NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of WARRANTECH CORPORATION:
The annual meeting of stockholders of Warrantech Corporation (the
"Company") will be held at the Company's offices located at 150 Westpark Way,
Euless, Texas 76040 on November 14, 1995 at 10:00 A.M., for the following
purposes:
1. To elect eight directors to serve until the next annual meeting
and until their successors are duly elected and qualified.
2. To transact such other business as may properly be brought
before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on October 6, 1995
are entitled to notice of and to vote at the annual meeting or any adjournments
thereof.
Your attention is called to the Proxy Statement on the following pages.
Please review it carefully. We hope that you will attend the meeting. If you do
not plan to attend, please sign, date and mail the enclosed proxy in the
enclosed envelope, which requires no postage if mailed in the United States.
By order of the Board of Directors,
DESIREE KIM CABAN
Secretary
October 23, 1995
<PAGE>
WARRANTECH CORPORATION
=========================================
PROXY STATEMENT
=========================================
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Warrantech Corporation (the "Company") of proxies in
the enclosed form for use at the annual meeting of stockholders to be held on
November 14, 1995 and at any adjournments thereof. Any proxy given pursuant to
such solicitation and received in time for the meeting will be noted with
respect to all shares represented by it and will be voted in accordance with the
instructions, if any, given in such proxy. If no instructions are specified,
proxies will be voted FOR the election of the nominees named in the table on the
following page. Any proxy may be revoked by written notice received by the
Secretary of the Company at any time prior to the voting. The affirmative vote
of the majority of the votes cast by stockholders present in person or
represented by proxy at the meeting and entitled to vote is required in order to
elect each of the director nominees.
Only stockholders of record at the close of business on October 6, 1995
will be entitled to notice of and to vote at the annual meeting. On October 6,
1995 the Company had outstanding 13,011,536 shares of Common Stock. Each share
of Common Stock entitles the record holder thereof to one vote.
<PAGE>
ELECTION OF DIRECTORS (Item 1 on Proxy Card)
A Board of Directors consisting of eight directors is to be elected by the
stockholders, to hold office until the next annual meeting and until their
successors are duly elected and qualified. The nominees are listed in the table
below. While the Board of Directors has no reason to believe that any of those
named will not be available as a candidate, should such a situation arise, the
proxy may be voted for the election of other persons as directors.
<TABLE>
<S> <C> <C> <C>
Director
Name Age Positions with Company Since
Joel San Antonio 43 Chairman of the Board,
Chief Executive
Officer and Director 1983
William Tweed 55 President and Director 1983
Jeff J. White 44 Director 1983
William Rueger 75 Director 1987
Michael J. Salpeter, D.M.D. 43 Director 1993
Kurt R. Schwamberger 49 Director 1993
Jo Ann Duarte 49 Director 1993
Lawrence Richenstein 42 Director 1993
</TABLE>
No family relationships exist among any of the Company's executive
officers or directors.
The business experience of each of the Company's directors and nominees
for election to the Board of Directors is as follows:
Joel San Antonio, 43, one of the Company's founders, was a Director, Chief
Executive Officer and President of the Company from incorporation through
February 1988. Since February 1988 Mr. San Antonio has been a Director, Chief
Executive Officer and Chairman of the Board of Directors and since October 27,
1989, he has also been Chairman and Chief Executive Officer of the Company's
principal operating subsidiaries, Warrantech Consumer Product Services, Inc.
("WCPS") and Warrantech Automotive, Inc. In 1975, Mr. San Antonio founded and,
thereafter through August, 1982, served as President of Little Lorraine, Ltd., a
company engaged in the manufacturing of women's apparel. Mr. San Antonio is
currently a member of the Southwestern Connecticut Area Commerce & Industry
Association, the World Forum, the Connecticut Business and Industry Association,
the Metropolitan Museum of Art, and the Young Presidents' Organizaton, Inc.
2
<PAGE>
William Tweed, 55, one of the Company's founders, was a Director, Vice
President and Secretary of the Company from incorporation through February 1988.
Since February 1988, Mr. Tweed has been a Director and President. From July 1976
through August 1982, he was Vice President of Little Lorraine, Ltd. Mr. Tweed
served as a Director of Nationwide Extended Warranty Service, Inc. from on or
about October 1981 through on or about January 1983.
Jeff J. White, 44, one of the Company's founders, has been a Director of
the Company from its inception. Mr. White was Vice President of the Company from
its inception until June 1988 and Treasurer of the Company from its inception
until October 1990. In September 1982, Mr. White, with his two partners,
established Marchon Eyewear, Inc. an international distributor of eyewear and
sunwear, including such well known collections as Calvin Klein, Fendi, Disney,
and Flexon. He is Co-President of Marchon and is responsible for internal
operations, information systems, and interfacing with counsel on patent,
trademark, and general legal matters. Mr. White is also an associate trustee of
the North Shore University Hospital Health System.
William Rueger, 75, was a consultant to the Company from 1985 to 1987.
Since November 1987, Mr. Rueger has been a Director of the Company and was
Secretary from February 1988 to August 1990. Mr. Rueger was Senior Vice
President, Corporate Planning and Development, of GTE Corporation from 1982 to
1984 and was employed by GTE Corporation, its subsidiary, GTE Products Corp. (as
Vice President and General Counsel) and predecessor companies, including
Sylvania Electric, from 1950 until his retirement in 1984. Mr. Rueger is an
attorney and serves as Village Judge in Old Westbury, New York.
