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SCHEDULE 14A
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(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
Filed by the registrant X
Filed by a party other than the registrant _
Check the appropriate box:
_ Preliminary proxy statement
X Definitive proxy statement
_ Definitive additional materials
_ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Interstate National Dealer Services, Inc.
(Name of Registrant as Specified in Its Charter)
Interstate National Dealer Services, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
_ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
_ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
_ 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:
(4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and how it was
determined.
_ 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:
<PAGE>
INTERSTATE NATIONAL DEALER SERVICES, INC.
The Omni, Suite 700
333 Earle Ovington Boulevard
Mitchel Field, New York 11553
March 14, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 annual meeting of
stockholders which will be held on Wednesday, April 16, 1997, beginning at 11:00
a.m. at the Long Island Marriott, 101 James Doolittle Blvd., Uniondale, New York
11553.
Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
Stockholders and Proxy Statement which follow. Also included is a Proxy Card and
postage paid return envelope.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend, we hope that you will complete and return your Proxy
Card in the enclosed envelope as promptly as possible.
Sincerely,
/s/ Chester J. Luby
Chester J. Luby
Chairman
<PAGE>
INTERSTATE NATIONAL DEALER SERVICES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 16, 1997
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The annual meeting of stockholders of Interstate National Dealer Services,
Inc. (the "Company") will be held at the Long Island Marriott, 101 James
Doolittle Blvd., Uniondale, New York 11553 on Wednesday, April 16, 1997, at
11:00 a.m., local time,
for the following purposes:
1. To elect two directors each for a term expiring at the
2000 annual meeting of stockholders.
2. To transact such other business as may properly come
before the meeting or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed March 14, 1997 as the record date for
determining the stockholders entitled to receive notice of and to vote at the
meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ Zvi D. Sprung
Zvi D. Sprung
Secretary
March 14, 1997
Mitchel Field, New York
<PAGE>
INTERSTATE NATIONAL DEALER SERVICES, INC.
The Omni, Suite 700
333 Earle Ovington Boulevard
Mitchel Field, New York 11553
PROXY STATEMENT
Annual Meeting of Stockholders
April 16, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Interstate National Dealer Services, Inc., a Delaware
corporation (the "Company"), of proxies from the holders of the Company's issued
and outstanding shares of common stock, $.01 par value per share (the "Shares"),
to be used at the Annual Meeting of Stockholders to be held on Wednesday, April
16, 1997 at the Long Island Marriott, 101 James Doolittle Blvd., Uniondale, New
York 11553 at 11:00 a.m. local time, and any adjournment(s) or postponement(s)
of such meeting (the "Annual Meeting"), for the purposes set forth in the
accompanying Notice of Annual Meeting.
This Proxy Statement and enclosed form of proxy are first being mailed to
the stockholders of the Company on or about March 14, 1997.
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following proposals:
1. The election of two directors; and
2. Such other business as may properly come before the Annual Meeting.
Only the holders of record of the Shares at the close of business on March
14, 1997 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. Each Share is entitled to one vote on all matters. As of the Record
Date, 3,394,233 Shares were outstanding.
A majority of the Shares outstanding must be represented at the Annual
Meeting in person or by proxy to constitute a quorum for the transaction of
business at the Annual Meeting.
In order to be elected as a director, a nominee must receive a plurality
of all the votes cast at the Annual Meeting. For purposes of calculating votes
cast abstentions and broker non-votes will not be counted as votes cast and will
have no effect on the result of the election of directors.
It should be noted that all of the directors and executive officers of the
Company, who with their family members collectively own or hold proxies to vote
<PAGE>
approximately 31.8% of the Shares outstanding as of March 14, 1997, have advised
the Company that they intend to vote in favor of the nominees for director.
