.
The Compensation and Evaluation Committee administers executive
compensation and bonus plans; it met one time during 1998.
The Stock Option Plan Committee administers the 1987 and 1992 Stock Option
Plans and met two times during 1998.
The Executive and Stock Option Plan Committees are comprised of Archer
McWhorter, William E. Lobeck, Jr. and Alvin E. Swanner. The Compensation and
Evaluation Committee is comprised of William E. Lobeck, Jr. and Alvin E.
Swanner.
The Audit Committee, which is comprised of Malcolm Galatin and Robert S.
Fried, assesses the Company's risk of fraudulent financial reporting and
management's program to monitor compliance with the code of corporate conduct,
participates in the recommendation of independent public accountants and reviews
the audit plans of the internal auditor and independent public accountants. The
Audit Committee met three times during 1998.
The Board of Directors of the Company met on five occasions during 1998.
During 1998, none of the incumbent directors attended less than 75% of the
aggregate of (1) the total number of meetings of the Board ( held during the
period for which he has been a director) and (2) the total number of meetings of
all committees of the Board on which he served (during the period that he
served).
Directors' Compensation
Each non-employee director receives $1,000 per month from Companies in the
Motor Club of America Group. Directors who are also employees do not receive any
amount, in addition to their compensation, for being directors. Each member of
the Executive Committee receives $4,000 per month from Companies in the Motor
Club of America Group; and each non-employee member of the Audit and Finance
Committees receives $250 per meeting.
4
<PAGE>
Executive Compensation Tables
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of the
chief executive officer and each of the four most highly compensated executive
officers of the Company for services in all capacities to the Company and its
subsidiaries.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD (2)
-------------------- ----------
(A) (B) (C) (D) (E) (F)
SECURITIES
UNDERLYING ALL OTHER
OPTIONS/ COMPEN-
NAMES AND PRINCIPAL SALARY BONUS (1) SAR'S (3) SATION (4)
POSITION YEAR ($) ($) (#) ($)
- ---------------------------- ------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Stephen A. Gilbert ................ 1998 170,962 121,000 7,500 15,010
President and Chief 1997 165,000 121,000 17,500 14,760
Executive Officer 1996 155,000 89,238 0 9,760
Patrick J. Haveron ................ 1998 140,192 100,000 5,000 7,515
Executive Vice President 1997 135,000 100,000 15,000 6,486
and Chief Financial Officer 1996 105,000 73,119 0 5,240
Myron Rogow ....................... 1998 130,962 42,435 2,500 7,422
Vice President- 1997 125,000 42,951 5,000 6,200
Underwriting 1996 125,000 30,000 0 6,200
Charles Pelosi .................... 1998 96,833 35,362 2,500 5,690
Vice President- 1997 92,135 35,792 5,000 5,224
Information Services 1996 92,135 25,000 0 5,224
G. Bruce Patterson ................ 1998 84,230 38,900 2,500 4,661
Vice President-- 1997 74,615 39,372 5,000 3,547
Marketing and Administration 1996 70,000 27,500 0 3,803
- -------------------
</TABLE>
(1) Bonus amounts shown were earned with respect to the year indicated but
were paid in the following year.
(2) The Company does not have a restricted stock award plan or a long term
incentive award plan other than certain stock option plans.
(3) Amounts shown represent the number of stock options granted each year;
there are no stock appreciation rights.
(4) Amounts shown include (a) Company contributions for the account of each
named executive officer under the 401(k) Plan, a tax-qualified defined
contribution plan open to all salaried employees of the Company and
certain subsidiaries upon completion of one year of service, (b) the value
of certain group life insurance premiums; and (c) in 1997 and 1998, for
Mr. Gilbert and Mr. Haveron, contributions to a non-qualified deferred
compensation plan.
