SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant......................................................[X]
Filed by a Party other than the Registrant...................................[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Rent-A-Wreck of America, Inc.
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(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a- 6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
----------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
RENT-A-WRECK OF AMERICA, INC.
11460 Cronridge Drive, Suite 120
Owings Mills, Maryland 21117
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 17, 1998
--------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Rent-A-Wreck of America, Inc., a
Delaware corporation (the "Company"), will be held on Saturday, October 17, 1998
at 1:00 p.m. local time, at MGM Grand Hotel located at 3799 Las Vegas Boulevard
South, Las Vegas, Nevada 89109, for the following purposes:
1. To elect directors for the ensuing year and until their
successors are elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on September 7, 1998
are entitled to vote at the meeting and at any adjournment or postponement
thereof. Shares can be voted at the meeting only if the holder is present or
represented by proxy. A list of stockholders entitled to vote at the meeting
will be open for inspection at the Company's corporate headquarters for any
purpose germane to the meeting during ordinary business hours for 10 days prior
to the meeting.
This Notice and Proxy Statement are being mailed on or about September
9, 1998.
A copy of the Company's 1998 Annual Report to stockholders and Form
10-KSB for the fiscal year ended March 31, 1998, which includes certified
financial statements, is enclosed. All stockholders are cordially invited to
attend the Annual Meeting in person.
Sincerely,
KENNETH L. BLUM, SR.
Chairman and Chief Executive Officer
Owings Mills, Maryland
September 9, 1998
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IMPORTANT: Please complete, date and sign the enclosed proxy and mail it
promptly in the enclosed envelope to assure representation of your shares,
whether or not you expect to attend the Annual Meeting. If you attend the Annual
Meeting, you may revoke the proxy and vote your shares in person.
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<PAGE>
RENT-A-WRECK OF AMERICA, INC.
11460 Cronridge Drive, Suite 120
Owings Mills, Maryland 21117
--------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 17, 1998
--------------------
SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Rent-A-Wreck of America, Inc. (the
"Company"). All shares represented by properly executed proxies, unless such
proxies have previously been revoked, will be voted in accordance with the
direction on the proxies. If no direction is indicated, the shares will be voted
in favor of the proposals to be acted upon at the Annual Meeting. The Board of
Directors is not aware of any other matter which may come before the meeting. If
any other matters are properly presented at the meeting for action, including a
question of adjourning the meeting from time to time, the persons named in the
proxies and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
When stock is in the name of more than one person, the proxy is valid
if signed by any of such persons unless the Company receives written notice to
the contrary. If the stockholder is a corporation, the proxy should be signed in
the name of such corporation by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
This Proxy Statement and the form of proxy which is enclosed are being
mailed to the Company's stockholders commencing on or about September 9, 1998.
A stockholder executing and returning a proxy has the power to revoke
it at any time before it is voted. A stockholder who wishes to revoke a proxy
can do so by executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting or by appearing in person at the Annual Meeting,
filing a written notice of revocation and voting in person the shares to which
the proxy relates.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith. All expenses incurred in connection with this
solicitation will be borne by the Company.
The mailing address of the principal corporate office of the Company is
11460 Cronridge Drive, Suite 120, Owings Mills, Maryland 21117.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on September 7,
1998 (the "Record Date") will be entitled to vote at the meeting. On the Record
Date, the Company had outstanding [4,098,792] shares of Common Stock and
[1,366,000] shares of Series A Convertible Preferred Stock ("Series A
Preferred"), each of which, except as noted below, entitles the record holder
thereof on such date to one vote on each matter presented at the meeting. As
further described below, the holders of Series A Preferred, voting as a class,
have the right to elect up to four directors of a seven-member board of
directors but have chosen only to exercise their right to elect two of the
directors. Because of the Series A Preferred's right to vote as a class for the
election of Class II directors, the proxy solicited from holders of Common Stock
does not involve the election of directors nominated in Class II.
