SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 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)
- - ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
INTERSTATE NATIONAL DEALER SERVICES, INC.
The Omni, Suite 700
333 Earle Ovington Boulevard
Mitchel Field, New York 11553
March 10, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 annual meeting of
stockholders which will be held on Wednesday, April 12, 2000, 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,
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 12, 2000
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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 12, 2000, at
11:00 a.m., local time, for the following purposes:
1. To elect two directors for a term expiring at the 2003 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 10, 2000 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 10, 2000
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 12, 2000
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 exercised at the Annual Meeting of Stockholders to be held on Wednesday,
April 12, 2000 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 of Stockholders.
This Proxy Statement and enclosed form of proxy are first being mailed to
the stockholders of the Company on or about March 10, 2000.
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
10, 2000 (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, 4,694,184 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 21.3% of the Shares outstanding as of March 10, 2000, have advised
the Company that they intend to vote in favor of the nominees for director.
<PAGE>
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 2001 annual meeting of
stockholders, one member (the "Class II Director") whose term will expire at the
2002 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 2003, 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.
Chester J. Luby, age 68, has been the Chairman, Chief Executive Officer, a
director and a principal stockholder 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 the insurance
business. Mr. Luby is a graduate of the University of Chicago and Yale Law
School and a member of the New York and Florida bars. Mr. Luby is a Class III
Director.
Donald Kirsch, age 68, is Chairman and President of The Wall Street Group,
Inc. and President and Chief Executive Officer of Wall Street Consultants, Inc.,
financial consulting and financial public relations firms, positions he has held
for more than five years. He has been a director of the Company since December
1996. Mr. Kirsch is a Class III Director.
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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 2003.
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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 45, 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. Ms. Luby is a Class I Director.
William H. Brown, age 69, 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. Mr. Brown is a Class I Director.
Harvey Granat, age 62, has been the President and Chief Executive Officer
of Sterling/Carl Marks Capital, Inc. ("Sterling"), a Small Business Investment
Company, since 1988. Prior to joining Sterling, Mr. Granat was the President and
Chief Executive Officer of Sussex Leasing Corp., an equipment leasing company.
He has been a director of the Company since January 1999. Mr. Granat is a Class
II Director.
Board of Directors' Meetings
During the Company's fiscal year ended October 31, 1999, the Board held
five meetings.
Board Committees
The Board has an Audit Committee, a Stock Option Committee and a
Compensation Committee. The members of the Audit Committee are Messrs. Harvey
Granat and Donald Kirsch. The members of the Stock Option Committee and the
Compensation Committee are Messrs. William Brown and Donald Kirsch. 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, 1999.
The Stock Option Committee is responsible for administering the Company's
Amended and Restated 1993 Stock Option Plan, as amended, and the Company's 1996
Incentive Plan (the "Incentive Plan"). The Stock Option Committee met once
during the fiscal year ended October 31, 1999.
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, 1999.
<PAGE>
Directors' Compensation
Each non-employee director of the Company receives a fee of $1,000 for
attendance at each Board or committee meeting. In addition, each non-employee
director of the Company is entitled, pursuant to the provisions of the Incentive
Plan, to an automatic grant of an option to purchase 15,000 Shares upon the
adoption of the Incentive Plan or their election to the Board. In addition, the
Company reimburses all of its directors for travel expenses incurred in
connection with their activities on behalf of the Company. Directors who are
employees of the Company do not receive any additional compensation by reason of
their service as directors.
In the fiscal year ending October 31, 1999, upon his election to the Board,
Mr. Granat was granted options to purchase 15,000 Shares under the Incentive
Plan. As of March 10, 2000, Messrs. Brown and Kirsch had options under the
Incentive Plan to purchase 10,000 and 15,000 Shares, respectively, all of which
are currently exercisable. As of March 10, 2000, Mr. Granat had options under
the Incentive Plan to purchase 15,000 Shares, 3,000 of which are currently
exercisable and the balance of which become exercisable at the rate of 3,000
Shares 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 52, 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 50, joined the Company in August 1995 as Controller and
was elected Chief Financial Officer, Treasurer and Secretary 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, 1999 (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.
