AUTOLEND GROUP, INC.
930 WASHINGTON AVENUE
MIAMI BEACH, FLORIDA 33137
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S
STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS
INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU
ARE REQUESTED NOT TO SEND THE COMPANY A PROXY
This Information Statement is being mailed on or about August 27, 1996
to the holders of shares of Common Stock, $.002 par value (the "Common Stock"),
of AutoLend Group, Inc., a Delaware corporation (the "Company"), in connection
with the designation of persons (the "Designated Directors") to the Board of
Directors of the Company (the "Board") who will constitute a majority of the
Board, other than at a meeting of stockholders. No action is required by the
stockholders of the Company in connection with the appointment of the Designated
Directors. However, Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the mailing to the Company's stockholders
of the information set forth in this Information Statement at least ten days
prior to a change in a majority of the Company's directors other than at a
meeting of the Company's stockholders.
On July 18, 1994, the Company entered into agreements (collectively,
the "Voting Agreements"), dated as of July 1, 1994, with respect to all shares
of Common Stock owned or thereafter acquired by Messrs. Nunzio P. DeSantis,
Courtlandt G. Miller and Vincent Villanueva (collectively the "Plaintiff
Stockholders"). Each of the Plaintiff Stockholders previously had served as
directors of the Company. Mr. DeSantis also previously served as its Chairman
and Chief Executive Officer and Mr. Miller served as its Corporate Secretary.
Pursuant to the Voting Agreements, Steve Simon ("Simon"), as Chief Executive
Officer of the Company, was appointed Voting Trustee with sole voting power over
all shares of Common Stock held by the Plaintiff Stockholders until the earlier
of (i) Simon's resignation as Voting Trustee, (ii) Simon ceasing to be Chief
Executive Officer of the Company and (iii) July 1, 1999. In the event Simon
resigned as Voting Trustee or ceased to be Chief Executive Officer of the
Company, the Board of Directors was empowered to elect a successor Voting
Trustee to serve for the remainder of the term of the Voting Agreements. As of
June 21, 1996, the Plaintiff Stockholders beneficially owned an aggregate of
908,000 shares of Common Stock. See "Security Ownership of Certain Beneficial
Owners and Management."
On December 26, 1995, the Plaintiff Stockholders commenced an action
(the "Derivative Suit") in the Delaware Court of Chancery for New Castle County
(the "Court") against Simon and two other directors of the Company, Stephen
Raphael and Elie Housman (collectively, the "Defendants"), and the Company as
nominal defendant, seeking, among
<PAGE>
other things, to temporarily, preliminarily and, if necessary, permanently
enjoin the Company's management and Board from taking certain contemplated
actions, including selling one of its subsidiaries to Simon and continuing the
repurchase of its outstanding Debentures, until a special meeting of the
Company's stockholders could be held. In addition, the Plaintiff Stockholders
sought to remove Simon as Voting Trustee under the Voting Agreements, the
validity of which was disputed by the Plaintiff Stockholders, and to bar Simon
from voting their shares. The Plaintiff Stockholders also sought damages to the
extent the Defendants proceeded with any of these actions before injunctive
relief could be obtained and for any breaches of fiduciary duty, gross
mismanagement and/or gross negligence that may have occurred.