Michael J. Salpeter, D.M.D., 43, co-founded Fulton Health Associates, P.C.
("Fulton Group"), a full scope dental health center, in July 1979. Since July
1979, in addition to establishing multiple centers, Dr. Salpeter has served as
the Fulton Group's Principal Partner and has maintained a full-time practice in
general dentistry. Dr. Salpeter also serves as a management and marketing
officer of Knowlton & Associates, a consulting firm involved in health policy
and practice management. Dr. Salpeter also serves as the President and Managing
Officer of Lifetyme Care, Inc., a managed care dental program.
Kurt R. Schwamberger, 49, has been employed with American International
Group, Inc. ("AIG") since 1985. Mr. Schwamberger was responsible for the
formation and development of the Personal Lines Division of American
International Underwriters of which he is the President. Mr. Schwamberger
is also a Vice President of New Hampshire Insurance Company, a Director of
Landmark Insurance Company (U.K.) and Chairman of Techmark Services Ltd.
Mr. Schwamberger's responsibilities include the worldwide development of
Warranty and Vehicle Service Contract Programs for AIG.
Jo Ann Duarte, 49, has been employed with AIG since June 1972, when she
was an Accounting Manager for Domestic Life Companies. In May 1991, Ms. Duarte
was elected Senior Vice President of Domestic Life Companies. She is currently
Senior Vice President and Chief Financial Officer of AIG-Cost Containment
Division.
3
<PAGE>
Lawrence Richenstein, 42, has been President and Chairman of the Board of
Lonestar Technologies, Ltd., a consumer electronics company located in
Hicksville, New York, since 1985. In addition to having sales and marketing
experience, Mr. Richenstein is involved in product development. Mr. Richenstein
is an attorney admitted to practice in New York who has, in the past, served as
a director of two public companies, both of which were involved in the
electronics industry.
Other Executive Officers And Key Employees
Bernard J. White, 50, joined Warrantech in February, 1994 as Vice
President-Finance, Treasurer and Chief Financial Officer. From 1992 to February
1994, Mr. White was Executive Vice President of Finance and Administration/Chief
Financial Officer at ENTEX Information Services, Inc., a reseller of computer
hardware, LAN and WAN designs and services. From 1972 to 1992, Mr. White was
employed by Smith Corona Corporation (SCM Corporation and Hanson Industries,
Inc. following its acquisition of SCM Corporation) in various financial
capacities, ultimately serving from 1979 as Vice President Finance-Controller,
overseeing both domestic and international operations.
Michael A. Basone, 37, has been Vice President and Chief Information
Officer since joining the Company in August 1994. From 1986 to 1994 Mr. Basone
held various systems positions with Pepsi-Cola International, ultimately serving
as Director of Management Information Systems. From 1984 to 1986, he was a
Systems Consultant with Howard Systems International. Prior to joining Howard
Systems, from 1982 to 1984, Mr. Basone served as Senior Systems Analyst at
Distillers Co. LTD.
Desiree Kim Caban, 30, has been Secretary of the Company since July
1993 and has been the Executive Assistant to the Chairman and the Office
Services Manager for the Company since 1989. She has been employed by the
Company since May 1986. Prior thereto, Ms. Caban was a personnel assistant
for the St. Paul Insurance Company's New York regional office. Ms. Caban
is currently a member of the National Association for Female Executives.
Jeanine Folz, 30, has been Assistant Secretary of the Company since
January of 1995. Since joining the Company in 1987, she has held various
customer service and project analyst positions, most recently as the Director of
Insurance Services. Prior to joining the Company, Ms. Folz held customer service
positions with Dean Witter Reynolds Inc. and Market Service, Inc. She is
currently a member of the Risk and Insurance Management Society and the National
Association for Female Executives.
Ronald Glime, 50, has been President of Warrantech Automotive, Inc.
since October 1992. Prior thereto he was Regional Sales Manager for
Warrantech Automotive, Inc. (then known as Warrantech Dealer Based Services,
Inc.) from February 1991 through October 1992. From 1983 through February
1991, Mr. Glime was an independent insurance agent for various insurance
companies. Prior thereto, from 1978 through 1982, Mr. Glime served in various
capacities including President at American Warranty Corp., a company in the
4
<PAGE>
warranty administration business. From 1977 through 1978, Mr. Glime was
an agent for Life Investors Insurance Co. of America, a subsidiary of Life
Investors, Inc. Prior thereto, from 1966 until 1977, Mr.Glime was Vice
President in charge of the credit life accident and health division of
Life Investors Insurance Co. of America.
Richard Rodriguez, 41, has been Chief Operating Officer of the Company's
Euless, Texas facilities since February 1992. He has been with the Company since
March 1987 and has held the positions of National Service Manager, Vice
President of Operations and Senior Vice President of Operations for WCPS. Mr.
Rodriguez served as Secretary of WCPS from August 1991 through July 1992. From
December 1986 through March 1987 he was Manufacturing/Production Manager for
Crown, Cork & Seal. Mr. Rodriguez was a service consultant from June 1984
through October 1986 specializing in the areas of warranty administration,
quality control and parts warehousing and distribution to manufacturers of
consumer electronic products.
