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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Interstate National Dealer Services, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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<PAGE>
PRELIMINARY COPY
INTERSTATE NATIONAL DEALER SERVICES, INC.
The Omni, Suite 700
333 Earle Ovington Boulevard
Mitchel Field, New York 11553
March 17, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 annual meeting of
stockholders which will be held on Thursday, April 16, 1998, beginning at
11:00 a.m. at the Chase Manhattan Bank World Headquarters, 270 Park Avenue
(47th Street) New York, New York 10017, 11th Floor Conference Center.
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,
Chester J. Luby
Chairman
<PAGE>
PRELIMINARY COPY
INTERSTATE NATIONAL DEALER SERVICES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 16, 1998
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The annual meeting of stockholders of Interstate National Dealer
Services, Inc. (the "Company") will be held at the Chase Manhattan Bank World
Headquarters, 270 Park Avenue (47th Street) New York, New York 10017, 11th
Floor Conference Center on Thursday, April 16, 1998, at 11:00 a.m., local
time, for the following purposes:
1. To elect two directors each for a term expiring at the 2001 annual
meeting of stockholders.
2. To amend the Bylaws to (a) fix the size of the Board of Directors
at a minimum of five and a maximum of nine directors, with the
authorized number of directors set at five, and the Board of
Directors having the sole power and authority to increase or
decrease the number of directors acting by an affirmative vote of
at least a majority of the total number of authorized directors
most recently fixed by the Board of Directors and (b) provide that
any vacancy on the Board of Directors may be filled for the
unexpired term (or for a new term in the case of an increase in the
size of the board) only by an affirmative vote of at least a
majority of the remaining directors then in office even if less
than a quorum, or by the sole remaining director.
3. To amend the Certificate of Incorporation to provide that a member
of the Board of Directors may only be removed by the stockholders
of the Company for cause by an affirmative vote of holders of at
least 66 2/3% of the voting power of the then outstanding shares of
any class or series of capital stock of the Company entitled to
vote generally in the election of directors, voting together as a
single class (the "Voting Stock").
4. To amend the Certificate of Incorporation and the Bylaws to permit
only the Board of Directors, acting by a majority of the then
authorized number of directors, or the Chairman of the Board of
Directors, to call special meetings of stockholders and to limit
the business permitted to be conducted at such meetings to that
brought before the meetings by or at the direction of the Board of
Directors or the Chairman of the Board.
5. To amend the Certificate of Incorporation and the Bylaws to
eliminate stockholder action by written consent.
6. To amend the Certificate of Incorporation and the Bylaws to require
an affirmative vote of 66 2/3% of the Voting Stock in order to
amend or repeal any adopted amendments to the Certificate of
Incorporation and Bylaws proposed herein.
7. 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 17, 1998 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
Zvi D. Sprung
Secretary
March 17, 1998
Mitchel Field, New York
<PAGE>
PRELIMINARY COPY
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, 1998
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 Thursday, April 16, 1998 at the Chase Manhattan Bank World
Headquarters, 270 Park Avenue (47th Street) New York, New York 10017, 11th
Floor Conference Center 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 17, 1998.
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.
2. To amend the Company's Amended and Restated Bylaws (the "Bylaws")
to (a) fix the size of the Board of Directors at a minimum of five
and a maximum of nine directors, with the authorized number of
directors set at five, and the Board of Directors having the sole
power and authority to increase or decrease the number of directors
acting by an affirmative vote of at least a majority of the total
number of authorized directors most recently fixed by the Board of
Directors and (b) provide that any vacancy on the Board of
Directors may be filled for the unexpired term (or for a new term
in the case of an increase in the size of the board) only by an
affirmative vote of at least a majority of the remaining directors
then in office even if less than a quorum, or by the sole remaining
director.
3. To amend the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") to provide that
a member of the Board of Directors may be removed by the
stockholders of the Company only for cause by an affirmative vote
of holders of at least 66 2/3% of the voting power of the then
outstanding shares of any class or series of capital stock of the
Company entitled to vote generally in the election of directors,
voting together as a single class (the "Voting Stock").
4. To amend the Certificate of Incorporation and the Bylaws to permit
only the Board of Directors, acting by a majority of the then
authorized number of directors, or the Chairman of the Board of
Directors, to call special meetings of stockholders and to limit
the business permitted to be conducted at such meetings to that
brought before the meetings by or at the direction of the Board of
Directors or the Chairman of the Board.
5. To amend the Certificate of Incorporation and the Bylaws to
eliminate stockholder action by written consent.
6. To amend the Certificate of Incorporation and the Bylaws to require
an affirmative vote of 66 2/3% of the Voting Stock in order to
amend or repeal any adopted amendments to the Certificate of
Incorporation and Bylaws proposed herein.
7. 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 17, 1998 (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, 4,630,416 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 approximately ___% of the Shares outstanding as of March 17, 1998,
have advised the Company that they intend to vote in favor of the nominees
for director and in favor of all proposals.
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 this Annual
Meeting, 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 the 2000 annual meeting of
stockholders.
Pursuant to the 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 I Directors will be elected to
hold office for a term of three years until the annual meeting of
stockholders to be held in 2001, 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.
Other than Chester Luby and Cindy Luby, who are father and daughter,
none of the directors or executive officers of the Company are related.
Cindy H. Luby, age 43, 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 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. 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 67, 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.
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THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF CINDY H. LUBY AND
WILLIAM H. BROWN FOR A THREE-YEAR TERM EXPIRING AT THE ANNUAL MEETING TO BE
HELD IN 2001.
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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.
Chester J. Luby, age 66, 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 Agency, Target, and DESI. 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.
Robert E. Schulman, age 72, 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.
Donald Kirsch, age 66, 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.
Board of Directors' Meetings
During the Company's fiscal year ended October 31, 1997, 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, 1997.
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,
1997.
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, 1997.
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, 1997, no options were granted
to employee directors. As of March 17, 1998, 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 77,000 and
71,034 Shares, respectively, are currently exercisable. The unvested
Director Options become exercisable at the rate of 20% per year. In
addition, as of March 17, 1998, 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, a total of 15,000 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 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 50, was elected Senior Vice President, Marketing
of the Company in April 1997. Mr. Altman was Vice President, Marketing, of
the Company since its inception in 1991 until April 1997. 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 48, 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 of Long Lake Energy Corporation from 1987 to 1992.
Mr. Sprung is a Certified Public Accountant in the State of New York.