The presence of a majority of the Common Stock and a majority of the
Series A Preferred, in person or by proxy, is required to constitute a quorum
for the conduct of business at the Annual Meeting. The two Class I nominees for
director receiving the highest number of affirmative votes (whether or not a
majority) cast by the shares represented at the Annual Meeting and entitled to
vote thereon, a quorum being present, shall be elected as directors.
Abstentions and broker non-votes are each included in the determination
of the number of shares present for quorum purposes. Because abstentions
represent shares entitled to vote, the effect of an abstention will be the same
as a vote cast against a proposal. A broker non-vote, on the other hand, will
not be regarded as representing a share entitled to vote on the proposal and,
accordingly, will have no effect on the voting for such proposal. However, only
affirmative votes are relevant in the election of directors.
Votes will be counted by the Inspector of Elections appointed by the
Chairman of the Annual Meeting and certified to the Company in writing.
Security Ownership of Certain Beneficial Owners and Management
As of July 31, 1998, the persons and entities identified in the
following table, including all directors, executive officers and persons known
to the Company to own more than 5% of the Company's voting securities, owned
beneficially, within the meaning of Securities and Exchange Commission Rule
13d-3, the shares of voting securities reflected in such table. All the
outstanding shares of Series A Preferred are immediately convertible at the
option of the holder into Common Stock, on a share-for-share basis. Except as
otherwise specified, the named beneficial owner has sole investment and voting
power with respect to such shares.
<TABLE>
<CAPTION>
Total (1)
----------------------
Shares Beneficially Percent Percent of
Name and Address of Beneficial Owner Title of Class Owned of Class Common
- ------------------------------------ -------------- ----- -------- ------
<S> <C> <C> <C> <C>
David Schwartz Common 865,000(2) 21.2 --
Bundy Rent-A-Wreck
12333 W. Pico Blvd.
Los Angeles, California 90064
Cumberland Associates Common 151,200(3) 3.7 --
1114 Ave. of the Americas Preferred(4) 96,250 7.0 5.9
New York, New York 10035
William L. Richter Common 881,040(5) 21.5 --
c/o Richter & Co., Inc. Preferred(4) 1,311,000(5) 96.0 40.3(6)
450 Park Avenue
New York, New York 10022
Aufzien Investments Limited Partnership Common 32,500 0.8 --
P.O. Box 2369 Preferred(4) 34,375 2.5 1.6
Secaucus, New Jersey 07094
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Total (1)
----------------------
Shares Beneficially Percent Percent of
Name and Address of Beneficial Owner Title of Class Owned of Class Common
- ------------------------------------ -------------- ----- -------- ------
<S> <C> <C> <C> <C>
Kenneth L. Blum, Sr.(8) -- -- -- --
11460 Cronridge Dr., #120
Owings Mills, Maryland 21117
Kenneth L. Blum, Jr.(7)(8) Common 650,000 15.9 --
11460 Cronridge Dr., #120
Owings Mills, Maryland 21117
Robin Cohn (7)(8) Common 649,999 15.9 --
c/o Rent-A-Wreck of America, Inc.
11460 Cronridge Dr., #120
Owings Mills, Maryland 21117
All Directors and Executive Officers Common 2,428,540(5) 59.4 --
as a Group, including the Directors (7)(8)
Named Above (5 persons) Preferred(4) 1,311,000(5) 96.0 68.9(6)
</TABLE>
- ----------
* Represents percentage ownership of Common Stock based upon shares of Common
Stock owned or deemed owned due to presently exercisable warrants and
options and after such person's conversion of Series A Preferred.
** Less than 1%.
Footnotes
(1) Based on 4,088,792 Common Shares and 1,366,000 Series A Preferred Shares
outstanding on the date of this table, July 31, 1998.
(2) Pledged to secure third-party bank loan to stockholder.
(3) Cumberland Associates is a limited partnership organized under the laws of
the State of New York and is engaged in the business of managing, on a
discretionary basis, eleven securities accounts. K. Tucker Andersen,
Richard Reiss, Jr., Robert Bruce III, and Oscar S. Schafer are the general
partners (the "General Partners") of Cumberland Associates. The business
address of each of the General Partners is the same as that of Cumberland
Associates. By virtue of Rule 13d-3, each of the General Partners may be
deemed the beneficial owner of all of the shares of Common Stock owned by
Cumberland Associates. The foregoing information is based on a Schedule 13D
dated October 10, 1989, filed by Cumberland Associates, as supplemented by
additional information supplied to the Company by Cumberland Associates.