<PAGE>
Summary Compensation Table
Long-Term
Compensation
Fiscal Year Annual Compensation Securities
Name and Ended Underlying All Other
Principal October Salary Bonus Options Compensation
Position 31, (4)
Chester J. Luby (1) 1999 $250,000 $208,313 $ - $62,865
Chairman and Chief 1998 200,000 181,500 25,000 62,865
Executive Officer 1997 154,167 137,829 - 62,919
Cindy H. Luby (2) 1999 175,000 162,125 - -
President and Chief 1998 125,000 141,100 31,000 -
Operating Officer 1997 100,961 98,450 - -
Lawrence J.Altman(3)1999 244,134 - - -
Senior Vice 1998 217,464 - 6,000 -
President, 1997 164,890 - - -
Marketing
1) Annual compensation paid to Mr. Luby was pursuant to an Amended and Restated
Employment Agreement dated November 1, 1998 between the Company and Mr.
Luby.
(2) Annual compensation paid to Ms. Luby was pursuant to an Amended and Restated
Employment Agreement dated November 1, 1998 between the Company and Ms.
Luby. The Company has a loan outstanding to Ms. Luby in the amount of
$45,000. 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. To date, Ms. Luby has prepaid $65,000 of the loan.
(3) Annual compensation paid to Mr. Altman was pursuant to an Amended and
Restated Employment Agreement dated February 1, 1999 between the Company and
Mr. Altman.
(4) Amount represents split dollar life insurance premiums paid by the Company
for the benefit of Mr. Luby. This amount will be reimbursed to the Company
in the event of Mr. Luby's death or the termination of his employment
agreement under certain circumstances. 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 stock options or stock appreciation rights
during the fiscal year ended October 31, 1999 to the Named Executives. The
Company's Uautobid.com subsidiary, however, in order to provide equity based
compensation to persons associated with the Company who have contributed to the
development of the subsidiary, granted options to the Named Executives in
September 1999. Mr. Luby was granted options to purchase 1,000,000 shares; Ms.
<PAGE>
Luby was granted options to purchase 200,000 shares and Mr. Altman was granted
options to purchase 10,000 shares. All of such options have an exercise price of
$.10 per share and expire ten years after the date of grant. The options were
granted as a portion of a total of 1,565,000 options granted by Uautobid.com,
Inc. to its directors and officers and various employees and directors of the
Company and outside consultants. The Company currently owns 7,500,000 shares of
common stock of Uautobid.com, Inc., and the options, if exercised in full, would
represent approximately 17% of the issued and outstanding shares of the
subsidiary.
The following table sets forth information concerning the exercise of stock
options by the Named Executives during the fiscal year ended October 31, 1999
and the value of unexercised options as of October 31, 1999 held by the Named
Executives.
Aggregated Option Exercises in Last Fiscal Year
and
Fiscal Year End Option Values
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money Options
on Exercise Realized Options at October at October 31, 1999(1)
31,1999
Exercis- Unexercis- Exercis- Unexercis-
able able able able
Chester Luby - 214,000 11,000 $336,643 $ 43,051
Cindy Luby 4,000 $24,650 186,834 9,000 273,224 35,450
Lawrence
Altman - - 27,900 16,400 73,269 19,421
(1) Based on the closing price of the Common Stock on NASDAQ on October 31,
1999.
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 a Stock Option and
Compensation Committee of the Board established for such purpose and consisting
of Donald Kirsch and William Brown, independent directors of the Board. 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 and Compensation 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. As of March 10, 2000, options to
purchase 220,666 Shares were outstanding under the Option Plan, 210,165 of which
are exercisable. Under the Option Plan, a total of 12,400 additional options may
be granted.
<PAGE>
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, 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 Mr. Granat upon his election in April 1999. As of March
10, 2000, options to purchase 200,800 Shares were outstanding under the
Incentive Plan, 122,400 of which are exercisable.
Employment Agreements
On November 1, 1998, the Company entered into an Amended and Restated
Employment Agreement with Chester J. Luby providing for his employment as
Chairman of the Board of Directors and Chief Executive Officer of the Company.
