AUTOINFO, INC.
1600 Route 208
Fair Lawn, New Jersey 07410
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
------------------------
To the Stockholders of
AutoInfo, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
AutoInfo, Inc. (the "Company") will be held at the executive offices of the
Company, 1600 Route 208, Fair Lawn, New Jersey 07410 on May 22, 1997 at 9:00
a.m., Daylight Savings Time, for the following purposes:
1. To elect a board of six directors.
2. To approve the Company's 1997 Stock Option Plan.
3. To approve the Company's 1997 Non-Employee Directors'
Stock Option Plan.
4. To consider and take action upon such other matters as may
properly come before the meeting or any adjournments thereof.
The close of business on April 18, 1997 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting. Whether
or not you expect to attend, you are requested to sign, date and return the
enclosed proxy promptly. Stockholders who execute proxies retain the right to
revoke them at any time prior to the voting thereof. A return envelope which
requires no postage if mailed in the United States in enclosed for your
convenience.
By Order of the Board of Directors
William Wunderlich, Secretary
Dated: April 22, 1997
AUTOINFO, INC.
1600 Route 208
Fair Lawn, New Jersey 07410
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of AutoInfo, Inc. (the "Company") of proxies in the
form enclosed for the Annual Meeting of Stockholders to be held at the executive
offices of the Company, 1600 Route 208, Fair Lawn, New Jersey 07410 on May 22,
1997 at 9:00 a.m., Daylight Savings Time, and for any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. The Board of Directors knows of no other
business which will come before the meeting.
All shares represented by each properly executed unrevoked proxy
received in time for the meeting will be voted as specified. In the absence of
any specification, proxies will be voted for the election of the six persons
listed herein as nominees as directors, for the approval of the 1997 Stock
Option Plan and 1997 Non-Employee Directors' Stock Option Plan and in the
judgment of the Board of Directors on any other matters which may properly come
before the meeting. Any stockholder giving a proxy has the power to revoke the
same at any time fore it is voted and a prior proxy is automatically revoked by
a stockholder giving a subsequent proxy or attending and voting at the meeting.
The approximate date on which this Proxy Statement and the
accompanying form of proxy will be mailed to the Company's stockholders is April
22, 1997. The Company's 1996 Annual Report, including financial statements, is
being mailed to stockholders along with this Statement, but should not be
regarded as proxy soliciting material. The principal executive offices of the
Company are located at 1600 Route 208, Fair Lawn, New Jersey 07410.
VOTING SECURITIES
Only stockholders of record at the close of business on April 18, 1997
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. On the record date there were issued and outstanding 8,018,752 Common
Shares. Each outstanding Common Share is entitled to one vote upon all matters
to be acted upon at the meeting. The affirmative vote of holders of a plurality
of the shares of Common Stock present or represented at the Annual Meeting is
required for the election of directors. The affirmative vote of holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting is required for the approval of the 1997 Stock Option Plan and the 1997
Non-Employee Directors' Option Plan.
2
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table, together with the accompanying footnotes, sets
forth information, as of April 1, 1997, regarding stock ownership of all persons
known by the Company to own beneficially 5% or more of the Company's outstanding
Common Stock, all directors and nominees, and all directors and officers of the
Company as a group.
Name of Shares of Common Stock Percentage
Beneficial Owner Beneficially Owned(1) of Ownership
- ---------------- --------------------- ------------
(i) Directors
Jason Bacher 353,272(2) 4.2%(6)
Robert Fagenson 30,750(3) (6)*
Andrew Gaspar 108,333(4) 1.3%(6)*
Howard Nusbaum 146,154 1.7%
Jerome Stengel 30,000 *
Scott Zecher 418,412(5) 5.0%(6)
All executive officers 1,198,588(7) 14.3%(7)
and directors as a group
(7 persons)
(ii) 5% Stockholders
Ashford Capital Management, Inc.(8)
P.O. Box 4172
Greenville, Delaware 19807 403,200 5.0%
Dimensional Fund
Advisors, Inc.(8)
1299 Ocean Avenue
Santa Monica, CA 90401 454,513 5.7%
Irving B. Harris(8)
2 North LaSalle Street
Suite 505
Chicago, IL 60602 474,000 5.9%
Ryback Management Corporation(8)
7711 Corondelet Avenue
St. Louis, Missouri 63105 900,850 11.2%
Steel Partners II L.P.(8)
750 Lexington Avenue
New York, New York 10022 1,133,500 14.1
- ----------
* Less than 1%
(1) Unless otherwise indicated below, each director, executive officer and each
5% stockholder has sole voting and investment power with respect to all
shares beneficially owned.
(2) Includes 75,000 shares subject to currently exercisable options.
(3) Includes (i) 1,500 shares owned by the Fagenson & Co. Profit Sharing Plan
and Employee Pension Plan, of which Mr. Fagenson is a trustee, and (ii)
29,250 shares issuable upon exercise of a Common Stock purchase warrant
held by Mr. Fagenson which is currently exercisable.
(4) Includes 33,333 shares subject to currently exercisable options.
(5) Includes 86,666 shares subject to currently exercisable options or
warrants. Mr. Zecher's address is c/o AutoInfo, Inc., 1600 Route 209, Fair
Lawn, New Jersey 07410.
(6) Assumes that all currently exercisable options or warrants owned by this
individual have been exercised.
(7) Assumes that all currently exercisable options or warrants owned by members
of the group have been exercised.
(8) Information with respect to this stockholder has been derived from the
Schedule 13D or Schedule 13G filed by such stockholder with the Securities
and Exchange Commission.
3
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent 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
("SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that all Section 16(a) filing requirements applicable to its officers
and directors were complied with except as follows: Howard Nusbaum, one report
regarding one transaction.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Summary Compensation Table below includes, for the Year-Ended
December 31, 1996, the seven months ended December 31, 1995 and the fiscal
Year-Ended May 31, 1995 individual compensation for services to the Company and
its subsidiaries paid to: (1) the Chief Executive Officer; and (2) the other
most highly paid executive officers of the Company in Fiscal 1996 whose salary
and bonus exceeded $100,000 (together, the "Named Executives").