The Shares represented by all properly executed proxies returned to the
Company will be voted at the Annual Meeting as indicated or, if no instruction
is given, in favor of all proposals. As to any other business which may properly
come before the Annual Meeting, all properly executed proxies will be voted by
the persons named therein in accordance with their best judgment. The Company
does not presently know of any other business which may come before the Annual
Meeting. Any person giving a proxy has the right to revoke it at any time before
it is exercised (a) by filing with the Secretary of the Company a duly signed
revocation or a proxy bearing a later date or (b) by electing to vote in person
at the Annual Meeting. Mere attendance at the Annual Meeting will not serve to
revoke a proxy.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Nomination and Election of Two Directors
The Company's Board of Directors (the "Board") currently consists of five
members. The directors are divided into three classes, consisting of two members
(the "Class I Directors") whose terms will expire at the 1998 annual meeting of
stockholders, one member (the "Class II Director") whose term will expire at the
1999 annual meeting of stockholders, and two members (the "Class III Directors")
whose terms will expire at this Annual Meeting.
Pursuant to the Company's Amended and Restated Certificate of
Incorporation, at each Annual Meeting the successors to the class of directors
whose term expires at such meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. Accordingly, at the Annual Meeting, the Class III
Directors will be elected to hold office for a term of three years until the
annual meeting of stockholders to be held in 2000, and until their respective
successors are duly elected and qualified.
Except where otherwise instructed, proxies solicited by this Proxy
Statement will be voted for the election of the Board's nominees listed below.
Each such nominee has consented to be named in this Proxy Statement and to
continue to serve as a director if elected.
Nominees for Election as Directors
The information below relating to the nominees for election as directors
and for each of the other directors whose terms of office continue after the
Annual Meeting has been furnished to the Company by the respective individuals.
In addition to the directors set forth below, Mr. Louis F. Dente served as a
Director of the Company from 1991 until his retirement as a director of the
Company on January 6, 1997.
Other than Chester Luby and Cindy Luby, who are father and daughter, none
of the directors or executive officers of the Company are related.
Chester J. Luby, age 65, has been the Chairman, Chief Executive Officer
and a director of the Company since its inception in 1991. Prior thereto, for
more than five years, Mr. Luby was the president and a principal stockholder of
Target Agency, Inc. ("Agency"), Target Insurance Ltd., a Bermuda joint stock
company ("Target"), and Dealers Extended Services, Inc. ("DESI"), private
companies involved in various aspects of insurance and service contract
businesses. Prior to 1983, Mr. Luby owned and operated several automotive
dealerships. Mr. Luby is a graduate of the University of Chicago and Yale Law
School and a member of the New York and Florida bars.
Donald Kirsch, age 65, has been Chairman and President of The Wall Street
Group, Inc. and President and Chief Executive Officer of Wall Street
Consultants, Inc., financial consulting and public relations firms, for more
than five years. He was elected as a director by the Board in December 1996.
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The Board recommends a vote "FOR" the election of each of Chester
J. Luby and Donald Kirsch for a three-year term expiring at the
annual meeting to be held in 2000.
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<PAGE>
Other Directors whose Terms of Office Continue after the Annual
Meeting
Information concerning the other directors whose terms do not expire at
the Annual Meeting is set forth below.
Cindy H. Luby, age 42, was elected President and Chief Operating Officer
of the Company in December 1995 and has been a director of the Company since its
inception. Ms. Luby was Vice President, Chief Financial Officer, Treasurer and
Secretary of the Company from its inception in 1991 until December 1995. Prior
thereto, for more than five years, Ms. Luby was a vice president of Agency,
Target and DESI. Ms. Luby is a licensed life and property and casualty insurance
agent and is a graduate of Wellesley College and General Motors School of
Merchandising and Management.
William H. Brown, age 66, has been President of Leroy Holdings, Inc., a
privately held vehicle leasing company, for more than five years. He has been a
director of the Company since September 1994.
Robert E. Schulman, age 71, is President of MRN Capital Company, a private
venture capital company, and Vice President and Director of Carbo Industries,
Inc., an oil distribution company. From 1969 to December 31, 1993, he was
President and Chairman of the Board of Sound One Corp., a public motion picture
post production company. He is currently a financial tax consultant to various
companies and a certified public accountant and has been a director of the
Company since September 1994.
Board of Directors' Meetings
During the Company's fiscal year ended October 31, 1996, the Board held
three meetings.
