<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.)
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 Rule 14a-11(c) or Rule 14a-12
INSURANCE AUTO AUCTIONS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(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:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(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):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
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<PAGE> 2
(5) Total fee paid:
________________________________________________________________________________
[ ] 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:
________________________________________________________________________________
(2) Form, schedule or registration statement no.:
________________________________________________________________________________
(3) Filing party:
________________________________________________________________________________
(4) Date filed:
________________________________________________________________________________
2
<PAGE> 3
[INSURANCE AUTO AUCTIONS LOGO]
INSURANCE AUTO AUCTIONS, INC.
850 EAST ALGONQUIN ROAD
SUITE 100
SCHAUMBURG, IL 60173
April 28, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of Insurance Auto Auctions, Inc. (the "Company") to be held on
June 17, 1998 at 9:30 a.m. at The Meadow Club, 2850 W. Golf Road, Rolling
Meadows, IL 60008. The formal Notice of Annual Meeting of Shareholders and
Proxy Statement accompanying this letter describe the business to be acted
upon.
It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. If you decide to attend the meeting, you may still vote in person
even if you have previously returned a signed proxy.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.
Sincerely,
/s/ James P. Alampi
James P. Alampi
President and Chief Executive Officer
3
<PAGE> 4
INSURANCE AUTO AUCTIONS, INC.
850 EAST ALGONQUIN ROAD
SUITE 100
SCHAUMBURG, ILLINOIS 60173
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1998
The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of
Insurance Auto Auctions, Inc. (the "Company") will be held on June 17, 1998 at
9:30 a.m. at The Meadow Club, 2850 W. Golf Road, Rolling Meadows, IL 60008,
for the following purposes:
1. To elect eight Directors of the Company to serve until the next
annual meeting or until their successors have been elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending December 31,
1998; and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 20, 1998
as the record date for determining shareholders entitled to notice of, and to
vote at, the Annual Meeting and at any adjournment or postponement thereof. A
list of shareholders entitled to vote at the Annual Meeting will be available
for inspection at the Company's headquarters at 850 East Algonquin Road, Suite
100, Schaumburg, IL 60173, during regular business hours prior to the Annual
Meeting.
Please read carefully the following Proxy Statement, which describes the
matters to be voted upon at the Annual Meeting, and then complete, sign and
return your Proxy as promptly as possible. Should you receive more than one
Proxy because your shares are registered in different names and addresses, each
Proxy should be signed and returned to assure that all your shares will be
voted. If you attend the Annual Meeting and vote by ballot, your Proxy will be
revoked automatically and only your vote at the Annual Meeting will be counted.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James P. Alampi
James P. Alampi
President and Chief Executive Officer
Schaumburg, Illinois
April 28, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
SO THAT YOUR COMMON STOCK WILL BE REPRESENTED AT THE ANNUAL MEETING IN THE
EVENT YOU ARE NOT PERSONALLY PRESENT, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. EXECUTION OF THE PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE MEETING.
- --------------------------------------------------------------------------------
4
<PAGE> 5
INSURANCE AUTO AUCTIONS, INC.
850 EAST ALGONQUIN ROAD
SUITE 100
SCHAUMBURG, ILLINOIS 60173
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1998
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Insurance Auto Auctions, Inc., an Illinois corporation (the "Company"), for use
at the 1998 Annual Meeting of Shareholders (the "Annual Meeting"). The Annual
Meeting will be held on June 17, 1998 at 9:30 a.m. at The Meadow Club, 2850 W.
Golf Road, Rolling Meadows, IL 60008. Shareholders of record on April 20, 1998
will be entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and accompanying proxy (the "Proxy") and Notice of
Annual Meeting were first mailed to shareholders on or about May 5, 1998.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy
Statement.
RECORD DATE, VOTING AND SHARE OWNERSHIP
On April 20, 1998, the record date for determination of shareholders
entitled to vote at the Annual Meeting, there were 11,307,704 shares of Common
Stock outstanding. No shares of the Company's Preferred Stock are outstanding.
Each shareholder is entitled to one vote for each share of Common Stock held by
such shareholder. A majority of the outstanding shares entitled to vote on a
matter, represented in person or by proxy, shall constitute a quorum for
consideration of such matter at the Annual Meeting. The eight candidates for
election as directors receiving the highest number of affirmative votes of the
majority of shares represented and entitled to vote at the Annual Meeting will
be elected Directors of the Company. Approval of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998
will be decided by the affirmative vote of a majority of the shares represented
and entitled to vote at the Annual Meeting. Abstentions with respect to any
matter are treated as shares present or represented and entitled to vote on
that matter and thus have the same effect as negative votes. If shares are not
voted by the broker who is the record holder of the shares, or if shares are
not voted in other circumstances in which proxy authority is defective or has
been withheld with respect to any matter, these non-voted shares are not deemed
to be present or represented for purposes of determining whether shareholder
approval of that matter has been obtained.
REVOCABILITY OF PROXIES
If you are unable to attend the Annual Meeting, you may vote by Proxy. The
enclosed Proxy is solicited by the Company's Board of Directors and, when
returned properly completed, will be voted as you direct in your Proxy. Unless
otherwise instructed in the Proxy, the proxyholders will vote the Proxies
received by them FOR each of the two proposals described herein.
Any person giving a Proxy has the power to revoke it at any time before
its exercise. It may be revoked by filing with the Vice President, Controller
of the Company at the Company's headquarters at 850 East Algonquin
5
<PAGE> 6
Road, Suite 100, Schaumburg, IL 60173, a notice of revocation or another signed
Proxy with a later date. You may also revoke your Proxy by attending the Annual
Meeting and voting in person.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to shareholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram or other means by directors, officers, employees or agents
of the Company. No additional compensation will be paid to directors, officers,
or employees of the Company for any such services. Except as described above,
the Company does not presently intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting must be received by
the Company at its principal executive offices no later than January 9, 1999 in
order that they may be included in the proxy statement and form of proxy
relating to that meeting.