Long-Term All
Annual Compensation Compensation Other
Name and Principal Position Year Salary Bonus Options Compensation(2)
- --------------------------- ---- ------ ----- ------- ---------------
Scott Zecher 1996 $150,000 $100,000 - $4,500
President and 1995(1) $ 87,500 $ 50,000 - $2,625
Chief Executive Officer 1995 $145,000 $235,000(3) 80,000 $4,230
William Wunderlich 1996 $120,000 $ 30,000 - $4,500
Treasurer and Chief 1995(1) $ 70,000 $ 15,000 - $1,320
Financial Officer 1995 $103,333 $ 80,000(3) 40,000 $5,500
- ----------
(1) Represents the seven month period ended December 31, 1995.
(2) Represents amounts contributed to the Company's 401(k) deferred
compensation plan.
(3) Includes a one-time bonus relating to the ADP transaction in the amount of
$150,000 to Scott Zecher and $50,000 to William Wunderlich.
4
Employment Agreements
Messrs. Zecher and Wunderlich are employed by the Company pursuant to
employment agreements which expire in April 1998 and April 1997, respectively.
These agreements provide for minimum annual compensation of $150,000 and
$120,000, respectively, and provide for annual review by the Board of Directors.
The Company has entered into supplemental employment agreements (the
"Supplemental Employment Agreements") with Messrs. Zecher and Wunderlich (the
"Covered Executives"), which provide that if there is a Change in Control of the
Company (as defined therein) during the Protected Period (described below), the
terms of the Supplemental Employment Agreements will supersede the Covered
Executives' existing employment agreements and will govern the terms of the
Covered Executives' employment following the Change in Control for a three-year
term, in the case of Mr. Zecher, and a two-year term, in the case of Mr.
Wunderlich (the "Employment Term"). For these purposes, the Protected Period is
a three-year period which commenced on April 10, 1995 and is automatically
extended for one year on and each April 10 thereafter, unless the Company
otherwise notifies the Covered Executive at least 90 days prior thereto. The
Supplemental Employment Agreements provide that during the Employment Term the
Covered Executives will remain employed in their capacities with the Company as
of the Change in Control and will continue to receive an annual salary (the
"Base Salary") and benefits at least equal to that which they received prior to
the Change in Control and an annual bonus at least equal to the Covered
Executive's average annual bonus during the three years prior to the Change in
Control. The Supplemental Employment Agreements provide that if, during the
Employment Term, the Covered Executive's employment is terminated by the Company
other than for Cause or Disability or by the Executive either for Good Reason or
during the 60-day Window Period commencing on the anniversary of the Change in
Control (as each of the foregoing terms are defined in the applicable
Supplemental Employment Agreement), the Covered Executive would receive a
severance payment equal to the sum of his Base Salary and the higher of his
annual bonus for the then most recent year or his average annual bonus during
the three years preceding the Change in Control (the "Highest Annual Bonus")
multiplied by two, in the case of Mr. Zecher, and one and one-half, in the case
of Mr. Wunderlich. In addition, the restrictions on any stock-related incentive
awards held by the Covered Executive would lapse and he would be entitled to
continued coverage under the Company's life, health and disability benefits for
two years following termination of his employment (three years in the case of
Mr. Zecher) or until he receives similar benefits from a new employer. Mr.
Zecher's Supplemental Employment Agreement also provides that if he is subject
to excise taxes under Section 4999 of the Internal Revenue Code on any payments
or benefits triggered by a Change in Control, he will be entitled to receive an
additional amount such that after the payment of all applicable taxes he will
retain an amount equal to that which he would have retained absent the excise
taxes. In connection with the Supplemental Employment Agreements, the Company
also approved the creation and funding of an Employee Protection Trust, which is
a form of grantor trust under which the assets of the trust remain subject to
the satisfaction of the general claims of the Company's creditors, to provide
for the payment of all benefits payable under the Supplemental Employment
Agreements.
The Supplemental Employment Agreements were entered into on April 10,
1995, after Steel Partners II LP acquired 14.9% of the Company's Common Stock.
In the opinion of the Board, it was necessary and desirable to enter into the
Supplemental Employment Agreements and to implement the Employee Protection
Trust so that the Covered Executives would concentrate on performing their
duties and promoting the best interests of the Company and its stockholders
without being concerned about the possibility of a Change in Control. In the
opinion of the Board of Directors, the provisions of the Supplemental Employment
Agreements
5
and the Employee Protection Trust would not have any significant impact on the
decision of any person or entity relating to whether or not to acquire the
Company or effect a Change in Control although a person or entity interested in
acquiring, or effecting a Change in Control, of the Company may view the
provisions of the Supplemental Employment Agreement and the funding of the
Employee Protection Trust as making it more difficult to consummate an
acquisition, or effect a Change in Control, of the Company. In addition, in the
opinion of the Board of Directors, entering into the Supplemental Employment
Agreements and implementing the Employee Protection Trust and the funding
thereof would not have an adverse impact on the Company's ability to execute its
business strategy in pursuing value for the benefit of all stockholders.
401(k) Cash or Deferred Compensation
The Company maintains a tax-qualified 401(k) cash or deferred
compensation plan that covers all employees who have completed 30 days of
service with the Company and have attained age 21. Participants are permitted,
within the limitations imposed by the Internal Revenue Code, to make pre-tax
contributions to the plan pursuant to salary reduction agreements. The Company
makes a 50% matching cash contribution on up to a 6% contribution by the
employee. In addition, the Company may, in its discretion, make additional
contributions as permitted by the Internal Revenue Code. The contributions of
the participants and the Company are held in separate accounts. Participants'
contributions are always fully vested. The Company's contributions vest
proportionally over a five year period commencing on the employee's date of
employment.