The Defendants denied all claims of wrongdoing and soon, after the
Plaintiff Stockholders commenced the Derivative Suit, the Plaintiff Stockholders
and the Defendants entered into extensive arms-length negotiations concerning a
change in existing management, the composition of the Board pending the next
annual meeting of stockholders of the Company and the resolution of all claims
between the parties. As a result of these negotiations, the parties entered into
a Stipulation of Settlement on May 3, 1996 (the "Stipulation"). The Stipulation
was approved by the Court on July 16, 1996 after due notice had been sent to all
of the Company's stockholders and notwithstanding the objection of one
stockholder of the Company. The order became final and unappealable on August
16, 1996. Pursuant to the Stipulation, all pending claims, including those
alleged in the Derivative Suit, have been dismissed and, among other things: (i)
current executive management of the Company will resign; (ii) all of the
directors of the Company other than Dr. Philip Vitale will resign from the
Board; (iii) Mr. DeSantis will be appointed to the Board and will be elected
Chairman and Chief Executive Officer; (iv) the Company's subsidiary, AutoLend
IAP, Inc., will be sold to an entity to be formed by Simon in consideration for
the payment to the Company of approximately $6.0 million in cash in settlement
of all intercompany receivables and for the issuance to the Company of
cumulative preferred stock, with a face amount of $1.0 million, in the newly
formed entity which is acquiring AutoLend IAP, Inc.; and (v) Simon and Helen
Porter, the Company's executive vice president, will be paid amounts due under
their current employment agreements, will enter into consulting agreement with
the Company and will be issued stock options in lieu of other stock options
which they have agreed to forfeit. The terms of the Stipulation were described
in detail in the notice sent to all of the Company's stockholders in accordance
with the order of the Court. See "Certain Relationships and Related
Transactions."
Simultaneously with the closing of the transactions contemplated by the
Stipulation, and as previously described, the current directors other than
Philip J. Vitale, M.D. will resign and Nunzio DeSantis will be appointed as a
director and as Chairman of the Board. Thereafter, Mr. DeSantis and Dr. Vitale
will appoint E. Gerald Riesenbach, Esquire, Miles M. Stuchin, Anthony Coelho and
Vincent Villanueva as additional directors, which appointments will constitute a
change in a majority of the Board of the Company, requiring the preparation and
mailing of this Information Statement.
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<PAGE>
PERSONS PROPOSED TO BE APPOINTED TO THE BOARD
OF DIRECTOR IN CONNECTION WITH THE SETTLEMENT
The following sets forth certain information regarding each of the
Designated Directors who will be appointed to the Company's Board of Directors
in connection with the Stipulation, to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualified.
Nunzio P. DeSantis, age 45, currently is President and Chairman of the
Board of Vista Health Care Group, a development stage health care company with
an address at Bradbury Court, Suite 3B, 215 Central Avenue, N.W., Albuquerque,
New Mexico, 87102. Prior to September 1995 and for more than five years, Mr.
DeSantis was Chairman of the Board and Chief Executive Officer of Diagnostek,
Inc.
E. Gerald Riesenbach, age 58, is a partner in the Philadelphia based
law firm Cozen and O'Connor. Prior to February 1995 and for more than five
years, he was a partner with the law firm of Wolf, Block, Schorr and
Solis-Cohen. Mr. Riesenbach also serves as a director of Kleinert's, Inc., a
manufacturer of children's apparel, and of Scott Mills, Inc., a textile
manufacturer. Mr. Riesenbach's address is 1900 Market Street, Philadelphia,
Pennsylvania 19103.
Miles M. Stuchin, age 43, is President of Access Capital, Inc., a
financial services corporation, a position he has held for more than five years.
Mr. Stuchin's address is 405 Park Avenue, New York, NY 10022.
Anthony Coelho, age 54, is Chairman and Chief Executive Officer of
Coelho Associates, a New York investment brokerage firm. From 1989 to 1995 Mr.
Coelho served as a Managing Director of the New York Investment banking firm
Wertheim Schroder & Co., Incorporated, and from 1990 to 1995 he also served as
President and Chief Executive Officer of Wertheim Schroder Investment Services,
Inc. Mr. Coelho also serves as a director of Circus Circus Enterprises, Inc.,
ICF Kaiser International, Inc., Service Corporation International, Specialty
Retail Group, Inc., Tankology Environmental, Inc. and Tele-Communications, Inc.
In addition, Mr. Coelho serves on Fleishman-Hillard, Inc.'s Advisory Board. Mr.
Coelho is a former U.S. Representative from California and Majority Whip of the
U.S. House of Representatives. Mr. Coelho's address is 1325 Avenue of the
Americas, New York, NY 10019
Vincent Villanueva, age 53, currently is a private investor. From 1990
to 1991, he was a business consultant. From 1991 to September 1995, he was V.P.
