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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
RENT-A-WRECK OF AMERICA, INC.
-----------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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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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3) Filing Party:
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4) Date Filed:
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** REVISED NOTICE OF ANNUAL MEETING **
** PLEASE DISREGARD NOTICE ON PAGE 1
OF ENCLOSED PROXY STATEMENT **
RENT-A-WRECK OF AMERICA, INC.
11460 CRONRIDGE DRIVE, SUITE 118
OWINGS MILLS, MARYLAND 21117
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 18, 1995
---------------------------------
TO THE STOCKHOLDERS:
Due to hurricane damage affecting the originally-scheduled
location of the 1995 Annual Meeting in St. Thomas, U.S. Virgin Islands, the
meeting location has been changed. Please disregard the Notice of Annual
Meeting on page 1 of the enclosed Proxy Statement.
The Annual Meeting of Stockholders of Rent-A-Wreck of America,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday, October
18, 1995 at 8:00 a.m. local time, at the Melia Cancun Beach & Spa Resort,
Blvd. Kukulcan Km 16.5, Zona Hotelera, 77500 Cancun, Q. R. Mexico for the
following purposes:
1. To elect directors for the ensuing year and until their successors
are elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on September
8, 1995 are entitled to receive notice of and to vote at the Annual Meeting.
This Notice and Proxy Statement is being mailed on or about
October 2, 1995.
All stockholders are cordially invited to attend the Annual
Meeting in person.
Sincerely,
KENNETH L. BLUM, SR.
Chairman and Chief Executive Officer
Owings Mills, Maryland
September 28, 1995
- - --------------------------------------------------------------------------------
Please complete, date and sign the enclosed proxy and mail it promptly in the
enclosed envelope to assure representation of your shares, whether or not you
expect to attend the Annual Meeting. If you attend the Annual Meeting, you may
revoke the proxy and vote your shares in person.
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RENT-A-WRECK OF AMERICA, INC.
11460 CRONRIDGE DRIVE, SUITE 118
OWINGS MILLS, MARYLAND 21117
---------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 18, 1995
---------------------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Rent-A-Wreck of America,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday, October
18, 1995 at 8:00 a.m. local time, at the Wyndham Sugar Bay Resort, 6500 Estate,
Smith Bay, St. Thomas, U.S.V.I 00802 for the following purposes:
1. To elect directors for the ensuing year and until their successors
are elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on September
8, 1995 are entitled to receive notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual
Meeting in person.
Sincerely,
KENNETH L. BLUM, SR.
Chairman and Chief Executive Officer
Owings Mills, Maryland
September 8, 1995
- - --------------------------------------------------------------------------------
Please complete, date and sign the enclosed proxy and mail it promptly in the
enclosed envelope to assure representation of your shares, whether or not you
expect to attend the Annual Meeting. If you attend the Annual Meeting, you may
revoke the proxy and vote your shares in person.
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RENT-A-WRECK OF AMERICA, INC.
11460 CRONRIDGE DRIVE, SUITE 118
OWINGS MILLS, MARYLAND 21117
---------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 18, 1995
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SOLICITATION, EXECUTION AND REVOCATION OF PROXIES
Proxies in the accompanying form are solicited on behalf, and at the
direction, of the Board of Directors of Rent-A-Wreck of America, Inc. (the
"Company"). All shares represented by properly executed proxies, unless such
proxies have previously been revoked, will be voted in accordance with the
direction on the proxies. If no direction is indicated, the shares will be voted
in favor of the proposals to be acted upon at the Annual Meeting. The Board of
Directors is not aware of any other matter which may come before the meeting. If
any other matters are properly presented at the meeting for action, including a
question of adjourning the meeting from time to time, the persons named in the
proxies and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
When stock is in the name of more than one person, the proxy is valid
if signed by any of such persons unless the Company receives written notice to
the contrary. If the stockholder is a corporation, the proxy should be signed in
the name of such corporation by an executive or other authorized officer. If
signed as attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the signer's full title should be given and, if not
previously furnished, a certificate or other evidence of appointment should be
furnished.
This Proxy Statement and the form of proxy which is enclosed are being
mailed to the Company's stockholders commencing on or about September 20, 1995.
A stockholder executing and returning a proxy has the power to revoke
it at any time before it is voted. A stockholder who wishes to revoke a proxy
can do so by executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of the Company prior to the vote at the Annual
Meeting, by written notice of revocation received by the Secretary prior to the
vote at the Annual Meeting or by appearing in person at the Annual Meeting,
filing a written notice of revocation and voting in person the shares to which
the proxy relates.