5
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the named executive
officers of the Company in 1998. Pursuant to Securities and Exchange Commission
rules, the table also shows the value of the options granted at the end of the
option terms (five years) if the stock price were to appreciate annually by 5%
and 10%, respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table. The table also indicates that if the
stock price of the option does not appreciate, there will be no increase in the
potential realizable value of the options granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- --------------------------------------------------------------------------------- ----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SAR'S EXERCISE
SAR'S GRANTED TO OR BASE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ------------------ --------- ----------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Gilbert ...... 7,500 26.3 11.75 10/6/03 24,375 53,775
Patrick J. Haveron ...... 5,000 17.5 11.75 10/6/03 16,250 35,850
Myron Rogow ............. 2,500 8.8 11.75 10/6/03 8,125 17,925
Charles Pelosi .......... 2,500 8.8 11.75 10/6/03 8,125 17,925
G. Bruce Patterson ...... 2,500 8.8 11.75 10/6/03 8,125 17,925
</TABLE>
- ------------------
(1) Amounts shown represent the number of stock options granted in 1998; no
stock appreciation rights ("SAR's) have ever been issued. Options may not
be exercised for at least one year after grant and may then be exercised
in installments of 25% of the grant amount each year until they are 100%
vested. Payment must be made in full upon exercise in cash or such other
consideration as is acceptable to the Stock Option Plan Committee.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION SAR VALUES
The following table provides information as to options exercised by each of
the named executive officers of the Company during 1998 and the value of options
held by such officers at year end measured in terms of the closing price of the
Company Common Stock on December 31, 1998.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SAR'S AT FISCAL IN-THE-MONEY OPTION/SAR'S
ACQUIRED VALUE YEAR-END (1) (#) AT FISCAL YEAR-END (1), (2) ($)
ON EXERCISE REALIZED ------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ------ ----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen A. Gilbert ..... 7,500 93,750 4,375 20,625 6,836 39,727
Patrick J. Haveron ..... 3,750 46,875 3,750 16,250 5,859 30,391
Myron Rogow ............ 3,750 48,750 1,250 6,250 1,953 12,266
Charles Pelosi ......... 0 0 1,250 6,250 1,953 12,266
G. Bruce Patterson ..... 1,750 26,250 1,250 6,250 1,953 12,266
</TABLE>
- --------
(1) No SAR's have ever been issued.
(2) The values shown equal the difference at December 31, 1998 between the
exercise price of unexercised in-the-money options and the closing market
price of the underlying Common Stock. Options are in-the-money if the fair
market value of the Common Stock exceeds the exercise price of the option.
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The Company does not maintain any Long Term Incentive Plans other than
stock option plans previously disclosed.
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth on the following page is a line graph comparing the cumulative
total stockholder return on the Company's Common Stock against the cumulative
total return of the Center for Research in Security Prices at The University of
Chicago Graduate School of Business (CRSP) Index for NASDAQ Stock Market (United
States Companies) and the CRSP Index for NASDAQ Fire, Marine & Casualty
Insurance for the period of five years commencing December 31, 1993 and ending
December 31, 1998. The graph and table assume that $100 was invested on December
31, 1993 in each of the Company's Common Stock, the CRSP Index for the NASDAQ
Stock Market (United States Companies) and the CRSP Index for the NASDAQ Fire,
Marine & Casualty Insurance. This data was furnished by CRSP.
6
<PAGE>
Comparison of Five Year-Cumulative Total Years Returns
Performance Graph for
MOTOR CLUB OF AMERICA
[The following data was represented by a line graph in the printed material]
- --------------------------------------------------------------------------------
Legend
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
MOTOR CLUB OF AMERICA 100.0 110.0 260.0 380.0 540.0 572.5
Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.6 293.2
NASDAQ Stocks (SIC 6330-6339 US Companies) 100.0 96.3 135.0 146.3 222.3 189.5
Fire, Marine, and Casualty Insurance
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/93.
- --------------------------------------------------------------------------------
7
<PAGE>
Executive Compensation
Report of the Compensation and Evaluation Committee and
Stock Option Plan Committee on Executive Compensation
The Compensation and Evaluation Committee was charged by the Board of
Directors with administering salaries and other compensation for executive
officers. The Stock Option Plan Committee administers the Company's incentive
stock option programs. For the purposes of insuring continuity in the
application of the Company's compensation philosophy, both Committees
(hereinafter referred to as the Committee) have identical membership, with Mr.