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, 1997 (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 ------------ All
Year Annual Compensation Securities Other
Name and Ended ------------------- Underlying Compen-
Principal Position October 31, Salary Bonus Options sation
- ------------------ ----------- ------ ----- ------- ------
Chester J. Luby (1) 1997 $154,167 $137,829 - $62,919
Chairman and Chief 1996 153,975 72,815 170,000 62,920
Executive Officer 1995 150,000 37,484 15,000 60,000
Cindy H. Luby (2) 1997 100,961 98,450 - -
President and Chief 1996 106,184 48,543 146,434 -
Operating Officer 1995 73,980 24,990 5,000 -
Lawrence J. Altman (3) 1997 164,890 - - -
Senior Vice President, 1996 134,702 5,000 26,500 -
Marketing 1995 104,300 - 5,000 -
___________________
(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. In April 1997, the Company provided a loan to Ms.
Luby in the amount of $110,000 to assist her in the purchase of a new
residence in close proximity to the Company's offices. The loan bears
interest, payable quarterly in arrears, at 7% per annum, is unsecured,
and is due and payable in full April 2002. The loan may be prepaid by
Ms. Luby in whole or in part at any time. In January 1998, Ms. Luby
prepaid $20,000 of the loan.
(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 Company did not grant any options or stock appreciation rights to
the Named Executives during the fiscal year ended October 31, 1997.
The following table sets forth information concerning the exercise of
stock options by the Named Executives during the fiscal year ended October
31, 1997 and the value of unexercised options as of October 31, 1997 held by
the Named Executives.
Aggregated Option Exercises in Last Fiscal Year
and
Fiscal Year End Option Values
Shares Number of Value of
Acquired Unexercised Unexercised In-the-
on Value Options at Money Options at
Name Exercise Realized October 31, 1997 October 31, 1997(1)
- ---- -------- -------- ----------------- -----------------
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
------- ------- ------- -------
Chester J. Luby - $ - 170,000 30,000 $952,054 $247,840
Cindy H. Luby - - 146,034 25,800 832,361 216,483
Lawrence J. Altman 10,000 48,500 14,500 31,000 112,333 204,068
_____________
(1) Based on the closing price of the Common Stock on NASDAQ on October 31,
1997.
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 February 1998, Mr. Altman
exercised 7,200 Options under the Option Plan. As of March 17, 1998, options
to purchase 246,234 Shares were outstanding under the Option Plan, 174,834 of
which are exercisable. Under the Option Plan, a total of 11,500 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 17, 1998, Options to purchase 142,500 Shares were outstanding under
the Incentive Plan, 70,000 of which are currently exercisable.
Employment Agreements
On December 1, 1993, the Company entered into an agreement with Chester
J. Luby providing for his employment as Chairman and Chief Executive Officer
of the Company. Under the terms of such employment agreement, as amended,
Mr. Luby is entitled to an annual salary of $200,000 plus a non-accountable
reimbursement of expenses of $1,000 per month. In addition, pursuant to his
employment agreement, Mr. Luby is entitled to receive during the term of such
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. The employment agreement terminates on December 31, 2007,
which date is automatically extended for additional one-year periods unless
either the Company or Mr. Luby provides written notice that no further
extensions shall be granted. 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 approximately $186,000 as of October
31, 1997. 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 an employment agreement
with Cindy H. Luby providing for her employment as Chief Financial Officer.
On December 18, 1995, Ms. Luby's employment agreement was amended to reflect
the promotion of Ms. Luby to the positions of Chief Operating Officer and
President. Under the terms of Ms. Luby's employment agreement, as amended,
Ms. Luby is entitled to an annual salary to $125,000 plus a non-accountable
reimbursement of expenses of $250 per month. In addition, 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. The employment agreement terminates on December
31, 2007, which date is automatically extended for additional one-year
periods unless either the Company or Ms. Luby provides written notice that no
further extensions shall be granted. 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 an 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. Such
employment agreement, as amended, terminates on December 31, 2002. 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
In connection with the acquisition by the Company of certain assets of
INDS Group, Inc (the "Acquisition"), the predecessor of the Company, INDS
Holdings, Inc. ("Holdings"), a company controlled by Chester and Joan Luby,
purchased 935,000 shares of the Company's Common Stock. 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. Target
is also owned and controlled by Mr. and Mrs. Luby. On November 23, 1993,
Holdings was merged into the Company, as a result of which the Company issued
to each of Mr. and Mrs. Luby 467,500 shares of Common Stock and issued to
Target a promissory Note in the amount of $60,000. This note, which bore
interest at the rate of 8% per annum, matured and was paid on October 21,
1997. In addition, as a result of 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, which
bore interest at 8.5% per annum, matured and was paid on October 21, 1997.
In November 1996, National Service Contract Insurance Company Risk
Retention Group, Inc. ("NSC"), an affiliated insurance company, entered into
a reinsurance agreement with Reliance National Indemnity Company ("Reliance")
which provided reinsurance for losses to NSC under certain circumstances.
Also in November 1996, Reliance entered into a reinsurance agreement with
Target which provided reinsurance for losses to Reliance under its agreement
with NSC. During fiscal 1997, Target received approximately $67,300 in
premiums under its agreement with Reliance. In November 1996, the Company
entered into agreements to indemnify Reliance and Target for any losses
incurred under the aforementioned reinsurance agreements. There were no such
losses, and there were no payments made by the Company under the
indemnification agreements. All of the aforementioned agreements were
terminated in December 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Shares, as of March 17, 1998, 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.
Percent
Shares of Shares
Name and Address of Beneficially Beneficially
Beneficial Owner Owned Owned (1)
- --------------------- ------------- -----------
Chester J. Luby. . . . . . . . . . . . . . . . .680,800 (2) 14.1%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Joan S. Luby . . . . . . . . . . . . . . . . . .492,500 (3) 10.6%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Cindy H. Luby. . . . . . . . . . . . . . . . . .184,894 (4) 3.9%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Lawrence J. Altman . . . . . . . . . . . . . . . 67,500 (5) 1.4%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Zvi D. Sprung. . . . . . . . . . . . . . . . . . 19,500 (6) -
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Robert E. Schulman . . . . . . . . . . . . . . . 18,000 (7) -
William H. Brown . . . . . . . . . . . . . . . . 18,000 (7) -
Donald Kirsch. . . . . . . . . . . . . . . . . . 15,000 (8) -
First Wilshire Securities Management, Inc. . . .476,300 (9) 10.3%
All directors and executive officers
as a group (seven persons). . . . . . . . . .1,005,194 19.7%
_________________
(1) Excludes (i) 110,000 Shares issuable upon the exercise of the Unit
Purchase Options issued to the underwriters in the Company's initial
public offering and (ii) 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 4,630,416 Shares outstanding on March 17, 1998 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, 177,000
of which are currently exercisable and the balance of which become
exercisable at the rate of 12,000 Options per year.