Kevin Rupkey, 37, has been President of Warrantech Consumer Product
Services, Inc. since April 1994. Prior thereto, he was Manager, National
Accounts for GE Consumer Marketing from June 1990 where he was responsible for
sales and marketing of GE's Service Protection Plus Program. From August 1987
until June 1990 Mr. Rupkey was District Sales Manager for GE Appliances. Prior
thereto, Mr. Rupkey held various sales and marketing positions with GE since
1980.
Randall San Antonio, 41, has been Vice President and General Manager of
Warrantech Direct, Inc. since May 1994. Prior thereto he was Vice President of
Finance of Castle Hill Production Inc. from June 1984. Prior thereto, from May
1983 until June 1984, Mr. San Antonio was the controller of the New York office
of Smith Hotel Associates, Inc., a hotel management corporation.
None of the Company's directors or executive officers is a director of any other
public company.
Information Concerning Meetings of the Board of Directors
During the fiscal year ended March 31, 1995, the Board of Directors
held five meetings. All such meetings were fully attended except three at
which Jeff J. White was not present and two at which Kurt R. Schwamberger was
not present. The Company has an Audit Committee, consisting of Messrs.
Rueger and White and Ms. Duarte. Such committee met twice during the 1995
fiscal year. The Company has a Compensation Committee, formed in February
1994, consisting of Messrs. Rueger, Salpeter and White. This committee met
once during the last fiscal year.
5
<PAGE>
===============================================================================
Security Ownership Of Certain Beneficial Owners and Management
===============================================================================
The following table sets forth as information concerning shares of Common
Stock, par value $.007 per share, the Company's only voting securities, owned
beneficially by each of the Company's Directors and nominees for the Board of
Directors, by each person who is known by the Company to own beneficially more
than 5% of the outstanding voting securities of the Company and by the Company's
executive officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Amount and Nature of Percent
Beneficial Ownership of Class
<S> <C> <C>
Joel San Antonio 3,054,064 shares(1) 21.8%
300 Atlantic Street
Stamford, Connecticut 06901
William Tweed 2,435,109 shares(2) 17.6%
300 Atlantic Street
Stamford, Connecticut 06901
Jeff J. White 1,667,863 shares(3) 12.1%
19 Foxwood Road
Kings Point, New York 11024
William Rueger 84,100 shares(4) .6%
4 Langley Lane
Old Westbury, New York 11568
Michael Salpeter 292,305 shares(5) 2.2%
7034 Highfield Drive
Fayetteville, New York 13066
Kurt R. Schwamberger 0 shares 0.0%
70 Pine Street
New York, New York 10270
Jo Ann Duarte 0 shares 0.0%
70 Pine Street
New York, New York 10270
Lawrence Richenstein 4,500 shares 0.0%
920 South Oyster Bay Road
Hicksville, New York 11801
All Directors and Officers
as a group (12 persons) 7,611,303 shares(1,2,3,4,5,6) 49.0%
<FN>
- ------------------
. (1) Includes 5,000 shares held by Mr. San Antonio as custodian for two
minor children. Includes 10,800 shares owned by Mr. San Antonio's wife as
to which he disclaims beneficial ownership. Does not include 19,800 shares
owned by Mr. San Antonio's brother and sister-in-law and 3,400 shares
owned by his mother as to which he disclaims any beneficial interest.
Includes an aggregate of 200,000 shares held in trusts for his children,
of which Mr. San Antonio's wife is a trustee as to which Mr. San Antonio
disclaims beneficial ownership. Includes options to purchase 120,408
shares which became
6
<PAGE>
exercisable on October 22, 1993, 120,408 which became exercisable on
October 22, 1994 and options to purchase an additional 722,448 shares
granted on October 22, 1992 which became exercisable on October 22, 1995.
Does not include 120,408 shares which become exercisable on October 22,
1996 and 120,408 shares which become exercisable on October 22, 1997.
(2) Includes 48,000 shares held by Mr. Tweed as custodian for one child.
Does not include an aggregate of 12,500 shares held by Mr. Tweed's
mother and sister. Includes 1,500 shares held by Mr. Tweed's wife,
and 25,000 held in trust for the benefit of Mr. Tweed's granddaughter,
of which Mr. Tweed's wife is the trustee, as to which he disclaims any
beneficial interest. Includes options to purchase 93,878 shares which
became exercisable on October 22, 1993, 93,878 which became
exercisable on October 22, 1994 and options to purchase an additional
563,265 shares granted on October 22, 1992 which became exercisable
on October 22, 1995. Does not include 93,878 shares which become
exercisable on October 22, 1996, and 93,875 shares which become
exercisable on October 22, 1997.
(3) Does not include an aggregate of 90,000 shares owned by Mr. White's
parents and sister as to which he disclaims any beneficial interest.
Includes options to purchase 85,715 shares which became exercisable on
October 22, 1993, 85,715 which became exercisable on October 22, 1994 and
options to purchase 514,291 shares granted on October 22, 1992 which
became exercisable on October 22, 1995. Does not include 85,713 shares
which become exercisable on October 22, 1996, and 85,713 shares which
become exercisable on October 22, 1997.
(4) Includes an option to purchase 25,000 shares at $2.50 per share which may
be exercised through November 30, 1995. All of such options are presently
exercisable. Includes 100 shares owned by Mr. Rueger's wife as to which he
disclaims beneficial ownership.