Archer McWhorter also being a member of the Stock Option Plan Committee.
COMPENSATION PHILOSOPHY
There are several guiding principles of the Committee in performing its
functions. The Company's compensation philosophy is to provide a competitive
salary and other remuneration tied to Company performance against operating
goals in order to attract and retain quality insurance executives. Stock options
are provided to executives to offer additional incentive compensation
commensurate with Company performance.
The Committee believes this compensation philosophy properly balances its
executives' incentives to provide short-term operating performance.
The Company's continuing financial improvement is the preeminent concern of
the Committee, and all compensation decisions derive from this concern.
COMPONENTS OF EXECUTIVE COMPENSATION
The Company's executive compensation program consists of: (i) an annual
salary, (ii) a short-term incentive in the form of participation in the Annual
Incentive Program and (iii) a long-term incentive in the form of stock options.
Salary
The Committee believes the Company has attracted executive officers with
talent and expertise which exceed the Company's current operating environment
and market scope. Accordingly, these executive officers are paid an annual
salary which is commensurate with their industry expertise, functional expertise
and value in the insurance marketplace.
Historically, many factors have been used to determine annual salary
increases. Such factors include Company performance, the Company's operating
plan and objectives thereunder, individual performance, Company performance in
relation to the industry, and the regulatory environment in which the Company
operates. In addition, exceptional performance by an individual, whether or not
it has a direct impact on Company performance, is taken into account in setting
salary increases.
During recent years, the Company has in general employed a cap on the
maximum increase any employee, including executive officers, may receive over
the previous year's salary. The Company has utilized this strategy in order to
control its expenses.
In order to control expenses further and assist with the Company's
financial recovery, the Committee eliminated all salary increases for calendar
year 1993, including executive officers' salaries; for calendar years since
1994, the Committee eliminated or substantially limited salary increases for key
and executive officers. The Committee does not believe these salary actions will
be detrimental to the Company's long-term prospects. The Committee further
believes that total compensation for executives and key officers should
primarily be determined by Company performance and that the Annual Incentive
Program (AIP) should be the featured additional remuneration component for these
individuals, as opposed to salary.
Stock Options
Stock options are granted as a means of providing executive officers and
key employees long term benefits and incentives from an improvement in Company
share performance. The options are granted at the market value of the stock on
the date of grant. Thus, the options gain value only to the extent the stock
price exceeds the option price during the life of the option. Options are
awarded in a manner which maintains the executive's focus on long-term share
performance.
8
<PAGE>
Many of the principal competitors of the Company have adopted and now have
in operation stock option plans. The plans are used as incentive devices by
corporations which wish to attract new management, to convert their officers
into "partners" by giving them a stake in the business, to retain the services
of executives who might otherwise leave and to give their employees generally a
more direct interest in the success of the corporation.
Annual Incentive Program
The Company also offers an AIP which provides incentive compensation tied
to the profitability of the Company against a performance factor which is
derived from the Company's calendar year Budget and Profit Plan. The
Compensation Committee selected participants in the 1998 AIP who perform
functions which directly affect the ability of the Company to meet its business
and performance objectives.
Under the 1998 AIP, because income before Federal income taxes for the year
was within a specific range as compared to the performance factor, bonuses,
adjusted to reflect individual performance, have been paid to participants,
including executive officers, during 1999.
The Committee reserves the right to withdraw the AIP in total or an
executive's participation in the AIP at any time. The Committee has established
an AIP for 1999 and its terms and performance factor are effective only for
1999.
The 1999 AIP will offer incentive compensation tied to the profitability of
the Company against a performance factor which is derived from the Company's
calendar year Budget and Profit Plan. The Compensation Committee will select
participants in the 1999 AIP who perform functions which directly affect the
ability of the Company to meet its business and performance objectives.