This agreement terminates on December 31, 2008, however, it is automatically
extended for additional one-year periods unless either the Company or Mr. Luby
provides prior written notice not to extend the agreement.
Mr. Luby is to be paid an annual salary of $250,000, which may be increased
annually in the discretion of the Board. Mr. Luby is also entitled to receive an
annual bonus on account of each fiscal year equal to the greater of $150,000 or
4-1/2% of the Company's earnings before interest and taxes for the fiscal year.
In addition to his annual salary and bonus, Mr. Luby may also be paid an annual
performance bonus in the discretion of the Board in an amount, if any,
determined at the sole discretion of the members of the Board. Mr. Luby's "Total
Compensation" (as defined in the employment agreement) for any fiscal year is
defined as the sum of his annual salary, annual bonus and annual performance
bonus (if any) for that fiscal year.
Under the terms of his employment agreement, Mr. Luby is entitled to the use
of a leased car and reimbursement for all operating expenses for such car,
reimbursement for travel expenses incurred in attending conferences and meetings
of certain trade associations and certain other business and employment related
expenses, and premium payments for split dollar life insurance policies for the
benefit of Mr. Luby and his family. With respect to the split-dollar life
insurance policies, the premium payments made by the Company are recorded as
non-interest bearing loans and total approximately $312,000 as of October 31,
1999. This amount will be reimbursed to the Company in the event of Mr. Luby's
death or the termination of his employment agreement under certain
circumstances.
If Mr. Luby dies during the term of his employment agreement, the Company
will pay to his estate a death benefit in an amount equal to five times Mr.
<PAGE>
Luby's annual salary for the Company's most recent fiscal year immediately prior
to his death. If Mr. Luby's employment is terminated because he becomes
disabled, the Company will pay him disability benefits equal to fifty percent
(50%) of his average Total Compensation during the three most recent fiscal
years prior to his disability. This annual disability benefit is payable until
Mr. Luby's death. If Mr. Luby terminates his employment with the Company for
"good reason" (as defined in the agreement), or if the Company terminates his
employment other than for "proper cause" (as defined in the agreement) or
disability, then he is entitled to be paid the amount of his Total Compensation
for the Company's most recent fiscal year immediately prior to his termination
multiplied by a factor equal to the greater of two (2) or the number of years
(including fractions) remaining in the term of his agreement. If Mr. Luby
retires during the term of his agreement, he is to be paid retirement benefits
equal to fifty percent (50%) of his Total Compensation for the Company's most
recent fiscal year prior to his retirement. This annual retirement benefit is
payable until Mr. Luby's death. If Mr. Luby is an employee of the Company
immediately prior to a "Change in Control" of the Company, as defined in the
agreement, all stock options he owns immediately vest and become exercisable. In
addition, the Company is required to pay Mr. Luby an amount equal to the number
of Shares underlying his options multiplied by the amount, if any, by which the
lesser of (i) the exercise price of Mr. Luby's options or (ii) the closing price
of the Company's Shares on the date of the Change in Control, exceeds the
average closing price of the Company's Shares during the period beginning 180
days and ending 150 days prior to the date of the Change in Control. Upon
receipt of this payment from the Company, Mr. Luby may then retain or exercise
his options. Alternatively, Mr. Luby may forfeit his options to the Company in
exchange for payment equal to the difference between the closing price of the
Company's Shares on the date of the Change in Control and the exercise price of
his options.
Mr. Luby's employment agreement also contains a three year "non-compete"
clause. This clause does not apply in the event that Mr. Luby terminates his
employment with the Company for good reason or if the Company terminates Mr.
Luby's employment for reasons other than disability or "proper cause," as
defined in the agreement.
On November 1, 1998, the Company entered into an Amended and Restated
Employment Agreement with Cindy H. Luby providing for her employment as
President and Chief Operating Officer of the Company. This agreement terminates
on December 31, 2008, however, it is automatically extended for additional
one-year periods unless either the Company or Ms. Luby provides prior written
notice not to extend the agreement.