Stock Option Plans
In February 1986, the Company's stockholders approved the AutoInfo
1985 Stock Option Plan (the "1985 Plan") which provides that a total of 555,000
shares of Common Stock are subject to options granted thereunder. In November
1986, the Company's stockholders approved the AutoInfo 1986 Stock Option Plan
(the "1986 Plan") which provides that a total of 637,500 shares of Common Stock
are subject to options granted thereunder. In October 1989, the Company's
stockholders approved the AutoInfo 1989 Stock Plan (the "1989 Plan") which
provides that a total of 300,000 shares of Common Stock are subject to options
granted thereunder. In November 1992, the Company's stockholders approved the
AutoInfo 1992 Stock Option Plan (the "1992 Plan") which provides that a total of
350,000 shares of Common Stock are subject to options granted thereunder. (The
1985 Plan, 1986 Plan, 1989 Plan and 1992 Plan are sometimes referred to herein
as the "Option Plans".)
Under the Option Plans, the Company may grant options to purchase
Common Stock to its officers, key employees, directors, and, in the case of the
1985 and 1992 Plans, to non-employees performing services for the Company.
Payment of the option exercise price is to be made (i) in cash, (ii) by delivery
of Common Stock already owned by and in the possession of the option holder, or
(iii) if so provided for in the option being exercised, by delivery of the
option holder's promissory note in favor of the Company. If an option granted
under an Option Plan expires, terminates or is canceled without being exercised
in full, the unpurchased shares subject to such options will again be available
for options to be granted under such Plan. Options may be granted in the form of
incentive stock options ("Incentive Option") or options which do not qualify for
the favorable tax treatment of Incentive Options which are known as
non-qualified options.
6
The Option Plans are administered by a committee of the Board of
Directors consisting of Messrs. Fagenson, Gaspar and Stengel who are ineligible
to participate in the Plans.
No options may be exercised more than ten years from the date of
grant, and no options may be granted after December 31, 1999 and December 31,
2002 under the 1989 Plan, and 1992 Plan, respectively. No further options may be
issued under the 1985 Plan and 1986 Plan.
The option price of each Incentive Option granted under the Option
Plans shall be not less than 100% of the fair market value of the Common Stock
as of the date the option is granted (110% of the fair market value if the grant
is to an employee holding 10% or more of the Company's outstanding Common
Stock). Options other than Incentive Options may be granted at an exercise price
as determined by the Board. The exercise prices of such non-qualified options
must be at least 85% of the fair market value of the underlying shares of Common
Stock at the date of grant. Options granted are not transferable and are subject
to various other conditions and restrictions. All Incentive Options granted
before December 31, 1986 must be exercised in the order in which they were
granted regardless of the differences in the exercise prices.
Option Grants during the Year-Ended December 31, 1996
During the Year-Ended December 31, 1996, no options were granted to
the Named Executives. The Board of Directors has proposed that the Company issue
to each of Scott Zecher and William Wunderlich performance-based options under
the 1997 Stock Option Plan being considered at the 1997 Annual Meeting of
Stockholders (see, Proposal No. 2).
Aggregate Year-End Option Values
Shown below is information with respect to unexercised options granted
in prior years under the Option Plans to the Named Executives and held by them
at December 31, 1996. No options were executed by Named Executives during 1996.
Number of Unexercised Options at Values of Unexercised In-the-Money Options
Name 12/31/96 at 12/31/96(1)
- ---- -------- --------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
Scott Zecher 86,666/26,667 $8,333/$0
William Wunderlich 111,667/13,333 $31,250/$0
- ----------
(1) Based on the closing price as quoted on NASDAQ/NMS on December 31, 1996.
Director Compensation
The Company pays a Directors fee of $750 for each meeting attended by
a non-employee director.
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 28, 1995 the Company entered into a Promissory Note and
Security and Pledge Agreement with Scott Zecher, its President, Chief Operating
Officer and a Director, pursuant to which the Company lent to Mr. Zecher,
consistent with the Company's past practice, the sum of $466,796.64, in
connection with Mr. Zecher's exercise of options to acquire 216,799 shares of
the Company's Common Stock (the "Shares") under the Company's 1985 and 1986
Stock Option Plans. The Note, which is non-interest bearing, is secured by the
Shares and is payable on the earlier of May 31, 1998 or out of proceeds of the
underlying collateral. As a result of such exercise, the percentage of
outstanding shares of Common Stock owned by executive officers and directors of
the Company at the time of such exercise increased from approximately 8.7% to
approximately 11.5%. This increase may discourage a party from instituting a
take-over attempt with regard to the Company. The purpose of the Company
granting an interest free loan for the purpose of exercising in-the money stock
options is the same as the purpose of the Company for granting stock options to
key employees and officers; namely, to encourage such key employees and officers
to acquire an increased personal interest in the success and progress of the
Company. The granting of the stock options provides the key employee or officer
with the potential to benefit from the success and growth of the Company and the
interest free loan enables such key employee or officer to actually realize the
benefit when the stock option becomes in-the-money.
On June 22, 1995, the Company entered into a Settlement Agreement with
Ryback Management Corporation ("Ryback"), Eric C. Ryback and Lawrence Callahan
(the "Agreement"; Ryback together with Eric C. Ryback and Lawrence Callahan,
collectively, the "Ryback Parties"). As more fully described below, the
Settlement provides that, for a period of five (5) years, Ryback, the holder of
approximately 14.8% of the Company's outstanding shares at the time the
Agreement was entered into, will vote such shares on all matters in accordance
with the recommendation of the Company's Board of Directors (the "Board"),
unless, as a result of the recommendation, the Board's "outside directors" (as
such term is hereinafter defined) would not continue to constitute a majority,
in which case, the shares would be voted in the same proportion as the vote of
other stockholders. The Agreement also provided for the dismissal of the
Company's litigation against the Ryback Parties and for mutual releases from the
Company to the Ryback Parties and from the Ryback Parties to the Company.
