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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
March 9, 1998
(Date of Report - Date of Earliest Event Reported)
NATIONAL AUTO CREDIT, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-11513 34-1816760
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File No.) Identification No.)
30000 AURORA ROAD, SOLON, OHIO 44139
(Address of Principal Executive Offices and Zip Code)
(440) 349-1000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name or former address, if changed from last report)
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ITEM 5. OTHER MATTERS
On March 9, 1998, National Auto Credit, Inc. (the "Company")
issued a press release to the following effect:
The Board of Directors of the Company has appointed a Special
Committee of independent directors consisting of John Gleason, James McNamara
and William Marshall, a newly appointed director. The Special Committee will act
as a standing committee of the Board and certain of its members will serve as
the Board's Audit and Compensation Committees. The Special Committee has also
been given the authority to continue the internal review of certain operations
of the Company previously commenced by a special committee established by the
Board. Sam J. Frankino is the fourth member of the four-person Board of
Directors.
The three members of the prior special committee resigned from
the Board following the issuance of the committee's report, stating that they
had fulfilled their obligations pursuant to a prior grant of authority. Certain
recommendations proposed by the prior committee were voted against by the Board
of Directors, which cited its concerns regarding the foundation for the
committee's report and the propriety of its recommendations. Resigning special
committee members, Noah T. Herndon and Per E. Hoel, were members of the
Company's Audit and Compensation committees and board members for six years and
fifteen years respectively. J. Hunter Brown also resigned from the Board.
The Board also authorized the continued engagement of an
executive search firm to assist in a search for certain key management
positions, including President and Chief Executive Officer. The Board accepted
the resignation of Robert J. Bronchetti, its former President, and has appointed
Edward T. Anderson as acting President.
A copy of the press release is included as an exhibit to this
report.
On January 30, 1998, the Securities and Exchange Commission
(the "Commission") notified the Company that the Commission was pursuing an
informal investigation of the Company. On March 11, 1998, the Company received
notice that the Commission had issued a formal order of investigation.
On March 16, 1998, the Company issued an additional press
release relating to the composition of its Board and events which occurred on
March 9, 1998. A copy of the press release is included as an exhibit to this
report.
ITEM 6. RESIGNATION OF DIRECTORS
As discussed in Item 5 above, on March 9, 1998, the prior
members of the special committee of the Board of Directors of the Company, J.
Hunter Brown, Noah T. Herndon and Per E. Hoel, resigned as directors of the
Company. The resignation letters state in part that "[a] t a Special Meeting of
the Board of Directors held on March 9, 1998, the three members of the Special
Committee proposed that, in order to restore the Company's credibility and
thereby
2
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preserve its viability, the Board should request the resignations of Sam
Frankino, Chairman, and Robert J. Bronchetti, President, and should also request
Mr. Frankino, the Company's majority shareholder, to place his shares in a
voting trust. The four remaining directors, Mr. Frankino, Mr. Bronchetti, [Mr.]
John Gleason and [Mr.] James McNamara, voted against adoption of resolutions to
this effect."
Based upon information available to them, a majority of the
directors present at the meeting of March 9, 1998 questioned the foundation and
appropriateness of certain of the recommendations made by the former Special
Committee.
The letters of resignation of such directors are included as
exhibits to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired: None.
(b) Pro Forma financial information: None.
(c) Exhibits:
17.1 Letter of Resignation, dated March 10, 1998, of Noah T.
Herndon as a director of the Company
17.2 Letter of Resignation, dated March 10, 1998, of Per E.
Hoel as a director of the Company
17.3 Letter of Resignation, dated March 10, 1998, of J. Hunter
Brown as a director of the Company
99.1 Press Release of the Company, dated March 9, 1998
99.2 Press Release of the Company, dated March 16, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NATIONAL AUTO CREDIT, INC.
March 16, 1998 /s/ Raymond A. Varcho
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Raymond A. Varcho
Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Exhibit Page
- ------- ----
17.1 Letter of Resignation, dated March 10, 1998, of Noah T. Hendon
as a director of the Company 6
17.2 Letter of Resignation, dated March 10, 1998, of Per E. Hoel
as a director of the Company 7
17.3 Letter of Resignation, dated March 10, 1998, of J. Hunter Brown
as a director of the Company 8
99.1 Press Release of the Company, dated March 9, 1998 9
99.2 Press Release of the Company, dated March 16, 1998 10
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Exhibit 17.1
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NOAH T. HERNDON
35 Clyde Street
Chestnut Hill, MA 02167
March 10, 1998
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139-2720
Attention: Raymond Varcho, Esq.
General Counsel
Gentlemen:
I resigned on March 9, 1998 as a director of National Auto Credit, Inc.
(the "Company") because of a disagreement with the Company on a matter relating
to its operations, policies or practices. This letter describes such
disagreement. I request that the matter be disclosed.