Corp./Public Affairs of Diagnostek, Inc. Mr. Villanueva's address is 842 Stover,
S.W., Albuquerque, NM, 87102.
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<PAGE>
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the
Company's current directors and executive officers, all of whom, except Philip
J. Vitale, M.D., will resign upon the closing of the Settlement.
<TABLE>
<CAPTION>
Year First
Name Age Elected Director Position
---- --- ---------------- --------
<S> <C> <C> <C>
Steve Simon.................................. 49 1993 Chairman of the Board,
President, Chief Executive
Officer and Director
Helen Porter................................. 47 N/A Executive Vice President and
Chief Operating Officer
Philip J. Vitale, M.D........................ 49 1992 Director
Robert Granoff............................... 53 1995 Director
James J. Newman.............................. 44 1995 Director
Drew Sakson.................................. 38 1995 Director
</TABLE>
Steve Simon has been the Chairman of the Board of the Company since
June 1994, President and a director since May 1993 and Chief Executive Officer
of the Company since September 1993. Mr. Simon also served as Chief Operating
Officer of the Company from May 1993 to September 1993. Mr. Simon has also
served as the President and Chief Operating Officer of AutoLend Corporation
since March 1994 and ALRG since April 1993. He was a co-founder of ALRC and has
been its President since ALRC's organization in June 1989. From January 1988 to
January 1989, Mr. Simon was a consultant to the insurance industry in the State
of Florida. Mr. Simon is the husband of Helen Porter.
Helen Porter has been Executive Vice President and Chief Operating
Officer of the Company since July 1994 and had been the Vice President -
Operations of the Company since November 1993 and Executive Vice President of
ALRG since April 6, 1993. She was a co-founder of ALRC and has been its
Treasurer and Secretary since its organization in June 1989. From 1980 to 1992,
Ms. Porter was Vice President of Office Specialists, Inc., a national temporary
employment service. Ms. Porter is the wife of Steve Simon.
Philip J. Vitale, M.D. has been a director of the Company since
February 1992. Dr. Vitale has been a doctor of medicine, specializing in
urology, at the Lovelace Medical Center, Albuquerque, New Mexico ("Lovelace")
since 1978. Dr. Vitale served on the Board of Directors of Lovelace from 1985
until 1989, and served on other governing boards and in governing capacities for
Lovelace at various times from 1980 until 1989, during which time
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<PAGE>
Lovelace was owned by several different entities. From 1976 until 1978, Dr.
Vitale served as Chief Urologist at Kirkland Air Force Base in Albuquerque.
Robert Granoff has been a director of the Company since December 1995
Since 1983, Mr. Granoff has served as Vice President of The Paper Wholesaler, a
company involved in wholesale paper distribution and the retail restaurant and
party supply industries. From 1976 to 1993, Mr. Granoff served as President of
Graco Paper, a wholesale paper distributor.
James Newman has been a director of the Company since December 1995.
Since March 1992, Mr. Newman has served as President of The Firm, an independent
manufacturer's representative selling microcomputer products nationally. From
1983 through December, 1992, Mr. Newman served as an owner and Vice President of
Sales for Pacific Micro Marketing, an independent manufacturer's representative
in Northern California selling microcomputer products.
Drew Sakson has been a director of the Company since December 1995.
Since 1987, Mr. Sakson has served as President of Drew Sakson Management, Inc.,
a mortgage investments and real estate company. Mr. Sakson has also served as a
manager of Roar L.L.C and Vice President of Midland Hotel L.L.C.
Directors of the Company hold office until the next annual meeting of
stockholders. Officers of the Company hold office at the pleasure of the board
of directors, subject to the terms of employment agreements between the Company
and each of Steve Simon and Helen Porter.
The Board of Directors met eight times during the fiscal year ended
March 31, 1996 ("fiscal 1996"). No incumbent director attended fewer than 75% of
the aggregate of either the total number of meetings of the Board of Directors
held during the period for which he had been a director or the total number of
meetings held by all committees of the Board of Directors on which he served,
during the periods for which he served.