(5) Includes 7,800 shares held in an IRA in the name of Dr. Salpeter, 7,100
shares held by Dr. Salpeter in trust or as custodian for his daughters,
Nicole and Whitney, 20,000 shares held in a company pension plan of which
Dr. Salpeter serves as a trustee, 200,000 shares held as trustee of trusts
for the benefit of Jonathan and Brandon San Antonio. Includes 2,950 shares
held by Dr. Salpeter's wife as to which he disclaims beneficial ownership.
(6) Includes options held by officers of the Company to purchase an aggregate
of 54,462 shares which are presently exercisable.
</FN>
</TABLE>
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information for the years ended March 31,
1995, 1994 and 1993, concerning the annual and long-term compensation of the
chief executive officer and each executive officer whose total annual salary
plus bonuses exceeded $100,000 for the fiscal year ended March 31, 1995.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards(1)
--------------------------------------------- --------------------------------
Other Annual Restricted Stock Option All
Name and Principal Positions Year Salary(2)(4) Bonus Compensation(2) Stock Awards (Shares) Other
Awards(3) Compensation
---------------- ---------------- -------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joel San Antonio 1995 $269,398 $576,957 $7,432 - - -
Chairman of the Board 1994 216,580 20,408 7,353 - 1,204,080 -
and Executive Chief Officer 1993 188,408 120,454 8,505 - - -
William Tweed 1995 265,721 577,773 7,927 - - -
President 1994 212,109 19,592 7,816 - 938,775 -
1993 204,601 115,638 8,906 - - -
Bernard J. White 1995 115,000 58,683 4,800 $12,760 - -
Vice President of Finance, 1994 11,058 - 800 - 25,000 -
Chief Financial Officer 1993 - - - - - -
Richard Rodriguez 1995 79,688 55,524 14,793 - 14,000 -
Chief Operating Officer 1994 75,861 12,230 14,793 - - -
1993 67,023 36,490 14,793 - - -
Ronald Glime 1995 129,132(5) 7,868 37,489 - 46,667 -
President of Warrantech 1994 108,234(5) - - - 20,000 -
Automotive, Inc. 1993 43,561 - - - 36,333 -
<FN>
(1) Its 1988 Stock Option Plan is its only long-term incentive plan.
(2) Included in Other Annual Compensation are auto allowances given to each
officer, life insurance premiums for Messrs, San Antonio, Tweed, and Rodriguez,
and living expenses paid Ronald Glime in fiscal 1995.
(3) All options reflect the 1-for-10 reverse stock split of the Company's shares on August 1, 1990.
(4) In 1993, the Company paid (i) Mr. San Antonio and Mr. Tweed $11,209 and $23,130, respectively, for salary adjustments in 1993
and (ii) Mr. San Antonio and Mr. Tweed $4,760 and $19,583, respectively, for salary adjustments accrued in 1989 and 1990.
(5) Consisting of $76,668 in base salary and $52,464 of commissions in fiscal 1995 and $69,058 in base salary and $39,176 of
commissions in fiscal 1994.
</FN>
</TABLE> 8
<PAGE>
Stock Options
No stock options were granted to any individuals named in the Summary
Compensation Table during fiscal 1995 except Ronald Glime. Mr. Glime was granted
options to purchase 46,667 shares in June 1994 at an exercise price of $4.563
per share. Such options become exercisable only if certain performance criteria
are achieved. Such options represented approximately 51% of all options granted
to employees during fiscal 1995. The potential realizable value of such options
during the option term is $86,661, assuming a 5% annual rate of stock
appreciation and $197,728, assuming stock price appreciation at an annual rate
of 10%. The Company does not have any outstanding stock appreciation rights.
Options Exercised and Holdings
The following table sets forth information with respect to the individuals
listed in the Summary Compensation Table above, concerning unexercised options
held as of the end of the 1995 fiscal year.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Acquired on Value Number of Unexercised Options In-The-Money Options
Name Exercise Realized at Fiscal Year-End(#) at Fiscal Year-End ($)
- -------------------- -------------------- ---------------- ------------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel San Antonio - - 240,816 963,264 $556,887 $2,227,548
William Tweed - - 187,756 751,018 434,181 1,736,734
Bernard White - - 16,666 8,334 - -
Ronald Glime - - 25,546 77,454 51,092 29,333
Richard Rodrigue - - 10,250 3,750 - -
<FN>
(1) Based on the closing price of common stock as reported on the NASDAQ National Market Systems for March 31, 1995.
</FN>
</TABLE>
9
<PAGE>
The following graph tracks an assumed investment of $100 on March 31, 1990
in the Common Stock of the Company, The Russell 2000 Index and a peer group
comprised of four companies whose principal operations are similar to those of
the Company, assuming full reinvestment of dividends and no payment of brokerage
or other commissions or fees. Past performance is not necessarily indicative of
future performance.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AS OF MARCH 31
AMONG WARRANTECH CORPORATION, THE RUSSELL 2000 INDEX AND A PEER GROUP
<CAPTION>
Measurement Period Warrantech Corporation The Russell Peer
(Fiscal Year Covered) 2000 Index Group
<S> <C> <C> <C> <C>
1990 100 100 100
1991 35 107 62
1992 61 129 107
1993 67 149 87
1994 82 165 117
1995 95 174 84
<FN>
Total return data reflects a 1 for 10 reverse stock split of Company's shares on August 1, 1990.
The peer group consists of Unico American Corp., Automobile Protection Corp., Harris & Harris Group, Inc.
and Homeowners Group, Inc.