(3) Includes 15,000 Shares issuable upon the exercise of Options, 10,000 of
which are currently exercisable and the balance of which become
exercisable at the rate of 5,000 Options per year.
(4) Includes 171,834 Shares issuable upon the exercise of Options, 151,034
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, as to which Ms. Luby disclaims
beneficial ownership.
(5) Includes 38,300 Shares issuable upon the exercise of Options, 8,800 of
which are currently exercisable and the balance of which become
exercisable at the rate of 13,100 Options per year.
(6) All of these Shares are issuable upon the exercise of Options, 3,400 of
which are currently exercisable and the balance of which become
exercisable at the rate of 3,900 Options per year.
(7) Includes (a) 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 and (b) 3,000 shares
issuable upon exercise of warrants to purchase Shares (the "Independent
Director Warrants"), 1,800 of which are currently exercisable and the
balance of which become exercisable at the rate of 600 Independent
Director Warrants per year.
(8) All of these Shares are 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.
(9) Pursuant to Schedule 13G supplied to the Company in February 1998.
First Wilshire Securities Management, Inc., a broker and investment
advisor, has sole voting power over 96,000 of the 476,300 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, 1997, all Section 16 filing requirements were complied
with by the Company's officers, directors and greater than 10% stockholders.
ANTI-TAKEOVER PROPOSALS
Proposals 2 through 6 in this Proxy Statement are proposals to amend the
Company's Certificate of Incorporation, and Bylaws which amendments, as
discussed below, may have certain anti-takeover effects. The following
section discusses the general consequences to stockholders of these proposals
and should be read in conjunction with the individual discussions with
respect to each proposal.
The Board of Directors has evaluated the potential vulnerability of the
Company's stockholders to the threat of unfair or coercive takeover tactics
and, although the Board of Directors is not currently aware of any such
threat, has considered the range of possible responses to any such threat.
The Board of Directors has unanimously approved, and recommends to the
Company's stockholders for their approval, the amendments to the Certificate
of Incorporation and Bylaws described in Proposals 2 through 6 set forth
below. Proposals 2 through 6 are referred to collectively as the "Anti-
Takeover Amendments."
THE ANTI-TAKEOVER AMENDMENTS
The Anti-Takeover Amendments involve related amendments to the
Certificate of Incorporation and Bylaws designed to assist the Company's
stockholders in obtaining fair and equitable treatment in the event of a
threatened takeover of the Company. The Anti-Takeover Amendments, if
approved, will: (i) fix the size of the Board of Directors at a minimum of
five and a maximum of nine directors, with the authorized number of directors
set at five, with the Board of Directors having the sole power and authority
to increase or decrease the number of directors and provide that any vacancy
on the Board of Directors may be filled for the unexpired term (or for a new
term in the case of an increase in the size of the board) only by a vote of a
majority of the remaining directors then in office, (ii) provide that a
member of the Board of Directors may be removed by the stockholders of the
Company only for cause by a vote of holders of 66 2/3% of the Voting Stock,
(iii) eliminate stockholder action by written consent, (iv) permit only the
Board of Directors, acting by a majority of the then authorized number of
directors, or the Chairman of the Board to call special meetings of
stockholders, and limit the business permitted to be conducted at such
meetings to that brought before the meetings by or at the direction of the
Board of Directors or Chairman of the Board and (v) require an affirmative
vote of 66 2/3% of the Voting Stock in order to amend or repeal any adopted
amendments to the Certificate of Incorporation and Bylaws proposed herein.
The Anti-Takeover Amendments are not in response to any effort, of which
the Company is aware, to accumulate Common Stock or to obtain control of the
Company. The Board of Directors has observed the relatively common use of
certain coercive takeover tactics in recent years, including the accumulation
of substantial common stock positions as a prelude to a threatened takeover
or corporate restructuring, proxy fights and partial tender offers and the
related use of "two-tiered" pricing. In addition, persons who do not intend
to gain control of companies use the threat of takeover bids to force the
companies to repurchase their shares at a premium or temporarily drive up the
market price of their stock. The Board of Directors believes that the use of
these tactics can place undue pressure on a corporation's board of directors
and stockholders to act hastily and on incomplete information and, therefore,
can be highly disruptive to a corporation as well as divert valuable
corporate resources and result in unfair differences in treatment of
stockholders who act immediately in response to announcement of takeover
activity and those who choose to act later, if at all. The Anti-Takeover
Amendments are intended to encourage persons seeking to acquire control of
the Company to initiate such an acquisition through arm's-length negotiations
with the Board of Directors.
While the Anti-Takeover Amendments, individually and collectively, give
added protection to the Company's stockholders and may help the Company
obtain the best price in a potential transaction, they may also have the
effect of making more difficult and discouraging a merger, tender offer or
proxy contest, even if such transaction or event may be favorable to the
interests of some or all of the Company's stockholders. The Anti-Takeover
Amendments also may delay the assumption of control by a holder of a large
block of Common Stock and the removal of incumbent management, even if such
removal might be beneficial to some or all of the stockholders. Furthermore,
the Anti-Takeover Amendments may have the effect of deterring or frustrating
certain types of future takeover attempts that may not be approved by the
incumbent Board of Directors, but that the holders of a majority of the
shares of Common Stock may deem to be in their best interests or in which
some or all of the stockholders may receive a substantial premium over
prevailing market prices for their stock. By discouraging takeover attempts,
the Anti-Takeover Amendments also could have the incidental effect of
inhibiting certain changes in management (some or all of the members of which
might be replaced in the course of a change of control) and also the
temporary fluctuations in the market price of Common Stock that often result
from actual or rumored takeover attempts.
The Board of Directors recognizes that a takeover might in some
circumstances be beneficial to some or all of the Company's stockholders, but
nevertheless believes that the stockholders as a whole will benefit from the
adoption of the Anti-Takeover Amendments. The Board of Directors further
believes that it is preferable to act on the proposed Anti-Takeover
Amendments when they can be considered carefully rather than hastily during
an unsolicited bid for control. Pursuant to the provisions of the Certificate
of Incorporation and the Bylaws, each of the proposed Anti-Takeover
Amendments described in Proposals 2 through 4 and in Proposal 6 requires the
affirmative vote of the holders of 66 2/3% of the Company's Voting Stock;
and Proposal 5 requires the affirmative vote of holders of majority of the
Company's Voting Stock. All of the proposals are permitted by law.
If stockholders approve any or all of the Anti-Takeover Amendments, the
Company will file with the Secretary of State of the State of Delaware an
amendment to the Certificate of Incorporation that reflects the amendments
which have been approved containing the provisions as set forth under each
proposal. The approved amendments to the Certificate of Incorporation will
become effective upon the filing with the Secretary of State of the State of
Delaware of a certificate with respect to such amendments, and the approved
amendments to the Bylaws will become effective immediately upon such
approval. Each of the Anti-Takeover Amendments adopted by the Company's
stockholders will become effective regardless of whether any of the other
Anti-Takeover Amendments to be acted upon at the Annual Meeting is adopted.