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In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the directors, officers and
regular employees of the Company. Such persons will receive no additional
compensation for such services. Arrangements will also be made with certain
brokerage firms and certain other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Common Stock
held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection therewith. All expenses incurred in connection with this
solicitation will be borne by the Company.
The mailing address of the principal corporate office of the Company
is 11460 Cronridge Drive, Suite 118, Owings Mills, Maryland 21117.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on September 8,
1995 (the "Record Date") will be entitled to vote at the meeting. On the Record
Date, the Company had outstanding 4,218,042 shares of Common Stock and 1,655,750
shares of Series A Convertible Preferred Stock ("Series A Preferred"), each of
which, except as noted below, entitles the record holder thereof on such date to
one vote on each matter presented at the meeting. As further described below,
the holders of Series A Preferred, voting as a class, have the right to elect up
to four directors of a seven-member board of directors. The proxy solicited by
this Proxy Statement relates only to the Company's Common Stock, and, because of
the Series A Preferred's right to vote as a class for the election of directors,
a proxy is solicited only for the election of directors nominated in Class I.
The presence of a majority of the Common Stock and a majority of the
Series A Preferred, in person or by proxy, is required to constitute a quorum
for the conduct of business at the Annual Meeting. The election of the two Class
I directors to be elected by the holders of Common Stock requires the
affirmative vote of a majority of the shares of Common Stock present in person
or by proxy at the Annual Meeting. Abstentions and broker non-votes are each
included in the determination of the number of shares present for quorum
purposes. Abstentions are counted in tabulations for the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of July 20, 1995, the persons and entities identified in the
following table, including all directors, executive officers and persons known
to the Company to own more than 5% of the Company's voting securities, owned
beneficially, within the meaning of Securities and Exchange Commission Rule
13d-3, the shares of voting securities reflected in such table. All the
outstanding shares of Preferred Stock are immediately convertible at the option
of the holder
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into Common Stock, on a share-for-share basis. Except as otherwise
specified, the named beneficial owner has sole investment and voting power with
respect to such shares.
Total
Name & Address Title of Shares Bene- % of % of
of Beneficial Owner Class ficially Owned Class Common
- - ------------------- -------- -------------- ----- ------
David Schwartz Common 888,700(1) 21.0 21.0
Bundy Rent-A-Wreck
12333 W. Pico Blvd.
Los Angeles, CA 90064
Cumberland Associates Common 151,200(2) 3.6 -
1114 Ave. of the Amer. Preferred(3) 96,250 5.8 5.7
New York, NY 10035
William L. Richter Common 1,014,748(4) 22.6 -
c/o Richter & Co., Inc. Preferred(3) 1,375,000(4) 83.1 40.6
950 Third Avenue
New York, NY 10022
Alan L. Aufzien Common 62,500(5) 1.5 -
P.O Box 2369 Preferred(3) 27,500 2.0 2.1
Secaucus, NJ 07094
Kenneth L. Blum, Sr.(6) - - - -
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117
Kenneth L. Blum, Jr.(6) Common 650,000 13.8 13.8
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117
Robin Cohn (7) Common 649,999 13.8 13.8
c/o Rent-A-Wreck of America, Inc.
11460 Cronridge Drive
Suite 120
Owings Mills, MD 21117
All Directors & Executive
Officers as a Group, Including Common 2,615,949 52.3 -
the Directors Named (1)(4)(5)(6)(7)
Above (5 Persons) Preferred(3) 1,375,000(4) 83.1 62.5
- - ----------------------------------
* Represents percentage ownership of Common Stock based upon shares of Common
Stock owned or deemed owned due to presently exercisable warrants and
options and after such person's conversion of Preferred Stock.
Footnotes
(1) Includes 10,000 shares issuable pursuant to options.
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(2) Cumberland Associates is a limited partnership organized under the laws of
the State of New York, and is engaged in the business of managing, on a
discretionary basis eleven securities accounts. K. Tucker Andersen, Richard
Reiss, Jr., Robert Bruce III, and Oscar S. Schafer are the general partners
(the "General Partners") of Cumberland Associates. The business address of
each of the General Partners is the same as that of Cumberland Associates.
By virtue of Rule 13d-3, each of the General Partners may be deemed the
beneficial owner of all of the shares of Common Stock owned by Cumberland
Associates. The foregoing information is based on a Schedule 13D dated
October 10, 1989, filed by Cumberland Associates, as supplemented by
additional information supplied to the Company by Cumberland Associates.