Under the 1999 AIP, if income before Federal income taxes for the year is
within a specific range as compared to the performance factor, bonuses, adjusted
to reflect individual performance and the further expansion of the Company by
merger or acquisition, will be paid during 2000. The executive officers named in
the Summary Compensation Table are participating in the AIP in 1999.
Chief Executive Officer Compensation
The Committee evaluated the base compensation of Mr. Gilbert, the rewards
of the AIP, and the long term incentive plan. It was determined that the total
compensation received by the Chief Executive Officer was commensurate with
similar officers within the insurance industry peer group as well his personal
and Company performance on both a qualitative and quantitative basis.
William E. Lobeck, Jr. Alvin E. Swanner
Compensation and Evaluation Committee Interlocks and Insider Participation
William E. Lobeck, Jr. and Alvin E. Swanner, who are members of the
Compensation and Evaluation Committee and the Stock Option Plan Committee, each
was paid director's fees of $60,000 during 1998. There are no Compensation and
Evaluation Committee interlocks.
Retirement Plan and Certain Transactions
In 1954, the Company established an Employees' Retirement Plan (Pension
Plan), which as amended covers employees with one year's service and provides
annual retirement benefits based on salary and length of service to companies in
the Motor Club of America Group. The Pension Plan was amended as of January 1992
to suspend benefit accruals. The trustees of the Pension Plan, which is
non-contributory, are Robert S. Fried, Stephen A. Gilbert and Patrick J.
Haveron.
In order to fund Plan benefits, the trustees have purchased guaranteed
investment group annuity contracts and United States Government obligations, and
have placed funds with money managers who are investing these monies in a
balanced relationship between equity and fixed-income securities.
The annual Pension Plan benefits payable upon retirement at or after the
normal retirement age of 65 consist of an amount equal to the sum as of January
1992 of:
(a) 11/2% of the first $12,000 of an employee's average annual compensation
plus 21/4% in excess of $12,000, multiplied by the employee's years of plan
participation prior to January 15, 1983; and
9
<PAGE>
(b) For each plan year after January 15, 1983, 13/4% of the first $13,200
of the employee's annual compensation plus 23/4% in excess of $13,200.
Early retirement is available at age 55 with 15 years of service. A
participant's Pension Plan benefits become 100% vested after five years of
service. Pension Plan amounts are not subject to deductions for Social Security
benefits or other offset amounts.
The following table sets forth certain information relating to the Pension
Plan with respect to the five most highly compensated executive officers
of the Company who are participants in the Pension Plan:
Latest
Remuneration
Estimated Annual Covered by Credited Years
Name Benefit at Age 65 the Plan (1) of Service (1)
- ---------------------------- ------------------ ------------- --------------
Stephen A. Gilbert ........ $52,650 $175,000 24
Patrick J. Haveron ........ 4,950 79,500 4
Myron Rogow ............... 9,500 113,950 4
Charles Pelosi ............ 21,250 86,920 18
G. Bruce Patterson ........ 5,125 76,766 4
- ----------
(1) As of January 1992 when Pension Plan accruals were suspended.
Proposal Relating to 1999 Stock Option Plan
The Board of Directors has approved, subject to the approval of the common
stockholders, the 1999 Stock Option Plan under which options to purchase 100,000
shares of Common Stock of the Company may be granted to key executives,
including certain officers. The Board of Directors is of the opinion that it
would be in the Company's best interests if such options were granted. Many of
the principal competitors of the Company have adopted and now have in operation
stock option plans. The plans are used as incentive devices by corporations
which wish to attract new management, to convert their officers into "partners"
by giving them a stake in the business, to retain the services of executives who
might otherwise leave and to give their employees generally a more direct
interest in the success of the corporation.
The complete text of the Plan is set out in Exhibit A, to which reference
is made for a full description of such Plan. The essential features of the Plan
are as follows:
The option price is to be not less than the fair market value of the stock
at the time of granting the option, as determined by the Stock Option Plan
Committee. Each option granted under the Plan will be exercisable as determined
by the Stock Option Plan Committee prior to grant. All options will expire when
the holder terminates employment, except for a limited right to exercise options
as permitted to such employees whose employment is terminated by reason of
disability or retirement and to the estates of employees who die leaving
unexercised options.