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors has nominated the eight nominees listed below (the
"Nominees") for election as directors to hold office until the next annual
meeting or until their respective successors are duly elected and qualified. As
of the date of this proxy statement, each person nominated for election has
agreed to serve if elected and the Board of Directors has no reason to believe
that any Nominee will be unavailable to serve. Unless otherwise instructed in
the Proxy, the proxy holders will vote the Proxies received by them FOR the
Nominees. The eight Nominees receiving the highest number of affirmative votes
of the majority of shares represented and entitled to vote at the Annual
Meeting will be elected Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY
UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND
QUALIFIED.
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<PAGE> 7
NOMINEES
Set forth below is information regarding the Nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were or are
selected as Directors and their ages as of March 31, 1998:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
NOMINEE(1) AGE APPOINTED DIRECTOR
---------- --- ------------------
<S> <C> <C>
James P. Alampi....................................... 51 1996
Susan B. Gould(2)(3).................................. 60 1991
Melvin R. Martin...................................... 67 1992
Thomas J. O'Malia(2)(3)............................... 54 1993
Christopher G. Knowles (2)............................ 55 1994
Glen E. Tullman....................................... 38 1994
Maurice A. Cocca (3)................................. 54 1997
John K. Wilcox (2).................................... 62 1998
</TABLE>
- ----------
(1) Bradley Scott has resigned his positions as Chairman and a Director of
the Company and will not be a Nominee for election to the Board.
(2) Member of Audit Committee
(3) Member of Compensation Committee
JAMES P. ALAMPI became President and Chief Executive Officer and a
Director of the Company in March 1996. As President and Chief Executive
Officer, Mr. Alampi oversees the Company's overall corporate administration as
well as strategic planning. Prior to joining the Company, Mr. Alampi served as
President of Van Waters & Rogers Inc., a subsidiary of Univar Corporation, a
chemical distribution company ("Univar"), from 1992 to 1995.
SUSAN B. GOULD has been a Director of the Company since October 1991. Ms.
Gould is the founder, and since 1988 has been President, of Gould & Associates,
a human resources consulting firm specializing in outplacement and
organizational team building. Since 1989, Ms. Gould has also served as a member
of the Board of Advisors of The Zitter Group, a healthcare outcomes information
company.
MELVIN R. MARTIN has been a Director of the Company since January 1992.
From June 1947 to January 1992, Mr. Martin was President and Chief Executive
Officer of M&M Auto Storage Pool, Inc., which he founded and which sold
substantially all of its assets to the Company in January 1992.
THOMAS J. O'MALIA has been a Director of the Company since September 1993.
Since July 1995, Mr. O'Malia has been a Professor of Clinical Entrepreneurship
and Director of the Entrepreneur Program at the University of Southern
California. From April 1994 to July 1995, Mr. O'Malia was General Manager,
Manufacturing Systems Division of Kronos, Incorporated ("Kronos"), a software
company. From 1985 to April 1994, Mr. O'Malia was Chief Executive Officer of
ShopTrac Data Collection Systems, Inc., a software company that he founded and
that was merged into Kronos in April 1994.
CHRISTOPHER G. KNOWLES has been a Director of the Company since June 1994
and was President and Chief Operating Officer of the Company from April 1994 to
March 1996. Mr. Knowles previously served as Senior Vice President, Operations
East of the Company from January 1994 to April 1994. Prior to joining the
Company, Mr. Knowles was Chairman and Chief Executive Officer from 1980 to 1994
of Underwriters Salvage Company, a multi-location salvage operation that the
Company acquired in January 1994. Since August 1991, Mr. Knowles has been a
director of Zebra Technologies Corporation, a manufacturer of barcoding
printers and label media. Since November 1997, Mr. Knowles has been a director
of Metal Management, Inc., a metals recycling firm.
7
<PAGE> 8
GLEN E. TULLMAN has been a Director of the Company since November 1994.
Since August 1997, Mr. Tullman has been Chief Executive Officer of Allscripts,
Inc., a provider of pharmaceutical management systems to physicians. From
October 1994 to July 1997, Mr. Tullman was Chief Executive Officer and a
Director of Enterprise Systems, Inc., a publicly held provider of healthcare
information systems and software for automating and streamlining key
operational areas in healthcare organizations. From 1990 to September 1994, Mr.
Tullman was President and Chief Operating Officer of CCC Information Services,
Inc., a provider of software and network services to insurance companies.
MAURICE A. COCCA has been a Director of the Company since February 1997.
From November 1993 to November 1995, Mr. Cocca was Managing Director of The
Fisons Laboratory Supplies Division of Fisons PLC. This Division is a
distributor of laboratory supplies that was later acquired by Fisher
Scientific. Mr. Cocca also served on the Board of Directors of Fisons PLC
during that period. From November 1993 to November 1995, Mr. Cocca served as
Chairman of Curtin Matheson Scientific, a division of Fisons PLC and a supplier
of diagnostic instruments, tests and related products. From 1977 to November
1995, Mr. Cocca was President of Curtin Matheson Scientific. Mr. Cocca has
served on the Board of Directors of J&W Scientific Holding, a manufacturer of
columns used in analysis in gas chromatographs, since April 1996.
JOHN K. WILCOX has been a Director of the Company since February 1998.