Pursuant to the Agreement, Ryback agreed that during the term of the
Agreement, unless specifically requested in writing in advance by the Board,
Ryback will not, and will cause its affiliates and associates (as such terms are
used within Rule 126-2 (as such rule is currently in effect) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) not to, alone
or in concert with others (and neither Ryback nor any affiliate or associate of
Ryback will advise, assist or encourage others to), directly or indirectly: (i)
by purchase or otherwise, acquire, or agree to acquire, ownership (including,
but not limited to, beneficial ownership) of any shares of Common Stock of the
Company (the "Common Stock"), including securities convertible into Common
Stock, or direct or indirect rights or options to acquire such ownership; (ii)
make any public announcement with respect to, or submit any proposal for, the
acquisition of beneficial ownership of Common Stock (or securities convertible
into Common Stock or direct or indirect rights or options to acquire such
beneficial ownership), or for or with respect to any extraordinary transaction
or merger, consolidation, sale of substantial assets or business combination
involving the Company or any of its affiliates, (iii) make, or in any way
participate in, any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act (the "Exchange Act")) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange
8
Act) to vote, or seek to advise or influence any person or entity with respect
to the voting of, any voting securities of the Company or any of its affiliates;
(iv) form, join or in any way participate in a "group" (as such term is used in
Section 1 3d(3) of the Exchange Act) to take any action otherwise prohibited by
the terms of the Agreement; (v) initiate or propose any stockholder proposals
for submission to a vote of stockholders, whether by action at a stockholder
meeting or by written consent, with respect to the Company or any of its
affiliates or propose any person for election to the Board of the Company or any
of its affiliates or propose the removal of any member of the Board of the
Company or any of its affiliates; (vi) otherwise seek to control the management
or policies of the Company or any of its affiliates, including, without
limitation, taking any action to seek to obtain representation on the Board of
the Company or any of its affiliates; (vii) institute, prosecute or pursue
against the Company (or any of its officers, directors, representatives,
trustees, employees, attorneys, advisors, agents, affiliates or associates) (a)
any claim with respect to any action hereafter duly approved the Board or (b)
any claim on behalf of a class of the Company's security holders; (viii)
disclose to any third party, or make any filing under the Exchange Act
(including, without limitation, under Section 13(d) thereof) disclosing, any
intention, plan or arrangement inconsistent with the foregoing; (ix) publicly
oppose any duly authorized Board action or recommendation; (x) initiate any
communication with any customer or supplier of the Company or any other person
which does or is contemplating doing business or entering into a transaction
with the Company with a view interfering or otherwise adversely affecting the
relationship between the Company and or the applicable customer, supplier or
other person; (xi) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing; or
(xii) request the Company (or its directors, officers, employees or agents) to
amend or waive any provision of the Agreement or otherwise seek any modification
to or waiver of any of the agreements or obligations of Ryback, or any of its
affiliates or associates, under the Agreement.
The Agreement also provides that during the term of the Agreement,
Ryback will not and will cause its associates and affiliates not to, transfer,
assign, pledge, sell, hypothecate or otherwise dispose (a "disposition") of any
capital stock of the Company owned by it, except if all of the following
conditions are satisfied with respect to such disposition: (i) the applicable
disposition together with all other dispositions for the account of Ryback and
its associates and affiliates during the one month period immediately preceding
the date of such disposition does not exceed one percent of the outstanding
Common Stock, as shown on the most recent applicable report or statement
published by the Company; (ii) such disposition shall be by means of a "broker's
transaction" within the meaning of rule 144(g) under the Securities Act of 1933,
as amended; and (iii) with respect to any such disposition, the seller shall
instruct its broker that such broker shall make due inquiry and shall not make
the disposition to any person (including any agent of such person) if Ryback
and/or its affiliates or associates or such broker knows, or has reason to
believe, that such person, together with such persons, affiliates and
associates, owns, collectively (with its associates and affiliates), or, will
own, collectively (with its associates and affiliates), upon consummation of the
disposition, 3% or more of the outstanding Common Stock as shown on the most
recent applicable report or statement published by the Company.
The Agreement also provides that during its term, with respect to each
matter submitted to the stockholders of the Company for a vote, whether at a
meeting or pursuant to any consent of stockholders, including, without
limitation, any matter submitted to the stockholders of the Company relating to
the election or removal of directors, Ryback agrees to, and agrees to cause its
affiliates and associates to, vote (whether by proxy or otherwise) all shares of
Common Stock owned by Ryback and/or any of its affiliates and associates in
accordance with the applicable duly authorized recommendation of the Board;
provided, however, that, with
9
respect to any recommendation relating to the election or removal of directors,
if, assuming such recommendation were adopted by the stockholders of the
Company, less than a majority of all directors constituting the Board would be
"outside directors" (as such term is hereinafter defined), Ryback and its
associates and affiliates shall vote their shares in the same proportion as the
votes of all other outstanding voting securities of the Company voting on such
applicable matter. As used in the Agreement, the term "outside directors" refer
to directors who are not also officers or employees of the Company.
Compensation Committee Interlocks and Insider Participation
During the Company's last fiscal year, Messrs. Bacher, Fagenson,
Gaspar and Stengel served on the Compensation Committee of the Board of
Directors. Other than in their capacities as directors of the Company, none of
Messrs. Fagenson, Gaspar or Stengel were employed by the Company during such
times.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
To the Board of Directors:
Compensation Policies Applicable To Executive Officers
The purpose of the Company's executive compensation program is to
attract, retain and motivate qualified executives to manage the business of the
Company so as to maximize profits and shareholder value. Executive compensation
in the aggregate is made up principally of the executive's annual base salary, a
bonus which may be awarded by the Company's Compensation Committee and awards of
Company stock or stock options under the Company's Stock Option Plans. The
Company's Compensation Committee annually considers and makes recommendations to
the Board of Directors as to executive compensation including changes in base
salary, bonuses and awards of Company stock or stock options.