The Plan is to be administered by the Stock Option Plan Committee.
Presently there are no definite plans as to individuals to whom options will be
granted, the number of shares to be called for by any option, the time or times
when options will be granted or any other term or condition which under the Plan
is within the discretionary authority of the Committee to fix with respect to
any option.
The Board of Directors may at any time amend, suspend or terminate the Plan
with respect to any shares as to which options have not been granted.
It is the present intention of the Company to grant these options as
"incentive stock options" within the meaning of the Internal Revenue Code and
add the proceeds received upon the exercise of any option to the general funds
of the Company and to use them for general corporate purposes. No monetary
consideration will be received for the granting of the options.
Under the Internal Revenue Code, an optionee of incentive stock options
does not realize any income for federal tax purposes until he disposes of the
shares that he acquires upon exercising the options. The optionee will then be
taxed on the difference between the amount realized on any sale or exchange of
the shares and the market value of the shares on the date of exercise. The
Company will not be entitled to any deduction with respect to these incentive
stock options at any time.
The closing sale price of the Common Stock of the Company in the NASDAQ
Stock Market on April 15, 1999 was $13.81, as reported by NASDAQ.
10
<PAGE>
The affirmative vote of the holders of a majority of the Common Stock
present in person or by proxy is required for approval of this proposal. It is
intended that the proxies solicited hereby will be voted for such approval
unless the stockholder specifies otherwise. Management believes that approval of
the 1999 Stock Option Plan is in the best interest of the stockholders and
recommends a vote FOR this proposal.
Proposal Relating to Amendment of Certificate of Incorporation
The Board of Directors has approved, subject to the approval of the common
stockholders, an amendment to Article FOURTH of the Restated and Amended
Certificate of Incorporation of the Company, to add 10,000,000 shares of
undesignated preferred stock to the shares of capital stock the Company is
authorized to issue
The Board of Directors is of the opinion that authorizing 10,000,000 shares
of undesignated preferred stock would be in the Company's best interests. An
increasing number of public and private companies have amended their
certificates of incorporation to authorize undesignated preferred stock, because
it is a highly flexible type of equity security that can be issued in any number
of series, each having its own, unique rights and preferences that are
"tailored" by the Board of Directors to meet specific transactional
requirements. For this reason, undesignated preferred stock has become favored
and widely used in a broad range of capital-raising and acquisition transactions
Article FOURTH of the Company's Restated and Amended Certificate of
Incorporation would be amended to read as follows:
"FOURTH: The aggregate number of shares which the Company shall have the
authority to issue is 20,000,000 shares in the amounts and classes set forth
below:
NUMBER OF
CLASSIFICATION SHARES PAR VALUE
- ------------------------------ ---------- ----------------------
Common Stock ......................... 10,000,000 $.50 per share
Undesignated Preferred Stock ........ 10,000,000 Each without par value
A. GENERAL
The shares of Common Stock, and the shares of Undesignated Preferred Stock
may be issued for any purpose and for such consideration as may be fixed from
time to time by the Board of Directors of the Company without further approval
of the shareholders of the Company, except as otherwise provided in the
Certificate of Incorporation or as otherwise required by law. Upon payment in
full of such consideration any and all such shares so issued shall be deemed
fully paid and non-assessable.
