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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
National Auto Credit, Inc.
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(Name of Issuer)
Common Stock, par value $.05 per share
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(Title of Class of Securities)
632900 10 6
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(CUSIP Number of Class of Securities)
Henry Y.L. Toh
1980 Post Oak Boulevard
Suite 1850
Houston, Texas 77056
(713)393-3083
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Daniel D. Rubino
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
(212) 728-8000
May 10, 1999
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following: [ ]
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SCHEDULE 13D
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CUSIP No. 632900 10 6 Page 2 of 11 Pages
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1 NAME OF REPORT PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Henry Y.L. Toh S.S. ####-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
2,849,630
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NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING 0
PERSON WITH
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9 SOLE DISPOSITIVE POWER
0
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,024,630
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.6%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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This Schedule 13D is being filed on behalf of Henry Y.L. Toh, an
individual, relating to the common stock, par value $.05 per share, of National
Auto Credit, Inc., a Delaware corporation (the "Company"). Unless the context
otherwise requires, references herein to the "Common Stock" are to the common
stock of National Credit, Inc., par value $.05 per share. Item 1. Security and
Issuer.
This statement on Schedule 13D relates to the Common Stock of the Company,
and is being filed pursuant to Rule 13d-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The address of the principal executive
offices of the Company is 30000 Aurora Road, Solon, Ohio 44139.
Item 2. Identity and Background.
(a) This statement is filed by Henry Y.L. Toh ("Toh").
(b) The business address of Toh is 1980 Post Oak Boulevard, Suite 1850,
Houston, Texas 77056.
(c) Toh is presently the Assistant Secretary and Director of I-Link
Incorporated, Director of Four M. International, Inc., Director of Four Vines
International, Inc. and President and Chief Executive Officer of Amerique
Investments International Corp. Toh has been a director of the Company since
December 22, 1998.
(d) Toh has not, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(e) Toh has not, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is
3 of 11 Pages
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subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
(f) Toh is a citizen of the United States of America. Item 3. Source and
Amount of Funds or Other Consideration.
On May 10, 1999 the Company and Mr. Ernest C. Garcia II (for himself and on
behalf of Verde Investments, Inc., in his capacity as President)("Garcia")
entered into an agreement pursuant to which the Company acquired an option to
purchase the 2,849,630 shares (the "Option") of Common Stock beneficially owned
by Garcia (the "Option Agreement"). The Option was for an initial term of 45
days (as it may be extended, the "Term") at a purchase price of $1.50 per share.
In consideration for the Option, the Company paid $1,000,000 from its working
capital, all of which will be credited toward the aggregate exercise price
payable by the Company upon exercise of the Option. On June 24, 1999, the Option
was extended for an additional 45 days (the "First Extension"). In consideration
for the First Extension, the Company paid $500,000 from its working capital,
$250,000 of which will be credited toward the aggregate purchase price payable
by the Company upon the exercise of the Option. Pursuant to a Letter Agreement,
dated as of August 8, 1999, between the Company and Garcia (the "Letter
Agreement"), the Option was extended for an additional 120 days (the "Second
Extension"). In consideration for the Second Extension, the Company paid
$1,000,000 from its working capital, $750,000 of which will be credited toward
the aggregate exercise
4 of 11 Pages
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price payable by the Company upon the exercise of the Option.
In connection with the Option Agreement, Garcia issued an irrevocable proxy
to vote all the shares of Common Stock subject to the Option to Toh, in his
capacity as an individual (the "Proxy").
Item 4. Purpose of Transaction.
Pursuant to the Proxy, Garcia constituted and appointed Toh the true and
lawful attorney-in-fact and proxy of Garcia to attend all meetings of the
stockholders of the Company, to receive notices thereof and to vote all
2,849,630 shares of Common Stock beneficially owned by Garcia.
The acquisition of beneficial ownership of the Common Stock pursuant to the
Proxy by Toh was effected because of the Company's desire to enter into the
Option Agreement with Garcia and the Company's belief that the Proxy should be
issued to a person acting in his individual capacity and not as a director of
the Company.
Toh, as an individual, (1) has sole voting power over the shares of Common
Stock under the Option Agreement and (2) in connection with such voting power,
has no plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Company, or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (d) any change in the
present Board of Directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
5 of 11 Pages
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vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Company; (f) any other material change in the Company's
business or corporate structure; (g) changes in the Company's charter, by-laws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those
enumerated above.
As a director of the Company, Toh has been awarded options to purchase
175,000 shares of Common and may from time to time in the future acquire
additional options to purchase shares of Common Stock.
Under the Option Agreement, the Company and Garcia also entered into an
Escrow Agreement under which they appointed a third-party escrow agent to hold
the 2,849,630 shares of Common Stock subject to the Option during the Term.
In the event that the Company fails to exercise the Option during the Term,
(i) Garcia has the right so long as Garcia owns at least 2,500,000 shares of
Common Stock to designate one member to the board of directors of the Company
(which member shall be subject to approval by a majority of the Company's
directors), (ii) Garcia shall have the right and the option (the "Shareholder
6 of 11 Pages
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Option") to purchase up to 2,849,630 shares of Common Stock from the Company, in
whole or in part, at a per share price equal to the lower of (A) $.89 (as
amended by the August 8, 1999 Letter Agreement) or (B) the average of the daily
closing sale price of the Common Stock over the 10 days immediately preceding
the expiration of the Term. The Shareholder Option is exercisable (if at all)
for a period of 30 days following expiration of the Term.
Garcia also agreed with the Company pursuant to the Option Agreement that
for a period of one year, Garcia will not take any action which adversely
impacts or interferes with (i) the business and operations of the Company, (ii)
completion of the audit of the Company's financial statements, (iii) existence,
composition, function or purpose of the Special Committee of the Company's board
of directors, (iv) efforts of the Company to preserve and maximize its assets,
(v) efforts of the Company to restore public confidence in the Company. Garcia
also agreed that for a period of one year, Garcia will not acquire beneficial
ownership of any additional shares of Common Stock without prior consent of the
Company. The above described provisions will terminate if the Company fails to
exercise the Option.
The summary of certain provisions of the Option Agreement, the Proxy, the
Escrow Agreement and the Letter Agreement is qualified in its entirety by
reference to the Option Agreement, a copy of which is set forth as Exhibit 1
hereto and is incorporated herein by reference, the Proxy, a copy of which is
set forth as Exhibit 2 hereto and is incorporated herein by reference, the
Escrow Agreement, a copy of which is set forth as Exhibit 3 hereto and is
7 of 11 Pages
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incorporated herein by reference and the Letter Agreement, a copy of which is
set forth as Exhibit 4 hereto and is incorporated herein by reference.
Item 5. Interest in Securities of the Issuer.