Cumberland Associates has no voting power with respect to any shares of
Common Stock.
(3) Holders of Preferred Stock, voting as a class, are entitled to elect up to
four members of a seven member Board of Directors and are also entitled to
vote as a class on other significant corporate actions. Pursuant to the
terms of a voting trust, Richter Investment Corp. ("RIC") holds a proxy to
vote 83.1% of the Preferred Stock. See note 4 below.
(4) Includes 550,000 shares of Preferred Stock and 275,000 shares of Common
Stock held by RIC and 84,375 shares of Common Stock and warrants to acquire
187,000 shares of Common Stock held by Richter & Co., Inc. ("RCI"). Also
includes 632,500 shares of Preferred Stock as to which RIC holds voting
authority via proxy (see note 3 above). Includes 46,600 shares of Common
Stock held in RCI's trading account. Mr. Richter has voting control of RIC,
and RIC holds 100% of the outstanding stock of RCI. Also includes 48,708
shares of Common Stock held by Richter Cohen & Co, Inc, as to which Mr.
Richter shares voting control. Also includes 117,334 shares of Common Stock
issuable upon exercise of options and warrants and 6,200 shares of Common
Stock and 13,750 shares of Preferred Stock held by family members.
(5) Includes 10,000 shares issuable pursuant to options. Does not include
holdings of RIC, although Mr. Aufzien is a minority shareholder in RIC.
(6) Mr. Blum, Sr. is the father of Kenneth L. Blum Jr. and Robin Cohn; see note
(7) below. Mr. Blum disclaims beneficial ownership of shares held by Mr.
Blum, Jr. and Ms. Cohn. See also "Certain Relationships and Related
Transactions."
(7) Includes 483,333 shares issuable pursuant to currently-exercisable options
and, in the case of Ms. Cohn, includes 166,666 shares held jointly with
spouse. See note (6) above. Mr. Blum, Jr. and Ms. Cohn disclaim beneficial
ownership of shares held by each other. For information regarding
additional options held by Mr. Blum, Jr. and Ms. Cohn which are not
currently exercisable (and thus not deemed beneficially owned for purposes
of the above table), see "Certain Transactions - Management Agreement with
K.A.B., Inc. and Related Transactions - Stock Option Grant."
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PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
Four persons have been nominated for election at the l995 Annual
Meeting as directors for terms expiring at the l996 Annual Meeting and until
their successors have been duly elected and qualified. Each of the nominees
currently is a director of the Company.
It is intended that votes will be cast pursuant to the enclosed proxy
for the election of each Class I nominee listed below, except for those proxies
which withhold such authority. If any of the nominees shall be unable or
unwilling to serve as a director, it is intended that the proxy will be voted
for the election of such other person or persons as the Company's management may
recommend in the place of such nominee. The management has no reason to believe
that any of the nominees will not be candidates or will be unable to serve.
All directors will hold office until the next Annual Meeting of
Stockholders and the election and qualification of their successors. Officers
are elected annually and serve at the pleasure of the Board of Directors.
Class I Directors:
The proxy will be voted as specified thereon and, in the absence of
contrary instruction, will be voted for the election of the following Class I
directors: Kenneth L. Blum, Sr. and David Schwartz. Such directors will serve
until the next annual meeting of stockholders and until their respective
successors are elected and qualified. Information with regard to the nominees is
set forth below:
KENNETH L. BLUM, SR., 69, Kenneth L. Blum, Sr. has served as Chairman
and a Director of the Company since June 1993 and was its President from June
1993 to October 1994. Mr. Blum co-founded United Healthcare, Inc., a Baltimore,
Maryland-based healthcare company in 1974 and served as its president and chief
executive officer until 1990. Since 1990, Mr. Blum has been a management
consultant to a variety of companies, including National Computer Services,
Inc., a computer service bureau; American Business Information Systems, Inc., a
high-volume laser printing company; and Mail-Rx, a mail-order prescription drug
company. Mr. Blum is a director of Avesis Incorporated, which markets and
administers discount benefit programs. Mr. Blum is the father of Kenneth L.
Blum, Jr. See "Certain Transactions."
DAVID S. SCHWARTZ, 60, has served as Vice-Chairman of the Board since
June 1993, and previously served as Co-Chairman of the Board since November
1989. Since January 1973, Mr. Schwartz has been the President of Bundy
Rent-A-Wreck Inc. -- the original Rent-A-Wreck location.