Board Committees
The Board has an Audit Committee, a Stock Option Committee and a
Compensation Committee. All three committees have two members, Messrs. William
Brown and Robert Schulman. The Board does not have a nominating committee or a
committee performing the functions of a nominating committee; the Board performs
the functions of such a committee.
The function of the Audit Committee is to review the results and scope of
the audits and other services provided by the Company's independent public
accountants. The Audit Committee also reviews related party transactions. No
member of the Audit Committee is an employee of the Company. The Audit Committee
met once during the fiscal year ended October 31, 1996.
The Stock Option Committee is responsible for administering the Company's
Amended and Restated 1993 Stock Option Plan, as amended (the "Option Plan") and
the Company's 1996 Incentive Plan (the "Incentive Plan"). The Stock Option
Committee met once during the fiscal year ended October 31, 1996.
The Compensation Committee determines and reviews the compensation of the
Company's senior management. The Compensation Committee met once during the
fiscal year ended October 31, 1996.
<PAGE>
Directors' Compensation
Each non-employee director of the Company receives a fee of $1,000 for
attendance at Board or committee meetings. In addition, each employee of the
Company who is also a director of the Company is entitled, pursuant to the
provisions of the Option Plan and the Incentive Plan, to grants of options to
purchase Shares. Such employee directors are not paid any directors' fees. In
addition, the Company reimburses all of its directors for travel expenses
incurred in connection with their activities on behalf of the Company.
During the fiscal year ended October 31, 1996, 136,434 options were
granted to employee directors pursuant to the Option Plan. In June 1996, an
additional 180,000 options were granted to employee directors. In January 1996,
Chester Luby and Cindy Luby exercised 10,000 and 13,600 options, respectively.
As of March 14, 1997, Chester Luby and Cindy Luby had options under the Option
Plan to purchase 100,000 and 91,834 Shares, respectively (collectively, the
"Director Options"), of which 65,000 and 59,234 Shares, respectively, are
currently exercisable. The unvested Director Options become exercisable at the
rate of 20% per year. In addition, as of March 14,1997, Chester Luby and Cindy
Luby had options to purchase 100,000 and 80,000 Shares, respectively, all of
which are currently exercisable.
In 1996, directors of the Company who were not otherwise affiliated with
the Company were awarded options to purchase 15,000 Shares under the Incentive
Plan. Messrs. Schulman and Brown were granted these options in April 1996 upon
approval by the Company's stockholders of the Incentive Plan. In addition, Mr.
Kirsch was granted options to purchase 15,000 Shares in December 1996 upon his
election to the Board. The options held by Messrs. Schulman, Brown and Kirsch,
none of which are currently exercisable, become exercisable at the rate of 5,000
options per year.
EXECUTIVE OFFICERS
The following information is provided with respect to the executive
officers and certain significant employees of the Company. Executive officers
are chosen by and serve at the discretion of the Board.
Chester J. Luby, Chairman and Chief Executive Officer. Biographical
information regarding Mr. Luby is set forth under "Proposal I - Election of
Directors."
Cindy H. Luby, President and Chief Operating Officer. Biographical
information regarding Ms. Luby is set forth under "Proposal I - Election of
Directors."
Lawrence J. Altman, age 49, has been the Vice President, Marketing, of the
Company since its inception in 1991. Prior thereto, for more than five years Mr.
Altman was a vice president of Agency and DESI. From 1973 to the present, Mr.
Altman has been in the vehicle service contract industry as an employee of
companies selling or designing, marketing and administering such contracts as
well as an independent agent marketing such contracts.
Zvi D. Sprung, age 47, joined the Company in August 1995 as Controller and was
elected Chief Financial Officer, Treasurer and Secretary of the Company in
December 1995. Prior to joining the Company, Mr. Sprung was Controller of
Advanced Media, Inc. from March 1994 to August 1995. Prior thereto, Mr. Sprung
was Chief Financial Officer of Pharmhouse Corp. from 1992 to 1994 and Controller
<PAGE>
of Long Lake Energy Corporation from 1987 to 1992. Mr. Sprung is a Certified
Public Accountant in the State of New York.