The Board has an Executive Committee and an Audit Committee.
The Executive Committee currently consists of Steve Simon and, during
portions of fiscal 1996, certain other directors who have since resigned. The
Executive Committee met once during fiscal 1996. The Executive Committee is
responsible for all matters which arise between regular meetings of the Board of
Directors. The Audit Committee currently has no members. The Audit Committee is
authorized by the Board of Directors to review, with the Company's independent
accountants, the annual financial statements of the Company prior to
publication; to review the work of, and approve non-audit services performed by,
such independent accountants; and to make annual recommendations to the Board of
Directors for the appointment of independent public accountants for the ensuing
year. The Audit Committee also reviews the effectiveness of the financial and
accounting functions,
- 5 -
<PAGE>
organizations, operations and management of the Company. The Audit Committee met
once during fiscal 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of (a) all persons known by the Company to own beneficially 5% or more
of the Company's outstanding Common Stock, (b) each current director and named
executive officer of the Company and all current, directors and executive
officers of the Company as a group, and (c) each Designated Director and the
Designated Directors as a group, as of June 21, 1996, on which date the Company
had outstanding 4,634,530 shares of Common Stock, excluding treasury shares.
<TABLE>
<CAPTION>
Amount and
Name and Address Nature of
of Beneficial Owner Beneficial Percent of
or Identity of Group Ownership(1) Class Owned
- -------------------- ------------ -----------
<S> <C> <C>
Steve Simon(2)(3)................................................... 644,467(4) 13.9%
Helen Porter(2)(3).................................................. 201,600(5) 4.2%
Philip J. Vitale, M.D. (2)......................................... 75,700(6) 1.6%
Robert Granoff(2)(3)............................................. 0 *
James Newman(2)(3)............................................... 0 *
Drew Sakson(2)(3)................................................... 133,340(7) 2.9%
Nunzio P. DeSantis (14)............................................. 608,900(8)(9) 13.1%
4500 Alexander Blvd., N.E.
Albuquerque, New Mexico 87107
Courtlandt G. Miller................................................ 382,900(9)(10) 8.3%
405 Park Avenue, Sixteenth Floor
New York, NY 10022
J.E. Sheehan & Company, Inc......................................... 244,647(11) 5.3%
711 Fifth Avenue
New York, NY 10022
Synalgest, S.A. .................................................... 254,997(1) 5.5%
20 Rue de la Paix
75002 Paris, France
Banque Degroof Luxembourg, S.A. .................................... 269,388(12) 5.8%
One Place D'armes
1136 Luxembourg
Allen & Company Incorporated........................................ 605,248(11) 11.6%
Allen Holding, Inc.
711 Fifth Avenue
New York, NY 10022
E. Gerald Riesenbach, Esquire(14)................................... 0 *
1900 Market Street
Philadelphia, PA 19103
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<PAGE>
Vincent Villanueva (14)............................................. 121,200(13) 2.6%
842 Stover, S.W., Albuquerque,
New Mexico, 87102
Anthony Coelho (14)................................................ 0 *
1325 Avenue of the Americas, 26th Fl.
New York, NY, 10019
Miles M. Stuchin (14)............................................... 3,000 *
405 Park Avenue
New York, NY 10022
All current directors and executive officers
as a group (6 persons)............................................. 1,055,107(15) 19.3%
All Designated Directors as a group (5 persons)..................... 808,800(16) 17.5%
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated, each individual who is listed or is part of
the group has sole voting and investment power for the shares listed
below.
(2) The address of this person is c/o AutoLend Group, Inc., 930 Washington
Avenue, Miami Beach, Florida 33139.
(3) This person will resign from the Board of Directors as part of the
transactions contemplated by the Stipulation.