Ms. Luby is to be paid an annual salary of $175,000, which may be increased
annually in the discretion of the Board. Ms. Luby is also entitled to an annual
bonus on account of each fiscal year equal to the greater of $100,000 or 3-1/2%
of the Company's earnings before interest and taxes for the fiscal year. In
addition to her annual salary and bonus, Ms. Luby may also be paid an annual
performance bonus in the discretion of the Board in an amount, if any,
determined at the sole discretion of the members of the Board. Ms. Luby's Total
Compensation for any fiscal year is defined as the sum of her annual salary,
annual bonus and annual performance bonus (if any) for that fiscal year.
Under the terms of her employment agreement, Ms. Luby is entitled to the use
of a leased car and reimbursement for all operating expenses for such car and
reimbursement for business expenses and employment related expenses, including
travel expenses incurred in attending conferences and meetings of certain trade
associations and dues of certain associations.
If Ms. Luby dies during the term of her employment agreement, the Company
will pay to her estate a death benefit in an amount equal to five times Ms.
<PAGE>
Luby's annual salary for the Company's most recent fiscal year immediately prior
to her death. If Ms. Luby's employment is terminated because she becomes
disabled, the Company will pay her disability benefits equal to fifty percent
(50%) of her average Total Compensation during the three most recent fiscal
years prior to her disability. This annual disability benefit is payable for the
longer of two (2) years or the balance of the term of her employment agreement.
If Ms. Luby terminates her employment with the Company for "good reason", or if
her employment is terminated by the Company for reasons other than "proper
cause" or disability, then she is entitled to be paid the amount of her Total
Compensation for the Company's most recent fiscal year immediately prior to the
termination multiplied by a factor equal to the greater of two (2) or the number
of years (including fractions) remaining in the term of her agreement. If Ms.
Luby retires during the term of her agreement, she is to be paid retirement
benefits equal to fifty percent (50%) of her Total Compensation for the
Company's most recent fiscal year prior to her retirement. The annual retirement
benefit is payable until Ms. Luby's death. If Ms. Luby is an employee of the
Company immediately prior to a Change in Control of the Company, all stock
options she owns immediately vest and become exercisable. In addition, the
Company is required to pay Ms. Luby an amount equal to the number of Shares
underlying her options multiplied by the amount, if any, by which the lesser of
(i) the exercise price of Ms. Luby's options or (ii) the closing price of the
Company's Shares on the date of the Change in Control, exceeds the average
closing price of the Company's Shares during the period beginning 180 days and
ending 150 days prior to the date of the Change in Control. Upon receipt of this
payment from the Company, Ms. Luby may then retain or exercise her options.
Alternatively, Ms. Luby may forfeit her options to the Company in exchange for
payment equal to the difference between the closing price of the Company's
Shares on the date of the Change in Control and the exercise price of her
options.
Ms. Luby's employment agreement also contains a three year "non-compete"
clause. This clause does not apply in the event that Ms. Luby terminates her
employment with the Company for good reason or if the Company terminates Ms.
Luby's employment for reasons other than disability or proper cause.
On February 1, 1999, the Company entered into an Amended and Restated
Employment Agreement with Lawrence J. Altman providing for his employment as
Senior Vice President, Marketing, of the Company. This agreement terminates on
January 31, 2004.
Mr. Altman is to be paid an annual salary of $70,710, which may be increased
annually in the discretion of the Company. Mr. Altman is also entitled to
receive monthly commissions equal to 2% of (i) all administrative fees for
vehicle service contracts and vehicle warranties paid to the Company during each
calendar month minus (ii) the aggregate selling expenses incurred by the Company
for such month minus (iii ) $150,000. In addition to his annual salary and
monthly commissions, Mr. Altman may also be paid an annual performance bonus in
an amount, if any, determined at the sole discretion of the members of the
Board. Mr. Altman's "Total Compensation" (as defined in the employment
agreement) for any fiscal year is defined as the sum of his annual salary,
monthly commissions and annual performance bonus (if any) for that fiscal year.