Before my resignation, I served as one of three members of the Special
Committee of the Board of Directors of the Company. On March 9, 1998 the Special
Committee reported on its investigation of information provided by Deloitte &
Touche LLP, the Company's former auditors, with respect to the Company's
financial statements. D&T resigned on January 16, 1998 on the ground that it
could no longer rely on management's representations.
The report found there was substantial competent evidence indicating
that D&T's position was well founded and appropriate. The report did not draw
any conclusions as to proof of wrongdoing by any of the Company's officers or
employees.
At a Special Meeting of the Board of Directors held on March 9, 1998,
the three members of the Special Committee proposed that, in order to restore
the Company's credibiility and thereby preserve its viability, the Board should
request resignations of Sam Frankino, Chairman, and Robert J. Bronchetti,
President, and should also request Mr. Frankino, the Company's majority
shareholder, to place his shares in a voting trust. The four remaining
directors, Mr. Frankino, Mr. Bronchetti, John Gleason and Jim McNamara, voted
against adoption of resolutions to this effect.
I resigned as a director at the conclusion of the Special Meeting. I
did so in the belief that, under the circumstances now presented, I could no
longer function effectively.
Very truly yours,
/s/ Noah T. Herndon
Noah T. Herndon
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Exhibit 17.2
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PER E. HOEL
9906 Buttonwood Way S.E.
Tequesta, Florida 33469
March 10, 1998
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139-2720
Attention: Raymond Varcho, Esq.
General Counsel
Gentlemen:
I resigned on March 9, 1998 as a director of National Auto Credit, Inc.
(the "Company") because of a disagreement with the Company on a matter relating
to its operations, policies or practices. This letter describes such
disagreement. I request that the matter be disclosed.
Before my resignation, I served as one of three members of the Special
Committee of the Board of Directors of the Company. On March 9, 1998 the Special
Committee reported on its investigation of information provided by Deloitte &
Touche LLP, the Company's former auditors, with respect to the Company's
financial statements. D&T resigned on January 16, 1998 on the ground that it
could no longer rely on management's representations.
The report found there was substantial competent evidence indicating
that D&T's position was well founded and appropriate. The report did not draw
any conclusions as to proof of wrongdoing by any of the Company's officers or
employees.
At a Special Meeting of the Board of Directors held on March 9, 1998,
the three members of the Special Committee proposed that, in order to restore
the Company's credibiility and thereby preserve its viability, the Board should
request resignations of Sam Frankino, Chairman, and Robert J. Bronchetti,
President, and should also request Mr. Frankino, the Company's majority
shareholder, to place his shares in a voting trust. The four remaining
directors, Mr. Frankino, Mr. Bronchetti, John Gleason and Jim McNamara, voted
against adoption of resolutions to this effect.
I resigned as a director at the conclusion of the Special Meeting. I
did so in the belief that, under the circumstances now presented, I could no
longer function effectively.
Very truly yours,
/s/ Per E. Hoel
Per E. Hoel
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Exhibit 17.3
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J. Hunter Brown
29 Old Lantern Dr.
Wilton, CT 06897
March 10,1998
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139-2720
Attention: Raymond Varcho, Esq.
General Counsel
Gentlemen:
I resigned on March 9, 1998 as a director of National Auto Credit, Inc.
(the "Company") because of a disagreement with the Company on a matter relating
to its operations, policies or practices. This letter describes such
disagreement. I request that the matter be disclosed.
Before my resignation, I served as one of three members of the Special
Committee of the Board of Directors of the Company. On March 9, 1998 the Special
Committee reported on its investigation of information provided by Deloitte &
Touche LLP, the Company's former auditors, with respect to the Company's
financial statements. D&T resigned on January 16, 1998 on the ground that it
could no longer rely on management's representations.
The report found there was substantial competent evidence indicating
that D&T's position was well founded and appropriate. The report did not draw
any conclusions as to proof of wrongdoing by any of the Company's officers or
employees.
At a Special Meeting of the Board of Directors held on March 9, 1998,
the three members of the Special Committee proposed that, in order to restore
the Company's credibility and thereby preserve its viability, the Board should
request resignations of Sam Frankino, Chairman, and Robert J. Bronchetti,
President, and should also request Mr. Frankino, the Company's majority
shareholder, to place his shares in a voting trust. The four remaining
directors, Mr. Frankino, Mr. Bronchetti, John Gleason and Jim McNamara, voted
against adoption of resolutions to this effect.
I resigned as a director at the conclusion of the Special Meeting. I
did so in the belief that, under the circumstances now presented, I could no
longer function effectively.
Very truly yours,
/s/ J. Hunter Brown
J. Hunter Brown
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Exhibit 99.1
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NEWS RELEASE
FOR IMMEDIATE RELEASE: March 9, 1998
NATIONAL AUTO CREDIT, INC.
(Cleveland, Ohio. March 9, 1998). National Auto Credit, Inc.