(4) Holders of Series A Preferred, voting as a class, are entitled to elect up
to four members of a seven member Board of Directors and are also entitled
to vote as a class on other significant corporate actions. Pursuant to the
terms of proxies granted to Richter Investment Corp. ("RIC"), 96.0% of the
Series A Preferred may be voted by RIC as of the date of this table. The
proxies are effective until such time that fewer than 500,000 shares of
Series A Preferred remain outstanding. See note 5 below.
(5) Includes 49,334 shares of Common Stock issuable upon exercise of options
and warrants, 178,750 shares of Series A Preferred, and 6,200 shares of
Common Stock and 13,750 shares of Series A Preferred held by family
members. Also includes 550,000 shares of Series A Preferred and 275,000
shares of Common Stock held by RIC, 190,975 shares of Common Stock and
warrants (currently exercisable or exercisable within 60 days) to acquire
70,000 shares of Common Stock held by Richter & Co., Inc. ("RCI"). Also
includes an additional 568,500 shares of Series A Preferred as to which RIC
holds voting authority via proxy (see note 4 above). Mr. Richter holds a
controlling interest in RIC, and RIC holds 100% of the outstanding stock of
RCI. Mr. Richter, RIC and RCI have the same address. Mr. Aufzien's 34,375
shares of Series A Preferred, held by a partnership controlled by Mr.
Aufzien, are subject to a voting proxy granted to RIC.
(6) Excludes 568,500 shares of Series A Preferred as to which RIC holds voting
authority via proxy (see notes 4 and 5 above) because RIC would not have
voting or investment control of the Common Stock issued upon conversion of
such shares of Series A Preferred.
(7) Mr. Blum, Sr. is the father of Kenneth L. Blum, Jr. and Robin Cohn; see
note 8 below. Mr. Blum disclaims beneficial ownership of shares held by Mr.
Blum, Jr. and Ms. Cohn. See also "Certain Transactions."
(8) Includes 483,333 shares issuable pursuant to currently exercisable options
and, in the case of Ms. Cohn, includes 166,666 shares held jointly with
spouse. See note 7 above. Mr. Blum, Jr. and Ms. Cohn disclaim beneficial
ownership of shares held by each other. For information regarding
additional options held by Mr. Blum, Jr. and Ms. Cohn which are not
currently exercisable (and thus not deemed beneficially owned for purposes
of the above table), see "Certain Transactions - Management Agreement with
K.A.B., Inc. and Related Transactions - Stock Option Grant."
-3-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
Four persons have been nominated for election at the 1998 Annual
Meeting as directors for terms expiring at the 1999 Annual Meeting and until
their successors have been duly elected and qualified. Each of the nominees
currently is a director of the Company.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the election of each of the Company's Class I nominees
listed below, except for those proxies which withhold such authority. If any of
the nominees shall be unable or unwilling to serve as a director, it is intended
that the proxy will be voted for the election of such other person or persons as
the Company's management may recommend in the place of such nominee. The
management has no reason to believe that any of the nominees will not be
candidates or will be unable to serve.
All directors will hold office until the next Annual Meeting of
Stockholders and the election and qualification of their successors. Officers
are elected annually and serve at the pleasure of the Board of Directors.
Class I Directors:
The proxy will be voted as specified thereon and, in the absence of
contrary instruction, will be voted for the election of the following Class I
directors: Kenneth L. Blum, Sr. and David Schwartz. Such directors will serve
until the next annual meeting of stockholders and until their respective
successors are elected and qualified. Information with regard to the nominees is
set forth below:
Kenneth L. Blum, Sr., 71. Kenneth L. Blum, Sr. has served as Chairman
and a Director of the Company since June 1993, has been the Company's Chief
Executive Officer since December 1993, and was its President from June 1993 to
October 1994. Since 1990, Mr. Blum has been a management consultant to a variety
of companies, including National Computer Services, Inc., a computer service
bureau, and American Business Information Systems, Inc., a high- volume laser
printing company. Mr. Blum is a director of Avesis Incorporated, which markets
and administers discount benefit programs. Mr. Blum is the father of the
Company's President, Kenneth L. Blum, Jr. Mr. Blum controls K.A.B., Inc., a
Florida corporation ("K.A.B."), which has a Management Agreement with the
Company. See "Certain Transactions."