B. UNDESIGNATED PREFERRED STOCK
The Board of Directors is expressly authorized to provide in its sole
discretion for the issuance of all or any part of the shares of the Undesignated
Preferred Stock in one or more classes or series, and to fix for each such class
or series such voting powers, full or limited or fractional, or no voting
powers, and such distinctive designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
Certificate of Incorporation, including, without limitation (i) whether such
shares shall be redeemable, and, if so, the terms and conditions of such
redemption, whether for cash, property or rights, including securities of any
other corporation, and whether at the option of either the Company or the holder
or both, including the date or dates or the event or events upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (ii) whether such shares shall be entitled to receive
dividends (which may be cumulative or noncumulative) at such rates, on such
conditions and at such times, and payable in preference to or in such relation
to, the dividends payable on any other class or classes or any other series;
(iii) the rights of such shares in the event of voluntary or involuntary
liquidation, dissolution or winding up the Company, and the relative rights of
priority, if any, of payment of such shares; (iv) whether such shares shall be
convertible into, or exchangeable for, shares of any other class or classes of
capital stock, or of any other series of the same or any other class or classes
of capital stock, whether at the option of either the Company or the holder or
both, and, if so, the terms and conditions of such conversion, including
11
<PAGE>
provisions for adjustments of the conversion rate in such event as the Board of
Directors shall determine; (v) whether the class or series shall have a sinking
fund for the redemption or purchase of such shares, and, if so, the terms and
amount of such sinking funds; (vi) provisions, if any, as to any other voting,
optional, and/or special or relative rights, preferences, limitations, or
restrictions; and (vii) the number of shares and designation of such class or
series."
Other Business
The management of the Company knows of no other matters which may be
presented at the meeting. However, if any matter not now known should come
before the meeting, it is intended that the persons named in the enclosed form
of proxy, or their substitutes, will vote the shares represented by them in
accordance with their judgment on such matter.
Financial Statements Available
A copy of the Annual Report of the Company for 1998, which contains
financial statements audited by the Company's independent public accountants, is
being sent to all stockholders with this proxy statement.
A COPY OF THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY, 95 ROUTE 17 SOUTH,
PARAMUS, NEW JERSEY 07653-0931.
Relationship with Independent Public Accountants
The Board of Directors has selected the firm of PricewaterhouseCoopers
L.L.P. as the Company's principal independent public accountant for the year of
1999. One or more members of this firm will attend the Annual Meeting, will have
the opportunity to make a statement if they so desire and will be available to
answer questions that may be asked by stockholders.
Proposals of Stockholders
In order for proposals of stockholders to be included in the proxy
materials for the 2000 Annual Meeting of Stockholders, such proposals must be
received by the Secretary of the Company no later than January 7, 2000.
A proposal of stockholders not included in the proxy material for the 2000
Annual Meeting of Stockholders can be presented to that Annual Meeting by other
means. However, if notice of a proposal is not given to the Secretary of the
Company on or before March 22, 2000, the persons authorized under management
proxies will have discretionary authority to vote and act according to their
best judgment on the matter, without any specific or further instructions of the
stockholders whose proxies they hold.
Cost of Solicitation
The costs of the meeting, including the solicitation of proxies, will be
borne by the Company. Proxies will be solicited by mail, and may also be
solicited, without extra compensation, by certain directors, officers and
regular employees of the Company, by mail, telephone, telegraph, telecopy or
personally. Arrangement will be made with brokerage houses and other custodians,
nominees and fiduciaries to forward proxy soliciting material to the beneficial
owners of stock held of record by such persons, and the Company may reimburse
them for reasonable out-of-pocket expenses incurred by them in doing so.
If you cannot be present in person, your management would greatly
appreciate your filling in, signing and returning the enclosed proxy, in the
envelope provided for the purpose, in time to arrive not later than June 8,
1999. Any proxy not received by that date may arrive too late to be voted at the
meeting.
By Order of the Board of Directors
Peter K. Barbano,
Secretary
Dated: Paramus, New Jersey
May 6, 1999
12
<PAGE>
EXHIBIT A
MOTOR CLUB OF AMERICA
1999 STOCK OPTION PLAN
1. Name and Effective Date
The name of this plan is the Motor Club of America 1999 Stock Option Plan
(Plan). The effective date of the Plan is upon approval by the shareholders.
2. Sponsor
The sponsor of the Plan is Motor Club of America (Company).
3. Purpose
The purpose of the Plan is to permit the Company to offer incentives to key
executives employed by it and its subsidiaries and affiliates through the grant
to them of options to purchase the common stock of the Company, and to motivate
such key executives to exert their best efforts on behalf of the Company.