(a) As of September 3, 1999, Toh may be deemed to beneficially own
3,024,630 shares of Common Stock by reason of his appointment by Garcia as proxy
under the Option Agreement and his ownership of options to purchase shares of
Common Stock. As of September 3, 1999, 3,024,630 shares of Common Stock which
may be deemed to be beneficially owned by Toh represented approximately 10.6% of
the outstanding shares of Common Stock, based on the 28,643,477 shares of Common
Stock outstanding as of August 2, 1999 as reported by the Company in its
Definitive Proxy Statement on Schedule 14A filed on August 23, 1999.
(b) Toh has sole power to vote or direct the vote of 2,849,630 shares of
Common Stock. Pursuant to the Option Agreement, the Company has the indirect
power to dispose or to direct the disposition of the 2,849,630 shares of Common
Stock as a result of the existence of the Option and the Company's ability to
exercise the Option.
(c) None.
(d) Except as set forth in this Item 5, no other person is known to have
the right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such securities.
(e) Not applicable.
8 of 11 Pages
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Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
See Items 3 and 4.
As a director of the Company, Toh is party to two (2) stock option
agreements with the Company pursuant to which he has been awarded options to
purchase a total of 175,000 shares of Common Stock. The two (2) stock option
agreements are attached hereto as Exhibit 5 and Exhibit 6 and are incorporated
herein by reference.
Except as set forth above and in Section 3 and Section 4, there are no
contracts, arrangements, understandings or relationships among the persons named
in Item 2 or between such persons and any other person with respect to any
securities of the Company.
Item 7. Material to be Filed as Exhibits.
1. Option Agreement, dated May 10, 1999, by and among the Company, Ernest
Garcia II (on his own behalf and, for the purposes of certain provisions of
the agreement, on behalf of Verde Investments, Inc., in his capacity as
President) and Steven Johnson (for purposes of certain portions of the
agreement only).
2. Irrevocable Proxy of Ernest C. Garcia II and Verde Investments, Inc. in
favor of Henry Toh, dated May 10, 1999.
3. Escrow Agreement, dated as if May 10, 1999, by and among the Company,
Ernest C. Garcia II and Gordon, Fournaris & Mammarella, as Escrow Agent.
4. Letter Agreement, dated as of August 8, 1999, by and among the Company,
Ernest Garcia II (on his own behalf and, for the purposes of certain
provisions of the agreement, on behalf of Verde Investments, Inc., in his
capacity as President) and Steven Johnson (for purposes of certain portions
of the agreement only).
5. Stock Option Agreement pursuant to which the Company grants Henry Toh
options to purchase 75,000 shares of Common Stock.
6. Stock Option Agreement pursuant to which the Company grants Henry Toh
options to purchase 100,000 shares of Common Stock.
9 of 11 Pages
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: September 3, 1999 /s/ Henry Y.L. Toh
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Henry Y.L. Toh
10 of 11 Pages
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Exhibit Index
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1. Option Agreement, dated May 10, 1999, by and among the Company, Ernest
Garcia II (on his own behalf and, for the purposes of certain provisions of
the agreement, on behalf of Verde Investments, Inc., in his capacity as
President) and Steven Johnson (for purposes of certain portions of the
agreement only).
2. Irrevocable Proxy of Ernest C. Garcia II and Verde Investments, Inc. in
favor of Henry Toh, dated May 10, 1999.
3. Escrow Agreement, dated as if May 10, 1999, by and among the Company,
Ernest C. Garcia II and Gordon, Fournaris & Mammarella, as Escrow Agent.
4. Letter Agreement, dated as of August 8, 1999, by and among the Company,
Ernest Garcia II (on his own behalf and, for the purposes of certain
provisions of the agreement, on behalf of Verde Investments, Inc., in his
capacity as President) and Steven Johnson (for purposes of certain portions
of the agreement only).
5. Stock Option Agreement pursuant to which the Company grants Henry Toh
options to purchase 75,000 shares of Common Stock.
6. Stock Option Agreement pursuant to which the Company grants Henry Toh
options to purchase 100,000 shares of Common Stock.
11 of 11 Pages
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NATIONAL AUTO CREDIT, INC.
30000 AURORA RD.
SOLON, OHIO 44139
May 10, 1999
Ernest C. Garcia II
2525 E. Camelback Road
Suite 1150
Phoenix, Arizona 85011
Dear Mr. Garcia:
This agreement sets forth our mutual understanding with respect to the
grant of an option to purchase certain shares of the Company's common stock held
by you and certain other related matters. Accordingly we hereby agree as
follows:
1. Grant of Options.
a. You are the beneficial owner of 2,849,630 shares (the "Shares")
of the Common Stock, par value $0.05 per share (the "Common Stock"), of National
Auto Credit, Inc. (the "Company"). For and in consideration of the sum of
$1,000,000 (the "Payment"), paid concurrently herewith by the Company by either
check or wire transfer of immediately available funds to an account designated
by you (the receipt of which is hereby acknowledged), you hereby grant the
Company the right and option (the "Option") to purchase all but not less than
all of the Shares from you at any time from the date hereof and continuing for a
period of 45 days (as it may be extended, the "Term"), at a purchase price of
$1.50 per Share; provided that, the Company may, at its option, extend the Term
for an additional 45 days for and in consideration of the sum of $500,000,
payable in the manner set forth above (the "Second Payment"); and provided
further that, the aggregate of the Payment and one-half of any Second Payment
shall be deducted from the aggregate amount payable by the Company to you upon
exercise of the Option. The Company shall have the right to transfer the Option
at any time during the Term to any third-party.
b. In the event that the Company fails to exercise the Option
during the Term, (i) the Company hereby agrees to provide you with the right,
for so long as you own at least 2,500,000 Shares, to designate one member to the
Board of Directors of the Company (which member shall be subject to the approval
of a majority of the Company's existing Board of Directors and/or Directors
approved by them ("Existing Directors"), such approval not to be unreasonably
withheld or delayed) and (ii) the Company hereby grants you the right and the
option (the "Shareholder Option") to purchase up to 2,849,630 shares of Common
Stock from the Company, in whole or in part, at any time from the expiration of
the Term and continuing for a period of 30 days, at a per share purchase price
equal to the lower of (A) $1.50 or (B) the average of the daily closing sale
price of the Common Stock in the over-the-counter market (as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or
such other system then in use, or if the Common Stock is not quoted by any such
organization, the daily average of the closing bid and asked price as furnished
by a professional market maker making a market in the Common Stock selected by
the Existing Directors and you) over the ten trading days immediately preceding
the expiration of the Term.
c. You hereby represent to the Company that the Shares are the only
shares of Common Stock that you beneficially own, that you are the owner of the
Shares and that upon the exercise of the Option by the Company, valid and
marketable title to the Shares, free and clear of all liens,
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Ernest C. Garcia
May 10, 1999
Page 2
encumbrances and restrictions, will pass to the Company (or any third-party
transferee of the Option, as the case may be). Concurrently with the grant of
the Option to the Company, you will enter into a proxy in favor of Henry Toh, in
the form attached hereto as Appendix I, and an escrow agreement (pursuant to
which you will deposit certificates evidencing the Shares and the Company will
deposit the amounts to be paid to you in consideration thereof), in the form
attached hereto as Appendix II. The Company hereby represents to you that it has
the power and authority to enter into and execute this Agreement and perform the
transactions contemplated hereby; that this Agreement and such transactions have
been approved by any necessary action on the part of the Company; that the
execution and delivery of this Agreement and the performance by the Company of
such transactions will not violate or conflict with any provisions of the
Company's Certificate of Incorporation or Bylaws, any material contract to which
the Company is a party or by which the Company or any of its properties may be
bound or any law, rule, regulation, order, decree or judgment to which the
Company is subject; and that any shares of Common Stock issued to you pursuant
to the valid exercise of the Shareholder Option will be validly issued, fully
paid and non-assessable.