David S. Schwartz, 62, has served as Vice Chairman of the Board since
June 1993 and previously served as Co-Chairman of the Board from November 1989
until June 1993. Since January 1973, Mr. Schwartz has been the President of
Bundy Rent-A-Wreck Inc., the original Rent-A-Wreck location.
Class II Directors:
Richter Investment Corp. ("RIC"), acting in its capacity as holder of a
proxy granted by certain holders of Series A Preferred, has at the present time
agreed to a four member board of directors and has selected Messrs. William L.
Richter and Alan L. Aufzien (the "Class II Directors") as the nominees to the
Board of the Series A Preferred. By virtue of this proxy and the Series A
Preferred owned or controlled by its affiliates as of the Record Date, RIC will
vote 96.0% of the outstanding Series A Preferred. RIC has indicated its intent
to vote its proxy in favor of such Class II nominees, thus ensuring their
election. These nominees have been approved by the Company's Board of Directors.
William L. Richter, 55, has been a director of the Company since
November 1989 and has served previously as a director from 1983 to 1985. Mr.
Richter was Co-Chairman of the Company from November 1989 to June 1993 and has
been Vice Chairman since June 1993. For the past nine years, Mr. Richter has
been President of Richter
-4-
<PAGE>
Investment Corp. and its wholly owned subsidiary, Richter & Co., Inc., a
registered broker-dealer and investment banking firm. Mr. Richter has been a
Senior Managing Director of Cerberus Capital Management, L.P. (or its
predecessor organization) since their founding in late 1992. Mr. Richter is a
Director and Co-Chairman of Avesis Incorporated, which markets and administers
discount benefit programs.
Alan L. Aufzien, 68, has served as a Director of the Company since
November 1989. Mr. Aufzien has also been a partner in the Norall Organization, a
private investment company, since 1987. Since 1983, he has also been the
president and a director of New York Harbour Associates, Inc. (a real estate
development firm). From 1986 to 1996, Mr. Aufzien was the Chairman of
Meadowlands Basketball Association (New Jersey Nets) and currently serves as a
director of that organization. Mr. Aufzien is also a director of First New
Jersey Real Estate Trust.
Other Executive Officers
Kenneth L. Blum, Jr., 34, has served as Secretary of the Company since
March 1994, as Vice President from May 1994 to October 1994, and as President
since October 1994. Mr. Blum is President and Chief Executive Officer and the
sole stockholder of National Health Enterprises, Inc., which provides management
and consulting services in the health care industry. Mr. Blum is also President
of American Business Information Systems, Inc., a high-volume laser printing
company and computer service bureau, and of Generic Auto, Inc., a franchisee of
the Company. Mr. Blum is the son of the Company's Chairman and Chief Executive
Officer.
Management Services Agreement. Effective June 30, 1993, the Company
entered into a Management Agreement (the "Management Agreement") with K.A.B.,
pursuant to which K.A.B. agreed to manage substantially all aspects of the
Company's business, subject to certain limitations and the direction of the
Company's Board of Directors. The Management Agreement was amended and extended
as of April 1, 1996. See "Certain Transactions."
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established, and the Company is required to disclose any failure to file by
these dates. The Company believes that all of these filing requirements were
satisfied during the fiscal year ended March 31, 1998, except that Mr. Aufzien,
a director, reported the August 1991 acquisition of certain shares of Preferred
Stock and Warrants in February 1998. In making these disclosures, the Company
has relied solely on written representations of its directors and executive
officers and copies of the reports that they have filed with the Commission.