Consistent with the above-noted purpose of the executive compensation
program, it is the policy of the Compensation Committee, in recommending the
aggregate annual compensation of executive officers of the Company, to consider
the overall performance of the Company, the performance of the division of the
Company for which the executive has responsibility and the individual
contribution and performance of the executive. The performance of the Company
and of the division for which the executive has responsibility are significant
factors in determining aggregate compensation although they are not necessarily
determinative. While shareholders' total return is important and is considered
by the Compensation Committee, it is subject to the vagaries of the public
market place and the Company's compensation program focuses on the Company's
strategic plans, corporate performance measures, and specific corporate goals
which should lead to a favorable stock price. The corporate performance measures
which the Compensation Committee considers include sales, earnings, return on
equity and comparisons of sales and earnings with prior years and with budgets.
The Compensation Committee does not rely on any fixed formulae or
specific numerical criteria in determining an executive's aggregate
compensation. It considers both corporate and personal performance criteria,
competitive compensation levels, the economic environment and changes in the
cost of living as well as the recommendations of management. The Compensation
Committee then exercises business judgment based on all of these criteria and
the purposes of the executive compensation program.
10
Compensation of the Chief Executive Officer
Mr. Zecher's base salary of $150,000 and bonus of $100,000 for 1996
was based principally on his rights under his employment agreement with the
Company. The Compensation Committee in determining Mr. Zecher's compensation
gave consideration to Mr. Zecher's efforts in guiding the Company's entrance
into the non-prime automobile finance market place, and believes that these
efforts will lead in future periods to enhanced performance and stockholder
value.
Section 162(m) of the Internal Revenue Code of 1996, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to the Company's chief executive officer and
four other most highly compensated executive officers, unless the compensation
is considered performance based. The compensation disclosed in this Proxy
Statement does not exceed the $1 million limit, and executive compensation for
1997 is also expected to qualify for deductibility. The Company currently
intends to structure the performance-based portion of its executive officers'
compensation to achieve maximum deductibility under Section 162(m) of the code
with minimal sacrifices in flexibility and corporate objective.
Respectfully submitted,
AutoInfo, Inc. Compensation Committee
(Jason Bacher, Andrew Gaspar, Robert
Fagenson and Jerome Stengel)
11
TOTAL RETURN COMPARISON
The following graph sets forth a five-year comparison of total returns
for: (1) the Company; and (2) THE NASDAQ - US CRSP Total Return Index.
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
12/91 12/92 12/93 12/94 12/95 12/96
---------------------------------------------
AUTOINFO AUTOINFO, Inc. 100 122 107 64 83 89
- -------- NASDAQ 100 116 134 131 185 227
12/91 4.089
12/92 5.000
12/93 4.375
12/94 2.625
12/95 3.375
12/96 3.625
NASDAQ
- ------
12/91 187.203
12/92 217.864
12/93 250.093
12/94 244.462
12/95 345.715
12/96 425.258
In December 1995, the Company entered the non-prime automobile finance
industry. Accordingly, a comparison of total returns for the one-year period
ended December 31, 1996 is presented for: (1) the Company; (2) a Company
selected Peer Group (comprised of Aegis Consumer Funding Corp., Consumer
Portfolio Services, Eagle Finance Corp., First Merchants Acceptance, General
Acceptance Corp., MS Financial Inc., NAL Financial Group, Inc., TFC Enterprises
Inc.); and (3) The NASDAQ - US CRSP Financial Stock Index.
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
12/95 12/96
---------------------
AUTOINFO AUTOINFO,Inc. 100 107
- -------- NASDAQ 100 128
12/95 3.375 PEER GROUP 100 60
12/96 3.625
NASDAQ
- ------
12/95 362.816
12/96 465.167
PEER GROUP PEER GROUP 12/95 12/96
- ---------- -----------------------------------------------------
12/95 10.507 1) AEGIS CONSUMER FUNDING CORP. 7.000 2.813
12/96 6.292 2) CONSUMER PORTFOLIO SERVICES 9.125 11.250
3) EAGLE FINANCE CORP. 13.750 5.500
4) FIRST MERCHANTS ACCEPTANCE 18.500 19.125
5) GENERAL ACCEPTANCE CORP. 15.500 3.250
6) MS FINANCIAL INC. 6.875 0.938
7) MONACO FINANCE INC CL A 4.563 2.500
8) NAL FINANCIAL GROUP INC. 13.625 9.625
9) TFC ENTERPRISES INC. 5.625 1.625
---------------------
TOTAL 94.563 56.626
12
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the meeting, six Directors will be elected by the stockholders to
serve until the next annual meeting or until their successors are elected and
qualified. The accompanying form of proxy will be voted for the election as
Directors of the six persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named herein. Management has no reason to believe that any of
the nominees will not be a candidate or will be unable to serve. However, in the
event that any of the nominees should become unable or unwilling to serve as
Director, the proxy will be voted for the election of such person or persons as
shall be designated by the Board of Directors.
ANDREW GASPAR, age 49, was named Chairman of the Board on March 29,
1995. He has been a director of the Company since 1978. Mr. Gaspar has, since
March 1991, been President of the general partner of R.S. Lauder, Gaspar & Co.
and Vice-Chairman of The Central European Development Corporation, venture
capital firms doing business in the United States and Eastern Europe. Mr. Gaspar
is a director of Central European Media Enterprises Ltd., a TV broadcasting
company and of RSL Communications Ltd., a global telephone company. From 1982 to
1991, Mr. Gaspar was a Partner of E.M. Warburg Pincus & Co., a venture banking
and investment advisory firm. He holds a B.S. degree from Columbia University,
an M.S. degree from Northeastern University and an M.B.A. degree from Harvard
Business School.