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Class II Directors:
As described further below, Richter Investment Corp. ("RIC"), acting
in its capacity as proxy holder pursuant to the Voting Agreement among certain
holders of Series A Preferred, the Company and RIC, has at the present time
agreed to a four member board of directors and has selected Messrs. William L.
Richter and Alan L. Aufzien (The "Class II Directors"), as the nominees to the
board of the Series A Preferred. By virtue of this proxy and the Series A
Preferred owned and/or controlled by its affiliates, RIC will vote 83.1% of the
outstanding Series A Preferred. RIC has indicated its intent to vote its proxy
in favor of such Class II nominees, thus ensuring their election. These nominees
have been approved by the Company's board of directors.
WILLIAM L. RICHTER, 52, has been a director of the Company since
November 1989 and has served previously as a director from 1983 to 1985. Mr.
Richter was Co-Chairman of the Company from November 1989 to June 1993 and has
been Vice Chairman since June 1993. Mr. Richter has been President of Richter
Investment Corp. and its wholly-owned subsidiary, Richter & Co., Inc., a
registered broker-dealer firm (or its predecessor organization) for the past
five years. Mr. Richter is a Director and Co-Chairman of Avesis Incorporated,
which markets and administers discount benefit programs.
ALAN L. AUFZIEN, 65, has served as a Director of the Company since
November 1989. Mr. Aufzien is Chairman and Chief Executive Officer of
Meadowlands Basketball Association (New Jersey Nets); director of First New
Jersey Real Estate Trust; former chairman of The RAL Corporation (a wholesale
distributor of plumbing and heating supplies); chairman of The Fairfield Group
(a real estate and business investment and development organization); chairman
of New York Harbour Associates (a real estate development firm); and treasurer
and a partner of CFC Venture Capital Company, (a private investment firm).
EXECUTIVE OFFICERS
Kenneth L. Blum, Jr., 31, has served as Secretary of the Company
since March 1994, as Vice President from May 1994 to October 1994, and as
President since October 1994. Mr. Blum is President and Chief Executive Officer
and the sole stockholder of National Health Enterprises, Inc., which provides
management and consulting services in the health care industry. Mr. Blum is also
President of National Computer Services, Inc., a computer service bureau; and
President of American Business Information Systems, Inc., a high-volume laser
printing company.
Management Services Agreement. Effective June 30, 1993, the Company
entered into a Management Agreement (the "Management Agreement") with K.A.B.,
Inc., a Florida corporation ("K.A.B.") pursuant to which K.A.B. agreed to manage
substantially all aspects of the Company's business, subject to certain
limitations and the direction of the Company's board of directors. See "Certain
Transactions."
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COMPLIANCE WITH SECTION 16(A) REPORTING REQUIREMENTS.
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose any failure to file by
these dates. All of these filing requirements were satisfied during the year
ended March 31, 1995, except that each of Kenneth L. Blum, Sr., a Director and
Chief Executive Officer of the Company, and Kenneth L. Blum, Jr., the Company's
President and Secretary, each filed one late report relating to one transaction,
and each of David S. Schwartz, a Director of the Company, and William L.
Richter, a Director of the Company filed two late reports relating to two
transactions. In making these disclosures, the Company has relied solely on
written representations of its directors and executive officers and copies of
the reports that they have filed with the Commission.
MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of two meetings
during the fiscal year ended March 31, 1995. During the fiscal year ended March
31, 1995, no director except David S. Schwartz attended fewer than 75% of the
aggregate of all meetings of the Board of Directors and the committees, if any,
upon which such director served. The Company has a Stock Option Committee but no
standing audit, nomination or compensation committee.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and related notes set forth information regarding the
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer for services rendered to the Company during the year ended March 31,
1994 and 1995. No other executive officer who was serving as an executive
officer during fiscal 1995 received salary and bonus which aggregated at least
$100,000 for services rendered to the Company during the year ended March 31,
1995.
Annual Compensation Long Term Compensation
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Awards Payouts
- - -----------------------------------------------------------------------------------------------------------------------------------
Other Annual Restricted All Other
Name and Compensation Stock Options/ LTIP Compensation
Principal Position Year Salary ($) Bonus ($) ($) Award(s)($) SARs (#) Payouts ($) ($)
- - ------------------ ---- ----------- --------- ------------ ----------- ------------ ----------- ------------
Kenneth L. Blum, 1995 $200,000(1) -- -- -- --(2) -- --
Sr., CEO 1994 $100,000(1) -- -- -- 2,250,000(2) -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
(1) Mr. Blum became Chief Executive Officer of the Company in connection with a
Management Agreement between the Company and K.A.B., Inc., a Florida
corporation ("K.A.B.") effective June 30, 1993. Mr. Blum does not receive
cash compensation directly from the Company. K.A.B. receives cash
compensation pursuant to the Management Agreement based on hours worked to
a maximum of $200,000 per year plus expense reimbursements. The amounts
indicated in the table represent compensation received by K.A.B. pursuant
to the Management Agreement. Mr. Blum is the sole stockholder of K.A.B. See
"Certain Relationships and Related Transactions - Management Agreement with
K.A.B., Inc. and Related Transactions - Management Agreement."