If Mr. Altman dies during the term of his employment agreement, the Company
will pay to his estate a death benefit in an amount equal to the Total
Compensation paid to Mr. Altman for the Company's most recent fiscal year prior
to his death. If Mr. Altman's employment is terminated because he becomes
disabled, the Company will pay him disability benefits equal to fifty percent
(50%) of his Total Compensation for the Company's most recent fiscal year
immediately prior to Mr. Altman's disability termination. Such disability
benefits are to be paid for the longer of two years or the balance of the term
of the agreement. If Mr. Altman terminates his employment by the Company for
"good reason" or if the Company terminates his employment other than for "proper
cause" or disability, then he is entitled to be paid the amount of his Total
Compensation for the Company's most recent fiscal year multiplied by a factor of
two.
<PAGE>
If Mr. Altman is an employee of the Company immediately prior to a "Change
in Control" of the Company, all stock options he owns immediately vest and
become exercisable. In addition, the Company is required to pay Mr. Altman an
amount equal to the number of Shares underlying his options multiplied by the
amount, if any, by which the lesser of (i) the exercise price of Mr. Altman's
options or (ii) the closing price of the Company's Shares on the date of the
Change in Control exceeds the average closing price of the Company's Shares
during the period beginning 180 days and ending 150 days prior to the date of
the Change in Control. Upon receipt of this payment from the Company, Mr. Altman
may then retain or exercise his options. Alternately, Mr. Altman may forfeit his
options to the Company in exchange for payment equal to the difference between
the closing price of the Company's Shares on the date of the Change in Control
and the exercise price of his options.
Mr. Altman's employment agreement contains a two year non-compete clause.
This clause does not apply in the event that Mr. Altman terminates his
employment with the Company for good reason or if the Company terminates Mr.
Altman's employment for reasons other than disability or proper cause.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The members of the Company's Compensation Committee for fiscal year ended
October 31, 1999 were William Brown and Donald Kirsch. All members are
non-employee directors of the Company and none has any direct or indirect
material interest in or relationship with the Company outside of his or her
position as a director. To the Company's knowledge, there were no other
interrelationships involving members of the Compensation Committee or other
directors of the Company requiring disclosure.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Although all final decisions regarding compensation of senior executive
officers, other than those relating to grants of awards under the Option Plan
and the Incentive Plan, which are made by the Stock Option Committee (which has
the same members as the Compensation Committee), are made by the Board, the
Board takes into consideration the recommendations of its Compensation Committee
in making such decisions. The Compensation Committee is responsible for
conducting annual reviews of the compensation package provided to the Company's
Chief Executive Officer and all other senior executive officers of the Company,
as well as the general compensation policies of the Company. Such annual review
includes a comparison of the Company's executive compensation, corporate
performance, growth, share appreciation and total return to the stockholders
with that of similar companies, and a comparison of actual comparable
performance with internal targets and plans. In addition, the Compensation
Committee in preparing its recommendations to the Board with respect to
executive compensation will generally take into account and give substantial
weight to the Chief Executive Officer's recommendations relating to compensation
to be paid to executive officers other than himself. The Compensation
Committee's objective is to provide compensation that is fair and equitable to
both the employee and the Company and that provides appropriate incentives to
the employee. Consideration is given to the employee's overall responsibilities,
business experience, job performance, technical expertise and their resultant
combined value to the Company's long-term performance and growth.
<PAGE>
The Company's executive officer compensation program, administered by the
Compensation Committee of the Board, is based upon the following guiding
principles:
1. Competitive pay and benefits that allow the Company to attract and retain
people with the skills critical to the long-term success of the Company.
2. Motivate and reward individual and team performance in attaining business
objectives and maximizing stockholder value.
3. Include the granting of equity-based awards so as to align the interests of
executive officers with those of the stockholders.
The key elements of the Company's executive compensation package consist of
base salary, annual bonus and stock options. The Company's policies with respect
to each of these elements are discussed below. In addition, while the elements
of compensation described below are considered separately, the Compensation
Committee also considers and will continue to review the full compensation
package provided by the Company to the individual, including severance, pension,
insurance and other benefits.
Base Salaries. An executive officer's base salary is determined by evaluating
the responsibilities of the position held, the individual's experience and the
competitive marketplace for executive talent. The base salary, taken in the
context of the executive's entire compensation package, is intended to be
competitive with base salaries paid to executive officers with comparable
qualifications, experience and responsibilities at other similar companies.