Stockholders are urged to read carefully the following descriptions and
discussions of each of the proposed Anti-Takeover Amendments before voting on
the Anti-Takeover Amendments.
OTHER ANTI-TAKEOVER DEVICES
Existing Provisions of the Certificate and Bylaws
In addition to the proposed Anti-Takeover Amendments, there are existing
provisions of the Certificate of Incorporation and Bylaws which may be deemed
to be an anti-takeover devices which could be utilized as a method of
discouraging, delaying or preventing a change in control of the Company or
diluting the public ownership of the Company, even if such transaction or
occurrence may be favorable to the interests of some or all of the Company's
stockholders.
The Certificate of Incorporation currently authorizes the Board of
Directors to issue up to 1,000,000 shares of preferred stock having such
rights, preferences and privileges as designated from time to time by the
Board of Directors (the "Preferred Stock") without stockholder approval.
Accordingly, the Board of Directors is empowered to issue preferred stock
with dividend, liquidation, conversion, voting or other rights, including
without limitation the right to elect additional directors under specified
circumstances, which could adversely affect the voting power or other rights
of the holders of Common Stock. The Preferred Stock could be used by the
Board of Directors for defensive purposes, including the issuance of shares
having special privileges or rights to third parties, which may have the
effect of delaying or discouraging an attempt to acquire control of the
Company. None of the preferred stock has been issued to date, and the
proposed amendments will not change the number of authorized shares of
preferred stock.
As of the Record Date, 4,630,416 shares of Common Stock were issued and
outstanding out of the 10,000,000 shares of authorized Common Stock.
Accordingly, 5,369,584 shares of Common Stock remain available for issuance
(not giving effect to any shares that may be issuable pursuant to the Rights
Plan as described below).
Although the Company does not currently have any plans, agreements,
commitments or understandings with respect to the issuance of additional
shares of Common Stock, the Board of Directors may issue the additional
shares of currently authorized but unissued and unreserved shares of Common
Stock, at such times, to such persons and for such consideration as the Board
of Directors may determine to be in the Company's best interests without
further stockholder approval, except as otherwise required by statute or
stock exchange rules. Depending on the circumstances, issuance of additional
shares of Common Stock could affect the existing holders of shares by
diluting the voting power of the outstanding shares. The stockholders do not
have preemptive rights under the Certificate of Incorporation and will not
have such rights with respect to the additional authorized shares of Common
Stock. The Company could use the additional shares of Common Stock (as it
could use the currently authorized but unissued shares of Preferred Stock) to
create voting impediments or to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company or to dilute the public
ownership of the Company and thereby to protect the continuity of the
Company's management. The Company could also privately place any such shares
with purchasers who might favor the Board of Directors in opposing a hostile
takeover bid, although the Company has no present intention to do so and has
no present knowledge of any such takeover efforts.
The Board of Directors is currently divided into three classes, each
class serving terms of three years in staggered succession. The staggered
terms prevent the stockholders from voting on the election of more than one
class of directors at each annual meeting and thus may delay a change of
control of the Company or deter a bid for control of the Company. The effect
of the classified board is that it could take two as opposed to one annual
meeting of stockholders for persons seeking a takeover of the Company to
achieve majority control of the members of the Board of Directors.
The Company's Certificate of Incorporation does not provide for
cumulative voting. As a result, in order to be assured of representation on
the Company's Board of Directors, a stockholder must control the votes of a
majority of the shares present and voting at a stockholders' meeting at which
a quorum is present. The absence of cumulative voting require seeking a
takeover to acquire a substantially greater number of shares to be assured of
representation on the Board of Directors than would be necessary were
cumulative voting available.
The Bylaws further provide for certain notice and procedural
requirements to follow when stockholders desire to make their own proposals
for special or annual meetings of stockholders and the Certificate of
Incorporation and Bylaws contain supermajority provisions with respect to
amending or repealing certain provisions, which may have the effect of
delaying the consideration of proposals sought by persons seeking to takeover
the Company.
The General Corporation Law of the State of Delaware ("Delaware GCL")
contains a number of other provisions which are designed to strengthen the
position of incumbent management in connection with a takeover attempt. For
example, Delaware law provides that a corporation has the general power,
exercisable by its Board of Directors of directors, to accept, reject,
respond to or take no action in respect of an actual or proposed acquisition,
divestiture, tender offer, takeover or other fundamental change. The case law
of Delaware has developed special standards for deciding whether to uphold or
advocate the actions of incumbent management in the context of takeover
proposals.
Rights Plan
On September 22, 1995, the Board of Directors adopted a Shareholders
Rights Plan (the "Rights Plan"). When triggered, the effect of the Rights
Plan is to significantly dilute an acquiring person or company's voting power
and equity interest in the Company, thereby making the contemplated
acquisition less attractive.
Pursuant to the Rights Plan, the Board of Directors of Directors
declared a dividend of one common share purchase right (a "Right") for each
common share of the Company held by stockholders of record on November 10,
1995 (the "Record Date") and for each share of Common Stock issued
thereafter. Each Right entitles the holder, upon an Acquiring Person's (as
defined below) attainment of certain threshold limits, to purchase shares of
common stock of the Company at a fifty per cent discount to the market value.
An "Acquiring Person" is defined as any person or group of affiliated
persons who, after the effective date of the Rights Agreement, acquires
beneficial ownership of 15% or more of the Company's common stock. Any
Rights owned by such Acquiring Persons become null and void and do not
provide the holder with the purchase rights described above. Excluded from
the definition of "Acquiring Person" are the Company, any of its
subsidiaries, any person (or such person's immediate family members) who, as
of the effective date of the Rights Agreement, beneficially owns 15% or more
of the Company's common stock, certain of the Company's benefit plans and any
person or group of affiliated persons whose acquisition of 15% or more is
approved by the Board of Directors in advance.
The Rights become exercisable upon the Distribution Date, which is
defined as the earlier of: (i) 10 days after the public announcement that an
Acquiring Person has acquired beneficial ownership of 15% or more of the
outstanding Common Shares; or (ii) 10 business days following the
commencement (or announcement of an intention to make) a tender offer which
would result in an Acquiring Person owning 15% or more of the outstanding
Common Shares. Upon and after the Distribution Date, the Rights may be
traded separately from the underlying common stock. However, prior to the
Distribution Date, any transfer of the Company's common stock also transfers
any Rights associated therewith.