(4) Includes 576,667 shares issuable upon exercise of options exercisable
within 60 days, which options will be forfeited as part of the
transactions contemplated by the Stipulation. Does not include the
908,000 shares that are the subject of the Voting Agreements which are
expected to be terminated shortly following consummation of the
transactions contemplated by the Stipulation. Also does not include
options to purchase 400,000 shares which will be granted as part of the
transactions contemplated by the Stipulation, which options will become
exercisable upon grant.
(5) Includes 200,000 shares issuable upon exercise of options exercisable
within 60 days, which options will be forfeited as part of the
transactions contemplated by the Stipulation. Does not include options
to purchase 125,000 shares which will be granted as part of the
transactions contemplated by the Stipulation, which options will become
exercisable upon grant
(6) Includes 8,200 shares held by Dr. Vitale jointly with his wife.
Includes 60,000 shares issuable upon exercise of options exercisable
within 60 days.
(7) Includes 2,885 shares held by Mr. Sakson jointly with his wife.
(8) Includes 75,000 shares issuable upon exercise of options exercisable
within 60 days. Does not include 51,600 shares owned by the Diagnostek
Charitable Foundation, for which Mr. DeSantis serves as Voting Trustee,
with respect to which Mr. DeSantis has disclaimed beneficial ownership.
Does not include the shares of Common Stock beneficially owned by Mr.
Simon and Ms. Porter which will become subject to a Voting Trust under
the terms of the Stipulation and for which Mr. DeSantis will serve as
Voting Trustee.
(9) These shares are subject to the Voting Agreements described in note 4
above and which are expected to be terminated shortly following
consummation of the transactions contemplated by the Stipulation.
(10) Includes 75,000 shares issuable upon exercise of options exercisable
within 60 days.
(11) Represents shares issuable upon exercise of Unit Purchase Options and
of Class A and Class B Warrants issuable upon exercise of Unit Purchase
Options and the Class A and Class B Warrants included therein.
(12) Represents shares issuable upon exercise of a currently exercisable
Warrant.
- 7 -
<PAGE>
(13) Includes 55,000 shares issuable upon exercise of options exercisable
within 60 days.
(14) This person is a Designated Director.
(15) Includes 836,667 shares issuable upon exercise of options exercisable
within 60 days. Does not include the 908,000 shares that are the
subject of the Voting Agreements described in note 4 above and which
are expected to be terminated shortly following consummation of the
transactions contemplated by the Stipulation.
(16) Includes shares beneficially owned by all of the Designated Directors
and Dr. Vitale. Does not include the shares of Common Stock
beneficially owned by Mr. Simon and Ms. Porter which will become
subject to a Voting Trust under the terms of the Stipulation and for
which Mr. DeSantis will serve as Voting Trustee.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation
for services in all capacities for fiscal 1996 and the fiscal years ended March
31, 1995 and March 31, 1994, of those persons who were, at the end of fiscal
1996 the Chief Executive Officer and the only other executive officer whose
compensation for fiscal 1996 exceeded $100,000 (collectively, the "Two Named
Officers").
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Fiscal Other Annual Awards All Other
Name and Principal Position Year Salary ($) Compensation(1) Options(#)(2) Compensation($)
- --------------------------- ---- ---------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Steve Simon 1996 174,996 -- 300,000 --
Chairman of the Board 1995 174,996 -- 125,000 --
and Chief Executive Officer 1994 185,396 -- 360,000 --
Helen Porter 1996 150,000 -- -- --
Executive Vice President 1995 131,250 -- 300,000 --
and Chief Operating Officer 1994 86,458 -- -- --
</TABLE>
- --------------------
(1) The aggregate amount of prerequisites and other personal benefits paid
to each of the Two Named Officers for fiscal 1996, 1995 and 1994 did
not exceed the lesser of 10% of such officer's total annual salary and
bonus for such fiscal years and $50,000; such amounts are, therefore,
not reflected in the table.
(2) All options held by the Two Named Officers will be forfeited as part of
the transactions contemplated by the Stipulation. Options to purchase
400,000 shares will be granted to Mr. Simon and options to purchase
125,000 shares will be granted to Ms. Porter as part of the
transactions contemplated by the Stipulation, which options will become
exercisable upon grant.