</FN>
</TABLE>
Employment Agreements
Effective on November 7, 1993, the Company entered into five-year
employment agreements with each of Messrs. San Antonio and Tweed. Messrs. San
Antonio and Tweed each devote substantially all of their working time to the
affairs of the Company. The agreements provide for annual base salaries
initially at a rate of $250,000, with annual increases of 10% together with an
adjustment based upon an employment cost index published by the Bureau of Labor
Statistics.
10
<PAGE>
Messrs. San Antonio and Tweed are entitled under their employment
agreements to be reimbursed for all ordinary, reasonable and necessary expenses
incurred by them in the performance of their duties. The Company provides each
such executive with a comprehensive medical-dental insurance policy as well as
disability coverage and a life insurance-death benefit policy in excess of
$1,000,000. In the event that one of such executives becomes "disabled", the
Company will pay the disabled executive's salary for a period not to exceed
twelve months. However, it is expected that the Company's obligations will be
partially offset by proceeds from the disability insurance policy, which shall
be the equivalent of approximately 80% of the salary and which shall become
payable after 90 days of disability. In addition, Messrs. San Antonio and Tweed
each receive an automobile expense allowance of $500 per month.
Effective February 28, 1994, the Company entered into an employment
agreement with Bernard J. White, its Chief Financial Officer. Pursuant to such
agreement, Mr. White receives a base salary initially at a rate of $9,583 per
month, subject to review each year with a minimum cost of living adjustment of
5% or an amount equal to the increased cost of living for the lower State of
Connecticut as measured by the appropriate index, whichever is greater at the
time of each such review. Under the terms of such agreement, Mr. White receives
annual bonuses equal to a share of 3% of the net annual operating profit before
taxes of the Company. Mr. White receives an automobile expense allowance
comparable to that provided the Company's other executive officers but in no
event less than $400 per month. The Company also provides Mr. White with
comparable medical/dental and other insurance coverage to that provided to its
other executive officers. The Company also reimburses all ordinary, reasonable
and necessary expenses incurred by Mr. White in the performance of his duties.
Mr. White is entitled to participate in the profit sharing, bonus, pension and
other employee benefit plans that the Company has in effect from time to time.
Effective October 17, 1992, Warrantech Automotive, Inc. entered into a
five-year employment agreement with Ronald Glime, its President. Pursuant to
such agreement, Mr. Glime receives a base salary of $6,389 per month. Under the
terms of such agreement, Mr. Glime receives monthly bonuses based upon the
number of vehicle service contracts processed by Warrantech Automotive, Inc. In
addition, under such agreement, Mr. Glime was granted options to purchase an
aggregate of 100,000 shares of the Company's common stock under its Incentive
Stock Option Plan.
Effective April 1, 1991, the Company entered into a five-year employment
agreement with Richard Rodriguez, its Chief Operating Officer. Such agreement
provides for a base salary initially at a rate of $55,650, subject to review
each year with a minimum cost of living adjustment of 5% at the time of each
such review. Under the terms of such agreement, Mr. Rodriguez receives annual
bonuses equal to a share of 3% of the net annual operating profit before taxes
of the Company. Mr. Rodriguez receives an automobile expense allowance to that
provided the Company's other executive officers, but in no event less than $400
per
11
<PAGE>
month. The Company also provides Mr. Rodriguez with comparable medical/
dental and other insurance coverage to that provided to its other executive
officers. The Company also reimburses all ordinary, reasonable and necessary
expenses incurred by Mr. Rodriguez in the performance of his duties. Mr.
Rodriguez is entitled to participate in the profit sharing, bonus, pension and
other employee benefit plans that the Company has in effect from time to time.
The Company's directors and officers receive no other forms of
compensation except for officers who receive distributions under the Company's
Bonus Incentive Plan and except for directors who are reimbursed for actual
expenses incurred by them in connection with the Company's business.
Long-Term Incentives
The Company provides executives equity-based long-term incentives through
its 1988 Employee Incentive Stock Option Plan, described elsewhere herein, and
its Bonus Incentive Plan, which are designed to award key management personnel
and other employees of the Company, with bonuses and stock options based on the
Company's and the employee's performance.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"Commission"). Officers, directors and greater than 10% shareholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based on a review of the reports, during the
fiscal year ended March 31, 1995, all Section 16 filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were complied
with.
Non-Management Directors' Compensation
Each non-employee director is entitled to receive compensation of
$1,000 for each meeting attended in person and $250 for each meeting attended
by telephone. During fiscal 1995, the following fees were paid:
Jeff J. White $2,750.00
William Rueger 2,250.00
Michael J. Salpeter 5,500.00
Kurt R. Schwamberger 3,000.00
JoAnn Duarte 6,250.00
Lawrence Richenstein 3,250.00
No directors' fees are payable to employees of the Company who serve as
directors.
12
<PAGE>
Report of Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors of the Company (the
"Committee") was formed in February 1994. The Committee is responsible for
setting and administering the compensation policies which govern annual
compensation, long-term compensation, and stock option and ownership programs
for the Company's executive officers as well as the other employees of the
Company and its subsidiaries. The Committee consists of three outside directors,
Jeff J. White, William Rueger and Michael J. Salpeter.
The Committee periodically reviews the reasonableness of compensation paid
to executive officers of the Company, by comparison to compensation paid by
competing companies and the Company's performance, taking into account
activities that have special value to the Company but have no immediate impact
on operating results.