If at any time following the Distribution Date: (a) the Company merges
into another entity; (b) an acquiring entity merges into the Company and the
Common Stock of the Company is changed into or exchanged for other securities
or assets of the acquiring entity; or (c) the Company sells more than 50% of
its assets or earning power, then each Right holder becomes entitled to
purchase, for the exercise price, the number of shares of common stock of
such other entity having a current market value of twice the exercise price.
However, the foregoing shall not apply to mergers, consolidations or other
combinations which were approved by a majority of the Board of Directors.
The terms of the Rights may be amended by the Board of Directors without
the consent of the holders prior to the Distribution Date. Thereafter, no
amendments may be made which would adversely affect the interests of the
Rights holders (other than those of an Acquiring Person, its Affiliates or
Associates).
The Rights will expire on November 10, 2005 unless extended or unless
the Rights are redeemed by the Company prior to the Distribution Date.
Redemption is at the sole discretion of the Board of Directors and
immediately terminates such Rights. The Redemption Price is fixed at $.01
per Right.
The foregoing represents the existing provisions of the Certificate of
Incorporation and Bylaws which could have an anti-takeover effect against
persons seeking to take control of the Company. Other than these provisions
and the proposals contained herein, no other anti-takeover provisions are
currently contemplated by the Board of Directors.
<PAGE>
PROPOSAL 2
AMENDING THE BYLAWS TO FIX THE NUMBER OF DIRECTORS AND PROVIDE FOR
FILLING VACANCIES ON THE BOARD
Fixing the Number of Directors
Article III, Section 3 of the Bylaws currently provides that the Board
of Directors consist of seven members, except as may be provided pursuant to
resolutions of the Board of Directors, adopted pursuant to the provisions of
the Certificate of Incorporation, establishing any series of Preferred Stock
and granting to holders of shares of such series of Preferred Stock rights to
elect additional directors under specified circumstances. The Board of
Directors has adopted, subject to stockholder approval, an amendment to the
Bylaws fixing the size of the Board of Directors at a minimum of five and a
maximum of nine directors, with the authorized number of directors set at
five, and the Board of Directors having the sole power and authority to
increase or decrease the size of the Board acting by an affirmative vote of
at least a majority of the total number of authorized directors most recently
fixed by the Board of Directors. At the Annual Meeting, stockholders will
ask to consider and vote on this proposed amendment.
Filling Vacancies on the Board of Directors
Article III, Section 2 of the Bylaws currently provides that Section
223 of the Delaware GCL will apply with regard to filling any vacancies on
the Board of Directors, which permits, but does not require, that vacancies
and newly created directorships be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
Board of Directors has adopted, subject to stockholder approval, an amendment
to Article III, Section 2 of the Bylaws providing that a vacancy on the Board
of Directors, including a vacancy created by an increase in the authorized
number of directors, may be filled only by the an affirmative vote of at
least a majority of the remaining directors then in office, even if less than
a quorum, or by the sole remaining director. At the Annual Meeting,
stockholder will ask to consider and vote on this proposed amendment.
Analysis of Proposal 2
Because, by increasing or decreasing the size of the Board of Directors,
a filling of vacancies by stockholders could circumvent the continuity to be
provided for by the Company's classified Board of Directors, the Board of
Directors believes that this proposal fixing the number of directors and
governing the filling of vacancies on the Board of Directors would promote
such continuity of management and thereby enhance the ability of the Company
to carry out long-range plans and goals for its benefit and the benefit of
its stockholders. This proposal would prevent a third party seeking majority
representation on the Board of Directors from obtaining such representation
simply by enlarging the Board of Directors and then filling the new
directorships with its own nominees.
In addition, this proposal, coupled with the proposal set forth below
relating to the removal of directors, if adopted, would preclude stockholders
from removing incumbent directors without cause and simultaneously gaining
control of the Board of Directors by filling the vacancies created by such
removal with their own nominees. Although the Company has not experienced
difficulties in the past in maintaining continuity of the Board of Directors
and management, the Board of Directors believes that this proposal will
assist the Company in maintaining this continuity of management into the
future.
The proposed amendment is in accordance with the Delaware GCL which
provides that the number of directors may be fixed in any manner as provided
for in a corporation's bylaws and that vacancies and newly created
directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director, unless the
certificate of incorporation or bylaws provide otherwise.
Persons attempting a takeover bid could be delayed or deterred by not
being able to procedurally obtain control of the Board of Directors as
quickly as they could in the absence of these provisions. For these reasons,
this Proposal may have an anti-takeover effect. The Board of Directors,
however, is not aware of any efforts to obtain control of the Company, and
the proposal of these measures is not in response to any such efforts. For a
general discussion of certain anti-takeover effects of Proposal 2, see the
section entitled "Anti-Takeover Proposals" above.
Proposed Resolutions
In order to implement Proposal 2, the following resolutions have been
adopted by the Board of Directors, subject to the approval of the
stockholders of the Company:
"RESOLVED, that the Bylaws be amended by replacing the first sentence of
Article III, Section 3 with the following:
The Board of Directors shall consist of not fewer than
five (5) members and not more than nine (9) members, with
the number of authorized directors being initially fixed
at five (5), which number may be changed from time to
time by a resolution of the Board of Directors adopted by
the affirmative vote of at least a majority of the total
number of authorized directors most recently fixed by the
Board of Directors, except in each case as may be
provided pursuant to resolutions of the Board of
Directors, adopted pursuant to the provisions of the
Certificate of Incorporation, establishing any series of
Preferred Stock and granting to holders of shares of such
series of Preferred Stock rights to elect additional
directors under specified circumstances. If the number of
directors is changed, then any increase or decrease in
such number shall be apportioned by the Board of
Directors among the classes of directors so as to
maintain as nearly as possible an equal number of
directors in each class."
"RESOLVED, that the Bylaws be amended by replacing the last sentence of
Article III, Section 2 with the following:
Any vacancy on the Board of Directors, howsoever
resulting, including through an increase in the number of
directors, shall only be filled by the affirmative vote
of a majority of the remaining directors then in office,
even if less than a quorum, or by the sole remaining
director. Any director elected to fill a vacancy shall
hold office for the same remaining term as that of his or
her predecessor, or if such director was elected as a
result of an increase in the number of directors, then
for the term specified in the resolution providing for
such increase".
Required Vote
The affirmative vote of holders of 66 2/3% of the Common Stock
outstanding and entitled to vote at the Annual Meeting is required to approve
this proposal.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL 2.
- -----------------------------------------------------------------------------
PROPOSAL 3
AMENDING THE CERTIFICATE OF INCORPORATION TO PROVIDE THAT
STOCKHOLDERS MAY ONLY REMOVE DIRECTORS FOR CAUSE
Removal of a Director for Cause
Once a classified board of directors is established, as the Company has
done, the Delaware GCL prohibits stockholders from removing members of a
classified board of directors without cause before the expiration of their
respective terms unless the Certificate of Incorporation specifies otherwise.