SCOTT ZECHER, age 38, joined the Company in January 1984, and became
its President and Chief Operating Officer in January 1993 and its Chief
Executive Officer in October 1996. Prior to becoming President and Chief
Operating Officer, he held the position of Executive Vice President and Chief
Financial Officer. He became a director of the Company in 1989. From 1980 to
1984, he was with the accounting firm of KPMG Peat Marwick. Mr. Zecher is a
Certified Public Accountant with a B.A. degree in Accounting and Economics from
the City University of New York at Queens College.
JASON BACHER, age 57, has been a director of the Company since its
inception in 1976. From its inception in 1976 through March 29, 1995 Mr. Bacher
was Chairman of the Board and the Chief Executive Officer of the Company. Mr.
Bacher has been associated with the automobile salvage industry since 1961 as a
principal of Bacher Tire Company, Inc., an automobile recycler located in the
New York metropolitan area. In connection with the sale by the Company of a
principal portion of its business to ADP Claims Solutions on April 1, 1995, Mr.
Bacher joined ADP Claims Solutions.
ROBERT FAGENSON, age 48, has been an officer and director of Fagenson
& Co., Inc., a registered broker-dealer, for more than five years. Mr. Fagenson
is a member of the Board of Directors of the New York Stock Exchange. Since
April 1983, Mr. Fagenson has also served as the Secretary and a director of
Starr Securities, Inc., a registered broker-dealer, which was the underwriter
of the Company's initial public offering in May 1986. Mr. Fagenson has been a
director of the Company since June 1986. Mr. Fagenson is also a director of
Healthy Planets Products, Inc., Microtel Franchise and Development Corp. and
Rentway, Inc. Mr. Fagenson has a B.S. degree in Business Administration from
Syracuse University.
13
HOWARD NUSBAUM, age 49, has been a director of the Company since its
inception in 1976. Mr. Nusbaum, who earned a B.A. degree from Brooklyn College,
has been a consultant to the automobile recycling industry since 1976. He is
presently President of SWZ Engineering, Inc.
JEROME STENGEL, 60, has been a Vice President, Treasurer and Chief
Financial Officer of Genovese Drug Stores, Inc., an American Stock Exchange
company, for more than five years. Mr. Stengel is a Certified Public Accountant
with a B.B.A. degree from the City University of New York. He has been a
director of the Company since 1987.
A plurality of votes of the holders of shares of Common Stock of the
Company present in person or by proxy at the meeting is required for
the election of directors.
Management Recommends a Vote FOR the Election of the Foregoing
Nominees.
Board Of Director Meetings
During the Year-Ended December 31, 1996, the Board of Directors held
six meetings. Each director standing for re-election attended at least 75% of
such meetings.
Board Of Director Committees
The Board maintains an Audit and Compensation Committee each comprised
of Messrs. Bacher, Fagenson, Gaspar and Stengel. The Company does not have a
nominating committee. Each committee member is a non-employee director. The
Audit Committee approves the selection of the Company's auditors and meets and
interacts with the auditors to discuss questions in regard to the Company's
financial reporting. The Compensation Committee evaluates the performance of the
Company's executive employees and determines the salaries and other
compensations payable to such persons. During the last full fiscal year, the
Compensation Committee met twice and the Audit Committee met once, with all
members present at each respective Committee meeting.
PROPOSAL NO. 2
APPROVAL OF 1997 STOCK OPTION PLAN
On February 26, 1997, the Board of Directors approved the 1997 Stock
Option Plan (the "1997 Plan"). The 1997 Plan will become effective upon
ratification by the affirmative vote of a majority of the Company's shares of
Common Stock present in person or by proxy at the meeting. The 1997 Plan
provides, among other matters, for incentive and/or non-incentive stock options.
A copy of the 1997 Plan is attached as Annex A to this Proxy Statement and the
description of the 1997 Plan set forth below is qualified in its entirety by
reference to the full text of the 1997 Plan.
Description of the 1997 Plan
The purpose of the 1997 Plan is to provide incentives to officers, key
employees and consultants whose performance will contribute to the long-term
success and growth of the Company, to strengthen the ability of the Company to
attract and retain employees of high competence, to increase the identity of
interests of such key employees with those of the
14
Company's stockholders and to help build loyalty to the Company through
recognition and the opportunity for stock ownership. All owners and key
employees of the Company who are in positions which enable them to make
significant contributions to the long-term performance and growth of the Company
are eligible to receive awards under the 1997 Plan. Approximately 125 officers
and employees of the Company are currently eligible to participate in the 1997
Plan.
The maximum aggregate number of shares as to which awards or options
may at any time be granted under the Plan is 1,000,000 shares.
The 1997 Plan is administered by a disinterested committee of the
Board of Directors, the members of which are ineligible to receive grants under
the 1997 Plan, which determines those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock that may be purchased under each option, and
the option price.
Terms of Options
The Plan permits the granting of both incentive stock options and
non-qualified stock options. The option price of both incentive stock options
and non-qualified stock options must be at least equal to 100% of the fair
market value of the shares on the date of grant. The maximum term of each option
is ten years. For any participant who owns shares possessing more than 10% of
the voting rights of the Company's outstanding Common Stock, the exercise price
of any incentive stock option must be at least equal to 110% of the fair market
value of the shares subject to such option on the date of grant and the term of
the option may not be longer than five years. Options become exercisable at such
time or times as the Stock Option Committee may determine at the time it grants
options.
No incentive stock option may be transferred by an optionee other than
by will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which to exercise the option.
Upon termination of employment of an optionee by reason of death or permanent
total disability, the option remains exercisable for one year thereafter to the
extent it was exercisable on the date of such termination. No similar limitation
applies to non-qualified options.
Under certain circumstances involving a change in the number of
outstanding shares of Common Stock without the receipt by the Company of any
consideration therefor, such as a stock split, stock consolidation or payment of
a stock dividend, the class and aggregate number of shares of Common Stock in
respect of which Options may be granted under the 1997 Plan, the number of
shares subject to each option and the option price per share shall be
proportionately adjusted.