2. Certain Actions.
a. In connection with the transactions contemplated hereby, you
hereby agree that for a period of one year from the date of this Agreement, you
will not take (and you will use your reasonable best efforts to cause your
affiliates and associates to refrain from taking), directly or indirectly,
without the prior written consent of the Existing Directors, any action which
adversely impacts or interferes with the: (i) business and operations of the
Company, (ii) completion of the audit of the Company's financial statements,
(iii) existence, composition, function or purpose of the Special Committee of
the Company's Board of Directors or (iv) efforts of the Board of Directors to
(A) preserve and maximize the assets of the Company, (B) continue to stabilize
the operations of the Company, (C) ensure proper financial and accounting
reporting and controls and (D) restore public confidence in the Company;
provided, however, that nothing in this Agreement shall restrict the ongoing
business operations of the Ugly Duckling Corporation or its subsidiaries, which
the parties acknowledge has business operations similar to those of the Company.
In addition, you hereby agree that for a period of one year from the date of
this Agreement, you will not acquire beneficial ownership of any additional
shares of Common Stock without the prior written consent of the Existing
Directors.
b. In addition, you agree to cooperate with the Company and its
Board of Directors, as well as all governmental, quasi-governmental and
regulatory authorities and securities exchanges, in connection with all
inquiries, investigations and proceedings that currently exist and may hereafter
arise; provided that, the Company will reimburse you for your reasonable out of
pocket expenses (including customary hourly fees charged by you and reasonable
attorneys' fees and costs) in connection with all such inquiries, investigations
and proceedings.
c. You hereby acknowledge that you are aware, and that you will
advise your Representatives (as defined below), as appropriate, that the United
States securities laws may prohibit any person who has received material,
non-public information concerning certain matters which are the subject of this
Agreement from purchasing or selling securities of the Company or from
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Ernest C. Garcia
May 10, 1999
Page 3
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
3. Confidential Treatment.
a. Unless otherwise agreed to in writing by the Company, you agree
to, except as required by law, keep all confidential information about the
Company confidential and not to disclose or reveal any such confidential
information to any person.
b. You agree that you will have no discussion, correspondence or
other contact or communication with the Company concerning the Company or its
securities except with the Chairman of the Board of Directors, the President of
the Company and their designated representatives.
4. Miscellaneous.
a. The parties agree that money damages would not be a sufficient
remedy for any breach of this Agreement by the other party or its
Representatives, and that in addition to all other remedies, each party shall be
entitled to specific performance and injunctive and other equitable relief as a
remedy for any such breach. Each party further agrees to waive, and to use its
respective best efforts to cause its Representatives to waive, any requirement
for the securing or posting of any bond in connection with such remedy.
b. For the purposes of this Agreement, the term "Representatives"
when used in respect of any person, shall mean such person's affiliates,
directors, officers, employees, agents or controlling persons.
c. Each party and Steven Johnson hereby releases, discharges,
cancels and waives any and all claims, demands, causes of action, damages and
liabilities of any nature whatsoever, whether in law or in equity, whether known
or unknown to the parties and whether contingent or otherwise, which such party
has against the other or its Representatives (including Steven Johnson) at the
time of execution of this Agreement. Nothing contained in this Agreement shall
be construed as an admission by any party that such party has violated any
statute, law, rule or regulation, or breached any contract or agreement.
d. The parties hereby acknowledge that the Company has not
nominated or appointed you as a Director or officer of the Company and you have
neither been elected nor served as such; and that based on the information
contained in your Schedule 13D filed with the Securities and Exchange Commission
on April 20, 1999, you are not a beneficial owner of 10% or more of the Common
Stock. The Company hereby agrees that it will not seek to recover any profit
that may be realized by you in connection with the transactions contemplated
hereby pursuant to Section 16(b) of the Securities Exchange Act of 1934, as
amended.
e. From the date hereof until the expiration of the Term, each of
the parties agrees to consult with the other in issuing any press release or
otherwise making any public statement with respect to this Agreement and the
transactions contemplated hereby, and neither party shall issue any
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Ernest C. Garcia
May 10, 1999
Page 4
such press release or make any such public statement without the prior written
consent of the other, except as may be required by applicable law, rule or
regulation, order of a court or governmental agency or by obligations pursuant
to any listing agreement with any national securities exchange or automated
quotation service.
f. The parties shall not make, and shall use their respective
reasonable best efforts to cause their respective Representatives to refrain
from making, at any time after the date hereof, disparaging or derogatory
remarks, whether oral or written, regarding the other or its Representatives;
provided that this obligation shall not apply to disclosures required by
applicable law, rule or regulation, order of a court or governmental agency or
obligations pursuant to any listing agreement with any national securities
exchange or automated quotation service.
g. You hereby withdraw (i) your letter (the "April 20 Letter") to
the Board of Directors of the Company dated April 20, 1999, pursuant to which
you requested certain information of the Company pursuant to Section 220(d) of
the General Corporation Law of the State of Delaware (the "DGCL"); (ii) the
written consent of stockholders pursuant to Section 228 of the DGCL enclosed
with the April 20 Letter; and (iii) the Notice of Special Meeting, dated April
20, 1999, called by you and Steven Johnson (it being understood that following
the expiration of the Term, nothing herein shall prevent you from exercising any
rights in this regard that may have been available to you).
h. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof, or the
exercise of any right, power or privilege hereunder. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to principles of conflict of laws. The exclusive forum for all
disputes arising out of this Agreement and the transactions contemplated hereby
shall be the state courts of the State of Delaware. All modifications of,
waivers of and amendments to this Agreement must be in writing and signed by you
and the Company.
i. Either party may terminate this Agreement upon a material breach
by the other party; provided that without otherwise limiting the rights of the
parties, (i) in the event of such a breach by you, you will return the Payment
and any Second Payment to the Company no later than two business days following
demand by the Company and (ii) in the event of such a breach by the Company, you
shall not be required to return the Payment or any Second Payment to the Company
(it being agreed that the provisions of this Section 4(i) are in addition to and
not in satisfaction of the rights and remedies that each party may have against
the other). In addition, the provisions of Section 2(a), 2(b) (solely as it
relates to your agreement to cooperate with the Company and its Board of
Directors), 4(c) and 4(e) shall terminate in the event that the Company fails to
exercise the Option.