Currently, Article SIXTH (b) of the Certificate of Incorporation provides
that any director, or the entire Board of Directors, may be removed, with or
without cause, by the affirmative vote of the holders of at least 66 2/3% of
the voting power of the then outstanding shares of any class or series of
capital stock of the Corporation entitled to vote generally in the election
of directors (the "Voting Stock"). The Board of Directors has adopted,
subject to stockholder approval, an amendment to Article SIXTH (b) which
provides that any director, or the entire Board of Directors, may be removed
by the stockholders for cause only by the affirmative vote of the holders of
at least 66 2/3% of the Voting Stock. At the Annual Meeting, stockholders
will be asked to consider and vote on this proposed amendment.
Analysis of Proposal 3
In conjunction with the Company's presently existing classified Board of
Directors, the proposed amendment should render more difficult an attempt to
acquire control of the Company without the approval of the Company's
management. The proposed amendment would make it impossible for someone who
acquires voting control of the Company immediately to remove the incumbent
directors who may oppose such person and to replace them with more friendly
directors, and will instead require such a person to replace incumbent
directors as their terms expire over a period of up to three years, unless
cause exists for such removal. This proposal would protect the continuity of
the Board of Directors and thereby enhance the ability of the Company to
carry out long-range plans and goals for its benefit and the benefit of its
stockholders.
Stockholders should recognize, however, that the amendment will also
make more difficult the removal of a director in circumstances which do not
constitute a takeover attempt and where, in the opinion of the holders of two
thirds of the Company's outstanding shares, such removal is appropriate but
where no cause exists. Moreover, the proposed amendment may have the effect
of delaying an ultimate change in existing management which might be desired
by a majority of the stockholders.
The proposed amendment is in accordance with the Delaware GCL, which
provides that when a corporation has a classified Board of Directors,
directors may be removed only for cause unless the Certificate of
Incorporation provides otherwise.
The inability to remove directors other than for cause may have the
effect of discouraging potential unfriendly bids for shares of the Company
because of the delay it could cause in replacing board members. However, the
Board of Directors is not aware of any efforts to obtain control of the
Company, and the proposal of this measure is not in response to any such
efforts. For a general discussion of certain anti-takeover effects of
Proposal 3, see the section entitled "Anti-Takeover Proposals" above.
Proposed Resolution
In order to implement Proposal 3, the following resolution has been
adopted by the Board of Directors, subject to the approval of the
stockholders of the Company.
"RESOLVED, that the Certificate of Incorporation be amended by replacing
Article SIXTH (b) with the following:
(b) Any director, or the entire Board of Directors, may
be removed, for cause only, by the affirmative vote of
the holders of at least 66 2/3% of the voting power of
the then outstanding shares of any class or series of
capital stock of the Corporation entitled to vote
generally in the election of directors, voting together
as a single class (the "Voting Stock")."
The affirmative vote of holders of 66 2/3% of the Common Stock
outstanding and entitled to vote at the Annual Meeting is required to approve
this proposal.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL 3.
- -----------------------------------------------------------------------------
PROPOSAL 4
AMENDING THE CERTIFICATE OF INCORPORATION AND BYLAWS TO PROVIDE
THAT ONLY THE BOARD OF DIRECTORS OR CHAIRMAN OF THE BOARD MAY CALL
SPECIAL MEETINGS
Ability to Call Special Meetings of the Stockholders
Article II, Section 3 of the Bylaws currently provides that special
meetings of stockholders may be called by the Board of Directors pursuant to
a resolution adopted by a majority of then authorized number of directors, by
the Chairman of the Board, or at the request in writing by one or more
holders in the aggregate of shares of Common Stock entitled to cast not less
than 10% of the votes at such meeting. The Board of Directors has adopted,
subject to stockholder approval, amendments to the Certificate of
Incorporation and Bylaws to require that special meetings of stockholders may
only be called by the Board of Directors acting by a majority of the then
authorized number of directors, or by the Chairman of the Board, that
stockholders of the Company are not permitted to call a special meeting or to
require that the Board of Directors or Chairman of the Board call a special
meeting of stockholders and that the business permitted to be conducted at
such meetings be limited to that brought before the meetings by or at the
direction of the Board of Directors or Chairman of the Board. At the Annual
Meeting, stockholders will be asked to consider and vote on these proposed
amendments.
Analysis of Proposal 4
The amendments, if adopted, would provide for the orderly conduct of all
Company affairs at special meetings of stockholders. Accordingly, a
stockholder could not force stockholder consideration of a proposal over the
opposition of the Board of Directors by calling a special meeting of
stockholders prior to the next annual meeting or prior to such time that the
Board of Directors believed such consideration to be appropriate. As a
result, the Board of Directors would have the opportunity to inform other
stockholders adequately of the matters to be considered.
The amendments, if adopted, would insulate the management of the Company
from requests for special meetings, allowing management to concentrate on its
business functions. Since stockholder approval of mergers subsequent to a
hostile takeover usually requires the calling of a special meeting, the
approval of the proposed amendment would make it more difficult for persons
interested in obtaining approval of a merger to do so without first having
approached the Board of Directors. This would encourage persons seeking to
enter into negotiations with the Company to deal directly with management,
which would then be able to properly evaluate any such proposals.
Stockholders should recognize that this provision would apply to any
reason which stockholders may have to call a special meeting and not merely
to meetings called subsequent to hostile takeovers. It may prevent
stockholders from calling a special meeting even when a majority desires to
do so.
This proposal is in accordance with the Delaware GCL, which provides
that special meetings of the stockholders may be called by the board of
directors or by such person or personas as may be authorized by the
certificate of incorporation or bylaws.
Persons attempting a takeover bid could be delayed or deterred by the
inability to call a special meeting of stockholders. For these reasons, this
Proposal may have an anti-takeover effect. The Board of Directors, however,
is not aware of any efforts to obtain control of the Company, and the
proposal of this measure is not in response to any such efforts. For a
general discussion of certain anti-takeover effects of Proposal 4, see the
section entitled "Anti-Takeover Proposals" above.
Proposed Resolutions
In order to implement Proposal 4, the following resolutions have been
adopted by the Board of Directors, subject to the approval of the
stockholders of the Company:
"RESOLVED, that the Certificate of Incorporation be amended by replacing
the first sentence of Article SEVENTH with the following:
Except as required by law and subject to the rights of
the holders of any series of Preferred Stock established
pursuant to the provisions of this Amended and Restated
Certificate of Incorporation, special meetings of
stockholders may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the
then authorized number of directors or by the Chairman of
the Board. Stockholders of the Corporation are not
permitted to call a special meeting or to require that
the Board of Directors or Chairman of the Board call a
special meeting of stockholders. The business permitted
at any special meeting of stockholders shall be limited
to the business brought before the meeting by or at the
direction of the Board of Directors or the Chairman of
the Board."