(2) During the year ended March 31, 1994, K.A.B. received options for the
purchase of 2,250,000 shares of the Company's Common Stock in connection
with the Management Agreement. During the year ended March 31, 1995, the
Board of Directors approved the vesting of 1,000,000 of these options at an
exercise price of $1 per share. Effective July 20, 1995 the exercise price
of the balance of the options was set by the Board of Directors at $1.15
per share, with vesting, subject to continued employment, on April 1, 1998,
or earlier subject to satisfaction of performance targets. Also effective
on that date, K.A.B. transferred the Options to certain transferees. See
"Certain Relationships and Related Transactions - Management Agreement with
K.A.B., Inc. and Related Transactions - Stock Option Grant."
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OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
The following table sets forth information about stock option grants during the
last fiscal year to the executive officers named in the Summary Compensation
Table.
Individual Grants
- - -----------------------------------------------------------------------------------------------------------------------
% of Total Option/SARs
Options/SARs Granted to Employees Exercise or Base
Name Granted (#) in Fiscal Year Price ($/Sh) Expiration Date
- - ---- ------------ ---------------------- ---------------- ---------------
Kenneth L. Blum, Sr. --(1) -- -- --
(1) See Note (2) to the Summary Compensation Table and "Certain Relationships
and Related Transactions - Management Agreement with K.A.B., Inc. and
Related Transactions - Stock Option Grant."
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE TABLE (1)
The following table sets forth information with respect to the executive officer
named in the Summary Compensation Table concerning the number and value of
options outstanding at the end of the last fiscal year. The executive officer
named in the Summary Compensation Table did not exercise any options during the
last fiscal year.
Number of Unexercised Value of Unexercised
Options/SARs at FY-End (#) in-the-Money Options/SARs
at FY-End ($)
-----------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- ------------- ----------- -------------
Kenneth L. Blum Sr. 1,000,000 1,250,000(1) $160,000 $0(1)
(1) As of March 31, 1995, these options were not exercisable and would become
exercisable at exercise prices ranging from $1.00 to $1.30 per share
contingent upon achievement of specified performance targets. Effective
July 20, 1995, the exercise price of these options was set at $1.15 per
share by action of the Board of Directors, with vesting, subject to
continued employment, on April 1, 1998, or earlier subject to satisfaction
of performance targets. See "Certain Relationships and Related Transactions
- Management Agreement with K.A.B., Inc. and Related Transactions - Stock
Option Grant." The value of the unexercised options which were not
exercisable at March 31, 1995 has been computed using an assumed exercise
price of $1.15 per share and the average of the closing bid and asked
prices of the Company's Common Stock on March 28, 1995, which was the last
date on which the Common Stock was traded during fiscal 1995.
EMPLOYMENT/CHANGE OF CONTROL ARRANGEMENTS
In the event of termination of the Management Agreement with K.A.B.
without cause, all options granted to K.A.B. in connection with the Management
Agreement remain outstanding for the balance of their five-year term. See
"Certain Relationships and Related Transactions -- Management Agreement with
K.A.B., Inc. and Related Transactions - Stock Option Grant."
COMPENSATION OF DIRECTORS
Currently, directors of the Company who also serve as officers of
the Company and outside directors receive no cash compensation in connection
with the services they render as directors. (Officers, however, receive
compensation in their capacity as officers as described above.) Directors are
reimbursed for expenses incurred in connection with their board service. In
addition, David Schwartz, a director of the Company, received $24,000 and $2,000
during the years ended March 31, 1994 and 1995, respectively, in consideration
of consulting services.
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CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS WITH K.A.B., INC. AND RELATED TRANSACTIONS
Management Agreement. Effective June 30, 1993, the Company entered
into a Management Agreement (the "Management Agreement") with K.A.B. pursuant to
which K.A.B. agreed to provide management consulting with respect to
substantially all aspects of the Company's business, subject to certain
limitations and the direction of the Company's board of directors. K.A.B. is
controlled by Kenneth L. Blum, Sr. who is Chairman and Chief Executive Officer
of the Company. The Management Agreement provides cash compensation based on
hours worked to a maximum of $200,000 per year, as well as options for the
purchase of up to 2,250,000 shares of the Company's Common Stock, as described
below. The Management Agreement has a term of five years. The Management
Agreement is terminable by the Company for cause, as defined.