4. Shares Subject to the Plan
Options may be granted by the Company from time to time to key executives
to purchase an aggregate of one hundred thousand (100,000) shares of common
stock, and such amount of shares shall be reserved for options granted under the
Plan (subject to adjustment as provided at subparagraph 7(h), below). The shares
issued upon exercise of options granted under the Plan may be authorized and
unissued shares, or shares held by the Company in its treasury. If any option
granted under the Plan shall terminate or expire, new options may be granted
thereafter covering such shares.
5. Administration of the Plan
The Plan shall be administered by a Stock Option Plan Committee (Committee)
duly appointed by the Board of Directors of the Company (Board). The Committee
shall interpret the Plan, prescribe, amend and rescind any rules and regulations
necessary or appropriate for the administration of the Plan, and make such other
determinations and take such other action as it deems necessary or advisable to
cause the Plan to operate in an effective manner. Any interpretation,
determination or other action made or taken by the Committee shall be final,
binding and conclusive.
6. Grant of Options
From time to time as it may determine, the Committee shall designate those
key executives of the Company to whom a grant of options is to be made. Such
individuals shall be participants in the Plan. At the time of making each grant,
the Committee shall also designate (i) the number of shares of common stock to
be covered by each option, (ii) the time or times when each option (or part
thereof) shall be first exercisable, and (iii) the day upon which, if an option
shall not have been exercised, it shall lapse and be null and void.
7. Terms and Conditions of Options
Each option granted under the Plan shall be evidenced by an Agreement, in a
form approved by the Committee. Such Agreement shall be subject to the following
terms and conditions and to such other terms and conditions as the Committee
shall deem appropriate.
a) Option Period
Each option Agreement shall specify the period for which the option
thereunder is granted and shall provide that the option shall expire at the end
of such period.
b) Option Price
The Option price per share shall be specified by the Committee at the time
each option is granted. Such price shall be the closing sale price of one share
of common stock on the date of the grant.
A-1
<PAGE>
c) Exercise Date
The Committee shall establish the date upon which each option, or any part
thereof, may be first exercised. Such date may be immediately upon the grant of
such option, or may be delayed until the participant has remained in the employ
of the Company or a subsidiary of affiliate for a continuous period after the
date of grant as shall be determined by the Committee.
d) Payment of Option Price Upon Exercise
Each option shall provide that the purchase price of the shares as to which
an option shall be exercised shall be paid to the Company at the time of
exercise in (i) cash, (ii) shares of the Company's common stock then owned by
the participant having a fair market value equal to such option price, (iii) a
combination of (i) and (ii), or (iv) such other consideration as the Committee
in its sole discretion deems appropriate. The option may also provide that to
the extent the participant pays all or part of the exercise price in the
Company's common stock, the participant may employ a cashless exercise procedure
through a broker-dealer, under such terms and conditions as the Committee in its
sole discretion may determine.
e) Exercise in the Event of Death or Termination
If a participant's employment is terminated because of his physical or
mental disability or because he retires or dies, his options may be exercised,
to the extent that he would have been entitled to do so on the date of such
termination, by the participant if living, or if not by the person or persons to
whom the right to exercise such options shall pass by operation of the
participant's will or, if no person has such right, by his executors or
administrators. Such exercise shall be made within three months from the date of
termination.
If a participant voluntarily resigns from the Company, or is terminated by
the Company, options held by him shall lapse and be of no further force or
effect.
f) Nontransferability
No option granted under the Plan shall be transferable other than by will
or by the laws of descent and distribution. During the lifetime of the
participant, an option shall be executed only by him.
g) Investment Representation-Resale Limitation
Each option agreement shall provide that, as a condition for the making of
an option grant to any participant in the Plan, the participant shall deliver to
the Board at the time of the exercise of any option (in whole or in part) a
written representation that the shares being acquired upon such exercise are to
be acquired for investment and not for resale or with a view to the distribution
thereof. Any shares delivered to a participant upon exercise of an option shall
bear a legend limiting the transferability of such shares as provided by such
representation.
h) Adjustments
In the event of a change in the common stock of the Company by reason of
any stock dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of such share or similar event, the number and
kind of share which shall be covered by the Plan, and the number and kind of
shares subject to outstanding options, along with the option price attaching to
such shares, may be appropriately adjusted consistent with such change in a
manner to be determined by the Committee to prevent substantial dilution or
enlargement of the rights granted to, or available to, participants in the Plan.