Meetings and Committees
The Board of Directors of the Company held a total of two meetings
during the fiscal year ended March 31, 1998. During the fiscal year ended March
31, 1998, no director attended fewer than 75% of the aggregate of all meetings
of the Board of Directors and the committees, if any, upon which such director
served. The Company's audit committee, which consists of Mr. Richter and Mr.
Aufzien, met once during the fiscal year ended March 31, 1998. The Company has
no standing nominating or compensation committee.
-5-
<PAGE>
Executive Compensation
Summary Compensation Table
The following table and related notes set forth information regarding
the compensation awarded to, earned by or paid to the Company's Chief Executive
Officer for services rendered to the Company during the fiscal years ended March
31, 1996, 1997 and 1998. No other executive officer who was serving as an
executive officer during fiscal 1996 received salary and bonus which aggregated
at least $100,000 for services rendered to the Company during the fiscal year
ended March 31, 1998.
Long-Term
Compensation
---------------------
Annual
Compensation Awards
------------ ---------------------
Securities Underlying
Name and Principal Position Year Salary Options/SARs(#)
- --------------------------- ---- ------ ---------------
Kenneth L. Blum, Sr., CEO 1998 $250,000 --(2)
1997 250,000 --(2)
1996 200,000 --(2)
(1) Mr. Blum became Chief Executive Officer of the Company in connection with
the Management Agreement between the Company and K.A.B., effective June 30,
1993. Mr. Blum does not receive cash compensation directly from the
Company. K.A.B. receives cash compensation pursuant to the Management
Agreement of $250,000 per year plus expense reimbursements ($8,037 in the
year ended March 31, 1998). The amounts indicated in the table represent
compensation received by K.A.B. pursuant to the Management Agreement. Mr.
Blum is the sole stockholder of K.A.B. See "Certain Transactions -
Management Agreement with K.A.B., Inc. and Related Transactions -
Management Agreement."
(2) During the year ended March 31, 1994, K.A.B. received options for the
purchase of 2,250,000 shares of the Company's Common Stock in connection
with the Management Agreement. During the year ended March 31, 1995, the
Board of Directors approved the vesting of 1,000,000 of these options at an
exercise price of $1.00 per share. Effective July 20, 1995 the exercise
price of the balance of the options was set by the Board of Directors at
$1.15 per share, with vesting, subject to continued employment, on July 1,
2002, or earlier subject to satisfaction of performance targets. Also
effective on that date, K.A.B. transferred the Options to certain
transferees. See "Certain Transactions - Management Agreement with K.A.B.,
Inc. and Related Transactions Stock Option Grant."
Option/SAR Grants in Last Fiscal Year
No stock options or SARs were granted to the executive officer named in
the Summary Compensation Table during the last fiscal year. See "Certain
Transactions - Management Agreement with K.A.B., Inc. and Related Transactions -
Stock Option Grant."
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<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Value Table
No executive officer named in the Summary Compensation Table held or
exercised options at the end of the last fiscal year. See "Certain Transactions
- - Management Agreement with K.A.B., Inc. and Related Transactions - Stock Option
Grant."
Employment/Change of Control Arrangements
In the event of termination of the Management Agreement with K.A.B.
without cause, all options granted to K.A.B. in connection with the Management
Agreement remain outstanding for the balance of their ten-year term. See
"Certain Relationships and Related Transactions - Management Agreement with
K.A.B., Inc. and Related Transactions - Stock Option Grant."
Compensation of Directors
Currently, directors of the Company who also serve as officers of the
Company and outside directors receive no cash compensation in connection with
the services they render as directors. (Officers, however, receive compensation
in their capacity as officers as described above.) Directors are reimbursed for
expenses incurred in connection with their board service.
Certain Transactions
Management Agreements with K.A.B., Inc. and Related Transactions
Management Agreement. Effective June 30, 1993, the Company entered into
a Management Agreement (the "Management Agreement") with K.A.B. pursuant to
which K.A.B. agreed to provide management consulting with respect to
substantially all aspects of the Company's business, subject to certain
limitations and the direction of the Company's board of directors. K.A.B. is
controlled by Kenneth L. Blum, Sr. who is Chairman and Chief Executive Officer
of the Company. The Management Agreement provides for a flat payment to K.A.B.
of $250,000 per year and options for the purchase of up to 2,250,000 shares of
the Company's Common Stock, as described below. The Management Agreement had an
original term of five years, and the term was extended for an additional five
years as of April 1, 1996. The Management Agreement is terminable by the Company
for cause, as defined.