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Ernest C. Garcia
May 10, 1999
Page 5
Please confirm your agreement with the foregoing by signing where
indicated below and returning to the undersigned a copy of this Agreement.
Very truly yours,
NATIONAL AUTO CREDIT, INC.
/s/ James J. McNamara
--------------------------
Name: James J. McNamara
Title: Chairman of the Board of Directors
Accepted and Agreed as of the
date first written above:
/s/ Ernest C. Garcia II
- -----------------------
ERNEST C. GARCIA II (*)
* On his own behalf and, for the
purposes of Section 1(a), on behalf of
Verde Investments, Inc., in his capacity
as President.
/s/ Steven Johnson
- ------------------
STEVEN JOHNSON (**)
** For the purposes of Section 4(c), (d) and
(g) only
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IRREVOCABLE PROXY COUPLED WITH AN INTEREST
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, each a
stockholder of NATIONAL AUTO CREDIT, INC., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint Henry Toh, the true and
lawful attorney-in-fact and proxy (the "Attorney in Fact") of the undersigned
for and in its name, place and stead to attend all meetings of the stockholders
of the Company, to receive notices thereof and to vote all 2,849,630 shares of
the Company's Common Stock, par value $0.05 per share, that the undersigned
beneficially own, as well as any other shares of capital stock of the Company
that the undersigned may acquire beneficial ownership of after the date hereof
(collectively, the "Subject Shares"), at all meetings of the stockholders or any
adjournment or adjournments thereof, and to exercise all consenual or other
voting rights with respect to the Subject Shares on any matter, subject to the
limitations set forth below.
This proxy is coupled with an interest and is irrevocable for the
period from the date hereof through the Term (as defined in the Letter Agreement
among Ernest C. Garcia II, Steven Johnson and the Company of even date
herewith). This proxy shall terminate immediately upon any breach by the Company
of such agreement or the escrow agreement referred to therein. The undersigned
hereby ratifies and confirms all that the said Attorney in Fact may lawfully do
or cause to be done by virtue hereof. In the event that this proxy purports to
grant a interest in the Subject Shares that is greater than the interest of the
undersigned therein, this proxy shall be deemed replaced by a grant of an
interest that is valid and enforceable and that comes closest to expressing the
interest of the undersigned in the Subject Shares. The rights and obligations of
the Attorney in Fact hereunder may be delegated and assigned to any other
individual or entity, and the Attorney in Fact shall be entitled to exercise all
rights hereunder with full rights of substitution.
This proxy may not be amended or terminated (except as provided above)
unless such amendment or termination shall have been approved by the Board of
Directors of the Company.
GIVEN at Phoenix, AZ this 10th day of May, 1999.
VERDE INVESTMENTS, INC. /s/ Ernest C. Garcia II
-----------------------
ERNEST C. GARCIA II
/s/ Ernest C. Garcia II
- ------------------------------
ERNEST C. GARCIA II, PRESIDENT
STATE OF ARIZONA )
) ss:
COUNTY OF MARICOPA )
BE IT REMEMBERED, that on May 10, 1999, before me, the subscriber, a Notary
Public in the State of Arizona, personally appeared ERNEST C. GARCIA II, to me
known, who being by me duly sworn did depose and say that he resides at Phoenix,
AZ that he is the person described in and who executed the above instrument on
his own behalf, and in the case of Verde Investments, Inc., as a duly authorized
officer of said corporation, and he acknowledged that he signed and delivered
the same as his voluntary act and deed.
/s/ Kathleen Chacon
- -------------------
Notary Public
<PAGE>
ESCROW AGREEMENT
----------------
ESCROW AGREEMENT, dated as of May 10, 1999, (the "Agreement"), between
National Auto Credit, Inc., a Delaware corporation (the "Company"), Ernest C.
Garcia II (the "Investor") and Gordon, Fournaris & Mammarella, P.A., a Delaware
professional corporation, as Escrow Agent (the "Escrow Agent").
WHEREAS, the Investor and the Company are parties to a Letter Agreement
(the "Letter Agreement"), dated as of the date hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Definitions. Terms used without definition herein shall have the
respective meanings ascribed thereto in the Letter Agreement.
2. Appointment of Escrow Agent; Deposit of Shares and Funds in Escrow. The
Company and the Investor hereby appoint the Escrow Agent as the escrow agent
under this Agreement, and the Escrow Agent accepts such appointment according to
the terms and conditions set forth herein. Within two business days of the date
hereof, the Company and the Investor shall have deposited with the Escrow Agent,
and the Escrow Agent hereby acknowledges receipt of, (a) certificates registered
in the name of the Investor (or other entities holding Common Stock beneficially
owned by the Investor) evidencing the Shares (together with appropriate stock
powers duly endorsed in blank or accompanied by other duly executed instruments
of transfer in favor of the Company), which, for the avoidance of doubt,
constitute 2,849,630 shares of Common Stock and (b) funds (the "Funds") in the
amount of $3,274,445, which, for the avoidance of doubt, constitutes the
consideration to be paid by the Company to the Investor upon exercise of the
Option, without giving effect to the making of the Second Payment and the
deduction from such consideration required in connection therewith; provided
that upon the making of the Second Payment (which the Company agrees to give the
Escrow Agent concurrent notice of), the Funds shall be reduced by $250,000 in
accordance with Section 3 hereof. The Escrow Agent shall hold, manage,
administer, distribute and dispose of the Shares and the Funds in accordance
with the terms and conditions of this Agreement. The Escrow Agent shall hold the
Shares and the Funds in the escrow created hereunder in its principal offices in
the City of Wilmington, Delaware; provided that, the Escrow Agent may, at the
instruction and expense of the Company, deposit the Funds in an insured interest
bearing account with a commercial bank located in the State of Delaware with
total capital and surplus in excess of $500 million (it being agreed and
understood that all interest in respect of the Funds shall be credited for the
account of the Company).
3. Release of Shares and Funds From Escrow. The Escrow Agent shall hold the
Shares and the Funds in escrow in accordance with this Agreement and shall
release the Shares and the Funds only as follows:
(a) Upon the exercise of the Option by the Company (or any third-party
which the Company has, in accordance with the Letter Agreement, transferred the
Option to), the Escrow Agent shall release the Shares and the Funds from the
escrow created hereunder and deliver the Shares to the Company (or such
third-party transferee) and deliver the Funds to the Investor. The Company shall
concurrently notify the Escrow Agent of its exercise of the Option.