The 1997 Plan will terminate on February 26, 2007 and may be
terminated by the Board of Directors of the Company prior to that date.
15
Tax Consequences of the 1997 Plan
General
The following discussion of tax consequences of stock option grants
under the 1997 Plan is subject to the limitations imposed by Section 162(m) of
the Code on the deductibility of compensation to certain executive officers of
the Company in excess of $1,000,000 in certain circumstances. See "Application
of Section 162(m) of the Code" below for a more complete discussion of those
limitations.
The Company believes that under present Federal tax laws the grant of
an option will create no taxable income consequences for an optionee or
deduction for the Company. The optionee will generally have no taxable income
upon exercising an Incentive Option (except that the alternative minimum tax may
apply), and the Company will receive no deduction when an Incentive Option is
exercised. The optionee must recognize a specified amount of ordinary income
with respect to the exercise of a Non-Incentive Option, and the Company (or its
subsidiary) will generally be entitled to a deduction for the same amount. The
timing of such income and deduction will generally depend on the length of the
Restricted Period with respect to shares purchased. The tax treatment to an
optionee of a disposition of shares acquired under the 1997 Plan depends on how
long the shares have been held and on whether such shares were acquired by
exercising an Incentive Option or a Non-Incentive Option. Generally, there will
be no tax consequence to the Company in connection with a disposition of shares
acquired under an Option, except that the Company (or its subsidiary) will
generally be entitled to a deduction in the case of a disposition of shares
acquired under an Incentive Option before the applicable Incentive Option
holding period has been satisfied.
Application of Section 162(m) of the Code
As discussed previously, Section 162(m) of the Code limits to $1
million per year the federal income tax deduction available to public companies
for compensation paid to its chief executive officer and its four other highest
paid executive officers. However, Section 162(m) provides an exception from this
limitation for certain "performance-based" compensation, if various requirements
are satisfied. The 1997 Plan is designed to satisfy the exception for stock
options issued thereunder. Therefore, the Company anticipates being entitled to
deduct an amount equal to the taxable income reportable by an option recipient
upon exercise of a non-incentive option.
Proposed Grants Under the 1997 Plan
The Compensation Committee of the Company has granted performance
based options to Scott Zecher, the Company's President and Chief Executive
Officer and William Wunderlich, the Company's Chief Financial Officer under the
1997 Plan, subject to stockholder approval of the 1997 Plan. Mssrs. Zecher and
Wunderlich will receive options to purchase 450,000 and 170,000 shares of Common
Stock, respectively, at an exercise price equal to the fair market value of the
Common Stock on the date the 1997 Plan is approved by stockholders. The vesting
of such options will be based upon the market performance of the Company's
Common Stock. Such options will vest in thirds upon the closing price of the
Company's Common Stock reaching $5.00, $7.00 and $10.00, respectively. These
price thresholds must be achieved within two, four and six years, respectively,
from the date of grant. Any options which do not vest in accordance with the
terms of the grant, as well as any options which have not vested as of the
termination date of the grantee's employment with the Company, will be restored
to the status of
16
unissued options under the 1997 Plan and will be available for further issuance
in accordance with the terms and provisions of the 1997 Plan.
The affirmative vote of holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required for the
approval of the 1997 Stock Option Plan.
The Board of Directors believes that the 1997 Plan should be approved
because of the need to have the ability to issue stock options to the key
employees upon whose performance and contribution the long-term success and
growth of the Company is dependent and accordingly deems the adoption of the
1997 Option Plan to be in the best interest of the Company and recommends a vote
FOR its approval.
PROPOSAL NO. 3
APPROVAL OF 1997 DIRECTORS' STOCK OPTION PLAN
On February 26, 1997, the Board of Directors approved the 1997
Non-Employee Directors' Stock Option Plan (the " Directors' Plan"). The
Directors' Plan will become effective upon the ratification by the affirmative
vote of a majority of the Company's shares of Common Stock present in person or
by proxy at the meeting. A copy of the Directors' Plan is attached as Annex B to
this Proxy Statement and the description of the Directors' Plan set forth below
is qualified in its entirety by reference to the full text of the Directors'
Plan.
General
The Directors' Plan is designed to provide an opportunity for
non-employee directors of the Company to become holders of, or increase their
holdings of, Common Stock and thereby acquire an increased stake in the growth
and prospects of the Company. It also provides the Company with an additional
means to attract qualified candidates for election to the Board of Directors
when and as vacancies on the Board exist. Currently, five members of the Board
of Directors, Jason Bacher, Robert Fagenson, Andrew Gaspar, Howard Nusbaum and
Jerome Stengel are eligible directors under the Directors' Plan.
Description of the Directors' Plan
The Directors' Plan provides that each director who is not employed by
the Company or any of its subsidiaries will automatically be granted an option
(an "Initial Option Grant"), effective upon the approval of the Directors' Plan
by the Company's stockholders, to purchase 5,000 shares of Common Stock. In
addition, the Directors' Plan provides that each non-employee director shall
automatically receive an additional option to purchase 5,000 shares of Common
Stock on the date of each annual meeting of stockholders of the Company,
commencing with the annual meeting of stockholders in 1998 and each new
non-employee director shall automatically receive an option to purchase 7,500
shares of Common Stock upon appointment or election. The maximum number of
shares for which options may be granted to any one non-employee director shall
not exceed 25,000 in the aggregate. If the number of shares remaining in the
Directors' Plan on a date-of grant are insufficient to grant options to purchase
5,000 shares to each eligible director, the number of shares subject to each
option shall be determined by dividing the total number of shares remaining in
the Directors' Plan by the number of eligible directors at that time. A total of
150,000 shares of Common Stock have
17
been reserved for issuance under the Directors' Plan, subject to adjustment for
stock splits and similar events.