The Management Agreement includes certain representations and
warranties and limitations on solicitation by K.A.B. of customers and employees
of the Company during the term of the Management Agreement and for two years
thereafter. The Management Agreement also requires that K.A.B. hold in
confidence the Company's confidential information. Mr. Blum, Sr., K.A.B. and
their affiliates are involved in various business ventures in addition to the
activities on behalf of the Company required by the Management Agreement.
Participation in such other ventures may detract from efforts on behalf of the
Company.
Stock Option Grant. Effective June 30, 1993, the Company issued
five-year options (the "Options") to K.A.B. for the purchase of up to 2,250,000
shares of the Company's Common Stock. The Options originally vested at prices
ranging from $1.00 to $1.30 contingent upon achievement of profitability and/or
stock price targets. Effective October 19, 1994, the Board of Directors approved
the vesting of 1,000,000 Options at an exercise price of $1.00 per share and
provided that the balance of the Options (an aggregate of 1,250,000 Options)
(the "Unvested Options") would vest at $1.30 on April 1, 1998 subject to
continued retention of K.A.B.'s services pursuant to the Management Agreement.
The Unvested Options also became exercisable on an accelerated basis pursuant to
the term of the original grant, as follows:
Number of Shares Alternative Vesting Event:
---------------- --------------------------
500,000 Completion of the first fiscal year in which the
Company has Profits of at least $750,000 or in
which the Stock Price is at least $4.00
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15
750,000 Completion of the first fiscal year in which the
Company has Profits of at least $1,000,000 or in
which the Stock Price is at least $5.00
"Profits" of the Company in any fiscal period shall mean the
Company's pretax operating profit during such period as determined
in accordance with generally accepted accounting principles ("GAAP")
based on the Company's books and records, and excluding any profit
or loss from financial transactions and any charge for compensation
expense relating to these stock options.
"Stock Price" means the average closing high bid price for the
Company's Common Stock as reported on NASDAQ (or, if applicable, the
NASD Bulletin Board or pink sheets) over any 30 consecutive calendar
days during the applicable fiscal year.
The exercise price of the Unvested Options would be $1.00, $1.15 and
$1.30 for options vesting pursuant to the above provisions with respect to
fiscal years ending March 31, 1996, 1997 and 1998, respectively. Effective July
20, 1995, the Board of Directors provided that the exercise price of the
Unvested Options would be $1.15 per share irrespective of the circumstances
under which the Options vest. The actions of the Board of Directors were
predicated upon the Board's view of the Company's performance relative to the
original vesting criteria and other relevant considerations.
Options remain exercisable throughout their five-year term, except
that exercisable Options terminate 120 days after termination of the Management
Agreement by the Company for cause.
The Options are transferable without the Company's consent only to
employees or affiliates of K.A.B. performing substantial services for or on
behalf of the Company or to employees of the Company, subject to compliance with
applicable law. Effective July 20, 1995, the Board of Directors approved the
transfer of 483,333 Options and 604,167 Unvested Options to each of Kenneth L.
Blum, Jr., the Company's President and Secretary; and Robin Cohn. Mr. Blum, Sr.
is the father of Mr. Blum, Jr. and Ms. Cohn. Also effective July 20, 1995, the
Board of Directors approved the transfer by K.A.B. of 33,334 Options and 41,666
Unvested Options to Richter & Co., Inc., a New York investment banking firm
("RCI"). A principal of RCI, William L. Richter, is a member (and Vice-Chairman
of) the Company's Board of Directors. In connection with Mr. Richter's
employment arrangements with RCI, RCI transferred 13,334 of these Options and
16,666 of these Unvested Options to Mr. Richter. See " -- Investment Banking
Services," below.
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Stock Purchase. Kenneth L. Blum, Jr. and Alan S. Cohn acquired
166,667 and 166,666 shares, respectively, of the Company's Common Stock (the
"Shares") on June 30, 1993 for consideration of $.75 per share. Mr. Blum, Sr. is
the father of Mr. Blum, Jr. and the father-in-law of Mr. Cohn.