Annual Bonuses. In addition to a base salary, Chester Luby, the Company's
Chairman of the Board and Chief Executive Officer, has historically been paid an
annual cash bonus equal to 4-1/2% of the Company's earnings before interest and
taxes for the previous fiscal year. Similarly, Cindy Luby, the Company's
President and Chief Operating Officer, has historically been paid an annual cash
bonus equal to 3-1/2% of the Company's earnings before interest and taxes for
the previous fiscal year. On November 1, 1998, the Company entered into
employment agreements with Chester Luby and Cindy Luby which, in each case,
contain provisions entitling such individuals to receive annual cash bonus
awards consistent with the awards historically paid.
Such employment agreements also provide that each of Chester Luby and Cindy
Luby may, in the sole discretion of the members of the Board, be paid an annual
performance bonus. A similar annual performance bonus provision is also
contained in the employment agreement, dated as of February 1, 1999, between the
Company and Lawrence J. Altman, Vice President, Marketing. The Compensation
Committee will, in determining the amount of annual performance bonuses, if any,
to be paid to such executive officers, review the performance of the Company
and, if appropriate, the Shares during the fiscal year then ended, and
non-financial performance measures such as the respective executive's
performance, effort and role in promoting the long-term growth of the Company,
as well as such other matters as the Compensation Committee may deem
appropriate. Financial factors include, among other things, revenue growth of
the Company and profitability of the Company and its individual business units.
The Compensation Committee will consider the grant of stock options or other
forms of equity-based incentives in lieu of or in addition to cash bonuses.
<PAGE>
Stock Options. The purpose of long-term awards, currently in the form of stock,
is to align the interests of the executive officers with the interests of the
stockholders. Additionally, long-term awards offer executive officers an
incentive for the achievement of superior performance over time and foster the
retention of key management personnel. The Compensation Committee favors the
granting of equity-based awards for such reasons and also believes that the
granting of stock options better motivates executive officers to exert their
best efforts on behalf of the Company and the stockholders. In determining
annual stock option grants, the Compensation Committee bases its decision on the
individual's performance and potential to improve stockholder value.
Compensation of Chief Executive Officer. With respect to the base salary paid to
Chester J. Luby, the Company's Chief Executive Officer, in the fiscal year ended
October 31, 1998, the Compensation Committee conducted an informal survey of the
base salaries of Chief Executive Officers of several other companies in the
region and other companies similar to the Company and the qualifications,
experience and responsibilities of such Chief Executive Officers. Mr. Luby's
annual base salary for the fiscal year ended October 31, 1999 was $250,000.
Federal Tax Implications for Executive Compensation. It is the responsibility of
the Compensation Committee of the Board to address the issues raised by the
recent change in Federal tax law which makes certain non-performance-based
compensation to executives of public companies, including the Company, in excess
of $1,000,000 non-deductible beginning in 1994. In this regard, the Compensation
Committee is obligated to determine whether any actions with respect to this new
limit need to be taken by the Company. At the present time, it is not
anticipated that any executive officer of the Company will receive any
compensation in excess of this amount.
The foregoing report has been furnished by the Compensation Committee.
March 1, 2000
<PAGE>
Performance Graph
The following graph compares the performance of the cumulative total return
on the Shares to the Company's stockholders for the period October 31, 1994
through October 31, 1999, with the cumulative total return for the NASDAQ Market
Index and the Financial Small Cap Index for the same period. Total return values
were calculated based on cumulative total return assuming (i) the investment of
$100 in the NASDAQ Market Index, the Financial Small Cap Index and the Shares on
October 31, 1994, (ii) full reinvestment of dividends and (iii) no payment of
brokerage or other commissions or fees. Past performance is not necessarily
indicative of future performance.