From November 1994 until November 1997, Mr. Wilcox was Group Vice President,
personal lines finance and planning of Allstate Insurance Company. From April
1990 to October 1994, Mr. Wilcox was Vice President, Finance, of Allstate
Insurance Company. In connection with the Company's acquisition of the
Reclamation Division of Tech-Cor, Inc. ("Tech-Cor"), a wholly-owned subsidiary
of Allstate, in 1993, the Company, Tech-Cor, and certain shareholders of the
Company entered into a stockholder agreement pursuant to which such
shareholders agreed to vote their shares of the Company's Common Stock to elect
to the Board of Directors a representative chosen by Tech-Cor (the "Allstate
Stockholder Agreement"). Mr. Wilcox was appointed as a member of the Board of
Directors pursuant to the Allstate Stockholder Agreement.
There are no family relationships among executive officers or directors of
the Company, except that Marcia A. McAllister, the Company's Vice President,
Public Affairs, is the wife of Mr. Knowles, and Donald J. Comis, the Company's
Vice President, Central Division, is the brother of Gerald C. Comis, the
Company's Vice President, Customer Service and Industry Relations.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors
held eight meetings. As of December 31, 1997, the Board of Directors had a
standing Audit Committee and Compensation Committee.
The Audit Committee is primarily responsible for, among other things,
approving the services performed by the Company's independent auditors,
reviewing financial statements of the Company and reviewing reports of the
Company's auditors regarding the Company's accounting practices and systems of
internal accounting controls. During 1997 the Audit Committee consisted of Mr.
O'Malia, its Chairman, Ms. Gould and Mr. Knowles. The Audit Committee held
three meetings during 1997. Mr. Wilcox became a member of the Audit Committee
in February 1998.
The Compensation Committee is generally responsible for, among other
things, reviewing and approving the Company's compensation policies and setting
the compensation levels for those Company executive officers and employees
reporting directly to the Company's Chief Executive Officer whose compensation
was not otherwise established pursuant to employment agreements approved by the
Board of Directors. The Compensation Committee is also responsible for the
administration of the Company's stock option plans and Employee Stock Purchase
Plan. The Compensation Committee currently consists of Ms. Gould, its
Chairperson, Mr. O'Malia and Mr. Cocca. The Compensation Committee held five
meetings during 1997.
8
<PAGE> 9
During 1997, no director attended fewer than 75% of the aggregate number
of (i) the total number of meetings of the Board of Directors and (ii) the
total number of meetings of Committees of the Board of Directors on which he or
she serves that were held during the period for which he or she has been a
member.
COMPENSATION OF DIRECTORS
For 1997, each non-employee Director received an annual retainer fee of
$15,000, with a $750 fee for each Board meeting attended, a $400 fee for each
Committee meeting attended (other than on the date of a regularly-scheduled
Board meeting), and an annual fee of $2,750 if such non-employee Director
served as a chairperson of one of the Committees of the Board of Directors.
Non-employee Directors are also reimbursed for expenses incurred in attending
such meetings.
For 1998, each non-employee Director will receive an annual retainer fee
of $18,000, a $1,000 fee for each Board meeting attended, a $500 fee for each
committee meeting attended (other than on the date of a regularly scheduled
Board meeting), and an annual fee of $3,000 if such non-employee Director
served as a Chairperson of a Committee.
Each non-employee Director is also eligible to receive periodic option
grants for shares of the Company's Common Stock pursuant to the automatic
option grant program in effect under the Company's 1991 Stock Option Plan.
Under this Automatic Option Grant Program, each individual who becomes a
non-employee Board member will be granted an option to purchase 10,000 shares
of Common Stock on the date such individual joins the Board or on the day he or
she becomes an independent Director of the Company. In addition, each
non-employee Director is also entitled to receive an automatic option to
purchase 2,000 shares of Common Stock on the last business day of the second
quarter of each fiscal year during which such individual continues to serve on
the Board. Each automatic option grant becomes exercisable in four equal
quarterly installments at the end of each fiscal quarter commencing with the
last day of the fiscal quarter after the option grant date, provided the
non-employee Director continues to serve on the Board. However, each option
will become immediately exercisable for all of the option shares in the event
the Company is acquired by a merger or sale of substantially all of its assets
or outstanding capital shares.
The Company also has or had certain employment and on-going business
arrangements with Messrs. Scott, Alampi, Martin and Knowles which are described
more fully under the sections "Employment Contracts and Change-in-Control
Arrangements" and "Certain Relationships and Related Transactions."
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<PAGE> 10
EXECUTIVE COMPENSATION
The following Summary Compensation Table provides certain summary
information concerning the compensation earned, for services rendered in all
capacities to the Company and its subsidiaries during each of the last three
fiscal years, by the Company's Chief Executive Officer and each of the
Company's other four most highly compensated executive officers. The
individuals whose compensation is disclosed in the following tables are
hereafter referred to as the "Named Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND PRINCIPAL ------------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- ------------ -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
James P. Alampi(2)......... 1997 329,000 32,000 804(3) -- 6,000(4)
President and Chief 1996 239,000 60,000 -- 200,000 --
Executive Officer 1995 -- -- -- -- --
Linda C. Larrabee(5)....... 1997 170,000 12,000 38,000(6) -- 6,000(4)
Senior Vice President 1996 82,462 15,460 -- 30,000 --
and Chief Financial Officer 1995 -- -- --
Kevin J. Code(7)........... 1997 172,000 9,000 -- -- 5,000(4)
Vice President, Sales 1996 163,000 25,000 -- -- 4,000(4)
and Marketing 1995 142,000 15,000 25,000(8) 25,000 --
Gerald C. Comis............ 1997 152,000 9,000 16,000(9) 3,000(4)
Vice President, Customer 1996 142,000 10,000 -- -- 6,000(4)
Service and Industry 1995 137,000 15,000 -- 10,000 6,000(4)
Relations
Marcia A. McAllister(10)... 1997 149,000 9,000 18,000(9) -- 6,000(4)
Vice President, 1996 142,000 10,000 -- -- 6,000(4)
Public Affairs 1995 125,000 15,000 -- 10,000 --
</TABLE>
- ----------
(1) Includes salary deferred under the Company's 401(k) Plan and Section
125 Plan, and all amounts are rounded to the nearest thousand.
(2) Mr. Alampi became President and Chief Executive Officer of the
Company in March 1996.