Registration Rights Agreement. The Company entered into a
Registration Rights Agreement (the "Registration Rights Agreement") effective
June 30, 1993 with K.A.B., Mr. Blum, Jr. and Mr. Cohn. The Registration Rights
Agreement provides up to three demand registrations with respect to the Shares
and the shares issuable pursuant to the Options ("Registrable Securities"). The
first demand registration is exercisable at the request of holders of at least
250,000 Registrable Securities after a fiscal year in which Profits are at least
$250,000, provided that the Stock Price is at least $2.00 at the time of the
request. The second demand registration is exercisable at the request of holders
of at least 600,000 Registrable Securities after at least 1,000,000 Options have
become exercisable. The third demand registration is exercisable at the request
of holders of at least 1,000,000 Registrable Securities after all of the Options
have become exercisable. Holders of the Company's Series A Preferred Stock have
the right to participate in the above demand registrations on a pro rata basis.
The Registration Rights Agreement also provides piggyback registration rights
with respect to registrations in which other selling stockholders are
participating. The Company is obligated to pay the offering expenses of each
such registration, except for the selling stockholders' pro rata portion of
underwriting discounts and commissions. No precise prediction can be made of the
effect, if any, that the availability of shares pursuant to registrations under
the Registration Rights Agreement will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of the Common Stock
pursuant to such registrations could adversely affect prevailing market prices.
Franchise Agreement. Effective June 30, 1993, K.A.B., Inc. acquired
a Company franchise for the Towson, Maryland area.
Investment Banking Services The Management Agreement and related
transactions with K.A.B. were structured and negotiated for the Company by RCI,
which received cash consideration of $15,000 and five-year warrants (the
"Warrants") to acquire (i) 20,000 shares of the Company's Common Stock currently
exercisable at $.80 per share; and (ii) 135,000 shares of the Company's Common
Stock exercisable on the same basis as is applicable to the Options, as
described above. RCI is also entitled to receive a commission equal to 6% of the
cash received by the Company upon any exercises of the Options. The shares of
Common Stock issuable pursuant to the Warrants are entitled to piggyback
registration rights with respect to any registration in which the Shares or the
Common Stock issuable pursuant to the Options are included. RCI has assigned
warrants for the purchase of 62,000 shares of the Company's Common Stock to Mr.
Richter out of the Warrants. Mr. Richter and his firm have provided and expect
to continue to provide substantial investment banking services for Mr. Blum and
various of his affiliated entities. To that extent, RCI may be deemed to have
had a conflict of interest with respect to its efforts on behalf of the Company
in effecting the Management Agreement and related agreements with K.A.B. The
Company's Board of Directors took into account the
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17
potential conflict of interest issues referred to above in structuring and
entering into the investment banking agreement with RCI and believes that such
agreement was desirable and in the best interests of the Company notwithstanding
such possibility.
As a result of actions taken by the Board of Directors on October
19, 1994 and July 15, 1995, the 135,000 Warrants referred to in the preceding
paragraph have the following terms: 24,000 Warrants held by Mr. Richter and
36,000 Warrants held by RCI are vested with an exercise price of $1.00 per
share; and 30,000 Warrants held by Mr. Richter and 45,000 Warrants held by RCI
have an exercise price of $1.15 per share and vest subject to the same criteria
applicable to the Unvested Options. See "-- Stock Option Grants" above.
OTHER
Financing Agreement. As of August 31, 1993, the Company entered into
a Commercial Installment Sales and Financing Agreement with K.A.B. The agreement
permits the Company to offer vehicle financing to franchisees. The Company
executed a Master Note in favor of K.A.B. in the amount of $200,000, but is only
obligated to repay amounts outstanding on vehicles purchased. Advances from
K.A.B. bear interest at 12% per annum. Pursuant to a separate Sales Commission
Agreement, the Company is also obligated to pay K.A.B. a 2% per annum commission
on the unpaid balance of advances made to the Company under the financing
agreement. As of March 31, 1994, the Company owed $146,414 to K.A.B., all of
which has since been paid. During the year ended March 31, 1994, the Company
recognized interest and commission expense to K.A.B. of $7,542 and $1,256,
respectively. The agreements described in this paragraph have been terminated.
Lease. As of October, 1993, the Company relocated its corporate
offices to Owings Mills, Maryland. The Company has entered into a month-to-month
lease with K.A.B., Inc. to lease approximately 2,700 square feet. For this space
the Company is currently paying $2,660 per month to K.A.B., Inc.
During fiscal 1994, the Company issued 500,000 shares of Common
Stock through RCI in transactions exempt from registration under the Securities
Act of 1993, as amended, yielding net proceeds of approximately $354,328. RCI
received cash compensation in an amount equal to approximately 6% of the gross
proceeds of the transactions plus five-year warrants for 30,000 shares of Common
Stock exercisable at $.80 per share. RCI has assigned 12,000 of such warrants to
William L. Richter.