The Management Agreement includes certain representations and
warranties and limitations on solicitation by K.A.B. of customers and employees
of the Company during the term of the Management Agreement and for two years
thereafter. The Management Agreement also requires that K.A.B. hold in
confidence the Company's confidential information. Mr. Blum, Sr., K.A.B. and
their affiliates are involved in various business ventures in addition to the
activities on behalf of the Company required by the Management Agreement.
Participation in such other ventures may detract from efforts on behalf of the
Company.
Stock Option Grant. Effective June 30, 1993, the Company issued
five-year options (the "Options") to K.A.B. for the purchase of up to 2,250,000
shares of the Company's Common Stock. The Options originally vested at prices
ranging from $1.00 to $1.30 contingent upon achievement of a combination of
profitability and stock price targets. Effective October 19, 1994, the Board of
Directors approved the vesting of 1,000,000 Options at an exercise price of
$1.00 per share and provided that the balance of the Options (an aggregate of
1,250,000 Options) (the "Unvested Options") would vest at $1.30 on April 1, 1998
subject to continued retention of K.A.B.'s services pursuant to the Management
Agreement. The Unvested Options also became exercisable on an accelerated basis
pursuant to the terms of the original grant, as follows:
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<PAGE>
Number of
Shares Alternative Vesting Event:
------ --------------------------
500,000 Completion of the first fiscal year in which the
Company has Profits of at least $750,000 or in
which the Stock Price is at least $4.00
750,000 Completion of the first fiscal year in which the
Company has Profits of at least $1,000,000 or in
which the Stock Price is at least $5.00
"Profits" of the Company in any fiscal period shall mean the
Company's pretax operating profit during such period as
determined in accordance with generally accepted accounting
principles based on the Company's books and records, and
excluding any profit or loss from financial transactions and any
charge for compensation expense relating to these stock options.
"Stock Price" means the average closing high bid price for
the Company's Common Stock as reported on Nasdaq (or, if
applicable, the NASD Bulletin Board or pink sheets) over any 30
consecutive calendar days during the applicable fiscal year.
Effective July 20, 1995, the Board of Directors provided that the
exercise price of the Unvested Options would be $1.15 per share irrespective of
the circumstances under which the Options vest. The actions of the Board of
Directors were predicated upon the Board's view of the Company's performance
relative to the original vesting criteria and other relevant considerations.
Options remain exercisable throughout their term, except that
exercisable Options terminate 120 days after termination of the Management
Agreement by the Company for cause. Effective April 1, 1996, the Board of
Directors delayed the vesting date of the Options (absent acceleration as
provided above) to July 1, 2002 in conjunction with the extension of the
Management Agreement by five years through June 30, 2003.
The Options are transferable without the Company's consent only to
employees or affiliates of K.A.B. performing substantial services for or on
behalf of the Company or to employees of the Company, subject to compliance with
applicable law. Effective July 20, 1995, the Board of Directors approved the
transfer of 483,333 Options and 604,167 Unvested Options to each of Kenneth L.
Blum, Jr., the Company's President and Secretary; and Robin Cohn. Mr. Blum, Sr.
is the father of Mr. Blum, Jr. and Ms. Cohn. Also effective July 20, 1995, the
Board of Directors approved the transfer by K.A.B. of 33,334 Options and 41,666
Unvested Options to RCI. A principal of RCI, William L. Richter, is a member
(and Vice Chairman of) the Company's Board of Directors. In connection with Mr.
Richter's employment arrangements with RCI, RCI transferred 13,334 of these
Options and 16,666 of these Unvested Options to Mr. Richter. See "- Investment
Banking Services," below.
Registration Rights Agreement. The Company entered into a Registration
Rights Agreement (the "Registration Rights Agreement") effective June 30, 1993
with K.A.B., Mr. Blum, Jr. and Alan S. Cohn. Mr. Blum, Sr. is the father of Mr.