(NYSE:NAK) announced today that its Board of Directors has appointed a Special
Committee of independent directors consisting of John Gleason, James McNamara
and William Marshall, a newly appointed director. The Special Committee will act
as a standing committee of the Board and its members will serve as members of
the Board's Audit and Compensation Committees. The Special Committee has also
been given the authority to continue the internal review of certain operations
of the Company previously commenced by a Special Committee established by the
Board.
The prior members of the special committee resigned from the
Board following the issuance of the committee's report, stating that the
committee had fulfilled its obligations pursuant to a prior grant of authority.
Certain recommendations proposed by the prior committee were voted against by
the Board of Directors, which cited its concerns regarding the foundation for
the committee's report and the propriety of its recommendations. Resigning
special committee members, Noah T. Herndon and Per E. Hoel, were members of the
Company's Audit and Compensation committees and board members for six years and
fifteen years respectively.
The Board also authorized the continued engagement of an
executive search firm to assist in a search for certain key management
positions, including President and Chief Executive Officer. The Board today
accepted the resignation of Robert J. Bronchetti, its former President and Chief
Executive Officer, and has appointed Edward T. Anderson as interim President and
Chief Executive Officer.
The Company welcomes the opportunity to return to a state of
normalcy following approximately two months of uncertainty and lack of direction
and will coordinate with its independent auditors and outside legal advisors.
The Company will immediately enter into discussions with its banks, lenders and
other constituencies to highlight the soundness of the Company's operations,
financial position and business prospects.
Contacts:
Anders Spubkjaer Linda Margolin
(440) 349-1000 (x.4404) Investor Relations
(440) 349-1000 (x.4495)
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Exhibit 99.2
NEWS RELEASE
FOR IMMEDIATE RELEASE: March 16, 1998
National Auto Credit, Inc.
(Cleveland, Ohio. March 16, 1998). National Auto Credit, Inc.
(NYSE:NAK) announced today that it filed a Form 8-K with the Securities and
Exchange Commission relating to the previously disclosed resignation of three of
its directors (who served on the prior Special Committee of the Board Of
Directors). On March 9, 1998, the Special Committee reported on its
investigation of information provided by Deloitte & Touche, LLP, the Company's
former auditors. Upon delivery of that report, the Special Committee that issued
it ceased to exist pursuant to the resolutions that created the Special
Committee and the positions of Chairman and President were reinstated to
Messrs. Frankino and Bronchetti, respectively.
The report did not reach any conclusions with respect to proof of
wrongdoing by the Company's officers or employees, nor did it reach any
conclusions regarding any impact on the Company's financial statements or public
reporting.
Each of the former directors, J. Hunter Brown, Noah T. Herndon and Per
E. Hoel, issued resignation letters dated March 10, 1998. The resignation
letters state in part that "[a]t a Special Meeting of the Board of Directors
held March 9, 1998, the three members of the Special Committee proposed that, in
order to restore the Company's credibility and thereby preserve its
viability, the Board should request the resignations of Sam Frankino,
Chairman, and Robert J. Bronchetti, President, and should also request Mr.
Frankino, the Company's majority shareholder, to place his shares in a voting
trust. The four remaining directors, Mr. Frankino, Mr. Bronchetti, [Mr.] John
Gleason and [Mr.] James McNamara, voted against adoption of resolutions to this
effect."
Based upon information available to them, a majority of the directors
questioned the foundation and appropriateness of certain of the recommendations
made by the former Special Committee.
On the evening of Monday, March 9, 1998, subsequent to the
above-referenced resignations, a second meeting of the Board of Directors was
convened. At that meeting, the Board of Directors accepted the resignation of
Mr. Bronchetti as an officer and director, and authorized the continued
engagement of a management search firm to assist in the search for qualified
individuals to fill certain key management positions, including President and
Chief Executive Officer.
The Company has been informed by the New York Stock Exchange, Inc. that
it intends to suspend trading in the Common Stock of the Company prior to the
opening of trading on March 16, 1998, and that, following suspension,
application will be made to the Securities and Exchange Commission to delist
the Common Stock of the Company. The Company stated that it regrets the action
by the NYSE and intends to appeal the decision, or, alternatively, seek
listing privileges on another stock exchange or market. On March 11, 1998, the
Company received notice that the SEC had issued a formal order of private
investigation of the Company. The Company also stated that it will fully assist
and cooperate with all authorities regarding the Company.
As previously disclosed on March 9, 1998, a new standing Special
Committee was created, consisting of, Mr. John Gleason, Mr. James McNamara and
Mr. William Marshall, all of whom will comprise the Compensation Committee of
the Board. The members of the Audit Committee are Messrs. McNamara and Marshall.
The statements contained in this release that are not purely historical are
forward looking statements within the meaning of the Securities and Exchange Act
of 1934. Among the factors that could cause actual results to differ materially
from the forward looking statements are the potential for greater than
anticipated non-performing contracts, the potential for lower than anticipated
recoverability of amounts advanced to the Company's member dealers, availability
of funds under the Company's financing arrangements, and other factors as
discussed in the Company's reports filed with the Securities and Exchange
Commission.