The policies and decisions of the committee are designed to achieve the
following goals:
Reflect a pay-for-performance relationship where a portion of total
compensation is at risk.
Attract and retain key management personnel critical to the Company's
long-term success.
In accordance with the above policies, the Committee monitors the
Company's Bonus Incentive Plan which is designed to reward key executive
officers of the Company with bonuses based on the Company's net pre-tax
operating income. Under the Bonus Incentive Plan, each eligible participant
becomes entitled to an incentive bonus payment equal to the proportion of his
then current salary base over the current salary base of all eligible persons
multiplied by a percentage of the Company's net profits in each fiscal year plus
a percentage of the amount by which net profits exceeded net profits of the
Company in the preceding fiscal year. During the fiscal year ended March 31,
1995, distributions under the Bonus Incentive Plan were made in the amounts of
$576,957 and $577,773 to Joel San Antonio and William Tweed, respectively. Other
key employees of the Company are entitled to receive bonuses outside the Bonus
Incentive Plan at the discretion of the Committee. The Committee has met several
times since the beginning of the 1996 fiscal year for the purpose of reviewing
compensation policies generally and in particular the Bonus Incentive Plan to
determine what, if any, changes should be made in such plan to take into account
the substantially increased level of revenues and income of the Company by
comparison to the revenues and income levels at the time such Plan was
implemented.
The committee also monitors the Company's Employee Incentive Stock Option
Plan (the "ISOP"). The ISOP, as amended has been in effect since 1988. As of
March 31, 1995,
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options to purchase an aggregate of 259,500 shares of Common Stock have been
granted under the ISOP of which 76,667 were granted during the fiscal year ended
March 31, 1995. To date, no options granted under the ISOP have been exercised.
The Committee is of the opinion that the ISOP is an extremely effective means of
attracting and retaining key executives and employees of the Company and its
subsidiaries and motivating them to improve the Company's financial performance.
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993
and effective for taxable years beginning after January 1, 1994, generally
limits to $1 million per individual per year the federal income tax deduction
for compensation paid by a publicly held company to the Company's chief
executive officer and its other four highest paid executive officers.
Compensation that qualifies as performance-based compensation for purposes of
Section 162(m) is not subject to the $1 million deduction limitation. The
Committee currently does not anticipate that any executive officer will be paid
compensation from the Company in excess of $1 million in any year (including
amounts that do not qualify as performance-based compensation under the Code),
and accordingly, the Committee anticipates that all amounts paid as executive
compensation will be deductible by the Company for federal income tax purposes.
Summary of Chief Executive Officer Compensation
During the fiscal year ended March 31, 1995, Mr. San Antonio received
$269,398 in salary and $576,957 in bonuses. Mr. San Antonio's total compensation
during the 1995 fiscal year, and the terms of his employment agreement, which
includes a base salary of $250,000 per year adjusted annually, was designed to
reward Mr. San Antonio for his diligent efforts overseeing the Company's
development of overseas markets, upgrading of systems, introduction of a range
of new programs and pursuit of major new customers, each of which impacts
current results for the long-term benefit of the Company, and achievement of
record operating results. Mr. Tweed's compensation during the past year and the
terms of his employment agreement were also designed to reward Mr. Tweed for his
efforts in connection with the foregoing activities.
COMPENSATION COMMITTEE
Jeff J. White
William Rueger
Michael J. Salpeter
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OTHER INFORMATION FURNISHED PURSUANT TO
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
Independent Accountants
On October 4, 1994, the Company, as authorized by its Board of Directors,
engaged Coopers & Lybrand L.L.P. ("Coopers & Lybrand") as its new independent
accountants for the fiscal year to end March 31, 1995, replacing Deloitte &
Touche LLP ("Deloitte & Touche"). Coopers & Lybrand have been the independent
accountants of Techmark Services, Ltd. (a significant joint venture of the
Company) from inception. In light of the planned expansion of this joint
venture, the replacement of Deloitte & Touche by Coopers & Lybrand is intended
to allow the Company to benefit from efficiencies resulting from the worldwide
use of Coopers & Lybrand as independent accountants for the Company and its
joint venture. It is anticipated that representatives of Coopers & Lybrand will
attend the annual meeting of shareholders, that they will have the opportunity
to make a statement if they desire to do so, and that they will be available to
respond to appropriate questions.
The Company's independent accountants for the fiscal year ended March 31,
1994 were Deloitte & Touche. On August 11, 1994 the Company's Board of Directors
authorized the dismissal of Deloitte & Touche as its independent accountants.
The Board of Directors of the Company and its audit committee participated in
and approved the decision to dismiss Deloitte & Touche as independent
accountants of the Company.
The report of Deloitte & Touche on the financial statements of the Company
for the fiscal year ended March 31, 1994 contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles, except that reference was made to certain
litigation and to a change in the Company's accounting for income taxes to
conform with Statement of Financial Accounting Standards No. 109 in fiscal 1994.