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<PAGE>
Options Granted in the Last Fiscal Year
The following table sets forth information concerning stock options
grants made during fiscal 1996 to the Two Named Officers. These grants are also
reflected in the Summary Compensation Table. In accordance with SEC rules, a
repricing of outstanding options is treated as a new grant. Also in accordance
with the SEC rules, the hypothetical gains or "option spreads" for each option
grant are shown based on compound annual rates of stock price appreciation of 5%
and 10% from the grant date to the expiration date. The assumed rates of growth
are prescribed by the SEC and are for illustrative purposes only; they are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance. The Company has not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Options Employees in Exercise Price Expiration Appreciation for Option Term(3)
Granted Fiscal Year per Share(2) Date 5% 10%
------- ----------- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Steve Simon 300,000 100% $1.50 June 16, 2005 $283,002 $717,184
Helen Porter -- -- -- -- -- --
</TABLE>
- -----------------
(1) All options held by the Two Named Officers will be forfeited as part of
the transactions contemplated by the Stipulation. Options to purchase
400,000 shares will be granted to Mr. Simon and options to purchase
125,000 shares will be granted to Ms. Porter as part of the
transactions contemplated by the Stipulation, which options will become
exercisable upon grant.
(2) Options were granted with an exercise price equal to the market price
of the stock at the date of grant.
(3) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates required by the SEC and therefore are not
intended to forecast possible future appreciation of the stock price.
Aggregated Options Exercised in Last Fiscal Yearand Year End Option
Values - 1996
The following table provides information concerning all exercises of
stock options during fiscal 1996 by the Two Named Officers and the fiscal
year-end value of unexercised options on an aggregated basis. The Company has
not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised In-the-Money
Acquired on Value Options at Year End Options at Year End(2)
Exercise(#) Realized($) Exercisable/Unexercisable(1) Exercisable/Unexercisable
----------- ----------- ---------------------------- -------------------------
<S> <C> <C> <C> <C>
Steve Simon -- -- 376,667/408,333 $0/$0
Helen Porter -- -- 100,000/200,000 $0/$0
</TABLE>
- --------------------
(1) All options held by the Two Named Officers will be forfeited as part of
the transactions contemplated by the Stipulation. Options to purchase
400,000 shares will be granted to Mr. Simon and options to purchase
125,000 shares will be granted to Ms. Porter as part of the
transactions contemplated by the Stipulation, which options will become
exercisable upon grant.
(2) Options are "in-the-money" if on March 31, 1996, the market price of
the Common Stock ($1.00) exceeded the exercise price of such options.
The value of such options is calculated by determining the difference
between the aggregate market price of the Common Stock covered by the
options on February 3, 1996 and the aggregate exercise price of such
options.
- 9 -
<PAGE>
Compensation of Directors
Directors who are not employees of the Company will receive $7,500 per
year in directors fees as well as $750 per board meeting or committee meeting
attended. Directors will also each receive options to purchase 50,000 shares of
the Company each year that they serve on the Board, except that they will each
receive options to purchase 75,000 shares for their service from their initial
election to the Board until the first annual meeting of the Company thereafter.
All current Directors have waived payment of fees and award of options in
respect of their service during the fiscal year ended March 31, 1996.
Employment Contracts
On April 2, 1993, ALRG entered into five-year employment agreements
with Steve Simon and Helen Porter. Mr. Simon was employed as president, chief
operating officer and a director of ALRG, and receives a minimum salary of
$125,000 per year, adjusted annually. In May 1993, Mr. Simon was appointed
President and was elected as a director of the Company and in June 1994 Mr.