<PAGE>
(b) If the Company has not exercised the Option, upon the expiration
of the Term or in the event of a breach of this Agreement or the Letter
Agreement resulting in a termination of Agreement and the Letter Agreement, the
Escrow Agent shall release the Shares and the Funds from the escrow created
hereunder and deliver the Shares to the Investor and deliver the Funds to the
Company.
(c) Any delivery required to be made hereunder by the Escrow Agent
shall be delivered in accordance with written instructions given to the Escrow
Agent by the party entitled under this Agreement to receive such delivery.
(d) Upon the giving of any notice of the making of any Second Payment
by the Company pursuant to Section 2 hereof, the Escrow Agent shall release
$250,000 of the Funds from the escrow created hereunder and deliver such amount
to the Company.
(e) Upon the release of the Shares and the Funds by the Escrow Agent
in accordance with this Section 3, this Agreement and the escrow created
hereunder shall terminate and the Escrow Agent shall be discharged from all
further obligations hereunder.
4. Conditions to Escrow. The Escrow Agent agrees to hold the Shares and the
Funds and to perform in accordance with the terms and provisions of this
Agreement. The Company and the Investor agree that the Escrow Agent does not
assume any responsibility for the failure of the Company or the Investor to
perform in accordance with the Letter Agreement or this Agreement. The
acceptance by the Escrow Agent of its responsibilities hereunder is subject to
the following terms and conditions, which the parties hereto agree shall govern
and control with respect to the Escrow Agent's rights, duties, liabilities and
immunities:
(a) The Escrow Agent may conclusively rely, and shall be protected in
acting or refraining from acting upon, any written notice, certification,
request, waiver, consent, receipt or other paper or document furnished to it,
not only as to its due execution and validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information therein
contained which the Escrow Agent reasonably believes to be genuine and to have
been executed and presented by the proper party or parties. Should it be
necessary for the Escrow Agent to act upon any instructions, directions,
documents or instruments issued or signed by or on behalf of any corporation,
fiduciary, or individual acting on behalf of another party hereto, it shall not
be necessary for the Escrow Agent to inquire into such corporation's,
fiduciary's or individual's authority, capacity, existence or identity. The
Escrow Agent is also relieved from the necessity of satisfying itself as to the
authority of the persons executing this Agreement in a representative capacity.
It is understood that any references herein to joint instructions or joint
written instructions or words of similar import include any instructions signed
in counterpart.
(b) The Escrow Agent shall not be liable for any error of judgment or
for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except for its own gross negligence or willful misconduct.
(c) The Escrow Agent may consult with, and obtain advice from, legal
counsel in the event of any question as to any of the provisions hereof or the
duties hereunder, and it shall incur no liability and shall be fully protected
in acting in good faith in accordance with the opinion and
2
<PAGE>
instructions of such counsel. The reasonable costs of such counsel's services
shall be paid to the Escrow Agent in accordance with Section 6 below.
(d) The Escrow Agent shall have no duties except those which are
expressly set forth herein and it shall not be bound by (i) the Letter Agreement
or any agreement of the other parties hereto (whether or not it has any
knowledge thereof) or by any notice of a claim, or demand with respect thereto
or (ii) any waiver, modification, amendment, termination or rescission of this
Agreement, in either case unless the Escrow Agent agrees thereto in writing.
(e) The Escrow Agent may resign and be discharged from its duties and
obligations hereunder by giving notice in writing of such resignation specifying
a date (no earlier than 30 days following the date of such notice) when such
resignation will take effect, provided, however, that until a successor escrow
agent is appointed by the Investor and the Company and such successor accepts
such appointment, the Escrow Agent shall continue to hold the Shares and the
Funds and otherwise comply with the terms of this Agreement; and provided
further that the parties to this Escrow Agreement agree to use their best
efforts to mutually agree on a successor escrow agent within 30 days after the
giving of Escrow Agent's notice and if no such successor escrow agent shall be
appointed within 30 days of the Escrow Agent providing its notice, the Escrow
Agent may, at the expense of the Company and the Investor, (i) appoint a
successor escrow agent which shall be a national or state-chartered banking,
trust or savings association or (ii) petition any court of competent
jurisdiction for the appointment of a successor escrow agent. Any successor
escrow agent shall execute and deliver an instrument accepting such appointment
and it shall, without further acts, be vested with all the estates, properties,
rights, powers and duties of the predecessor escrow agent as if originally named
as escrow agent. The resigning Escrow Agent shall thereupon be discharged from
any further obligations under this Escrow Agreement.
(f) Upon delivery of all of the Shares and all of the Funds pursuant
to the terms of Section 3 above or to a successor escrow agent, the Escrow Agent
shall thereafter be discharged from any further obligations hereunder. The
Escrow Agent is hereby authorized, in any and all events, to comply with and
obey any and all final judgments, orders and decrees (not subject to appeal) of
any court of competent jurisdiction which may be filed, entered or issued, and,
if it shall so comply or obey, it shall not be liable to any other person by
reason of such compliance or obedience.
(g) The Escrow Agent shall not have any responsibility or liability
for the completeness, correctness or accuracy of any transactions between the
Investor, on the one hand, and the Company, on the other hand.
(h) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Shares or the Funds which, in its sole opinion, are in conflict with either
other instructions received by it or any provision of this Agreement, it shall
without liability of any kind, be entitled to hold the Shares and the Funds
pending the resolution of such uncertainty to the Escrow Agent's sole
satisfaction, by final judgment of a court or courts of competent jurisdiction
or otherwise.
5. Indemnification. The Company and the Investor, jointly and severally,
hereby agree to indemnify the Escrow Agent, its directors, officers, agents and
employees and any person who "controls" the Escrow Agent within the meaning of
Section 15 of the Securities Act of 1933 (collectively, the "Indemnified
Parties") for and to hold them harmless against any loss, liability or expense
(including, without limitation, all expenses reasonably incurred in its
investigation and defense
3
<PAGE>
and costs and expenses reasonably incurred in enforcing this right of
indemnification) incurred without gross negligence or willful misconduct on the
part of the Indemnified Parties arising out of or in connection with this
Agreement. The provisions of this Section 5 shall survive the termination of
this Agreement.
6. Escrow Costs; No Right of Set-off. The Escrow Agent shall be entitled to
be paid a fee of $4,500 for its services pursuant to this Agreement and to be
reimbursed for its reasonable costs and expenses hereunder (including reasonable
counsel fees), which fees, costs and expenses shall be paid from time to time by
the Company. Nothing in this Section 6 limits the Escrow Agent's rights against
the Company and the Investor for the payment of amounts due to the Escrow Agent
under Section 5 above or the Escrow Agent's fees, costs and expenses hereunder.
7. Miscellaneous.
-------------
(a) Governing Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflict of laws. The parties agree that the exclusive forum
for all disputes arising out of this Agreement and the transactions contemplated
hereby shall be the state courts of the State of Delaware.
(b) Paragraph and Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part of this Agreement.