TOTAL SHAREHOLDER RETURNS
10/94 10/95 10/96 10/97 10/98 10/99
Interstate National
Dealer Services, Inc. 100 37.80 136.08 260.40 186.51 149.52
NASDAQ Market Index 100 134.65 158.93 209.17 234.09 391.01
Financial Small Cap Index 100 132.52 167.51 272.89 288.43 311.04
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Shares, as of March 10, 2000, by each person known by the Company
to be the beneficial owner of 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 . . . . . . . . . 705,800 (2) 14.3%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Joan S. Luby . . . . . . . . . . . 492,500 (3) 10.5%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Cindy H. Luby . . . . . . . . . . . 210,394 (4) 4.3%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Lawrence J. Altman . . . . . . . . . 62,300 (5) 1.3%
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
Zvi D. Sprung. . . . . . . . . . . . 21,400 (6) -
333 Earle Ovington Blvd.
Mitchel Field, New York 11553
William H. Brown . . . . . . . . . . 18,000 (7) -
Donald Kirsch . . . . . . . . . . . . 15,000 (8) -
Harvey Granat . . . . . . . . . . . . 15,000 (9) -
First Wilshire Securities Management,
Inc. . . . . . . . . . . . 476,300 (10) 10.1%
Jack Silver ......................... 275,000 (11) 5.9%
All directors and executive officers
as a group (seven persons) . . 1,047,894 20.1%
<PAGE>
(1) Amount and Percent of Shares Beneficially Owned was computed based on
4,694,184 shares of Common Stock outstanding on March 10, 2000 and, in each
person's case, the number of shares of Common Stock 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 of Common Stock 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 of Common Stock
issuable upon the exercise of any other outstanding options and/or
Independent Director Warrants.
(2) Includes 225,000 shares issuable upon the exercise of stock options, 221,000
of which are currently exercisable and the balance of which become
exercisable at the rate of 4,000 options per year.
(3) Includes 15,000 shares issuable upon the exercise of stock options, all of
which are currently exercisable.
(4) Includes 195,834 shares issuable upon the exercise of stock options, 191,834
of which are currently exercisable and the balance of which become
exercisable at the rate of 4,000 options per year. Also includes 960 shares
owned by Ms. Luby's husband, as to which Ms. Luby disclaims beneficial
ownership.
(5) Includes 40,900 shares issuable upon the exercise of stock options, 26,000
of which are currently exercisable and the balance of which become
exercisable at the rate of 6,500 options per year.
(6) All of these shares are issuable upon the exercise of stock options, 9,100
of which are currently exercisable and the balance of which become
exercisable at the rate of 4,900 options per year.
(7) Includes (a) 10,000 shares issuable upon the exercise of stock options, all
of which are currently exercisable and (b) 1,200 shares issuable upon
exercise of warrants to purchase Common Stock (the "Independent Director
Warrants"), all of which are currently exercisable.
(8) All of these shares are issuable upon the exercise of stock options, all of
which are currently exercisable.
(9) All of these shares are issuable upon the exercise of stock options, 3,000
of which are currently exercisable and the balance of which become
exercisable at the rate of 3,000 options per year.
(10)Based on information provided in 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.
(11)Based on information provided in Schedule 13D filed with the Securities and
Exchange Commission in February, 2000. Jack Silver has sole voting power
over 247,500 of the 275,000 shares.
<PAGE>
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, 1999, all Section 16 filing requirements were complied with by
the Company's officers, directors and greater than 10% stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP were the Company's independent public accountants for
the fiscal year ended October 31, 1999, and for more than five years prior to
fiscal 1999. Representatives of Arthur Andersen LLP are expected to be present
at the Annual Meeting 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 2001 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 10, 2000 for inclusion in the
Company's proxy statement and form of proxy relating to that meeting. Any
stockholder who intends to propose any other matter to be acted upon at the 2001
Annual Meeting of Stockholders must inform the Company no later than January 25,
2001. If notice is not provided by that date, the persons named in the Company's
proxy for the 2001 Annual Meeting of Stockholders will be allowed to exercise
their discretionary authority to vote upon any such proposal without the matter
having been discussed in the proxy statement for the 2001 Annual Meeting of
Stockholders.
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, 1999,
including financial statements, is being furnished to stockholders concurrently
with this Proxy Statement.
<PAGE>
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 10, 2000 By Order of the Board of Directors
Zvi D. Sprung, Secretary
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, individually, 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 12, 2000, 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 NOMINEE 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 person as director of the Company to serve for
the term 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:________________________________________,2000
----------------------------------------------
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