Blum, Jr., and the father-in-law of Mr. Cohn. The Registration Rights Agreement
provides up to three demand registrations with respect to the Shares and the
shares issuable pursuant to the Options ("Registrable Securities"). The first
demand registration is exercisable at the request of holders of at least 250,000
Registrable Securities after a fiscal year in which Profits are at least
$250,000, provided that the Stock Price is at least $2.00 at the time of the
request. The second demand registration is exercisable at the request of holders
of at least 600,000 Registrable Securities after at least 1,000,000 Options have
become exercisable. The third demand registration is exercisable at the request
of holders of at least 1,000,000 Registrable Securities after all of the Options
have become exercisable. Holders of the Company's Series A Preferred Stock have
the right to participate in the above demand registrations on a pro rata basis.
The Registration Rights Agreement also provides piggyback registration rights
with respect to registrations in which other selling stockholders are
participating. The Company is obligated to pay the offering expenses of each
such registration, except for the selling stockholders' pro rata portion of
underwriting discounts and commissions. No precise prediction
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<PAGE>
can be made of the effect, if any, that the availability of shares pursuant to
registrations under the Registration Rights Agreement will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of the Common Stock pursuant to such registrations could adversely affect
prevailing market prices.
Franchise Agreement. K.A.B. sold a Company franchise for the Towson,
Maryland area in March 1998 to an unaffiliated third party.
Investment Banking Services. The Management Agreement and related
transactions with K.A.B. were structured and negotiated for the Company by RCI,
which received cash consideration of $15,000 and five-year warrants (the
"Warrants") to acquire: (i) 20,000 shares of the Company's Common Stock
currently exercisable at $.80 per share (which have been exercised); and (ii)
135,000 shares of the Company's Common Stock exercisable on the same basis as is
applicable to the Options, as described above. RCI is also entitled to receive a
fee equal to 6% of the cash received by the Company upon any exercises of the
Options. The shares of Common Stock issuable pursuant to the Warrants are
entitled to piggyback registration rights with respect to any registration in
which the Shares or the Common Stock issuable pursuant to the Options are
included. RCI has assigned warrants for the purchase of 62,000 shares of the
Company's Common Stock to Mr. Richter out of the Warrants. Mr. Richter and his
firm have provided and expect to continue to provide substantial investment
banking services for Mr. Blum and various of his affiliated entities. To that
extent, RCI may be deemed to have had a conflict of interest with respect to its
efforts on behalf of the Company in effecting the Management Agreement and
related agreements with K.A.B. The Company's Board of Directors took into
account the potential conflict of interest issues referred to above in
structuring and entering into the investment banking agreement with RCI and
believes that such agreement was desirable and in the best interests of the
Company notwithstanding such possibility.
As a result of actions taken by the Board of Directors on October 19,
1994 and July 15, 1995, the 135,000 Warrants referred to in the preceding
paragraph have the following terms: 24,000 Warrants held by Mr. Richter and
36,000 Warrants held by RCI are vested with an exercise price of $1.00 per
share; and 30,000 Warrants held by Mr. Richter and 45,000 Warrants held by RCI
have an exercise price of $1.15 per share and vest subject to the same criteria
applicable to the Unvested Options. See "- Stock Option Grant" above.
Other
Lease. As of October 1993, the Company relocated its corporate offices
to Owings Mills, Maryland. The Company has entered into a month-to-month lease
to lease approximately 1,000 square feet. The Company paid rent of $9,649 during
the year ended March 31, 1998 for this space to American Business Information
Systems, Inc. ("ABIS"). Kenneth L. Blum, Jr. and Robin Cohn are significant
stockholders of ABIS, and Mr. Blum is an executive officer of ABIS.
Effective January 1, 1995, the Company entered into a five-year
agreement with National Computer Services, Inc. ("NCS," which merged with ABIS
in January 1996) to develop computer software and related documentation. During
the year ended March 31, 1998, ABIS received $21,839 pursuant to this agreement.