Albert V. Meneses, age 45, was elected Vice President, Claims of the
Company in April 1995. From the Company's inception in 1991 until 1994, Mr.
Meneses was Claims Supervisor of the Company and from 1994 until April 1995, Mr.
Meneses was Claims Manager of the Company. From 1989 to 1991, Mr. Meneses was a
Claims Adjuster for INDS Group, Inc., and from 1972 to 1989, Mr. Meneses was in
the automotive industry as a service manager for various dealers and
distributors.
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years indicated to the Company's Chief
Executive Officer and to its executive officers whose salaries and bonuses
exceeded $100,000 during the fiscal year ended October 31, 1996 (the "Named
Executives"). The Company did not grant any restricted stock awards or stock
appreciation rights or make any long-term incentive plan payouts during the
years indicated.
Summary Compensation Table
Long-Term
Compensation
Fiscal Year Annual Securities
Name and Ended Compensation Underlying All Other
Principal Position October 31, Salary Bonus Options Compensation (4)
Chester J.Luby (1) 1996 $153,975 $72,815 170,000 $62,920
Chairman and Chief 1995 150,000 37,484 15,000 60,000
Executive Officer 1994 143,500
-
Cindy H. Luby (2) 1996 106,184 48,543 146,434 -
Presient and Chief 1995 73,980 24,990 5,000 -
Operating Officer 1994 73,266 - -
Lawrence J. Altman(3) 1996 134,702 5,000 26,500 -
Vice President, 1995 104,300 - 5,000 -
Marketing 1994 76,426 - -
(1) Annual compensation paid to Mr. Luby was pursuant to an Employment Agreement
effective as of December 1, 1993 between the Company and Mr. Luby, as
amended.
(2) Annual compensation paid to Ms. Luby was pursuant to an Employment Agreement
effective as of December 1, 1993 between the Company and Ms. Luby, as
amended.
(3) Annual compensation paid to Mr. Altman was pursuant to an Employment
Agreement effective as of December 1, 1993 between the Company and Mr.
Altman, as amended.
(4) Amount represents split dollar life insurance premiums paid by the Company
for the benefit of Mr. Luby. Amount does not include certain other personal
benefits, the total value of which was less than the lesser of $50,000 or
ten percent of the total salary and bonus paid or accrued by the Company for
services rendered by such officer during the fiscal year indicated.
The following table sets forth certain information concerning options to
purchase Shares ("Options") granted during the fiscal year ended October 31,
1996 to the Named Executives.
<PAGE>
Option Grants in Last Fiscal Year
Number of Percentage of Total
Securities Option Shares
Underlying Granted Employees Exercise Price Expiration
Name Options Granted in Fiscal 1996 Per Share Date
Chester J.Luby (1) 10,000 2.27% $1.4438 12/18/2005
(1) 10,000 2.27% 1.9688 12/18/2005
(2) 50,000 11.37% 4.2500 06/12/2006
(2) 50,000 11.37% 4.5000 06/12/2006
(2) 50,000 11.37% 4.7500 06/12/2006
Cindy H. Luby (1) 10,000 2.27% $1.3125 12/18/2005
(1) 10,000 2.27% 1.9688 12/18/2005
(2) 46,434 10.55% 4.2500 06/12/2006
(2) 40,000 9.09% 4.5000 06/12/2006
(2) 40,000 9.09% 4.7500 06/12/2006
Lawrence J. (1) 2,500 0.57% $1.3125 12/18/2005
Altman (3) 8,000 1.82% 4.2500 06/12/2006
(3) 8,000 1.82% 4.5000 06/12/2006
(3) 8,000 1.82% 4.7500 06/12/2006
(1) These Options became exercisable in December 1996 at an annual
rate of 20% of the underlying Shares.
(2) These Options became exercisable in June 1996.
(3) These Options become exercisable in June 1997 at an annual rate
of 20% of the underlying Shares.
The following table sets forth information concerning the exercise of
Options by the Named Executives during the fiscal year ended October 31, 1996
and the value of unexercised Options as of October 31, 1996 held by the Named
Executives.