Simon was appointed Chief Executive Officer of the Company. Ms. Porter was
employed as Executive Vice President of ALRG and receives a minimum salary of
$75,000 per year, adjusted annually. In July 1994, Ms. Porter was appointed
Chief Operating Officer of the Company. Under terms of the Settlement, Steve
Simon and Helen Porter will resign from the Company and amounts remaining under
their respective employment agreements as of the date of their resignations will
be accelerated.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 18, 1994, the Company entered into the Voting Agreements with
respect to all of the Common Stock owned or thereafter acquired by the Plaintiff
Stockholders. Pursuant to the Voting Agreements, Simon, as Chief Executive
Officer of the Company, served as Voting Trustee with sole voting power over all
shares of Common Stock held by the Plaintiff Stockholders until the earlier of
(i) his resignation as Voting Trustee, (ii) his ceasing to be Chief Executive
Officer of the Company and (iii) July 1, 1999. In the event that Simon resigned
as Voting Trustee or ceased to be Chief Executive Officer of the Company, the
Board of Directors was empowered to elect a successor Voting Trustee to serve
for the remainder of the term of the Voting Agreements. As of June 21, 1996, the
Plaintiff Stockholders beneficially owned an aggregate of 908,000 shares of
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management."
On June 27, 1996, the Delaware Chancery Court entered an order
approving the Stipulation settling the Derivative Suit. Pursuant to the
Stipulation, the action was dismissed with prejudice. AutoLend IAP, Inc.
("IAP"), a subsidiary of the Company, will be sold by the Company to a newly
formed affiliate of Simon for consideration including (i) repayment at closing
by IAP of all short term intercompany indebtedness in respect of amounts
borrowed by IAP to fund its loans to used car dealers to buy cars at auction,
which payment
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<PAGE>
is estimated to be approximately $6.0 million; (ii) the issuance to the Company,
prior to closing of the transactions contemplated by the Stipulation, by IAP of
Preferred Stock with a face amount of $1.0 million and a cumulative preferred
dividend of 11%, with dividend payments beginning 26 months following issuance,
and redemption rights beginning 36 months from issuance at face amount plus
accrued interest; (iii) the deposit at closing by IAP of $250,000 into escrow in
support of the redemption rights; and (iv) the representation and warranty by
IAP that it has no less than $2.0 million of common equity, and $5.0 million in
subordinated debt financing as of the closing.
In addition, IAP will purchase from the Company certain fixed assets
for the book value of those assets as currently recorded on the financial
statements of the Company. Some of the licenses, trade names, trademarks and
software of the Company used by IAP for its business will be assigned to IAP,
with IAP granting the Company a license of limited duration for the continued
use of certain of such licenses, trade names, trademarks and software necessary
to the Company's business.
Simultaneously with the closing, the current directors, with the
exception of Dr. Philip J. Vitale, M.D., will resign and appoint Nunzio DeSantis
to serve as Chairman of the Board and a director of the Company. Thereafter, Mr.
DeSantis and Dr. Vitale will appoint E. Gerald Riesenbach, Esquire, Miles M.
Stuchin, Anthony Coelho and Vincent Villanueva as directors. Messers DeSantis
and Villanueva previously served as directors of the Company, and Mr. DeSantis
previously served as its Chairman and Chief Executive Officer. Simon and Helen
Porter will be paid all amounts remaining under their employment agreements,
which will equal the product of the number of months remaining until the
scheduled expiration of the employment agreements in April 1998. Mr. Simon and
Ms. Porter have agreed to indemnify the Company for any tax liability resulting
from the non-withholding of taxes with respect to such payments and will place
in escrow $25,000 of such payments in support of the indemnity obligation. To
facilitate the management transition, Simon and Helen Porter will each enter
into three year consulting agreements with the Company, under which they will
assist the Company (i) with the collection of its remaining automobile
receivables and (ii) with the maintenance of its remaining vatical settlement
policies. In consideration of their entering into the consulting agreements,
each will receive $210,000 at the closing. Simon will also resign as Voting
Trustee. It is expected that the Voting Agreements will be terminated shortly
following consummation of the transactions contemplated by the Stipulation.
In addition, Simon and Helen Porter will enter into a Voting Trust
pursuant to which all shares of Common Stock that they now own or may hereafter
acquire shall be voted by Mr. DeSantis as the initial Voting Trustee. The Voting
Trust will not restrict the sale of the shares at any time by Mr. Simon or Ms.