Kenneth L. Blum, Jr. was the sole stockholder and an executive officer of NCS.
Effective March 20, 1995, the Company retained RCI as its exclusive
financial advisor and placement agent. RCI's fees under this arrangement are
payable only upon completion of defined transactions and, in such event, are
calculated upon the basis of a percentage of the transaction value. The
agreement is terminable by the Company upon 90 days notice, provided that RCI is
entitled to receive certain fees for two years following termination in the
event a transaction is concluded involving an entity introduced to the Company
by RCI. The Company made no payments under this agreement during the year ended
March 31, 1998.
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<PAGE>
RCI provides substantial ongoing financial management and other
services to the Company at no charge. In the opinion of management, the terms of
the Company's arrangements with RCI, K.A.B. and ABIS taken as a whole are at
least as favorable to the Company as could be obtained from third parties.
AUDIT MATTERS
The Board of Directors has appointed Grant Thornton LLP as independent
auditors to audit the financial statements of the Company for the fiscal year
ending March 31, 1999. Grant Thornton LLP's representatives are not expected to
be present at the Annual Meeting.
OTHER MATTERS
The Company is unaware of any other matters that are to be presented
for action at the meeting. Should any other matter come before the meeting,
however, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies with respect to such matter in accordance with
their judgment.
FINANCIAL INFORMATION
Enclosed with this Proxy Statement are the Company's 1998 Annual Report
to Stockholders and a copy of the Company's Report on Form 10-KSB for the year
ended March 31, 1998 which includes the Company's audited financial statements
and financial statement schedules and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
STOCKHOLDER PROPOSALS
Proposals intended to be presented at the 1999 Annual Meeting of
Stockholders must be received by the Company by May 12, 1999 to be considered
for inclusion in the Company's proxy materials relating to that meeting. Notice
of Stockholder proposals for presentation at the 1999 Annual Meeting, but which
are not going to be presented to the Company for inclusion in the proxy
materials, will be considered untimely after July 24, 1999.
RENT-A-WRECK OF AMERICA, INC.
KENNETH L. BLUM, SR.
September 9, 1998 Chairman and Chief Executive Officer
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<PAGE>
[FRONT OF CARD]
RENT-A-WRECK OF AMERICA, INC.
11460 Cronridge Drive, Suite 120
Owings Mills, Maryland 21117
--------------------
This Proxy is Solicited on
Behalf of the Board of Directors
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and revoking all prior proxies, hereby appoints Kenneth L. Blum, Sr. and
Kenneth L. Blum, Jr., as proxies, each with the full power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated on the reverse side of this proxy card, all the shares of Common
Stock of Rent-A-Wreck of America, Inc., a Delaware corporation (the "Company")
held on record by the undersigned on September 7, 1998 at the Annual Meeting of
Stockholders to be held on October 17, 1998, and at any adjournment or
postponement thereof.
PLEASE DATE AND SIGN ON REVERSE SIDE)
- --------------------------------------------------------------------------------
[REVERSE OF CARD]
Please date, sign and mail your
proxy card back as soon as possible
Annual Meeting of Stockholders
RENT-A-WRECK OF AMERICA, INC.
October 17, 1998
[X] Please mark your votes as in this example
Nominees: Kenneth L. Blum, Sr. 2. In their discretion, to vote upon such
David S. Schwartz other business as may properly come before
the Annual Meeting or any adjournment thereof.
Vote FOR all nominees WITHHOLD
stated to the right AUTHORITY
except as indicated to vote for
to the contrary all nominees
below (if any)
ELECTION
OF CLASS 1 [ ] [ ]
DIRECTORS:
(Instructions: To withhold your vote for any individual nominee, write the
nominee's name in the space below.)
-------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ABOVE NOMINEES, AS RECOMMENDED BY THE BOARD OF DIRECTORS.
Stockholder Name(s): Print
-------------------------- ------------------------
Signature
-------------------------- Dated , 1998
Signature if held jointly ----------------
Note:Please sign exactly as name appears on your stock certificate. When shares
are held by joint tenants, both should sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please give full corporate name and indicate that
execution is by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