The Company believes that in connection with its audit of the fiscal year
ended March 31, 1994 and through August 11, 1994, there were no disagreements
with Deloitte & Touche on any matter of accounting principles or practices,
financial disclosure or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Deloitte & Touche would have caused them to make
reference thereto in their report on the financial statements for the fiscal
year ended March 31, 1994. In discussions with Deloitte & Touche in connection
with the preparation of the Form 8-K, announcing their dismissal as independent
accountants, Deloitte & Touche informed the Company that there were three issues
raised during the course of their audit of the Company's financial statements
for the fiscal year ended March 31, 1994, which they believe constituted
disagreements. All of these issues were, however, resolved to Deloitte &
Touche's satisfaction in the presentation of the financial statements. The
issues raised by Deloitte & Touche were as follows:
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- Profit sharing recognition methodology, whereby Deloitte & Touche
evaluated the Company's methodology for the recognition of profit sharing
which is based on a calculation of profits as determined in accordance
with contractual agreements between the Company and certain insurance
companies, and concluded that the profit sharing calculation methodology
should instead be based on an estimate of ultimate profit, if any, to be
earned under the contractual agreements (contractually stipulated maximum
allowable losses less actuarial estimate of ultimate losses) multiplied by
the ratio of losses paid to date to the actuarial estimate of ultimate
losses to be incurred under the contractual agreements.
- Restriction on auditing scope and procedures, arising out of the
Company's reluctance to have Deloitte & Touche perform an actuarial study
of its profit sharing calculations, because the Company did not believe
that actuarial consultants, unfamiliar with the Company's industry and
business, could properly perform such a study, taking into consideration
all the factors necessary to make an informed judgment in the time
permitted. Nevertheless, the Company acceded to Deloitte & Touche's
request to have such study performed and accepted the findings of the
study as presented to it by Deloitte & Touche.
- Capitalization of start-up costs with respect to the Company's joint
venture, Techmark Services Ltd., formed in July 1993, whereby the Company
inquired as to the appropriateness of the deferral of certain start-up
costs of the joint venture. While there were several discussions relating
to the accounting for such costs, the determination by Deloitte & Touche
that deferral of such costs would be inappropriate was agreed to by the
Company and no adjustment ever was proposed, insisted upon or required by
the Company.
- Consolidation of the Company's joint venture, Techmark Services Ltd.,
whereby the Company requested Deloitte & Touche to consider the
appropriateness of consolidating this significant joint venture. It should
be noted that the Company's interest in such joint venture has from
inception and continues to be accounted for by the Company under the
equity method of accounting approved by Deloitte & Touche and the
Company's request to Deloitte & Touche was a theoretical one, in
contemplation of certain proposed changes in ownership of the joint
venture that have not occurred.
Management and Deloitte & Touche discussed these issues during the course
of the audit and the Board of Directors of the Company was made aware of these
discussions by management. Deloitte & Touche informed the audit committee of its
position on these issues, and the audit committee determined that all of the
issues were resolved to the satisfaction of Deloitte & Touche in the
presentation of all matters included in the financial statements as filed in the
Company's Form 10-K for the fiscal year ended March 31, 1994.
The Company has authorized Deloitte & Touche to respond fully to the
inquiries of Coopers & Lybrand concerning any and all matters related to the
Company's financial statements for the fiscal year ended March 31, 1994. The
Company has not consulted with
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Coopers & Lybrand on the application of accounting principles to a
specified transaction, either completed or proposed, or the type of opinion
that might be rendered on the Company's financial statements with respect
to such a transaction which consultation resulted in either a written
report or oral advice from Coopers & Lybrand that was an important factor
considered by the Registrant in reaching a decision as to the accounting,
auditing or financial reporting issue or any matter that was either the subject
of a disagreement or a Reportable Event.
During the period from the date of engagement of Deloitte & Touche through
August 11, 1994, there were no Reportable Events (as defined below).
Upon filing a report on Form 8-K with the SEC relating to the dismissal of
Deloitte & Touche, the Company requested that Deloitte & Touche furnish it with
a letter addressed to the Securities and Exchange Commission (the "Commission")
stating whether or not it agreed with the statements contained therein. A copy
of Deloitte & Touche's letter, dated September 30, 1994, is filed as an exhibit
to the amendment filed October 4, 1994 to the Company's report on Form 8-K dated
August 18, 1994. The Company also has provided Deloitte & Touche with an
opportunity to make a brief statement of its views in this proxy statement.
On October 5, 1993 the Board of Directors of the Company authorized the
replacement of Weinick, Sanders & Co. as its independent accountants. The reason
for the replacement of Weinick, Sanders & Co. was that the Company's business
had grown in international scope and worldwide perspective and the Company
believed that it required independent accountants who possessed a more
international practice and expertise.
The reports of Weinick, Sanders & Co. on the financial statements of the
Company for the past two fiscal year for which it served as the Company's
independent accountants contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
The Board of Directors of the Company participated in and approved the
decision to change independent accountants.
In connection with its audits for the two most recent fiscal years prior
to its dismissal and through October 5, 1993, there were no disagreements with
Weinick, Sanders & Co. on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Weinick, Sanders & Co.
would have caused them to make reference thereto in their report on the
financial statements for such years.