(c) Notices. All notices and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given:
(i) if to the Company, to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Daniel D. Rubino, Esq.
Facsimile: (212) 728-8111
(ii) if to the Investor, to: with a copy
(which shall not constitute
notice) to:
Ernest C. Garcia II
2525 E. Camelback Road Steven D. Pidgeon, Esq.
Suite 1150 Snell & Wilmer L.L.P.
Phoenix, Arizona 85011 One Arizona Center
Facsimile: (602) 522-3160 Phoenix, Arizona 85004-0001
Facsimile: (602) 382-6070
4
<PAGE>
(iii) if to the Escrow Agent, to:
Gordon, Fournaris & Mammarella, P.A.
1220 North Market Street, Suite 700
Wilmington, DE 19801
Facsimile: (302) 652-1142
or such other address or facsimile number as a party may hereafter specify by
like notice to the other parties. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified herein and the appropriate
confirmation is provided; (ii) if given via a nationally recognized courier
service marked "Next Day Delivery," one business day following the date of the
delivery to such courier service; (iii) if given via United States mail, five
days after such notice is deposited in the mail in a postage pre-paid envelope;
or (iv) if given by any other means, when delivered at the address specified
herein.
(d) Expenses and Taxes. Each party shall pay its own fees and expenses
incurred in connection with the transactions contemplated hereby.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
(f) Entire Agreement; Amendment and Waiver. This Agreement and the
Letter Agreement constitute the entire understanding of the parties hereto and
supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived only with the written
consent of the Company and Investor. No course of dealing between the Company
and Investor nor any delay in exercising any rights hereunder shall operate as a
waiver of any rights of either party hereto.
(g) Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.
(h) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the date first written above.
NATIONAL AUTO CREDIT, INC.
/s/ James J. McNamara
-------------------------------
Name: James J. McNamara
Title: Chairman of the Board
of Directors
/s/ Ernest C. Garcia II
-------------------------------
ERNEST C. GARCIA II (*)
GORDON, FOURNARIS & MAMMARELLA, P.A.
By: /s/ Peter S. Gordon
---------------------------
Peter S. Gordon, Esquire
President
(*) On his own behalf and, for purposes
of delivery of 134,000 shares of Common
Stock, on behalf of Verde Investments,
Inc., as President.
<PAGE>
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139
As of August 8, 1999
Ernest C. Garcia II
2525 E. Camelback Road
Suite 1150
Phoenix, Arizona 85011
Dear Mr. Garcia:
Reference is made to (i) the Letter Agreement, dated May 10, 1999 (the
"Option Agreement"), by and among National Auto Credit, Inc., a Delaware
corporation (the "Company"), Ernest C. Garcia II and Steven Johnson (for
purposes of Section 4(c), (d) and (g) of the Option Agreement only), as extended
by a Notice of Extension from the Company dated June 24, 1999, (ii) the Escrow
Agreement, dated as of May 10, 1999, between the Company, Ernest C. Garcia II
and Gordon, Fournaris & Mammarella, P.A., a Delaware professional corporation,
as Escrow Agent, and (iii) the Irrevocable Proxy Coupled with an Interest, dated
as of May 10, 1999, entered into by Ernest C. Garcia II in favor of Henry Toh
(the "Proxy"). This letter sets forth our mutual understanding with respect to
the extension of that certain Option (the "Option") to purchase 2,849,630 shares
of the Common Stock, par value $0.05 per share, of the Company granted by you to
the Company pursuant to the Option Agreement.
1. You hereby agree to amend Section 1(a) of the Option Agreement to
extend the Term (as defined in the Option Agreement) of the Option for an
additional 120 days from the date hereof for and in consideration of the
non-refundable sum of $1 million payable by the Company on August 12, 1999 (the
"Third Payment"), provided, however, that $750,000 of the Third Payment shall be
deducted from the aggregate amount payable by the Company to you upon any
exercise of the Option. As used in the Option Agreement, the Escrow Agreement
and the Proxy, the word "Term" shall mean the Term, as extended by this letter.
2. You agree that Section 1(b) of the Option Agreement is hereby
amended by deleting "$1.50", and inserting "$0.89" in its stead.
3. You agree that Section 4(i) of the Option Agreement is hereby
amended and restated in its entirety as follows:
"i. Either party may terminate this Agreement upon a material breach by
the other party; provided that without otherwise limiting the rights of the
parties, (i) in the event of such a breach by you, you will return the
Payment, one half (1/2) of the Second Payment and the $1 million payment to
be made by the Company to Ernest C. Garcia II under that certain Letter
Agreement, dated as of August 8, 1999 among the Company, Ernest C. Garcia
II and Steven Johnson (for purposes of Section 4(c), (d) and (g) of this
<PAGE>
Ernest C. Garcia II
As of August 8, 1999
Page 2
Agreement only) and Gordon, Fournaris & Mammarella, P.A. (the "Third
Payment" and, collectively with the Payment and one-half (1/2) of the
Second Payment, the "Payments") to the Company no later than two business
days following demand by the Company; provided that you shall not be
required to return the Payments if the Existing Directors shall not be in
office at the time of such breach, and (ii) in the event of such a breach
by the Company, you shall not be required to return the Payments to the
Company (it being agreed that the provisions of this Section 4(i) are in
addition to and not in satisfaction of the rights and remedies that each
party may have against the other). In addition, the provisions of Section
2(a), 2(b) (solely as it relates to your agreement to cooperate with the
Company and its Board of Directors), 4(c) and 4(e) shall terminate in the
event that the Company fails to exercise the Option."
4. All other provisions of the Option Agreement shall remain unchanged
in full force and effect.
5. You agree that the Escrow Agent shall, upon execution of this
letter, release $750,000 of the Funds (as defined in the Escrow Agreement) from
the escrow and deliver such amount to the Company in accordance with Sections 2
and 3(d) of the Escrow Agreement. You further agree that the Escrow Agreement is
hereby ratified and confirmed.
The Company hereby confirms that after such withdrawal the escrow will
have and retain sufficient funds to cover the balance of the aggregate exercise
price of the Option.
Please confirm your agreement with the foregoing by signing where
indicated below and returning to the undersigned a copy of this letter.
Very truly yours,
NATIONAL AUTO CREDIT, INC.
By:/s/ James J. McNamara
----------------------------
Name: James J. McNamara
Title: Chairman of the Board
ACCEPTED AND AGREED:
/s/ Ernest C. Garcia II
- ------------------------
Ernest C. Garcia II(*)
/s/ Steven Johnson
- ------------------------
Steven Johnson
(*) On his own behalf and, for purposes of delivery of 134,000 shares of Common
Stock, on behalf of Verde Investments, Inc., as President
<PAGE>
Ernest C. Garcia II
As of August 8, 1999
Page 3
GORDON, FOURNARIS & MAMMARELLA, P.A.