(3) Represents gross-up to cover taxes incurred for relocation expense
reimbursement.
(4) Represents matching contributions that the Company made to its 401(k)
Plan on behalf of the Named Officer.
(5) Ms. Larrabee became Senior Vice President and Chief Financial Officer
in June 1996.
(6) Represents $19,000 for gross-up to cover taxes incurred for
relocation expense reimbursement and $19,000 for an automobile
allowance.
(7) Mr. Code resigned as Vice President, Sales and Marketing of the
Company in March 1998.
(8) Represents $25,000 signing bonus paid when Mr. Code joined the
Company.
(9) Automobile allowance.
(10) Ms. McAllister became Vice President, Public Affairs in February
1995.
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<PAGE> 11
STOCK OPTIONS
During 1997, the Named Officers were not granted any stock options or
stock appreciation rights. The following table sets forth information with
respect to unexercised options held as of the end of the 1997 fiscal year by
the Named Officers. No stock options were exercised during the 1997 fiscal
year. No stock appreciation rights were outstanding at the end of 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL YEAR-END
FISCAL YEAR-END(#) ($)(1)(2)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James P. Alampi..... 50,000 150,000 112,500 337,500
Linda C. Larrabee... 7,500 22,500 0 0
Kevin J. Code....... 12,500 12,500 28,350 28,350
Marcia A. McAllister 5,000 5,000 22,500 22,500
Gerald C. Comis..... 14,000 8,000 22,500 22,500
</TABLE>
- ----------
(1) "In-the-money" options are options whose exercise price was less than the
market price of the Common Stock on December 31, 1997, the last day of the
1997 fiscal year.
(2) Based upon the market price of $11.50 per share, which was the closing
price per share of the Company's Common Stock on the Nasdaq National
Market on December 31, 1997, less the exercise price payable per share.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has general
responsibility for establishing the compensation payable to the Company's
executive officers, including the President and Chief Executive Officer, and
has the sole and exclusive authority to administer the Company's stock option
plans and Employee Stock Purchase Plan.
EXISTING COMPENSATION ARRANGEMENTS. The compensation paid to James P.
Alampi for the 1997 fiscal year was based on the 1996 employment agreement,
which the Company negotiated with Mr. Alampi prior to his commencement of
employment (the "Alampi Agreement"). Under the Alampi Agreement, Mr. Alampi was
entitled to an initial annual base salary of $310,000, plus a performance
incentive bonus of up to 40% of his annual salary based upon the achievement of
objectively quantifiable and measurable goals and objectives determined in
advance by the Compensation Committee. In 1997, Mr. Alampi received a base
salary increase of 3% to $329,399 as part of the annual performance review
process. Mr. Alampi's performance bonus in 1997 was $31,930.
GENERAL COMPENSATION POLICY. The Committee's fundamental policy is to
offer the Company's executive officers competitive compensation opportunities
based upon overall Company performance, their individual contribution to the
financial success of the Company and their personal performance. Accordingly,
each executive officer's compensation package consists of: (i) base salary (ii)
annual incentive compensation and (iii) long-term stock-based incentive
compensation.
BASE SALARY. Each Named Officer received a modest increase in his or her
base salary for the 1997 fiscal year. This increase was authorized by the
Compensation Committee on the basis of its evaluation of the personal
performance of each such individual and the Company's objective of maintaining
base salary at a level that will enable the Company to attract and retain the
services of the high quality executives critical to the Company's financial
success. The Company also provides its executive officers with perquisites,
such as automobile allowances
11
<PAGE> 12
and relocation expenses, which are designed to match the fringe benefits
provided to executive officers of similarly-sized or comparable companies with
which the Company competes for executive talent.
ANNUAL INCENTIVE COMPENSATION. As indicated, Mr. Alampi is entitled to an
annual bonus based upon the achievement of objectively quantifiable and
measurable goals and objectives determined in advance by the Compensation
Committee. For 1997, Mr. Alampi received a bonus equal to $31,930. In
addition, the Company's other executive officers may earn annual bonuses on the
basis of their achievement of individual qualitative and quantitative targets
that are related to the financial performance of the Company. These targets are
generally set by the Compensation Committee at the start of each fiscal year.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION. The Company makes stock
option grants that in general are designed to align the interests of the
executive officer with those of the shareholders and provide each officer with
a significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. Option grants are typically made at the
initial employment of the executive and reviewed periodically thereafter. The
number of shares underlying the options are based upon the level of the
officer's responsibilities and internal comparability considerations.
Option grants allow the officer to acquire shares of Common Stock at a
fixed price per share (the closing price on the date preceding the grant date)
over a specified period of time (up to 10 years). The options typically vest in
periodic installments over a four-year period, contingent upon the executive
officer's continued service relationship with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she remains
a service provider to the Company, and then only if the market price of the
Company's Common Stock appreciates over the option term.
TAX LIMITATION. Section 162(m) of the Internal Revenue Code, enacted in
1993, generally disallows a tax deduction to publicly-held corporations for
compensation exceeding $1 million paid to certain of the corporation's
executive officers. It is not expected that the cash compensation to be paid to
the Company's executive officers for fiscal 1998 will exceed the $1 million
limit per officer. In addition, the Company's 1991 Stock Option Plan has been
amended to limit the maximum number of shares of common stock for which any one
participant may be granted stock options over the remaining term of that Plan
so that any compensation deemed paid to an executive officer when he or she
exercises an outstanding option under that Plan will qualify as
performance-based compensation which will not be subject to the $1 million
limitation.