Aggregated Option Exercises in Last Fiscal Year
and
Fiscal Year End Option Values
Shares Value of Unexercised
Acquired Value Number of Unexercised In-the-Money Options
on Exercise Realized Options at October at October 31, 1996(1)
31,1996
Exercis- Unexercis- Exercis- Unexercis-
able able able able
Chester Luby 10,000 $ 9,750 158,000 42,000 $118,375 $156,519
Cindy Luby 13,600 13,260 134,234 37,600 107,995 146,117
Lawrence
Altman 10,000 26,625 11,400 44,100 52,053 100,535
(1)An individual upon exercise of an Option, does not receive cash equal to
the amount contained in the Value of Unexercised In-the-Money Options at
October 31, 1996 column. Instead, the amounts contained in such column
reflect the increase in the price of the Company's Shares from the Option
grant date to October 31, 1996, multiplied by the number of Shares covered
by the Option. The increases reflected above are based on the closing price
of $5.0625 per Share on the NASDAQ SmallCap Market on October 31, 1996. No
cash is realized until the Shares received upon exercise of an Option are
sold.
<PAGE>
Stock Option Plan
The Company's Amended and Restated 1993 Stock Option Plan, as amended (the
"Option Plan"), is designed to attract, retain and motivate key employees by
granting them Options. The Option Plan provides for the grant of a maximum of
344,000 Shares and permits the granting of Options to employees which are either
"incentive stock options" ("ISOs") meeting the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
stock options" ("NSOs"). The Option Plan is administered by the Stock Option
Committee of the Board consisting of Robert Schulman and William Brown,
independent directors of the Board of Directors. Subject to the terms of the
Option Plan, such Committee determines the recipients of Options and the number
of Options to be granted under the Option Plan. The Option Plan also provides
for the Stock Option Committee to establish an exercise price for ISOs and NSOs
that is not less than the fair market value per share at the date of grant. In
January 1997, Mr. Altman exercised 10,000 Options under the Option Plan. As of
March 14, 1997, options to purchase 266,834 Shares were outstanding under the
Option Plan, 148,234 of which are exercisable. Under the Option Plan, a total of
8,100 additional Options may be granted.
Incentive Plan
The Company's Incentive Plan, is designed to assist the Company in
attracting and retaining selected individuals to serve as directors, officers,
consultants, advisors and employees of the Company who will contribute to the
Company's long-term success. The Incentive Plan authorizes the granting of
incentive awards through grants of Options, grants of Share appreciation rights,
grants of Share purchase awards and grants of restricted Shares (collectively,
"Awards"). The Incentive Plan provides for the grant of a maximum of 300,000
Shares and permits the granting of Options which are either ISOs meeting the
requirements of Section 422 of the Code, or NSOs. The Incentive Plan is
administered by the Stock Option Committee which determines the recipients of
Awards to be granted under the Incentive Plan.
In addition to grants of discretionary Awards by the Stock Option Committee
, the Incentive Plan provides for automatic grants of Options to purchase 15,000
Shares to all independent directors (as defined in the Incentive Plan) at an
exercise price equal to the fair market value of the Shares, initially upon
adoption of the Incentive Plan by the stockholders of the Company and,
thereafter, upon the appointment of an independent director to the Board. As a
result of this provision of the Incentive Plan, Options to purchase 15,000
Shares were automatically granted to each of Messrs. Schulman and Brown in April
1996 and Options to purchase 15,000 Shares were automatically granted to Mr.
Kirsch upon his election in December 1996. As of March 14, 1997, Options to
purchase 120,000 Shares were outstanding under the Incentive Plan, none of which
are currently exercisable.
Employment Agreements
On December 1, 1993, the Company entered into a five-year employment
agreement with Chester J. Luby providing for his employment as Chairman and
Chief Executive Officer of the Company at an annual salary of $150,000 plus a
non-accountable reimbursement of expenses of $1,000 per month. In fiscal 1996,
Mr. Luby and the Company amended the employment agreement to extend its term for
an additional five years from the original date of termination. Pursuant to his
employment agreement, Mr. Luby is entitled to receive during the term of such
<PAGE>
agreement, an annual bonus at the discretion of the Company's Board and
reimbursement for membership in certain organizations. Mr. Luby is also provided
with the use of a leased car and reimbursed for all operating expenses thereof.