By:/s/ Peter S. Gordon
---------------------------
Name: Peter S. Gordon, Esq.
Title: President
<PAGE>
NATIONAL AUTO CREDIT, INC.
STOCK OPTION AGREEMENT
NATIONAL AUTO CREDIT, INC., a Delaware corporation, and its subsidiaries
("Company") hereby grants to the individual identified on Exhibit A, hereto
("Optionee") certain options, as more particularly described in Exhibit A which
is attached hereto and incorporated herein by reference, which are exercisable
to purchase that number of shares of the Company's common stock ("Stock") as set
forth in Exhibit A. The right to purchase any one share of Stock hereunder is
herein referred to as an "Option." The Options granted hereunder are subject to
all of the terms, conditions and limitations of the Company's 1993 Equity
Incentive Plan ("Plan"), which is incorporated herein by reference and the terms
and conditions of this Stock Option Agreement ("Agreement"). Unless otherwise
indicated herein, defined terms in this Agreement shall have the meaning
indicated in the Plan.
1. Option Price. The Option price for each share of Stock subject to the
Options granted hereunder is specified in Exhibit A.
2. Description of Options. The Optionee is granted a NQSO to purchase the
number of shares of Stock as set forth in Exhibit A.
3. Exercise of Options.
A. Schedule of Rights to Exercise. All of the Options shall be fully
vested and exercisable as of the Date of Grant specified in Exhibit A.
B. Termination of Board Membership. The termination of Optionee's
membership from the Board for any reason shall have no effect on the
exercisability of the Options which shall remain exercisable until the
expiration of the Options' term.
C. Method of Exercise. Options may be exercised, in whole or in part,
by the Optionee providing the Company a written notice which shall:
(1) state the election to exercise all or part of the Options
granted hereunder, identify the Options(s) being exercised, the legal
name of the Optionee in whose name the stock certificate or
certificates for such shares of Stock is to be registered, and his
address and Social Security Number;
<PAGE>
(2) contain such representations and agreements as to the
Optionee's investment intent with respect to such shares of Stock as
may be satisfactory to the Company, and its counsel;
(3) be signed by the Optionee entitled to exercise such Options;
and
(4) be in writing and delivered in person or by certified mail to
the Chairman of the Board of the Company at 30000 Aurora Road, Solon,
OH 44139.
D. Payment. Payment of the Option price for shares of Stock acquired
upon exercise of an Option shall be in the manner provided in Section 8 of
the Plan. The certificate or certificates for shares of the Stock acquired
upon the exercise of Options granted hereunder shall be registered in the
name of the person exercising such Options. A partial exercise of the
Options granted hereunder does not waive an Optionee's right to a later
exercise of some or all of such unexercised Options.
E. Compliance with Law. The obligation of the Company to issue shares
of Stock pursuant to the exercise of Options shall be subject to all
applicable laws, rules and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any of the
provisions hereof, the Optionee hereby agrees that the Optionee will not
exercise the Options, and that the Company will be under no obligation to
offer to sell or to sell and shall be prohibited from offering to sell or
selling any shares of Stock pursuant to the exercise of any Option unless
such exercise, offer or sale shall be properly registered pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) (the
"Securities Act") with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company,
that such shares may be offered or sold without such registration pursuant
to an available exemption therefrom and the terms and conditions of such
exemption have been fully complied with. Any determination in this
connection by the Company shall be final, binding and conclusive. The
Company shall in no event be obliged to register the offer or sale of
shares of Stock underlying any Option pursuant to the Securities Act or to
take any other affirmative action in order to cause the exercise of the
Options or the issuance or transfer of shares pursuant thereto to comply
with any law or regulation of any governmental authority. If the shares of
Stock offered for sale or sold under any Option are offered or sold
pursuant to any exemption from registration under the Securities Act, the
Company may restrict the transfer of such shares and may legend the Stock
certificates representing such shares in such manner as it deems advisable
to ensure the availability of any such
2
<PAGE>
exemption.
The Company is relieved from any liability for the non-issuance or
non-transfer or any delay in issuance or transfer of any shares of Stock
subject to Options which results from the inability of the Company to
obtain or in any delay in obtaining from any regulatory body having
jurisdiction all requisite authority to issue or transfer shares of Stock
of the Company either upon exercise of the Options or shares of Stock
issued as a result of such exercise if counsel for the Company deems such
authority necessary for lawful issuance or transfer of any such shares.
4. Non-Transferability of Options. The Options granted hereunder may not be
transferred in any manner otherwise than by will or the laws of descent and
distribution and (other than in the event of the Optionee's death or incapacity)
may be exercised during the lifetime of the Optionee only by him/her. The terms
of the Options granted hereunder shall be binding upon the executors,
administrators, heirs and successors of the Optionee.
5. Term of Options. The Options granted hereunder shall terminate on the
tenth (10th) anniversary of the date of grant as set forth below and may be
exercised only in accordance with the Plan and the terms of this Agreement and
all applicable Securities Laws and Regulations.
6. Estoppel Provision: Additional Provisions.
(A) Optionee shall not have any rights to dividends or any other
rights of a shareholder with respect to any shares of Stock subject to the
Options until such shares shall have been issued to him (as evidenced by
the appropriate entry on the books of a duly authorized transfer agent of
the Company) upon the purchase of such shares following exercise.
(B) The Company shall not be liable or bound in any manner by any oral
or written statement, representation, or other information pertaining to
the Stock, the Company or any affiliate of the Company unless the same are
specifically set forth herein or in the Plan. The Optionee's acceptance
hereof represents his agreement and acknowledgment that the Company has not
made and is not making any representation or warranty either express or
implied, concerning the Stock or any matter or thing relating to or
affecting the Company or any of its affiliates except as specifically set
forth in this Agreement.
3
<PAGE>
(C) Optionee specifically acknowledges his understanding that sales or
other dispositions of any shares of Stock made in reliance upon Rule 144
under the Securities Act of 1993, as amended (the "Act") can be made only
in limited amounts in accordance with the terms and conditions of such
Rule.
7. Plan. This Agreement is subject to the terms and conditions of the Plan,
a copy of which is attached hereto and incorporated by reference herein.
NATIONAL AUTO CREDIT, INC.
ATTEST:
/s/ James J. McNamara
- --------------------------------------
MEMBER OF THE ADMINISTRATIVE COMMITTEE
OF THE 1993 EQUITY INCENTIVE PLAN
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts these Options subject to all the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Plan.
DATED: August 26, 1999
-------------------------------
/s/ Henry Y.L. Toh
- --------------------------------------
OPTIONEE
4
<PAGE>
EXHIBIT A
Henry Toh 12-22-99
- ----------------------------- --------------
(Optionee) (Grant Date)
12-22-99
--------------
(Expiration
Date)
Non-qualified Stock Option ("NQSO")
- -----------------------------------
Number of shares subject to 75,000
NQSO --------------
Option price for each share
subject to a NQSO $0.92
-----
<PAGE>
NATIONAL AUTO CREDIT, INC.