During the Company's two most recent fiscal years prior to the dismissal
and through October 5, 1993, Weinick, Sanders & Co. did not advise the Company
of any of the following ("Reportable Events"):
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(A) that the internal controls necessary for the Company to develop
reliable financial statements did not exist; or
(B) that information had come to is attention that led it to no longer be
able to rely on management's representations or that made it unwilling to be
associated with the financial statements prepared by management; or
(C) (1) of the need to expand significantly the scope of its audit or that
during such period information had come to its attention that, if further
investigated, may have
(a) had a material impact on the fairness or reliability of either
(I) a previously issued audit report or the underlying financial statements, or
(ii) the financial statements issued or to be issued covering the fiscal
period(s) subsequent to the date of the most recent financial statements covered
by an audit report (including information that may have prevented it from
rendering an unqualified audit report on those financial statements), or
(b) caused it to be unwilling to rely on management's
representations or be associated with the Company's financial statements, and
(2) due to its dismissal, or for any other reason, it did not so
expand its audit or conduct such further investigation; or
(D) (1) that information had come to is attention that it had concluded
had a material impact on the fairness or reliability of either:
(a) a previously issued audit report or underlying financial
statement, or
(b) the financial statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the most recent financial statements
covered by an audit report (including information that, unless resolved to its
satisfaction, would prevent it from rendering an unqualified audit report on
those financial statements), and
(2) due to its dismissal, or for any other reason, the issue had not
been resolved to its satisfaction prior to its dismissal.
The Company requested that Weinick, Sanders & Co. furnish it with a letter
addressed to the Securities and Exchange Commission (the "Commission") stating
whether or not it agrees with the above statements. A copy of such letter, dated
October 12, 1993, is filed as an Exhibit to the Form 8-K dated October 5, 1993.
The Board of Directors of the Company authorized the engagement of
Deloitte & Touche as its independent accountants on October 5, 1993.
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In October 1991, Deloitte & Touche assisted the Company and Weinick,
Sanders & Co. with an application for relief from FASB TB 90-1. In connection
with this matter, Deloitte & Touche provided a letter of concurrence to the
Commission. Also, in March 1993, the Company engaged Deloitte & Touche to
provide tax assistance in connection with the Company's recently completed
transactions with AIG.
Prior to October 5, 1993, other than as described above, the Company did
not consult with Deloitte & Touche on (A) applications of accounting principles
to a specified transaction, either completed or proposed, or (B) the type of
auditing opinion that might be rendered on the Company's financial statements,
and neither a written report was provided to the Company nor oral advice was
provided that Deloitte & Touche concluded was an auditing or financial reporting
issue. The Company has not had any disagreements with Deloitte & Touche on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of
Deloitte & Touche, would have caused them to make reference thereto in their
financial statements, nor has Deloitte & Touche advised the Company of any
Reportable Events.
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Stockholder Proposals for 1996 Meeting
Proposals of stockholders to be included in the Company's proxy material
for the 1996 annual meeting must be received in writing by the Company at its
executive offices not later than December 31, 1996 in order to be included in
the Company's proxy material relating to that meeting.
Other Matters
The solicitation of proxies in the accompanying form will be made at the
Company's expense, primarily by mail and through brokerage and banking
institutions. Those institutions will be requested to forward soliciting
materials to the beneficial owners of the stock held of record by them and will
be reimbursed for their reasonable forwarding expenses.
The Board of Directors is not aware of any other matters that are to be
presented to stockholders for formal action at the meeting. If, however, any
other matter properly comes before the meeting or any adjournments thereof, it
is the intention of the persons named in the enclosed form of proxy to vote
those proxies in accordance with their judgment on such matter.
By order of the Board of Directors,
DESIREE KIM CABAN
Secretary
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WARRANTECH CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints JOEL SAN ANTONIO, WILLIAM TWEED, JEFF J.
WHITE, and each or any of them with full power of substitution, proxies to vote
at the Annual Meeting of Stockholders of WARRANTECH CORPORATION (the "Company")
to be held on Tuesday November 14, 1995, at 10:00 a.m. Eastern Time and at any
adjournment or adjournments thereof, hereby revoking any proxies heretofore
given, at the Company's offices located at 150 Westpark Way, Euless, Texas, for
the purposes shown on the reverse side of this proxy card:
(To be Signed on Reverse Side.)
- --------------------------------------------------------------------------
/ X / Please mark your
votes as in this
example.
FOR all nominees WITHHOLD
listed to right AUTHORITY
(except as indicated to vote for all Nominees: Joel San Antonio
below) nominees listed to right William Tweed
William Rueger
1. ELECTION / / / / Jeffrey J. White
OF Michael Salpeter
DIRECTORS Kurt R. Schwamberger
(INSTRUCTIONS: To withhold authority to vote for Jo Ann Duarte
any individual nominee print that nominee's name on the Lawrence Richenstein
line provided below:
- -----------------------------------
2. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting. This
proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder. If no direction is made this proxy
will be voted For proposal 1.
SIGNATURE ________________________ DATE_______________
SIGNATURE ________________________ DATE ______________
Note: (Please sign exactly as name appears stenciled on this Proxy.
When signing as attorney, executor, administrator, trustee, or guardian,
please set forth your full title.)
<PAGE>
Edgar Format Appendix
Pursuant to Rule 304(a) of Regulation S-T, following is a list of all graphic
or image information contained in the paper format version of Warrantech
Corporation's 1995 Notice of Annual Meeting of Stockholders, Proxy
Statement and Form of Proxy:
1. Page 10 contained a line graph, with the horizontal axis labeled in years
from March 1990 through March 1995, and the verticle axis labeled in dollars
from 0 to 200, in increments of 50, on which such data contained in the table
on page 10 of the attached EDGAR format version of the Proxy Statement is
represented by three lines, labeled Warrantech Corporation, Peer Group, and
Russell 2000, respectively. The data represented in the graph and a key to
the lines contained in the graph, is set forth below the graph.