"RESOLVED, that the Bylaws be amended by replacing Article II, Section 3
with the following:
Special Meetings. Except as required by law and subject
to the rights of the holders of any series of Preferred
Stock established pursuant to the provisions of this
Amended and Restated Certificate of Incorporation,
special meetings of stockholders may be called only by
the Board of Directors pursuant to a resolution approved
by a majority of the then authorized number of directors
or by the Chairman of the Board. Stockholders of the
Corporation are not permitted to call a special meeting
or to require that the Board of Directors or Chairman of
the Board call a special meeting of stockholders. The
business permitted at any special meeting of stockholders
shall be limited to the business brought before the
meeting by or at the direction of the Board of Directors
or the Chairman of the Board."
Required Vote
The affirmative vote of holders of 66 2/3% of the Common Stock
outstanding and entitled to vote at the Annual Meeting is required to approve
this proposal.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL 4.
- -----------------------------------------------------------------------------
PROPOSAL 5
AMENDING THE CERTIFICATE OF INCORPORATION AND BYLAWS TO ELIMINATE
STOCKHOLDER ACTION BY WRITTEN CONSENT
Ability for Stockholders to Act by Written Consent
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken by stockholders
of a corporation may be taken without a meeting, without prior notice and
without a stockholder vote, if a written consent setting forth the action to
be taken is signed by the holders of shares of outstanding stock having the
requisite number of votes that would be necessary to authorize such an action
at a meeting of stockholders at which all shares entitled to vote thereon
were present and voted. Currently, the Certificate of Incorporation does not
prohibit such action by written consent. Furthermore, Article II, Section
10 of the Bylaws specifically provides for such stockholder action by written
consent. The Board of Directors has adopted, subject to stockholder approval,
an amendment to the Certificate of Incorporation and a corresponding
amendment to the Bylaws to provide that actions required or permitted to be
taken at any annual or special meeting of the stockholders may be taken only
upon the vote of the stockholders at a meeting duly called and may not be
taken by written consent of the stockholders. At the Annual Meeting,
stockholders will be asked to consider and vote on these proposed amendments.
Analysis of Proposal 5
The adoption of this proposal would eliminate the ability of the
Company's stockholders to act by written consent in lieu of a meeting. It is
intended to prevent solicitation of consents by stockholders seeking to
effect changes without giving all of the Company's stockholders entitled to
vote on a proposed action an adequate opportunity to participate at a meeting
where such proposed action is considered. The proposed amendment would
prevent a takeover bidder holding or controlling a large block of the
Company's voting stock from using the written consent procedure to take
stockholder action unilaterally.
This amendment, if adopted, would ensure that all stockholders would
have advance notice of any attempted major corporate action by stockholders,
and that all stockholders would have an equal opportunity to participate at
the meeting of stockholders where such action was being considered. It would
enable the Company to set a record date for any stockholder voting and would
reduce the possibility of disputes or confusion regarding the validity of
purported stockholder action. The amendment would encourage a potential
acquiror to negotiate directly with the Board of Directors.
In addition, the Board of Directors believes that this change to
eliminate stockholder action by written consent is desirable to avoid
untimely action in a context that might not permit stockholders to have the
full benefit of the knowledge, advice and participation of the Company's
management and Board of Directors. In the event of a proposed acquisition of
the Company, the Board of Directors believes that the interests of
stockholders would best be served by a transaction that resulted from
negotiations based on careful consideration of the proposed terms. Although
there can be no certainty as to the result of any particular negotiations,
the Board of Directors believes that the intended effect of Proposal 5 of
promoting negotiations concerning any proposed acquisition of the Company,
with the bargaining power in the Board of Directors, would be in the long-
term interests of the Company and its stockholders. However, any provision in
the Certificate of Incorporation which effectively requires a potential
acquiror to negotiate with the Company's management and Board of Directors
could be characterized as increasing management's and the Board of
Directors's ability to retain their positions with the Company and to resist
a transaction which may be deemed advantageous by even a majority of the
stockholders.
These proposed amendments are in accordance with the Delaware GCL, which
provides that stockholders may act by written consent unless otherwise
provided by a corporation's certificate of incorporation.
Persons attempting a takeover bid could be delayed or deterred by not
being able to propose a transaction at a time advantageous for them. For
these reasons, this Proposal may have an anti-takeover effect. The Board of
Directors, however, is not aware of any efforts to obtain control of the
Company, and the proposal of this measure is not in response to any such
efforts. For a general discussion of certain anti-takeover effects of
Proposal 5, see the section entitled "Anti-Takeover Proposals" above.
Proposed Resolutions
In order to implement Proposal 5, the following resolutions have been
adopted by the Board of Directors, subject to the approval of the
stockholders of the Company:
"RESOLVED, that the Certificate of Incorporation be amended by adding a
new Article THIRTEENTH, sub-section (a) which shall read as follows:
THIRTEENTH: (a) Except as otherwise provided in the
resolutions of the Board of Directors designating any
series of Preferred Stock, any action required or
permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or
special meeting of stockholders and may not be effected
by a consent in writing by any such stockholders."
"RESOLVED, that the Bylaws be amended by replacing Article II, Section
10 in its entirety with the following:
SECTION 10. No Consent of Stockholders in Lieu of
Meeting. Except as otherwise provided in the resolutions
of the Board of Directors designating any series of
Preferred Stock, any action required or permitted to be
taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in
writing by any such stockholders."
"RESOLVED, that the Bylaws be further amended by deleting in its
entirety paragraph 3 of Section 4 of Article VII of the Bylaws, which deals
with fixing the record date for stockholders entitled to act by written
consent without a meeting."
Required Vote
The affirmative vote of holders of a majority of the Common Stock
outstanding and entitled to vote at the Annual Meeting is required to approve
this proposal.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL 5.