STOCK OPTION AGREEMENT
NATIONAL AUTO CREDIT, INC., a Delaware corporation, and its subsidiaries
("Company") hereby grants to the individual identified on Exhibit A, hereto
("Optionee") certain options, as more particularly described in Exhibit A which
is attached hereto and incorporated herein by reference, which are exercisable
to purchase that number of shares of the Company's common stock ("Stock") as set
forth in Exhibit A. The right to purchase any one share of Stock hereunder is
herein referred to as an "Option." The Options granted hereunder are subject to
all of the terms, conditions and limitations of the Company's 1993 Equity
Incentive Plan ("Plan"), which is incorporated herein by reference and the terms
and conditions of this Stock Option Agreement ("Agreement"). Unless otherwise
indicated herein, defined terms in this Agreement shall have the meaning
indicated in the Plan.
1. Option Price. The Option price for each share of Stock subject to the
Options granted hereunder is specified in Exhibit A.
2. Description of Options. The Optionee is granted a NQSO to purchase the
number of shares of Stock as set forth in Exhibit A.
3. Exercise of Options.
A. Schedule of Rights to Exercise. All of the Options shall be fully
vested and exercisable as of the Date of Grant specified in Exhibit A.
B. Termination of Board Membership. The termination of Optionee's
membership from the Board for any reason shall have no effect on the
exercisability of the Options which shall remain exercisable until the
expiration of the Options' term.
C. Method of Exercise. Options may be exercised, in whole or in part,
by the Optionee providing the Company a written notice which shall:
(1) state the election to exercise all or part of the Options
granted hereunder, identify the Options(s) being exercised, the legal
name of the Optionee in whose name the stock certificate or
certificates for such shares of Stock is to be registered, and his
address and Social Security Number;
<PAGE>
(2) contain such representations and agreements as to the
Optionee's investment intent with respect to such shares of Stock as
may be satisfactory to the Company, and its counsel;
(3) be signed by the Optionee entitled to exercise such Options;
and
(4) be in writing and delivered in person or by certified mail to
the Chairman of the Board of the Company at 30000 Aurora Road, Solon,
OH 44139.
D. Payment. Payment of the Option price for shares of Stock acquired
upon exercise of an Option shall be in the manner provided in Section 8 of
the Plan. The certificate or certificates for shares of the Stock acquired
upon the exercise of Options granted hereunder shall be registered in the
name of the person exercising such Options. A partial exercise of the
Options granted hereunder does not waive an Optionee's right to a later
exercise of some or all of such unexercised Options.
E. Compliance with Law. The obligation of the Company to issue shares
of Stock pursuant to the exercise of Options shall be subject to all
applicable laws, rules and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any of the
provisions hereof, the Optionee hereby agrees that the Optionee will not
exercise the Options, and that the Company will be under no obligation to
offer to sell or to sell and shall be prohibited from offering to sell or
selling any shares of Stock pursuant to the exercise of any Option unless
such exercise, offer or sale shall be properly registered pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) (the
"Securities Act") with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company,
that such shares may be offered or sold without such registration pursuant
to an available exemption therefrom and the terms and conditions of such
exemption have been fully complied with. Any determination in this
connection by the Company shall be final, binding and conclusive. The
Company shall in no event be obliged to register the offer or sale of
shares of Stock underlying any Option pursuant to the Securities Act or to
take any other affirmative action in order to cause the exercise of the
Options or the issuance or transfer of shares pursuant thereto to comply
with any law or regulation of any governmental authority. If the shares of
Stock offered for sale or sold under any Option are offered or sold
pursuant to any exemption from registration under the Securities Act, the
Company may restrict the transfer of such shares and may legend the Stock
certificates representing such shares in such manner
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<PAGE>
as it deems advisable to ensure the availability of any such exemption.
The Company is relieved from any liability for the non-issuance or
non-transfer or any delay in issuance or transfer of any shares of Stock
subject to Options which results from the inability of the Company to
obtain or in any delay in obtaining from any regulatory body having
jurisdiction all requisite authority to issue or transfer shares of Stock
of the Company either upon exercise of the Options or shares of Stock
issued as a result of such exercise if counsel for the Company deems such
authority necessary for lawful issuance or transfer of any such shares.
4. Non-Transferability of Options. The Options granted hereunder may not be
transferred in any manner otherwise than by will or the laws of descent and
distribution and (other than in the event of the Optionee's death or incapacity)
may be exercised during the lifetime of the Optionee only by him/her. The terms
of the Options granted hereunder shall be binding upon the executors,
administrators, heirs and successors of the Optionee.
5. Term of Options. The Options granted hereunder shall terminate on the
tenth (10th) anniversary of the date of grant as set forth below and may be
exercised only in accordance with the Plan and the terms of this Agreement and
all applicable Securities Laws and Regulations.
6. Estoppel Provision: Additional Provisions.
(A) Optionee shall not have any rights to dividends or any other
rights of a shareholder with respect to any shares of Stock subject to the
Options until such shares shall have been issued to him (as evidenced by
the appropriate entry on the books of a duly authorized transfer agent of
the Company) upon the purchase of such shares following exercise.
(B) The Company shall not be liable or bound in any manner by any oral
or written statement, representation, or other information pertaining to
the Stock, the Company or any affiliate of the Company unless the same are
specifically set forth herein or in the Plan. The Optionee's acceptance
hereof represents his agreement and acknowledgment that the Company has not
made and is not making any representation or warranty either express or
implied, concerning the Stock or any matter or thing relating to or
affecting the Company or any of its affiliates except as specifically set
forth in this Agreement.
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<PAGE>
(C) Optionee specifically acknowledges his understanding that sales or
other dispositions of any shares of Stock made in reliance upon Rule 144
under the Securities Act of 1993, as amended (the "Act") can be made only
in limited amounts in accordance with the terms and conditions of such
Rule.
7. Plan. This Agreement is subject to the terms and conditions of the Plan,
a copy of which is attached hereto and incorporated by reference herein.
NATIONAL AUTO CREDIT, INC.
ATTEST:
/s/ James J. McNamara
- --------------------------------------
MEMBER OF THE ADMINISTRATIVE COMMITTEE
OF THE 1993 EQUITY INCENTIVE PLAN
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
annexed hereto, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts these Options subject to all the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Plan.
DATED: August 26, 1999
--------------------------
/s/ Henry Y.L. Toh
- --------------------------------
OPTIONEE
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<PAGE>
EXHIBIT A
Henry Toh 6-6-99
- ----------------------------- --------------
(Optionee) (Grant Date)
6-6-99
--------------
(Expiration
Date)
Non-qualified Stock Option ("NQSO")
- -----------------------------------
Number of shares subject to 100,000
NQSO --------------
Option price for each share
subject to a NQSO $1.03
-----
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