8. No Rights as Shareholder
No participant shall have any rights as a shareholder with respect to any
shares to an option held by him prior to the date of issuance to him of a
certificate or certificates for such shares.
9. No Right to Continued Services
Neither the existence of the Plan, nor any option held under the Plan shall
grant to any person any right with respect to continued service with the Company
or any subsidiary or affiliate thereof, nor shall they interfere in any way with
the right of the Company or a subsidiary or affiliate thereof to terminate such
service at any time.
A-2
<PAGE>
10. Legal Compliance
The Plan and the grant of options thereunder, and the obligation of the
Company to deliver shares upon exercise of options, shall be subject to approval
of this Plan by the stockholders of the Company at the next annual meeting of
stockholders and to all applicable federal, state or local laws, regulations and
rules and to such approvals of competent government agencies as may, in the
opinion of the Committee, be required.
11. Amendment and Termination
The Board may from time to time amend, suspend or terminate the Plan
provided, however, that subject to the provisions of Subparagraph 7 (h), above,
no such amendment, suspension or terminate shall alter or impair any option
previously granted to any participant in the Plan, without such participant's
written agreement.
A-3
<PAGE>
[MOTOR CLUB OF AMERICA LOGO]
ANNUAL MEETING OF STOCKHOLDERS
MARRIOTT AT GLENPOINTE HOTEL
200 FRANK W. BURR BOULEVARD
TEANECK, NEW JERSEY
JUNE 9, 1999
10:00 A. M.
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
MOTOR CLUB OF AMERICA
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HEAL JUNE 9, 1999
PROXY: ARCHER McWHORTER, ALVIN E. SWANNER, WILLIAM E. LOBECK, JR. AND STEPHEN A.
GILBERT, and each of them are hereby appointed as attorneys and proxies, with
full power of substitution, to represent and to vote all stock of MOTOR CLUB OF
AMERICA (the Company) in the name of the undersigned, as fully and effectively
as the undersigned could do if personally present, at the Annual Meeting of
Stockholders of the Company, to be held at the Marriott at Glenpointe Hotel, 100
Frank W. Burr Boulevard, Teaneck, New Jersey 07666, on June 9, 1999 at 10
o'clock A.M. (New Jersey Time), and at any adjournment thereof, upon the matters
set forth in the Proxy Statement, which has been received by the undersigned, as
indicated on the reverse side hereof, and in their discretion in the transaction
of such other business as may properly come before the meeting or any
adjournment thereof.
1. Election of directors (Mark Only One Box).
Nominees: A. McWhorter, S.A. Gilbert, R.S. Fried, M. Galatin, W.E. Lobeck,
Jr., A.E. Swanner, P.J. Haveron, A. McWhorter, Jr.
[ ] Vote FOR all nominees listed above and
recommended by the Board of Directors, EXCEPT [ ] Vote WITHHELD
vote withheld from the following nominees (if any): from all nominees.
<PAGE>
- --------------------------------------------------------------------------------
(PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENVELOPE
PROVIDED)
MOTOR CLUB OF AMERICA
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
IF NO INDICATION IS MADE, THE PROXIES SHALL VOTE FOR THE ELECTION OF THE
DIRECTORS NOMINEES AND FOR PROPOSALS 2 AND 3.
(INSTRUCTION: To withhold authority to vote for any individual nominee listed
on the reverse side hereof, write that nominee name on the line provided below.)
- --------------------------------------------------------------------------------
2. Approval of the 1999 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of Amendment of Certificate of Incorporation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon any other
business that may come before the meeting or any adjournment thereof.
Please sign here personally, exactly as your
name appears hereon. Joint owners must both
sign.
DATED______________________________________1999
SIGNED_________________________________________
SIGNED_________________________________________