The exercise price of options granted under the Directors' Plan is the
Fair Market Value of the Common Stock on the date of grant. "Fair Market Value"
of the Common Stock means the closing sale price of the Common Stock as reported
by the Nasdaq National Market on the date of grant or, if the Common Stock was
not traded on the date of grant, the immediately preceding business day on which
the Common Stock was traded. The Directors' Plan provides that each option
granted under the Directors' Plan shall vest one year after the date of grant.
Any option granted under the Directors' Plan shall expire ten years after the
date of grant and no option may be granted under the Directors' Plan after
February 27, 2007. If a director ceases to be a director prior to the time any
portion of an option vests, such portion will immediately be canceled. The
vested portion of any option will remain exercisable for a period of one year
following the date on which a director ceases to serve as such, except if
cessation is for cause, in which event all vested options held by such director
will immediately be canceled. Options granted under the Directors' Plan are not
transferable by the optionee otherwise than by will or the laws of descent or
distribution or pursuant to a qualified domestic relations order. The exercise
price of an option may be paid in cash, in shares of Common Stock or a
combination thereof.
The Directors' Plan provides that a proportionate or equitable
adjustment shall be made in the number or kind of shares subject to unexercised
options and in the exercise price thereof in the event of a stock dividend,
split or combination of shares or a merger, consolidation or reorganization with
another company or entity in which the holders of Common Stock receive other
securities, or any other relevant change in the capitalization of the Company.
The Board of Directors has the power to terminate or amend the
Directors' Plan from time to time in such respects as it deems advisable, except
that no termination or amendment shall materially adversely affect any
outstanding option without the consent of the optionee. In addition, the
approval of the Company's stockholders is required in respect of any amendment
which would (i) increase the total number of shares subject to the Directors'
Plan, (ii) increase the total number of shares issuable to any person under the
Directors' Plan, (iii) change the timing of the grant of options or the exercise
price for shares issuable thereunder, or (iv) change the designation of the
persons eligible to receive options.
The Directors' Plan is administered by the Board of Directors. As the
Directors' Plan specifically identifies the persons eligible to receive options,
the date of grant of options, the number of shares to be subject thereto, the
exercise price, duration and other significant terms thereof, the
administration, interpretation and construction of the Directors' Plan by the
Board of Directors will be essentially ministerial in nature. The Directors'
Plan provides that the interpretation and construction of the Directors' Plan by
the Board of Directors shall be final.
The affirmative vote of holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required for the
approval of the Non-Employee Directors' Stock Option Plan.
The Board of Directors believes that the 1997 Plan should be approved
because of the need to have the ability to attract and retain qualified
directors to contribute to the long-term success and growth of the Company and
accordingly deems the adoption of the 1997 Non-Employee Directors' Option Plan
to be in the best interest of the Company and recommends a vote FOR its
approval.
18
GENERAL
The management of the Company does not know of any matters other than
those stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such other
matters in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such other matters is conferred by such
proxies upon the persons voting them.
The Company expects representatives of Arthur Andersen LLP, the
Company's independent auditors, to be present at the Annual Meeting and to
respond to pertinent questions of stockholders.
The Company will bear the cost of preparing, assembling and mailing
the Proxy, Proxy Statement and other material which may be sent to the
stockholders in connection with this solicitation. In addition to the
solicitation of proxies by use of the mail, officers and regular employees may
solicit the return of proxies. The Company may reimburse persons holding stock
in their names or in the names of other nominees for their expenses in sending
proxies and proxy material to principals. Proxies may be solicited by mail,
personal interview, telephone and telegraph.
The Company will provide without charge to each person being solicited
by this Proxy Statement, on the written consent of any such person, a copy of
the Annual Report of the Company on Form 10-K for the Year-Ended December 31,
1996 (as filed with the Securities and Exchange Commission) including the
financial statements thereto. All such requests should be directed to William
Wunderlich, Secretary, AutoInfo, Inc., 1600 Route 208, Fair Lawn, New Jersey
07410.
All proposals of stockholders intended to be included in the proxy
statement to be presented at the 1997 Annual Meeting of Stockholders must be
received at the Company's executive offices no later than December 22, 1997 and
should be directed to the Secretary of AutoInfo, Inc.
By Order of the Board of
Directors
William Wunderlich,
Secretary
Dated: April 22, 1997
19
PROXY
AUTOINFO, INC.
This Proxy is solicited by the Board of Directors Annual Meeting on May 22,1997
The undersigned hereby appoints Andrew Gaspar and Scott Zecher and each of
them, with full power of substitution, the attorneys and proxies of the under-
signed to attend the Annual Meeting of Stockholders of AutoInfo, Inc. to be held
on May 22, 1997 at 9:00a.m., and at any adjournment thereof, hereby revoking any
proxies heretofore given, to vote all shares of Common Stock of the Company held
or owned by the undersigned as indicated on the proposals as more fully set
forth in the Proxy Statement, and in their discretion upon such other matters as
may come before the meeting.
1. ELECTION OF DIRECTORS--Jason Bacher, Robert Fagenson, Andrew Gaspar,
Howard Nusbaum, Jerome Stengel and Scott Zecher.
|_| FOR all nominees,
|_| WITHHOLD authority to vote for all nominees,
|_| FOR all nominees, EXCEPT nominees(s) written below.
-----------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. The approval of the 1997 Stock Option Plan |_| |_| |_|
3. The approval of the 1997 Non-Employee Directors'
Stock Option Plan |_| |_| |_|
(Continued, and to be Signed, on Reverse Side)
The shares represented by this Proxy will be voted as directed or if no
direction is indicated, will be voted FOR each of the proposals.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
Dated:____________________________,1997
-----------------------------
Signature of Stockholder
-----------------------------
Signature of Stockholder
DATE AND SIGN EXACTLY AS NAME
APPEARS HEREON. EACH JOINT TENANT
MUST SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, TRUSTEE, ETC., GIVE FULL
TITLE. IF SIGNER IS CORPORATION, SIGN
IN FULL CORPORATE NAME BY AUTHORIZED
OFFICER.