Effective December 31, 1992, the Company entered into an agreement
with David Schwartz to convert a portion of a note payable to him by the Company
to common stock. The Company issued 133,333 shares of common stock to Mr.
Schwartz in exchange for cancellation of $100,000 of the note, and granted Mr.
Schwartz an option to convert the remaining portion of the note into common
stock at $.75 per share. In June 1994, the Company retired the note via a
payment of $127,943, representing the entire unpaid principal balance.
- 15 -
18
Effective January 1, 1995, the Company entered into a five-year
agreement with National Computer Services, Inc. ("NCS") to develop computer
software and related documentation. During the year ended March 31, 1995, NCS
received $30,919 pursuant to this agreement. Kenneth L. Blum, Jr. is the sole
stockholder and an executive officer of NCS.
Effective March 20, 1995, the Company retained RCI as its exclusive
financial advisor and placement agent. RCI's fees under this arrangement are
payable only upon completion of defined transactions and, in such event, are
calculated upon the basis of a percentage of the transaction value. The
agreement is terminable by the Company upon 90 days notice, provided that RCI is
entitled to receive certain fees for two years following termination in the
event a transaction is concluded involving an entity introduced to the Company
by RCI.
RCI provides substantial ongoing financial management and other
services to the Company at no charge. In the opinion of management, the terms of
the Company's arrangements with RCI, K.A.B. and NCS taken as a whole are at
least as favorable to the Company as could be obtained from third parties.
INDEPENDENT AUDITORS
Arthur Andersen LLP, which has audited the Company's financial
statements for fiscal 1995, has audited the Company's financial statements
annually since 1991. Its representatives are not expected to be present at the
Annual Meeting. The Company has not yet finalized its selection of auditors for
the year ending March 31, 1996.
OTHER MATTERS
The Company is unaware of any other matters that are to be presented
for action at the meeting. Should any other matter come before the meeting,
however, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies with respect to such matter in accordance with
their judgment.
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REPORT ON FORM 10-KSB
Upon written request directed to Kenneth L. Blum, Jr., Secretary,
Rent-A-Wreck of America, Inc., 11460 Cronridge Drive, Suite 118, Owings Mills,
Maryland 21117, the Company will furnish without charge to stockholders of
record on the Record Date a copy of the Company's Report on Form 10-KSB for the
year ended March 31, 1995 (the "Form 10-KSB").
FINANCIAL INFORMATION
Enclosed with this Proxy Statement are the Company's 1995 Annual
Report to Stockholders and Annex I thereto, which includes the "Management's
Discussion and Analysis" and the Company's audited financial statements in the
form such items were included in the Company's Form 10-KSB.
STOCKHOLDER PROPOSALS
Proposals intended to be presented at the 1996 Annual Meeting of
Stockholders must be received by the Company by May 22, 1996 to be considered
for inclusion in the Company's proxy materials relating to that meeting.
RENT-A-WRECK OF AMERICA, INC.
KENNETH L. BLUM, SR.
September 8, 1995 Chairman and Chief Executive Officer
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20
RENT-A-WRECK OF AMERICA, INC.
11460 CRONRIDGE DRIVE, SUITE 118
OWINGS MILLS, MARYLAND 21117
---------------------------------
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
---------------------------------
The undersigned hereby appoints Kenneth L. Blum, Sr. and Kenneth L.
Blum, Jr., as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Common Stock of Rent-A-Wreck of America, Inc., a Delaware corporation
(the "Company") held on record by the undersigned on September 8, 1995, at the
Annual Meeting of Stockholders to be held on October 18, 1995, and at any
adjournment thereof.
1. ELECTION OF CLASS I DIRECTORS
Kenneth L. Blum, Sr. David S. Schwartz
/ / VOTE FOR all nominees listed, except as indicated to the contrary
below (if any). (Instructions: To withhold your vote for any
individual nominee, write the nominee's name in the space below.)
/ / WITHHOLD AUTHORITY to vote for all nominees.
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2. In their discretion, to vote upon such other business as may properly
come before the Annual Meeting or any adjournment.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED
FOR THE ABOVE NOMINEES.
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21
Please sign exactly as name appears on your stock certificates. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please give full corporate name and indicate that execution is by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: , 1995.
-------------------
Stockholder Name(s): (Print)
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Signature
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Signature if held jointly
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