Under the terms of such agreement, if Mr. Luby's employment with the Company is
terminated other than for cause, he is entitled to receive compensation in an
amount equal to the greater of (a) the aggregate salary and discretionary bonus
paid or payable by the Company for the most recent two fiscal years prior to his
termination of employment and (b) the aggregate salary payable to Mr. Luby from
the date of termination of employment through the expiration of such agreement.
The employment agreement also provides for assistance to Mr. Luby with respect
to the purchase by his trustee of split-dollar life insurance policies which
benefit Mr. Luby and his family. The amounts disbursed by the Company are
recorded as non-interest bearing loans and total $122,920 as of October 31,
1996. This amount will be reimbursed to the Company in the event of death of the
insured or termination of the agreement.
On December 1, 1993, the Company entered into a five-year employment
agreement with Cindy H. Luby providing for her employment as Chief Financial
Officer at an annual salary of $72,000 plus a non-accountable reimbursement of
expenses of $250 per month. On December 18, 1995, Ms. Luby's employment
agreement was amended to promote Ms. Luby to the positions of Chief Operating
Officer and President at an annual salary of $100,000 effective as of November
1, 1995. In fiscal 1996, Ms. Luby and the Company further amended the agreement
to extend its term for an additional five years from the original date of
termination. Pursuant to her employment agreement, Ms. Luby is entitled to
receive during the term of such agreement, an annual bonus at the discretion of
the Company's Board. Ms. Luby is also provided with the use of a leased car and
is reimbursed for all operating expenses thereof. Under the terms of such
agreement, if Ms. Luby's employment with the Company is terminated other than
for cause, she is entitled to receive an amount equal to the aggregate salary
paid or payable by the Company for the most recent two fiscal years prior to her
termination of employment.
As of December 1, 1993, the Company entered into a five-year employment
agreement with Lawrence J. Altman providing for his employment as Vice
President, Marketing of the Company at an annual salary of $69,150 including
reimbursement of expenses incurred in connection with the use of his car. Mr.
Altman also receives monthly commissions in an amount equal to 2% of (a) all
administrative fees paid to the Company during such month minus (b) the
aggregate selling expenses incurred for such month minus (c) $150,000. In fiscal
1996, Mr. Altman and the Company amended the employment agreement to extend its
term for an additional three years from the original date of termination.
Pursuant to his employment agreement, Mr. Altman is entitled to receive during
the term of such agreement, an annual bonus at the discretion of the Company's
Board. Under the terms of such agreement, if Mr. Altman's employment with the
Company is terminated other than for cause, he is entitled to receive
compensation in an amount equal to the aggregate salary paid or payable by the
Company to him for the most recent two fiscal years prior to his termination of
employment.
Certain Relationships and Related Transactions
On October 25, 1991, in connection with the acquisition by the Company of
certain assets of INDS Group, Inc., of which Louis Dente is a controlling
shareholder (the "Acquisition"), Target, a Bermuda joint stock company wholly
owned by Chester Luby and Joan Luby, made a $200,000 loan to the Company, which
loan matured and was paid in October 1996. The loan bore interest at a rate per
annum equal to the greater of (i) 10% and (ii) 1% plus the prime rate.
<PAGE>
In connection with the Acquisition, INDS Holdings, Inc. ("Holdings"), a
company controlled by Chester Luby and Joan Luby, purchased 935,000 Shares. Upon
consummation of the Acquisition, all of the common stock of Holdings was owned
by Mr. and Mrs. Luby, and Target owned all of the preferred stock of Holdings.
In November 1993, Holdings was merged into the Company and, in connection
therewith, the Company issued to each of Mr. and Mrs. Luby 467,500 Shares and
issued to Target a promissory note in the amount of $60,000. This note, which
bears interest at the rate of 8% per annum, matures on October 21, 1997. The
Company has the right to prepay the note at any time. In addition, in connection
with the merger, the Company assumed the obligations of Holdings under a
promissory note to Target in the amount of $100,000 arising out of a loan made
by Target to Holdings. This note bears interest at 8.5% per annum, matures on
October 21, 1997, and is prepayable at any time by the Company.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Shares, as of March 14, 1997, by each person who beneficially owns
more than five percent of such Shares, by each director of the Company, by each
executive officer of the Company and by all directors and executive officers of
the Company as a group. Each person named in the table has sole voting and
investment power with respect to all Shares shown as beneficially owned by him
or it, except as otherwise set forth in the notes to the table.