Porter to an unaffiliated purchaser.
Concurrently with the closing, the parties to the Derivative Suit, as
well as certain current and former directors of the Company, will exchange
releases.
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<PAGE>
LEGAL PROCEEDINGS
On December 26, 1995, the Plaintiff Stockholders commenced the
Derivative Suit in the Court against Defendants, and the Company as nominal
defendant, seeking, among other things, to temporarily, preliminarily and, if
necessary, permanently enjoin the Company's management and Board from taking
certain contemplated actions, including selling one of its subsidiaries to Simon
and continuing the repurchase of its outstanding Debentures, until a special
meeting of the Company's stockholders could be held. In addition, the Plaintiff
Stockholders sought to remove Simon as Voting Trustee under the Voting
Agreements, the validity of which was disputed by the Plaintiff Stockholders,
and to bar Simon from voting their shares. The Plaintiff Stockholders also
sought damages to the extent the Defendants proceeded with any of these actions
before injunctive relief could be obtained and for any breaches of fiduciary
duty, gross mismanagement and/or gross negligence that may have occurred.
The Defendants denied all claims of wrongdoing, and soon after the
Plaintiff Stockholders commenced the Derivative Suit, the Plaintiff Stockholders
and the Defendants entered into extensive arms-length negotiations concerning a
change in existing management, the composition of the Board pending the next
annual meeting of stockholders of the Company and the resolution of all claims
between the parties. As a result of these negotiations, the parties entered into
the Stipulation on May 3, 1996. The Stipulation was approved by the Court on
July 16, 1996 after due notice had been sent to all of the Company's
stockholders and notwithstanding the objection of one stockholder of the
Company. The order became final and unappealable on August 16, 1996. Pursuant to
the Stipulation, all pending claims, including those alleged in the Derivative
Suit, have been dismissed and, among other thing: (i) current executive
management of the Company will resign; (ii) all of the directors of the Company
other than Dr. Philip Vitale will resign from the Board; (iii) Mr. DeSantis will
be appointed to the Board and will be elected Chairman and Chief Executive
Officer; (iv) the Company's subsidiary, AutoLend IAP, Inc., will be sold to an
entity to be formed by Simon in consideration for the payment to the Company of
approximately $6.0 million in cash in settlement of all intercompany receivables
and for the issuance to the Company of cumulative preferred stock, with a face
amount of $1.0 million, in the newly formed entity which is acquiring AutoLend
IAP, Inc.; and (v) Simon and Helen Porter, the Company's executive vice
president, will be paid amounts due under their current employment agreements,
will enter into consulting agreement with the Company and will be issued stock
options in lieu of other stock options which they have agreed to forfeit. See
"Certain Relationships and Related Transactions." The terms of the Stipulation
were described in detail in the notice sent to all of the Company's stockholders
in accordance with the order of the Court.
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<PAGE>
Simultaneously with the closing of the transactions contemplated by the
Stipulation, the current directors other than Philip J. Vitale, M.D. will resign
and Nunzio DeSantis will be appointed as a director and as Chairman of the
Board. Thereafter, Mr. DeSantis and Dr. Vitale will appoint E. Gerald
Riesenbach, Esquire, Miles M. Stuchin, Anthony Coelho and Vincent Villanueva as
additional directors, which appointments will constitute a change in a majority
of the Board of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers or beneficial owners of over 10% of any class of the
Company's equity securities to file certain reports regarding their ownership of
the Company's securities or any changes in such ownership. Such reporting
persons are required to furnish the Company with copies of all Section 16(a)
reports they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, all Section 16(a) filing requirements
applicable to its officers, directors and beneficial owners of over 10% of the
Company's Common Stock during fiscal 1996 were complied with, other than with
respect to the designation of Messrs. Sakson, Granoff, and Newman as directors,
and the grant of options to Mr. Simon reflected above, which were or will be
reported on Forms 5 on or about the date hereof.
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