Compensation Committee
Susan B. Gould Thomas J. O'Malia Maurice A. Cocca
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Ms. Gould, Mr. O'Malia and
Mr. Cocca. None of these individuals was at any time during the fiscal year
ended December 31, 1997 or at any other time an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
12
<PAGE> 13
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total shareholder return
on the Company's Common Stock with the cumulative total return of (i) the
Nasdaq Stock Market-US Companies Index and (ii) the Nasdaq Stock Market SIC
Peer Group 5000-5099 Index (which includes companies listed on Nasdaq that are
primarily engaged in the wholesale distribution of durable goods) for the
five-year period from December 31, 1992 through December 31, 1997. This graph
assumes the investment of $100 on December 31, 1992 in the Company's Common
Stock, the Nasdaq Stock Market Index and the Nasdaq SIC Peer Group index and
assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data
and the Company cautions that the stock price performance shown in the graph
below is not indicative of, nor intended to forecast, the potential future
performance of the Company's Common Stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NASDAQ STOCK MARKET - US COMPANIES,
NASDAQ STOCK MARKET SIC PEER GROUP 5000 - 5099
AND INSURANCE AUTO AUCTIONS, INC.
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IAA 100 162.0 132.9 46.7 41.3 50.0
Market 100 114.8 112.2 158.7 195.2 239.6
Peer 100 130.2 112.5 132.0 136.7 138.5
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, the Compensation Committee
Report on Executive Compensation and Performance Graph are not to be
incorporated by reference into any of those prior or future filings made by the
Company under those statutes.
13
<PAGE> 14
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The following is a description of the employment or service agreements in
effect between the Company and certain of its Directors and the Named Officers.
In March 1996, the Company and Mr. Alampi entered into an employment
agreement (as amended as of March 1998, the "Alampi Agreement") pursuant to
which Mr. Alampi agreed to serve as President and Chief Executive Officer of
the Company and the Company agreed to nominate Mr. Alampi as a Director of the
Company. Under the Alampi Agreement, Mr. Alampi is entitled to receive a
initial annual base salary of $310,000. Mr. Alampi is eligible to receive a
cash bonus of up to 40% of his annual salary upon the achievement of certain
specified goals and objectives to be determined by the Compensation Committee.
The Company granted Mr. Alampi an option to purchase 200,000 shares of the
Company's Common Stock. The option becomes exercisable in four annual
installments beginning one year after the grant date. In the event of a
termination of Mr. Alampi's employment for any reason (other than his
resignation from the Company, his termination for cause, as such term is
defined in the Alampi Agreement, or his termination in connection with a change
in control), the Company shall provide to Mr. Alampi (i) salary continuation,
at the rate in effect at the time of such termination, for a period of 12
months; and (ii) continued health coverage for up to one year from the date of
termination. In the event of the termination of Mr. Alampi's employment (other
than for cause and voluntary resignations in certain cases) following a change
in control, the Company shall (i) pay Mr. Alampi an amount equal to his monthly
salary and bonus for a period of twenty-four months; (ii) provide continued
health coverage for up to 18 months from the date of termination; and (iii)
accelerate vesting on all outstanding options to purchase Company Common Stock.
The Company has entered into Change of Control Employment Agreements (the
"Employment Agreements") with each of the Named Officers, except for Mr.
Alampi. Below is a general description of certain terms and conditions of the
Employment Agreements.
In the event of a "Change of Control" of the Company followed within two
years by (1) the termination of the executive's employment for any reason other
than death, disability, or "Cause" or (2) the termination of the executive's
employment by the executive for "Good Reason", the Employment Agreements
provide that the executive shall be paid a lump sum cash amount equal to one
and one-half times the executive's annual base salary and "Highest Annual
Bonus" as defined in the Employment Agreements. In addition, the executive is
entitled to continued employee welfare benefits for 18 months after termination
of employment.
"Change of Control" means (a) the acquisition by an individual, entity or
group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities
Exchange Act of 1934) of 50% or more of the voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors, (b) a change in the majority of the board of directors,
(c) a major corporate transaction, such as a reorganization, merger or
consolidation, or sale or other disposition of all or substantially all of the
Company's assets, or (d) a liquidation or dissolution of the Company.
"Cause" means the willful and continued failure of the executive to
perform substantially the executive's duties or the willful engaging by the
executive in illegal conduct or gross misconduct materially injurious to the
Company.
"Good Reason" means the diminution of responsibilities, assignment to
inappropriate duties, failure of the Company to comply with compensation or
benefit provisions, transfer to a new work location more than 75 miles from the
executive's previous work location, a purported termination of the Employment
Agreement by the Company other than in accordance with the Employment
Agreement, or failure of the Company to require any successor to the Company to
comply with the Employment Agreement.
In 1997, the Company paid Bradley Scott, its former Chairman of the Board,
a $100,000 consulting fee pursuant to the terms of a 1996 agreement between the
Company and Mr. Scott (the "Letter Agreement"). Also, pursuant to the Letter
Agreement, the Company paid Mr. Scott a performance bonus for 1997 of $126,000.
The Company and Mr. Scott recently entered into an agreement which, among
other things, terminates various
14
<PAGE> 15
agreements (including the Letter Agreement) which provided for compensation and
benefits for Mr. Scott though June 30, 1999.
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Knowles Consulting Agreement In May 1996, the Company and Mr. Knowles
entered into a consulting agreement pursuant to which Mr. Knowles agreed to
resign as an employee and to provide up to 45 hours of consulting services to
the Company per month and the Company agreed to transfer an automobile and
certain office equipment to Mr. Knowles. In 1997, pursuant to the consulting
agreement, Mr. Knowles received a gross monthly consulting fee of $5,000 plus
reimbursement of reasonable expenses. The agreement was terminated effective
November 24, 1997.
In February 1995, Marcia A. McAllister, the wife of Mr. Knowles, was named
Vice President, Public Affairs of the Company.
Tech-Cor Acquisition. In December 1993, the Company purchased certain
assets from and assumed certain specified obligations and liabilities of the
Reclamation Division of Tech-Cor, Inc. ("Tech-Cor") (the "Tech-Cor
Acquisition"). The consideration for the Tech-Cor Acquisition was 1,667,000
shares of the Company's Common Stock, which shares were subsequently
transferred by Tech-Cor to Allstate, the parent company of Tech-Cor.
Concurrently, the Company entered into a five-year lease with respect to
certain real property owned by Allstate located in Wheeling, Illinois. The
Company is required to pay rent of $18,333 per month to Allstate during the
term of such lease, which may also be renewed by the Company for one additional
five-year term. The Company, Tech-Cor and certain shareholders of the Company
also entered into a shareholder agreement pursuant to which such shareholders
agreed to vote their shares of the Company's Common Stock to elect to the Board
of Directors a representative chosen by Tech-Cor and the Company agreed to
facilitate such shareholders' actions. The Company and Tech-Cor also entered
into a Registration Agreement pursuant to which the Company is obligated under
certain circumstances to register with the Securities and Exchange Commission
shares of the Company's Common Stock held by Tech-Cor or Allstate. In addition,
Allstate agreed not to purchase shares of the Company's voting stock that would
result in ownership by Allstate and its affiliates of more than 20%, in the
aggregate, of the Company's voting stock.
Allstate Supply Agreement. Effective December 1, 1993, the Company
entered into a national sales agreement with Allstate to be Allstate's
exclusive provider of automotive salvage services in markets that the Company
currently services or enters in the future. In May 1996, this national sales
agreement was amended to modify certain terms and changed the Company's
relationship with Allstate to that of a preferred provider.
In its normal course of business dealings with Allstate, the Company
purchases vehicles from Allstate and advances funds for intermediary towing and
storage fees ("Advanced Charges") on behalf of Allstate. Additionally,
depending on the type of sales agreement in effect at a Company location,
Allstate may owe the Company for various fees. Upon settlement, the Advanced
Charges and the related amounts owed to Allstate for the purchase of the
vehicle and the amount owed by Allstate to the Company for various fees are
netted. During the years ended December 31, 1997 and 1996, the Company recorded
fee income of $7,000,000 and $6,000,000, respectively, related to the
consignment sale of Allstate-insured vehicles, recorded sales of $34,700,000
and $66,000,000, respectively, and cost of sales of $32,800,000 and
$63,900,000, respectively, related to the purchase of Allstate-insured vehicles
under the purchase-agreement method.
M & M Acquisition. In January 1992, the Company purchased the auto
salvage pool operations of M & M Auto Storage Pool, Inc., an Arizona
corporation ("M & M"), and acquired a 10-year option to purchase 35 acres of
land on which M & M's operation is located. Melvin R. Martin, the founder,
chief executive officer and principal shareholder of such auto salvage
operation, was elected as a Director of the Company in January 1992. The
Company is required to pay rent to Mr. Martin during the ten-year term of the
lease relating to the real property owned by Mr. Martin. In 1997, the Company
paid $300,000 pursuant to the lease. The Company believes the terms of the
lease are no less favorable than those available from unaffiliated third party
lessors. In addition, the Company has the option to purchase such real
property at the end of the term of the lease.
15
<PAGE> 16
Commencing in January 1993, the Company was obligated to pay to certain members
of Mr. Martin's family an aggregate of $50,000 over a five-year period in
consideration for their covenants not-to-compete. Mr. Martin is also subject to
a similar covenant.
In connection with the acquisition, the Company entered into an exclusive
towing services agreement with a corporation owned by Mr. Martin and his wife,
pursuant to which such entity provides towing services to the Company. During
1997, the Company paid $1,753,000 for towing services pursuant to such towing
arrangement. The Company believes that the towing fees charged to the Company
under such agreement are on terms no less favorable than those available from
unaffiliated third party towing contractors.
Mr. Martin and the Company were parties to a Consulting Agreement pursuant
to which Mr. Martin agreed to provide up to twenty (20) hours of consulting
services to the Company per week. In 1997, Pursuant to the Agreement, Mr.
Martin received $34,200 in consulting fees and reimbursement of reasonable
expenses. The agreement was terminated effective as of the end of September
1997.
The Company leases office space for use by Mr. Martin and in 1997, made
rental payments of $3,977 . The lease was terminated effective November 1997.
Dallas, Texas Lease. The Company leases certain property located in
Dallas, Texas from a partnership in which Mr. Martin is a partner. In 1997, the
Company paid $334,000 a month under this lease.
PROPOSAL NO. 2: RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the shareholders to ratify the selection of KPMG
Peat Marwick LLP as the Company's independent auditors for the fiscal year
ending December 31, 1998. The affirmative vote of a majority of the shares of
Common Stock represented and entitled to vote at the Annual Meeting will be
required to ratify the selection of KPMG Peat Marwick LLP.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its shareholders.
KPMG Peat Marwick LLP were auditors for the years ended December 31, 1993,
1994, 1995, 1996 and 1997 and have been recommended to the shareholders for
ratification as auditors for the year ending December 31, 1998. A
representative of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP TO SERVE AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
16
<PAGE> 17
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of March 31, 1998 for
(i) each Director and Nominee, (ii) all persons who are beneficial owners of
five percent or more of the Company's Common Stock, (iii) any other Named
Officer and (iv) all officers and Directors of the Company as a group. Unless
otherwise indicated, each of the shareholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
NAME AND ADDRESS SHARES SHARES OUTSTANDING(1)
------------------------------------------- --------- ---------------------
<S> <C> <C>
Allstate Insurance Company(2).............. 1,667,000 14.7%
3075 Sanders Road, Suite G4B
Northbrook, Illinois 60062
State of Wisconsin Investment Board(3)..... 950,000 8.4%
P.O. Box 7842
Madison, Wisconsin 53707
Peak Investment Limited Partnership (4).... 531,700 4.7%
Peak Management, Inc. (5).................. 531,700 4.7%
Peter H. Kamin (6)......................... 799,000 7.1%
Wanger Asset Management, L.P. (7).......... 726,500 6.4%
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
President and Fellows of Harvard College(8) 701,300 6.2%
c/o Harvard Management Company
600 Atlantic Avenue
Boston, MA 02210
James P. Alampi(9)......................... 105,250 *
Linda C. Larrabee(9)....................... 9,601 *
Marcia A. McAllister(9).................... 5,000 *
Kevin J. Code(9)........................... 16,250 *
Gerald C. Comis(9)......................... 16,424 *
Thomas J. O'Malia(9)....................... 25,000 *
Melvin R. Martin(9)........................ 25,625 *
Bradley S. Scott(9)........................ 804,750 7.0%
Glen E. Tullman(9)......................... 21,100 *
Susan B. Gould(9).......................... 20,700 *
Christopher G. Knowles(9).................. 161,289 1.4%
Maurice A. Cocca(9)........................ 16,500 *
John K. Wilcox (10)........................ 0 *
All officers (including Named Officers) and
Directors as a group (20 persons)(11)...... 1,273,450 10.8%
</TABLE>
- -----------
* Less than 1%
(1) Percentage of beneficial ownership is calculated assuming 11,307,454
shares of common stock were outstanding on March 31, 1998. This percentage
may include common stock of which such individual or entity has the right
to acquire beneficial ownership within sixty days of March 31, 1998,
including but not limited to the exercise of an option; however, such
common stock shall not be deemed outstanding for the purpose of computing
the percentage owned by any other individual or entity. Such calculation
is required by General Rule 13d-3(d)(1)(i) under the Securities Exchange
Act of 1934, as amended.
17
<PAGE> 18
(2) Such information is based on a Schedule 13G filed by Allstate with the
SEC reflecting stock ownership as of December 31, 1995 and on subsequent
representations by Allstate to the Company. According to such Schedule 13G
and representations, Allstate has sole voting and investment power over
all the shares.
(3) Such information is based on a Schedule 13G filed by State of Wisconsin
Investment Board with the SEC on January 20, 1998 and reflects stock held
as of December 31, 1997. According to such Schedule 13G, the State of
Wisconsin Investment Board retains sole voting and dispositive power for
all the shares.
(4) Peak Limited Partnership ("Peak L.P.") is the beneficial owner of 531,700
shares of Common Stock. Peak L.P. has the sole power to vote or to dispose
of or to direct the voting or to direct the disposition of the Common
Stock beneficially owned by it. Such voting and dispositive power may be
exercised on behalf of Peak L.P. by its General Partner, Peak Management,
Inc., of which Peter H. Kamin is the sole officer, director and
stockholder. Accordingly, Peter H. Kamin may be deemed to have shared
voting and dispositive power over the 531,700 shares of the Common Stock
beneficially owned by Peak L.P. Such information is based on a Schedule
13D filed with the SEC on July 2, 1997.
(5) By reason of its interest as General Partner of Peak L.P., Peak
Management, Inc. may be deemed to have shared voting and dispositive power
over the 531,700 shares of Common Stock beneficially owned by such
partnership. Such information is based on a Schedule 13D filed with the
SEC on July 2, 1997.
(6) Peter H. Kamin is the beneficial owner of 92,900 shares of Common Stock,
over which he has the sole power to vote or dispose of the 77,000 shares
of Common Stock beneficially owned by him for his own account, and the
15,900 shares of Common Stock beneficially owned by him in trust for his
children. In addition Mr. Kamin, individually, acts as an investment
advisor to certain institutional and private investors regarding
investment and trading in securities and other financial investments. A
portion of the Common Stock reported herein as beneficially owned by Peter
H. Kamin is held in managed brokerage accounts (the "Managed Accounts").
Mr. Kamin has voting and/or dispositive power with respect to all shares
of Common Stock in the Managed Accounts pursuant to the terms of certain
investment advisory agreements between himself and each of the Managed
Accounts. Thus, by virtue of his discretionary trading authority over
assets held in the Managed Accounts, Peter H. Kamin may be deemed the
beneficial owner of 174,400 shares of Common Stock held by the Managed
Accounts.
In addition to the above, by reason of his position as the sole director,
officer and stockholder of Peak Management, Inc., which is the sole
General Partner of Peak L.P., Peter H. Kamin may be deemed to have
indirect shared voting and dispositive power over the 531,700 shares of
Common Stock beneficially owned by such partnership. Accordingly, Peter
H. Kamin may be deemed the beneficial owner of an aggregate 799,000 shares
of Common Stock. Such information is based on a Schedule 13D filed with
the SEC on July 2, 1997.
(7) Such information is based on a Schedule 13G filed by Wanger Asset
Management, L.P., with the SEC on February 6, 1998 and reflects stock held
as of December 31, 1997. According to such Schedule 13G, Wanger Asset
Management, L.P. has shared voting and dispositive power for all the
shares.
(8) Such information is based on a Schedule 13G filed by the President and
Fellows of Harvard College ("Harvard") with the SEC on February 13, 1998
and reflects stock held as of December 31, 1997. According to such
Schedule 13G, Harvard has sole voting and dispositive power over all the
shares.
(9) Includes that portion of options to purchase shares of Common Stock
granted under the 1991 Stock Option Plan that are currently exercisable or
will become exercisable within 60 days after March 31, 1998: Mr. Alampi,
100,000 shares; Ms. Larrabee, 7,500 shares; Ms. McAllister, 5,000 shares;
Mr. Code, 16,250 shares; Mr. Gerald C. Comis, 14,000 shares; Mr. Scott,
207,750 shares; Mr. O'Malia, 20,000 shares; Mr. Martin, 25,000 shares; Mr.
Tullman, 15,500 shares; Ms. Gould, 14,700 shares; Mr. Knowles, 34,000
shares; and Mr. Cocca, 11,500 shares.
18
<PAGE> 19
(10) Mr. Wilcox was appointed a member of the Board of Directors pursuant to
the Allstate Stockholder Agreement. Mr. Wilcox disclaims beneficial
interest in any shares owned by Allstate Insurance Company.
(11) Includes options to purchase 511,450 shares of Common Stock granted under
the 1991 Stock Option Plan that are currently exercisable or will become
exercisable within 60 days after March 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders are
required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely upon a review of the copies of such reports furnished to the
Company and written representations from such officers, directors and greater
than ten percent shareholders that no other reports were required to be made,
the Company believes that there was full compliance for the fiscal year ended
December 31, 1997 with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent shareholders, except
for a late filing of one report by James P. Alampi, on Form 4 covering one
transaction involving the purchase of the Company's Common Stock.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1997 has been mailed concurrently with this Proxy Statement to all
shareholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.
ADDITIONAL INFORMATION AVAILABLE
The Company files an Annual Report on Form 10-K with the SEC. Shareholders
may obtain a separate copy of this report, without charge, by writing to the
Secretary of the Company at 850 East Algonquin Road, Suite 100, Schaumburg, IL
60173.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent
as the Board of Directors may recommend. Discretionary authority with respect
to such other matters is granted by the execution of the enclosed Proxy.
THE BOARD OF DIRECTORS OF
INSURANCE AUTO AUCTIONS, INC.
Dated: April 28, 1998
19
<PAGE> 20
DIRECTIONS TO THE MEADOW CLUB
Site of the 1998 Annual Meeting of Shareholders
THE MEADOW CLUB
2850 W. Golf Road
Rolling Meadows, IL 60008
Phone: (847) 640-3200
Fax: (847) 640-5855
FROM THE EAST (CITY AND THE LOOP)
Take the Kennedy Expressway/Northwest Tollway I-90 past O'Hare to the
Arlington Heights Road North exit. Go one short block and turn left on
Algonquin Road (Route 62). Take Algonquin Road to the first traffic light/Golf
Road (Route 58) and turn left. Proceed down Golf Road to the second traffic
light and turn right into the Meadow Corporate Center.
FROM THE NORTH
Take Route 53 South to the Woodfield Road exit. Proceed to the traffic
light at Woodfield Road and turn left. You will go under Route 53 to another
traffic light where you will make a left towards Golf Road. Keep to the right,
being careful not to get back on to Route 53. At the first traffic light turn
right on Golf Road (Route 58). Proceed to the second traffic light and turn
left into the Meadows Corporate Center.
FROM THE SOUTH
Take the Eisenhower I-290 or the North/South Tollway I-355 to Route 53
North. Exit at the Higgins/Golf Road exit. Proceed through the traffic light
at Higgins Road. Keep to the right, being careful not to get back on Route 53.
At the second traffic light after Higgins Road turn right on Golf Road (Route
58). Proceed to the second traffic light and turn left into the Meadows
Corporate Center.
FROM THE WEST
Take the Northwest Tollway I-90 East toward Chicago. Exit at Route 53 (15
cent toll). Keep to the right and enter Route 53 South. Exit at Woodfield
Road and proceed to the traffic light. Turn left at Woodfield Road and go
under route 53 to another traffic light, turn left. Keep to the right on Golf
Road (Route 58). At the second traffic light turn left into the Meadows
Corporate Center.
20
<PAGE> 21
INSURANCE AUTO AUCTIONS, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INSURANCE AUTO AUCTIONS, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held on June 17, 1998 and
the Proxy Statement and appoints James P. Alampi and Linda C. Larrabee, and
each of them, the Proxy of the undersigned, with full power of substitution, to
vote all shares of Common Stock of Insurance Auto Auctions, Inc. (the
"Company") which the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Annual Meeting of
Stockholders to be held at The Meadow Club, 2850 W. Golf Road, Rolling Meadows,
IL 60008, on Wednesday, June 17, 1998, at 9:30 a.m. local time and at any
adjournment or postponement thereof (the "Annual Meeting"), with the same force
and effect as the undersigned might or could do if personally present thereat.
The shares represented by this Proxy shall be voted in the manner set forth on
the reverse side.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED BELOW
AND A VOTE FOR THE OTHER PROPOSALS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL
BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED BELOW AND FOR THE OTHER PROPOSALS
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
1. To elect the following directors to serve for a term ending upon the 1999
Annual Meeting of Stockholders or until their successors are elected and
qualified.
Nominees: James P. Alampi, Maurice A. Cocca, Susan B. Gould, Christopher G.
Knowles, Melvin R. Martin, Thomas J. O'Malia, Glen E. Tullman, John K. Wilcox.
FOR WITHHOLD
ALL [ ] [ ] AUTHORITY
NOMINEES TO VOTE FOR
ALL NOMINEES.
[ ] ____________________________
For all nominees, except for any nominee(s) whose name is written in the space
provided above.
2. To ratify the appointment of KPMG FOR AGAINST ABSTAIN
Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent auditors for
the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the Annual
Meeting and at any adjournment or postponement thereof.
21
<PAGE> 22
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please sign your name.
Signature: _______________________________________________Date:____________
Signature: _______________________________________________Date:____________
22