Shares Percent of Shares
Name and Address of Beneficially Beneficially
Beneficial Owner Owned Owned (1)
Chester J. Luby 680,800(2) 19.0%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Louis F. Dente 409,116(3) 12.1%
384 Ocean Avenue North.
Long Branch, New Jersey 07740
Joan S. Luby 492,500(4) 14.5%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Cindy H. Luby 186,394(5) 5.2%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Lawrence J. Altman 67,500(6) 2.0%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Zvi D. Sprung 14,500(7) -
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Robert E. Schulman 101,534(8) 3.0%
William H. Brown 18,000(9) -
Donald Kirsch 15,000(10) -
First Wilshire Securities Management, Inc. 408,000(11) 12.1%
All directors and executive officers
as a group (seven persons) 1,083,728 28.0%
<PAGE>
(1) Excludes (i) 1,225,100 Shares issuable upon the exercise of the Warrants
issued to the public as part of the Company's public offering; (ii) 110,000
Shares issuable upon the exercise of the Unit Purchase Options issued to the
underwriters in the Company's IPO and (iii) 110,000 Shares issuable upon
exercise of the Warrants issued as part of the Units comprising the Unit
Purchase Options. Amount and Percent of Shares Beneficially Owned was
computed based on 3,394,233 Shares outstanding on March 14, 1997 and, in
each person's case, the number of Shares issuable upon the exercise of
Options and/or Independent Director Warrants (defined below) held by such
person, or in the case of all directors and executive officers as a group,
the number of Shares issuable upon the exercise of Options and/or
Independent Director Warrants held by all such members of such group, but
does not include the number of Shares issuable upon the exercise of any
other outstanding Options and/or Independent Director Warrants.
(2) Includes 200,000 Shares issuable upon the exercise of Options, 165,000 of
which are currently exercisable and the balance of which become exercisable
at the rate of 12,000 Options per year.
(3) Includes 2,266 Shares owned by Mr. Dente's wife.
(4) Includes 15,000 Shares issuable upon the exercise of Options, 5,000 of which
are currently exercisable and the balance of which become exercisable at the
rate of 5,000 Options per year.
(5) Includes 171,834 Shares issuable upon the exercise of Options, 139,234 of
which are currently exercisable and the balance of which become exercisable
at the rate of 11,800 Options per year. Also includes 960 Shares owned by
Ms. Luby's husband, of which Ms. Luby disclaims beneficial ownership.
(6) Includes 45,500 Shares issuable upon the exercise of Options, 2,900 of which
are currently exercisable and the balance of which become exercisable at the
rate of 13,100 Options per year. Mr. Altman exercised 10,000 Options on
January 15, 1997.
(7) All of these Shares are issuable upon the exercise of Options, 500 of which
are currently exercisable and the balance of which become exercisable at the
rate of 2,900 Options per year.
(8) Includes (a) 15,000 Shares issuable upon the exercise of Options, none of
which are currently exercisable and which become exercisable at the rate of
5,000 Options per year, (b) 3,000 Shares issuable upon exercise of warrants
to purchase Shares (the "Independent Director Warrants"), 1,200 of which are
currently exercisable and the balance of which become exercisable at the
rate of 600 Independent Director Warrants per year and (c) 83,534 Shares
owned by MRN Capital Company of which Mr. Schulman is a controlling person.
(9) Includes (a) 15,000 Shares issuable upon the exercise of Options, none of
which are currently exercisable and which become exercisable at the rate of
5,000 Options per year and (b) 3,000 Shares issuable upon exercise of
Independent Director Warrants, 1,200 of which are currently exercisable and
the balance of which become exercisable at the rate of 600 Independent
Director Warrants per year.