- -----------------------------------------------------------------------------
PROPOSAL 6
AMENDING THE CERTIFICATE OF INCORPORATION AND BYLAWS TO REQUIRE
SUPERMAJORITY VOTE TO AMEND OR REPEAL THE PROPOSED AMENDMENTS
WHICH ARE ADOPTED
Requirement for Supermajority Vote to Amend any Adopted Proposals
Delaware Law provides that the Certificate of Incorporation may be
amended by the vote of a majority of the shares of Common Stock outstanding
and entitled to vote. Delaware law further confers sole authority to adopt,
amend or repeal bylaws in the stockholders unless the certificate of
incorporation also confers such a power upon the board of directors. Article
NINTH of the Certificate of Incorporation expressly confers such powers upon
the Board of Directors, provided, however, that the stockholders may change
or repeal any Bylaw adopted by the Board of Directors. The Board of
Directors has adopted, subject to stockholder approval, amendments to the
Certificate of Incorporation and Bylaws to require the affirmative vote of
holders of 66 2/3% of the Voting Stock to amend or repeal, or to adopt any
provisions inconsistent with, any of the provisions added to the Certificate
of Incorporation and Bylaws by Proposals 2 through 5 above and this Proposal
6. At the Annual Meeting, stockholders will be asked to consider and vote on
the proposed amendment.
Analysis of Proposal 6
Proposal 6, by limiting the manner in which the Anti-Takeover Amendments
may be amended or repealed, is intended not only to promote continuity of
operations and thereby enhance the Company's ability to attain its long term
goals, but also to allow the Board of Directors to more effectively manage
the affairs of and internal operating procedures of the Company. These
proposals are intended to have the effect of making it more difficult for
stockholders, following the Annual Meeting, to eliminate the constituent
elements contained within Proposals 2 through 5 above and this Proposal 6.
The Stockholders have previously approved supermajority provisions, which are
currently in place, related to amending or repealing certain existing anti-
takeover provisions of the Bylaws and Certificate of Incorporation, including
related to the provisions discussed herein. Proposal 6, if adopted, would
expand the scope of the existing supermajority provision.
Proposal 6 will have the effect of making it more difficult for
stockholders to change the Anti-Takeover Amendments which have been adopted.
This may further discourage potentially unfriendly bids for shares of the
Company. For these reasons, Proposal 6 may have an anti-takeover effect. The
Board of Directors, however, is not aware of any efforts to obtain control of
the Company, and the proposal of this measure is not in response to any such
efforts. For a general discussion of certain anti-takeover effects of
Proposal 5, see the section entitled "Anti-Takeover Proposals" above.
Proposed Resolutions
In order to implement Proposal 6, the following resolutions have been
adopted by the Board of Directors, subject to the approval of the
stockholders of the Company:
RESOLVED, that the Bylaws be amended by changing the last sentence of
Article XI to read as follows:
Notwithstanding the preceding sentence, the affirmative vote of holders
of at least 66-2/3% of the voting power of the then outstanding shares
of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be
required to amend or repeal, or adopt any provisions inconsistent with,
Section 3, Section 7 or Section 10 of Article II of these Bylaws,
Section 2, Section 3 or Section 8 of Article III of these Bylaws,
Article X of these Bylaws or this last sentence."
"RESOLVED, that the Certificate of Incorporation be amended by replacing
the second sentence of Article NINTH with the following:
Notwithstanding the foregoing and anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, Section 3
("Special Meetings"), Section 7 ("Order of Business") or Section 10
("Consent of Stockholders") of Article II ("Meetings of Shareholders")
of the By-laws, Section 2 ("Terms and Vacancies"), Section 3
("Nominations of Directors; Election") or Section 8 ("Quorum and Manner
of Acting") of Article III ("Directors") of the By-laws, Article X
("Indemnification of Directors and Officers") of the By-laws, or the
final sentence of Article XI ("Amendments") of the By-laws shall not be
amended or repealed, and no provision inconsistent with any thereof
shall be adopted, without the affirmative vote of the holders of at
least 66-2/3% of the voting power of the Voting Stock, voting together
as a single class."
"RESOLVED, that the Certificate of Incorporation be amended by adding a
sub-section (b) to the new Article THIRTEENTH, which would read as follows:
(b) Notwithstanding anything contained in this Amended and Restated
Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least 66-2/3% of the Voting Stock, voting together as
a single class, shall be required to amend or repeal, or adopt any
provision inconsistent with, any provision of this Article THIRTEENTH."
Required Vote
The affirmative vote of 66 2/3% of the Common Stock outstanding and
entitled to vote at the Annual Meeting is required to approve this proposal.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
THE APPROVAL OF PROPOSAL 6.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RESERVES THE RIGHT TO AMEND THE LANGUAGE OF ANY OF THE
FOREGOING PROPOSED RESOLUTIONS AND TO TAKE SUCH OTHER ACTIONS AS MAY BE
NECESSARY TO FULLY IMPLEMENT AND CARRY OUT THE INTENT OF ANY ADOPTED PROPOSAL
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP have been selected as the Company's independent
public accountants for the Company's current fiscal year. Representatives of
Arthur Andersen LLP are expected to be present at the 1998 Annual Meeting of
Stockholders with the opportunity to make a statement if they desire to do
so, and they are expected to be available to respond to appropriate
questions.
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 13, 1998 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, 1997,
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, 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 17, 1998 By Order of the Board of Directors
Zvi D. Sprung, Secretary
<PAGE>
PRELIMINARY COPY
INTERSTATE NATIONAL DEALER SERVICES, INC.
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
Thursday, April 16, 1998, at 11:00 a.m. at 270 Park Avenue, New
York, New York 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 FOR THE PROPOSALS 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.
CINDY H. LUBY WILLIAM H. BROWN
_FOR such nominee _WITHHELD as to FOR such nominee _WITHHELD as to
such nominee such nominee
The Board of Directors recommends a vote FOR each of the nominees.
2. Amending the Bylaws to fix the number of directors and provide for
filling vacancies on the Board.
_For Proposal 2 _Against Proposal 2 _Abstain on Proposal 2
The Board of Directors recommends a vote FOR Proposal 2.
3. Amending the Certificate of Incorporation to provide that stockholders
may only remove directors for cause.
_For Proposal 3 _Against Proposal 3 _Abstain on Proposal 3
The Board of Directors recommends a vote FOR Proposal 3.
4. Amending the Certificate of Incorporation and Bylaws to provide that only
the Board of Directors or Chairman of the Board may call special
stockholders meetings.
_For Proposal 4 _Against Proposal 4 _Abstain on Proposal 4
The Board of Directors recommends a vote FOR Proposal 4.
5. Amending the Certificate of Incorporation and Bylaws to eliminate
stockholder action by written consent.
_For Proposal 5 _Against Proposal 5 _Abstain on Proposal 5
The Board of Directors recommends a vote FOR Proposal 5.
6. Amending the Certificate of Incorporation and Bylaws to require
supermajority vote to amend or repeal the proposed amendments which are
adopted at the meeting.
_For Proposal 6 _Against Proposal 6 _Abstain on Proposal 6
The Board of Directors recommends a vote FOR Proposal 6.
7. 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 _________________________________, 1998
_______________________________________________
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