(10)All of these Shares are issuable upon the exercise of Options, none of
which are currently exercisable and which become exercisable at the rate of
5,000 Options per year.
<PAGE>
(11)Pursuant to a Schedule 13G supplied to the Company in July 1996. First
Wilshire Securities Management, Inc., a broker and investment advisor, has
sole voting power over 86,800 of the 408,000 Shares.
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than 10% stockholders are required by regulation
of the Securities and Exchange Commission to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended October 31, 1996, all Section 16 filing requirements were complied with by
the Company's officers, directors and greater than 10% stockholders, other than
the exercise of 2,266 Options and purchase of the underlying Shares by the wife
of Louis Dente in January 1996 which was reported by Mr. Dente in a Form 5 filed
in January 1997.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 14, 1997 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
In addition, the Bylaws of the Company provide that in order for a
stockholder to nominate a candidate for election as a director at an annual
meeting of stockholders or propose business for consideration at such meeting,
notice must be given to the secretary of the Company no more than 60 days nor
less than 30 days prior to the annual meeting; provided, however, that in the
event that less than 40 days' notice or prior public disclosure of the date of
the annual meeting is given to stockholders, then a stockholder must give notice
to the secretary of the Company no more than 10 days following the day on which
notice of the annual meeting was mailed or public disclosure was made to
stockholders. The fact that the Company may not insist upon compliance with
these requirements should not be construed as a waiver by the Company of its
right to do so at any time in the future.
FINANCIAL AND OTHER INFORMATION
The Company's Annual Report for the fiscal year ended October 31, 1996,
including financial statements, is being furnished to stockholders concurrently
with this Proxy Statement.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Brokers and
nominees should forward soliciting materials to the beneficial owners of the
Shares held of record by such persons, and the Company will reimburse them for
their reasonable forwarding expenses. In addition to the use of the mails,
<PAGE>
proxies may be solicited by directors, officers and regular employees of the
Company, who will not be specially compensated for such services, by means of
personal calls upon, or telephonic or telegraphic communications, with
stockholders or their personal representatives.
OTHER MATTERS
The Board knows of no matters other than those described in this Proxy
Statement which are likely to come before the Annual Meeting. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of proxy intend to vote the proxies in accordance with their
best judgment.
March 14, 1997 By Order of the Board of Directors
/s/ Zvi D. Sprung
Zvi D. Sprung, Secretary
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INTERSTATE NATIONAL DEALER SERVICES, INC.
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PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned stockholder of Interstate National Dealer Services,
Inc., a Delaware corporation (the "Company"), hereby appoints Chester J.
Luby and Cindy H. Luby, as proxy for the undersigned, with full power of
substitution, to vote and otherwise represent all the shares that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
the Company to be held on Wednesday, April 16, 1997, at 11:00 a.m. in
Uniondale, New York 11553 and at any adjournment(s) or postponement(s)
thereof, with the same effect as if the undersigned were present and
voting such shares, on the matters and in the manner set forth below and
as further described in the accompanying Proxy Statement. The undersigned
hereby revokes any proxy previously given with respect to such shares.
The undersigned acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS
MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE NOMINEES
AND IN THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S)
THEREOF.
1. The election of the following persons as directors of the Company to serve
for the respective terms as set forth in the accompanying Proxy Statement.
CHESTER J. LUBY
_FOR such nominee _WITHHELD as to such nominee
DONALD KIRSCH
_FOR such nominee _WITHHELD as to such nominee
2. To vote and otherwise represent the shares on any other matters which may
properly come before the meeting or any adjournment(s) or postponement(s)
thereof, in their discretion.
_ MARK HERE IF YOU PLAN TO ATTEND THE MEETING
Please sign exactly as name appears hereon and
date. If the shares are held jointly, each holder
should sign. When signing as an attorney,
executor, administrator, trustee, guardian or as
an officer signing for a corporation, please give
full title under signature.
Dated ------------------------------------, 1997
------------------------------------------
Signature
-------------------------------------------
Signature, if held jointly
Votes must be indicated by filling in (x) in
black or blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope
