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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 EXCHANGE ACT OF 1934
April 22, 1999
(Date of Report - Date of Earliest Event Reported)
NATIONAL AUTO CREDIT, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-11601 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 Events
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(a) On May 12, 1999, the Company appointed Allen D. Rice, formerly an
executive with General Electric Capital Services, Inc., as President. Mr. Rice
will assume his position and operating responsibilities effective immediately.
The Company entered into an employment agreement with Mr. Rice, dated as of
May 12, 1999, set forth as Exhibit 10(i) hereto and incorporated herein by
reference.
(b) As disclosed in the Schedule 13D filed with the Securities and
Exchange Commission on April 20, 1999 by Ernest C. Garcia II and Verde
Investments, Inc., Sam J. Frankino, majority shareholder of National Auto
Credit, Inc. (the "Company"), granted Ernest C. Garcia II a revocable proxy (the
"Frankino Proxy") to vote shares in the Company owned or controlled by Mr.
Frankino with respect to all matters, except mergers, consolidations,
combinations, dispositions or sales of assets of the Company. On the same date,
the Company also received from Mr. Garcia a Consent of Stockholders seeking to
elect two new directors to the Company's Board of Directors, including Mr.
Garcia and Mr. Steven Johnson, as well as a request for certain information
regarding the Company. As disclosed in the Schedule 13D filed with the
Securities and Exchange Commission on May 12, 1999 by Mr. Gracia and Verde
Investments, Inc., Mr. Garcia resigned as proxy under the Frankino Proxy.
(c) On May 10, 1999, the Company and Mr. Garcia entered into an
agreement (the "Option Agreement") pursuant to which the Company acquired an
option to purchase the 2,849,630 shares of the Company's common stock
beneficially owned by Mr. Garcia. The option is for an initial term of 45 days
and is exercisable at price of $1.50 per share. In consideration for the
option, the Company paid $1 million, all of which will be credited toward the
aggregate exercise price payable by the Company upon exercise of the option.
Pursuant to the Option Agreement, Mr. Garcia withdrew the April 20, 1999
Consent of Stockholders. The Option Agreement and the Escrow Agreement entered
into in connection with the Option Agreement are set forth as Exhibits 10(j)
and 10(l) hereto and are incorporated herein by reference. Concurrent with the
grant of the option, an independent director of the Company's Board of
Directors obtained a proxy (the "Proxy") to vote all of the shares subject to
the option. The Proxy is set forth as Exhibit 10(k) hereto and is incorporated
herein by reference.
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Item 7. Financial Statements and Exhibits
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(c) Exhibits:
(3) (c) Amended and Restated By-Laws of National Auto Credit,
Inc. dated January 14, 1999.
(10) (i) Employment Agreement dated as of May 12, 1999,
between the Company and Allen D. Rice.
(10) (j) Option Agreement, dated May 10, 1999, by and
among the Company, Ernest C. 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).
(10) (k) Irrevocable Proxy of Ernest C. Garcia and Verde
Investments, Inc. in favor of Henry Toh, dated
May 10, 1999.
(10) (l) Escrow Agreement, dated as of May 10, 1999, by
and among the Company, Ernest C. Garcia II and
Gordon, Fournaris & Mammarella, as Escrow Agent.
(99) (a) Press release of the Company, dated April 22, 1999.
(99) (b) Press release of the Company, dated May 12, 1999.
(99) (c) Press release of the Company, dated May 20, 1999.
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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.
Date: May 25, 1999 /s/ Davida S. Howard
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Davida S. Howard
Vice President-Finance and Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit Page
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(3)(c) Amended By-Laws of National Auto Credit, Inc. dated
January 14 , 1999. 5
(10)(i) Employment Agreement dated as of May 12, 1999, between
the Company and Allen D. Rice. 24
(10)(j) Option Agreement, dated May 10, 1999, by and among the
Company, Ernest C. 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). 38
(10)(k) Irrevocable Proxy of Ernest C. Garcia and Verde
Investments, Inc. in favor of Henry Toh, dated May 10,
1999. 43
(10)(l) Escrow Agreement, dated as of May 10, 1999, by and
among the Company, Ernest C. Garcia II and Gordon,
Fournaris & Mammarella, as Escrow Agent. 44
(99)(a) Press release of the Company, dated April 22, 1999. 50
(99)(b) Press release of the Company, dated May 12, 1999. 51
(99)(c) Press release of the Company, dated May 20, 1999. 53
</TABLE>
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Exhibit 3(c)
AMENDED AND RESTATED BY-LAWS OF NATIONAL AUTO CREDIT, INC.
Incorporated Under the Laws of the State of Delaware
ARTICLE I.
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The corporation may also have
offices at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II.
FISCAL YEAR - STOCKHOLDERS
Section 1. FISCAL YEAR. The first fiscal year of the
corporation shall end January 31, 1996 and thereafter commence on the first day
of February each year and end on the last day of January unless changed from
time to time by action of the board of directors.
Section 2. ANNUAL MEETING. The annual meeting of the
stockholders for the election of directors and for the transaction of any other
proper business, shall be held at such date and time during the first eight
months of each calendar year as shall be determined by the board of directors.
If no earlier date is determined by the board of directors, the annual meeting
shall be held on the fourth Tuesday in August of each year, if not a legal
holiday under the laws of the State where such meeting is to be held and if a
legal holiday under the laws of such State, then on the next succeeding business
day not a legal holiday under the laws of such State.
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Section 3. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise provided by statute
or by the Certificate of Incorporation, may be called at any time by the
chairman of the board, or the president, or any vice president, or secretary,
and shall be called by the president or secretary at the request in writing of a
majority of the directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Any such request shall state the purpose or
purposes of the proposed meeting.
Section 4. PLACE OF MEETINGS. All meetings of the stockholders
for the election of directors shall be held at such place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of such meeting.
Section 5. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written
notice of the annual meeting or a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than fifty (50) days before the date of the meeting.
Business transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice. When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days or if a new record date is fixed for the adjourned
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meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 6. STOCKHOLDERS' LIST. The officer who has charge of
the stock ledger of the corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 7. QUORUM AND ADJOURNMENTS. At such meeting of the
stockholders, except as otherwise provided by statute or by the Certificate of
Incorporation, the holders of a majority of the issued and outstanding shares of
each class of stock entitled to vote thereat, present in person or represented
by proxy, shall be necessary and sufficient to constitute a quorum for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
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Section 8. VOTING. When a quorum is present or represented at
any meeting, the vote of the holders of a majority of the shares of stock having
voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes or of the Certificate of Incorporation or of these
By-Laws a different vote is required, in which case such express provision shall
govern and control the decision of such question.
Section 9. PROXIES. At each meeting of the stockholders, each
stockholder shall, unless otherwise provided by the Certificate of
Incorporation, be entitled to one vote in person or by proxy for each share of
stock held which has voting power upon the matter in question, but no proxy
shall be voted after three years from its date, unless the proxy provides for a
longer period.
Section 10. ACTION OF STOCKHOLDERS WITHOUT A MEETING. No
corporate action may be taken by consent of the stockholders. Whenever the vote
of stockholders is required or permitted to be taken for or in connection with
any corporate action, whether by any provision of the statutes or of the
Certificate of Incorporation or otherwise, such corporate action may only be
taken at a duly called and noticed meeting of stockholders.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. NUMBER OF DIRECTORS. The number of directors
constituting the board shall be reduced to, and fixed at, five (5) members; and
no vacancy shall be deemed to exist in the board unless and until the number of
directors in office falls below the number so
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fixed. No decrease in the number of directors shall shorten the term of any
incumbent director. Directors may, but need not, be stockholders.
Section 2. ELECTION OF DIRECTORS. The directors shall be
elected at the annual meeting of stockholders, or if not so elected, at a
special meeting of stockholders called for that purpose. Directors shall hold
office for a term of three years and shall be divided into three classes so that
approximately one-third of the board shall stand for election at each annual
meeting of stockholders. At the annual meeting of stockholders in 1996, and at
each annual meeting thereafter, approximately one-third of the membership of the
board shall be elected for three year terms. If the number of directors is
changed, any increase or decrease in directors shall be apportioned among the
classes so as to maintain all classes as nearly equal in number as possible and
any individual director elected to any class shall hold office for a term which
shall coincide with the term of such class. At any meeting of stockholders at
which directors are to be elected, only persons nominated as candidates shall be
eligible for election, and the candidates receiving the greatest number of votes
shall be elected. Nominations for the election of directors may be made by the
board of directors. Nominations for election of directors may also be made by
any stockholder entitled to vote for the election of directors, by notice in
writing, delivered or mailed, postage prepaid, to the secretary of the
corporation not less than fourteen nor more than fifty days prior to any meeting
of the stockholders called for the election of directors. Each such notice shall
set forth the name, age, business address, residence address and principal
occupation or employment of each nominee proposed in such notice, and the number
of shares of stock of the corporation which are beneficially owned by such
nominee. The chairman of the meeting at which directors are to be elected may,
if the facts warrant, determine that a nomination was not made in accordance
with the foregoing
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procedure and, if the chairman should so determine, the defective nomination
shall be disregarded.
Section 3. VACANCIES. A resignation from the board of
directors shall be deemed to take effect immediately or at such other time as
the director may specify. When one or more directors shall resign from the
board, effective at a future date, a majority of the directors then in office,
including those who have resigned, although less than a quorum, shall have the
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the board for any reason may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, at any meeting of the board. A director elected to fill
a vacancy shall be elected to hold office until the expiration of the term of
the class to which he or she has been elected and until a successor shall be
duly elected or qualified or until his or her earlier death, resignation or
removal.
Section 4. ANNUAL MEETING. After each annual election of
directors, on the same day the board of directors may meet for the purpose of
organization, the election of officers and the transaction of other business at
the place where the annual meeting of the stockholders for the election of
directors is held. Notice of such meeting need not be given. Such meeting may be
held at any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors or in a
consent and waiver of notice thereof signed by all the directors.
Section 5. REGULAR MEETINGS. Regular meetings of the board of
directors may be held at such places (within or without the State of Delaware)
and at such times as the board
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shall by resolution determine. If any day fixed for a regular meeting shall be a
legal holiday at the place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held at such place at the
same hour and on the next succeeding business day not a legal holiday. Notice of
regular meetings need not be given.
Section 6. SPECIAL MEETINGS. Special meetings of the board of
directors shall be held whenever called by the president, or by any vice
president, or by any two of the directors. Notice of each such meeting shall be
mailed to each director, addressed to such director at his or her residence or
usual place of business, at least three (3) days before the day on which the
meeting is to be held, or shall be sent to such director by telegraph, cable or
wireless so addressed, or shall be delivered personally or by telephone, at
least 24 hours before the time the meeting is to be held. Each such notice shall
state the time and place (within or without the State of Delaware) of the
meeting but need not state the purposes thereof, except as otherwise provided by
statute or by these By-Laws. Notice of any meeting of the board need not be
given to any director who shall be present at such meeting; and any meeting of
the board shall be a legal meeting without any notice thereof having been given,
if all of the directors then in office shall be present thereat.
Section 7. QUORUM. Except as otherwise provided by statute or
by these By-Laws, a majority of the total number of directors (or the closest
whole number thereto) shall be required to constitute a quorum for the
transaction of business at any meeting, and the affirmative vote of a majority
of the directors present at a meeting at which a quorum is present shall be
necessary for the adoption of any resolution or the taking of any other action.
In the absence of a quorum, the director or directors present may adjourn any
meeting from time to time until a quorum be had. Notice of any adjourned meeting
need not be given.
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Section 8. TELEPHONE COMMUNICATIONS. Members of the board of
directors or any committee thereof may participate in a meeting of such board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this subsection shall constitute
presence in person at such meeting.
Section 9. ACTION OF DIRECTORS WITHOUT A MEETING. Any action
required or permitted to be taken at any meeting of the board of directors or of
any committee thereof may be taken without a meeting if all members of the board
or of such committee, as the case may be, consent thereto in writing and such
written consent is filed with the minutes or proceedings of the board or such
committee.
Section 10. COMPENSATION. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the board of
directors a fixed sum and expenses of attendance, if any, may be allowed for
attendance at such regular and special meeting of the board or of any committee
thereof. Nothing herein contained shall be construed so as to preclude any
director from serving the corporation in any other capacity, or from serving any
of its stockholders, subsidiaries or affiliated corporations in any capacity,
and receiving compensation therefor.
Section 11. COMMITTEES. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee who may replace any absent or disqualified member at any
meeting of the committee. Any such committee, to the extent provided in the
resolution, shall have and may exercise the powers of the board of directors in
the management
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of the business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers which may require it; provided,
however, that in the absence or disqualification of any member of such committee
or committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 12. INDEMNIFICATION. The corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
served any other enterprise at the request of the corporation, against any and
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred in connection with such action,
suit or proceeding, in any circumstances, and to the full extent, permitted by
Section 145 of the Delaware Corporation Law, any amendment thereto, or any law
of similar import.
ARTICLE IV.
NOTICES
Section 1. NOTICES. Whenever under the provisions of the
statutes or of the Certificate of Incorporation or of these By-Laws, notice is
required to be given to any director
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or stockholder, it shall not be necessary that personal notice be given, and
such notice may be given in writing, by mail, addressed to such director or
stockholder, at such director or stockholder's address as it appears on the
records of the corporation or at his or her residence or usual place of
business, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegraph, cable or wireless, and such
notice shall be deemed to be given when the same shall be filed, or in person or
by telephone, and such notice shall be deemed to be given when the same shall be
delivered.
Section 2. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of the statutes or of the Certificate of
Incorporation or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE V.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be
a chairman of the board, a president, one or more vice presidents, a secretary,
and a treasurer. Any two or more offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers shall be elected
by the board of directors and each shall hold office at the pleasure of the
board of directors until a successor shall have been duly elected and qualified,
or until such officer's death, or until such officer resigns or has been removed
in the manner hereinafter provided.
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Section 3. OTHER OFFICERS. In addition to the officers named
in Section 1 of this Article, the corporation may have such other officers and
agents as may be deemed necessary by the board of directors. Such other officers
and agents shall be appointed in such manner, have such duties and hold their
offices for such terms, as may be determined by resolution of the board of
directors.
Section 4. RESIGNATION. Any officer may resign at any time by
giving written notice of resignation to the board of directors, to the president
or to the secretary of the corporation. Any such resignation shall take effect
at the time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. REMOVAL. Any officer may be removed, either with or
without cause, by action of the directors.
Section 6. VACANCY. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled by the board of
directors.
Section 7. CHAIRMAN OF THE BOARD. The chairman of the board
shall be the chief executive officer of the corporation, shall preside at all
meetings of stockholders and of the board of directors, shall have general
control and management of the business affairs and policies of the corporation,
and shall see that all orders and resolutions of the board of directors are
carried into effect. Except where by law the signature of the president is
required, the chairman of the board shall possess the same power as the
president to sign all certificates, contracts, and other instruments of the
corporation. During the absence or disability of the president, the chairman of
the board shall exercise all the powers and discharge all of the duties of the
president. The chairman shall have such other powers and
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perform such other duties as from time to time may be conferred or imposed upon
the chairman by the board of directors.
Section 8. PRESIDENT. The president of the corporation shall
be the chief operating officer of the corporation. During the absence or
disability of the chairman of the board, the president shall exercise all of the
powers and discharge all of the duties of the chairman of the board. The
president shall possess power to sign all certificates, contracts and other
instruments of the corporation. The president shall, in the absence of the
chairman of the board, preside at all meetings of the stockholders and of the
board of directors. The president shall perform all such other duties as are
incident to the office of president or are properly required by the board of
directors.
Section 9. VICE PRESIDENT. In the event of the absence or
disability of the chairman of the board and the president, the vice president,
or, in case there shall be more than one vice president, the vice president
designated by the board of directors, shall perform all the duties of the
president, and when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the president. Except where by law the signature of
the president is required, each of the vice presidents shall possess the same
power as the president to sign all certificates, contracts, obligations and
other instruments of the corporation. Any vice president shall perform such
other duties and may exercise such other powers as from time to time may be
assigned by these By-Laws or by the board of directors or by the president.
Section 10. SECRETARY. The secretary shall, if present, act as
secretary of, and keep the minutes of, all the proceedings of the meetings of
the stockholders and of the board of directors and of any committee of the board
of directors in one or more books to be kept for
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that purpose; shall perform such other duties as shall be assigned by the
president or the board of directors; and, in general, shall perform all duties
incident to the office of secretary.
Section 11. TREASURER. If required by the board of directors,
the treasurer shall give a bond for the faithful discharge of the duties of the
treasurer, in such sum and with such surety or sureties as the board of
directors shall determine. The treasurer shall keep or cause to be kept full and
accurate records of all receipts and disbursements in the books of the
corporation and shall have the care and custody of all funds and securities of
the corporation. The treasurer shall disburse the funds of the corporation as
may be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all transactions performed as
treasurer and shall perform such other duties as may be assigned by the chairman
of the board or the board of directors; and, in general, shall perform all
duties incident to the office of treasurer.
Section 12. CONTROLLER. The controller, if such office is
created by the board, shall be the chief accounting officer of the corporation.
The controller shall keep or cause to be kept all books of account and
accounting records of the corporation and shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation. The controller shall prepare or cause
to be prepared appropriate financial statements for the corporation and shall
perform such other duties as may be assigned by the chairman of the board or the
board of directors; and, in general, shall perform all duties incident to the
office of controller.
Section 13. SALARIES. The salaries of the officers shall be
fixed from time to time by the board of directors or by the chairman of the
board. Any such decision by the chairman of the board shall be final unless
expressly overruled or modified by action of the
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board of directors, in which event such action of the board of directors shall
be conclusive of the matter. Nothing contained herein shall preclude any officer
from serving the corporation in any other capacity, including that of director,
or from serving any of its stockholders, subsidiaries or affiliated corporations
in any capacity and receiving a proper compensation therefor.
ARTICLE VI.
LOANS, CHECKS, DEPOSITS, ETC.
Section 1. GENERAL. All checks, drafts, bill of exchange or
other orders for the payment of money, issued in the name of the corporation,
shall be signed by such person or persons and in such manner as may from time to
time be designated by the board of directors, which designation may be general
or confined to specific instances.
Section 2. LOANS AND EVIDENCES OF INDEBTEDNESS. No loan shall
be contracted on behalf of the corporation, and no evidence of indebtedness
shall be issued in its name, unless authorized by the board of directors. Such
authorization may be general or confined to specific instances. Loans so
authorized by the board of directors may be effected at any time for the
corporation from any bank, trust company or other institution, or from any firm,
corporation or individual. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the corporation issued for such loans shall be
made, executed and delivered as the board of directors shall authorize. When so
authorized by the board of directors any part of or all the properties,
including contract rights, assets, business or good will of the corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned in trust as security for the payment of
such bonds,
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debentures, notes and other obligations or evidences of indebtedness of the
corporation, and of the interest thereon, by instruments executed and delivered
in the name of the corporation.
Section 3. BANKING. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the board of directors
may authorize. The board of directors may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these By-Laws, as it may deem expedient. For the purpose of
deposit and for the purpose of collection for the account of the corporation,
checks, drafts and other orders for the payment of money which are payable to
the order of the corporation shall be endorsed, assigned and delivered by such
person or persons and in such manner as may from time to time be authorized by
the board of directors.
Section 4. SECURITIES HELD BY THE CORPORATION. Unless
otherwise provided by resolution adopted by the board of directors, the chairman
of the board, the president or any vice president may from time to time appoint
an attorney or attorneys, or an agent or agents, to exercise in the name and on
behalf of the corporation the powers and rights which the corporation may have
as the holder of stock or other securities in any other corporation to vote or
to consent in respect of such stock or other securities; and the chairman of the
board, the president, or any vice president may instruct the person or persons
so appointed as to the manner of exercising such powers and rights, and the
chairman of the board, the president, or any vice president may execute or cause
to be executed in the name and on behalf of the corporation and under its
corporate seal, or otherwise, all such written proxies, powers of attorney or
other written instruments as the chairman of the board, the president, or any
vice-
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president may deem necessary in order that the corporation may exercise such
powers and rights.
ARTICLE VII.
SHARES AND THEIR TRANSFER
Section 1. SHARE CERTIFICATES. Every stockholder shall be
entitled to have a certificate certifying the number of shares of stock of the
corporation owned by him, signed by, or in the name of the corporation by the
chairman of the board or the president or a vice president and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of the
corporation (except that when any such certificate is countersigned by a
transfer agent other than the corporation or its employee of by a registrar
other than the corporation or its employee the signatures of any such officers
may be facsimiles). If the corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except in the
case of restrictions on transfers of securities which are required to be noted
on the certificate, in lieu of the foregoing requirements, there may be set
forth on the face or back of the certificate which the corporation shall issue
to represent such class or series of stock, a statement that the corporation
will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. LOST, STOLEN OR DESTROYED CERTIFICATES. The board
of directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to advertise
the same in such manner as it shall require and/or give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. TRANSFERS. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. RECORD DATES. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the
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purpose of any other lawful action, the board of directors may fix, in advance,
a record date, which shall not be less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to such meeting or to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 5. PROTECTION OF CORPORATION. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VIII.
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX.
MISCELLANEOUS
Except as otherwise provided herein, these By-Laws may be
altered, added to, amended or repealed as follows: (a) at any meeting of the
stockholders by affirmative vote of a
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majority in interest of each class of stock outstanding and entitled to vote
thereat, provided notice of the proposed alteration, addition, amendment or
repeal shall have been given in the notice of such meeting; or (b) by the board
of directors, except with respect to any provision of which by law, the
Certificate of Incorporation or By-Laws requires action by the stockholders. Any
Bylaw adopted by the board of directors may be amended or repealed by the
stockholders, as provided in this Section. The provisions contained in Sections
1 through 12 of Article III of these By-Laws shall not be amended, altered or
repealed except (a) by the affirmative vote of the holders of at least eighty
percent (80%) of each class of stock outstanding and entitled to vote at any
meeting of the stockholders, provided notice of the proposed amendment,
alteration or repeal shall have been given in the notice of such meeting or (b)
by the board of directors, provided a majority of the Continuing Directors, (as
defined in Article SIXTH of the Certificate of Incorporation) concur in the
amendment, alteration or repeal. Dated as of: January 14, 1999
* * * * * * * * * END OF BY-LAWS * * * * * * * * *
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Exhibit 10(i)
EXECUTION VERSION
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as of May 12, 1999
(the "Effective Date"), between Allen D. Rice ("Executive") and National Auto
Credit, Inc., a Delaware corporation ("Employer").
In consideration of the premises and the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive, and Executive hereby agrees
to be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
Subject to earlier termination as provided in section 5, the term of
Executive's employment under this Agreement shall commence as of the date hereof
and shall continue for a period of three (3) years (the "Initial Employment
Period"). Unless either party gives notice of non-renewal at least six (6)
months prior to the expiration of the Initial Employment Period or any extension
thereof, the term of this Agreement shall be extended for an additional one (1)
year period beyond the end of the Initial Employment Period, or the end of any
extension thereof, as the case may be (the Initial Employment Period and any
extension thereof is hereafter referred to as the "Employment Period").
3. DUTIES AND RESPONSIBILITIES
3.1 GENERAL. During the Employment Period, Executive shall have the
title of President of the Employer and shall be charged with pursuing a growth
strategy of building the Employer's business within the specialty finance sector
and developing and extending the Employer's business within the sub-prime auto
finance segment. Executive shall report directly to and take direction from the
Board of Directors of the Employer (the "Board"), the Chairman of the Board and
any appropriately appointed committee of the Board (acting in their capacities
as members of the Board) and to no other individual or group of
<PAGE> 2
individuals. Executive shall devote all of his business time and expend his best
efforts, energies and skills to the Employer. Executive shall be the primary
person responsible for the operations and affairs of the Employer and its
subsidiaries in pursuit of the Employer's business. Executive shall perform such
duties, consistent with his status as President of Employer, as he may be
assigned from time to time by the Board. On or before September 30, 1999,
Employer shall nominate Executive to the Board and use its best efforts to see
that Executive is appointed to the Board. Any such appointment shall be subject
to Board approval. Executive acknowledges that the Employer may expand its
business beyond the sub-prime auto finance industry into other areas. In
connection therewith, Employer may hire individuals with knowledge and
experience in such alternative business areas to guide Employer in the pursuit
of such alternative business areas and to be solely responsible for Employer's
expansion into such alternative business areas. In such circumstances, such
individuals may be charged to report directly to the Board and may receive
titles of President of such alternative business areas. However, such
individuals shall not exercise any authority over Executive. The expansion into
such alternative business areas under the guidance and direction of such other
individuals shall not in and of itself be a diminution of Executive's duties or
give Executive any right to terminate the Employment Period or this Agreement
for Good Reason (as defined below).
4. COMPENSATION AND RELATED MATTERS
4.1 BASE SALARY. For each twelve-month period during the Employment
Period, commencing with the twelve-month period beginning on the date of this
Agreement (each such period, an "Employment Year"), Employer shall pay to
Executive a base salary equal to $300,000, subject to increase at the discretion
of the Board; provided that the base salary shall be increased annually by a
minimum percentage equal to the percent increase in the consumer price index
from year to year (the initial base salary, including any Board approved
increase thereof, the "Base Salary"). The Base Salary for each Employment Year
shall be payable in advance in monthly increments.
4.2 ANNUAL BONUS. For each fiscal year during the Employment Period
(each, a "Bonus Year"), at the discretion of the Board, Executive may receive a
cash bonus of up to 66.66% of the Base Salary (the "Bonus") based upon
attainment of annual performance objectives to be reasonably established by the
Board
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for the Bonus Year, such performance objectives to be established as soon as
possible following the beginning of the Bonus Year; provided, however, that for
the first Bonus Year (commencing on February 1, 1999), the performance
objectives shall be established as soon as possible following the date hereof.
One-half of the Bonus (in an amount equal to $100,000) for the first Bonus Year
shall be guaranteed and such guaranteed portion of the Bonus for the first Bonus
Year shall be payable on the date hereof. Otherwise, any Bonus earned for any
subsequent Bonus Year and any additional Bonus for the first Bonus Year shall be
payable promptly following the determination thereof, on the later of (i)
fifteen (15) days after the members of the Board have received the audited
financial statements for such Bonus Year, or (ii) the first meeting of the Board
following the end of such Bonus Year. Except as otherwise set forth in Section 6
hereof, the Bonus payable for any Bonus Year in which the Employment Period
terminates shall equal the Bonus that would have been paid had the Employment
Period not so terminated, multiplied by a fraction, the numerator of which shall
be the number of days of the Employment Period within the Bonus Year and the
denominator of which shall be 365.
4.3 LIFE INSURANCE. Employer shall maintain in effect at all times
during the Employment Period, at Employer's expense, a policy of term insurance
on the life of Executive in the amount equal to five times Base Salary, naming
such person as Executive shall designate from time to time as the owner and
beneficiary thereof. Such life insurance may be voluntarily extended by
Executive at Executive's expense by an additional amount of up to $1,500,000 of
coverage. Executive agrees that Employer shall have the right to obtain other
life insurance on Executive's life, at Employer's sole expense and with Employer
or an affiliate thereof as the sole beneficiary thereof. Executive shall (i)
cooperate fully with Employer in obtaining all such insurance, (ii) sign any
necessary consents, applications and other related forms or documents, and (iii)
take any required medical examinations.
4.4 AUTOMOBILE; HEALTH CLUB; TAX AND FINANCIAL PLANNING; LEGAL
EXPENSES. Employer shall provide Executive with a monthly allowance during the
Employment Period of $1,000 to cover the costs of a leased automobile, including
maintenance, fuel, and insurance. In addition, during the Employment Period,
Employer shall pay for or reimburse Executive (as determined by Employer) for
monthly dues at a local health club or fitness facility. Employer shall
reimburse Executive up to $2,000 annually for costs
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incurred by Executive for annual tax and financial planning. Employer shall also
reimburse Executive up to $10,000 for Executive's reasonably incurred legal
expenses for the review and negotiation of this Agreement and ancillary matters
in connection with the execution of this Agreement and Executive's commencement
of employment with Employer.
4.5 OTHER BENEFITS. During the Employment Period, subject to, and to
the extent Executive is eligible under their respective terms, Executive shall
be entitled to receive such fringe benefits as are, or are from time to time
hereafter generally provided by Employer to Employer's senior management
employees or other employees (other than those provided under or pursuant to
separately negotiated individual employment agreements or arrangements) under
any pension or retirement plan, disability plan or insurance, group life
insurance, medical and dental insurance, accidental death and dismemberment
insurance, travel accident insurance or other similar plan or program of
Employer. Employer shall provide short-term and long-term disability insurance
for Executive which provides benefits equal to at least 60% of Base Salary. To
the degree that Employer's medical insurance does not fully cover the cost of an
annual physical examination for Executive, Employer shall reimburse Executive
for such expense promptly after such expense is incurred. Executive's Base
Salary shall (where applicable) constitute the compensation on the basis of
which the amount of Executive's benefits under any such plan or program shall be
fixed and determined.
4.6 EXPENSE REIMBURSEMENT. Employer shall reimburse Executive for all
business expenses reasonably incurred by him in the performance of his duties
under this Agreement upon his presentation of signed, itemized accounts of such
expenditures, all in accordance with Employer's procedures and policies as
adopted and in effect from time to time and applicable to its senior management
employees.
4.7 VACATIONS. Executive shall be entitled to 20 days vacation for each
calendar year during the Employment Period, which vacations shall be taken at
such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
4.8 ANNUAL EQUITY INCENTIVES. In order to provide further incentive to
Executive and align the interests of Executive with those of the stockholders of
Employer, Employer shall grant to
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Executive annual equity incentives consisting of (i) shares of common stock of
Employer, par value per share $0.05 (the "Common Stock"), subject to forfeiture
and restricted as to transfer ("Restricted Stock") and (ii) options to purchase
Common Stock ("Options").
(a) RESTRICTED STOCK AWARD. As of the date hereof, Employer shall grant
to Executive a Restricted Stock Award consisting of 30,000 shares of Restricted
Stock (the "Restricted Stock Award"). The Restricted Stock Award shall vest and
become transferable proportionately on a monthly basis over a period of two
years from the date hereof and shall have such other terms and conditions as set
forth in the Restricted Stock Award Agreement attached hereto as Exhibit A.
(b) OPTION AWARD. As of the date hereof, Employer shall grant to
Executive an Option with respect to 300,000 shares of Common Stock with an
exercise price equal to the closing price of the Common Stock on the NASDAQ
Bulletin Board as of the trading day immediately prior to the date hereof (the
"Option Award"). The Option shall vest and become exercisable proportionately on
a monthly basis over a period of two years from the date hereof and shall have
such other terms and conditions as set forth in the Stock Option Agreement
attached hereto as Exhibit B. On each of the first and second anniversaries of
the date hereof, provided Executive is employed on such dates, Employer shall
grant to Executive an additional Option Award (with respect to 300,00 shares on
each such anniversary) vesting over the two-year period subsequent to the date
of grant on similar terms and conditions.
(c) ADDITIONAL OPTION PURCHASE. On the last day of each fiscal year
during the Employment Period, provided Executive has met or exceeded the
performance objectives agreed upon by the Board and Executive for such fiscal
year, Executive shall have the right to purchase from Employer an additional
Option with respect to 100,000 shares of Common Stock (the "Additional Option").
The Additional Option shall have a per share exercise price equal to the closing
price of the Common Stock on the NASDAQ Bulletin Board on the trading day
immediately prior to the date of purchase. The Additional Option shall be fully
vested and shall have such other terms and conditions as are mutually agreed
upon between Employer and the Executive. The purchase price for any Additional
Option shall be determined by Employer's independent accountants based on a
Black-Scholes valuation methodology.
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4.9 RELOCATION EXPENSES; TEMPORARY LIVING EXPENSES. Upon submission of
properly documented receipts, Employer shall reimburse Executive for (i)
reasonable moving costs in connection with Executive's relocation of his family
from Chicago to a location near the Employer's main headquarters prior to August
of the year 2000 and (ii) reasonable real estate commissions with respect to the
sale of Executive's current residence in Chicago in connection with or following
such relocation. In addition, for a period of one year from the date hereof or
until Executive relocates his family to such location, if earlier, Employer
shall reimburse Executive for the reasonable cost of temporary housing in such
location and reasonable travel between Chicago and such location for the purpose
of visiting his family. Such reimbursement for temporary housing and reasonable
travel shall not exceed $20,000 and shall be subject to submission of properly
documented housing and travel receipts. In addition, the Employer shall pay to
Executive up to an additional $10,000 (the "Tax Gross-Up") to cover part of the
tax consequences to Executive for the benefits payable pursuant to this Section
4.9. The Tax Gross-Up shall be payable within 30 days following the relocation
of Executive's family as stated above. In the event Executive's tax liability
for payments pursuant to this Section 4.9 does not rise to $10,000, Employer
shall pay such lesser amount.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 TERMINATION WITHOUT CAUSE; VOLUNTARY TERMINATION BY EXECUTIVE.
Employer may, by notice to Executive at any time during the Employment Period,
terminate the Employment Period without Cause (as defined below). The effective
date of such termination of the Executive from the Employer shall be the date
that is thirty (30) days following the date on which such notice is given,
except as otherwise specifically provided herein. Executive may, by notice to
Employer at any time during the Employment Period, voluntarily resign from the
Employer and terminate the Employment Period. The effective date of such
termination of the Executive from the Employer shall be the date that is thirty
(30) days following the date on which such notice is given.
5.2 BY EMPLOYER FOR CAUSE. Employer may, at any time during the
Employment Period, by notice to Executive, terminate the Employment Period for
"Cause." As used herein, "Cause" shall mean fraud, embezzlement, gross
negligence or willful misconduct or a material default by Executive in the
performance of his
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duties hereunder. No act or failure to act on the Executive's part will be
considered "willful" unless done or omitted to be done by him not in good faith
or without a reasonable belief that his action or omission was in the best
interest of the Employer. If the Employer believes that the Executive's
employment should be terminated for Cause, the Board will notify the Executive
in writing, stating the basis for its belief. The Executive will have ten (10)
days to respond to the notice. If, following receipt of the Executive's response
or Executive's failure to timely respond, the Board determines that the
Executive's employment should be terminated for Cause, the Company may, upon 30
day's prior written notice to the Executive, terminate his employment for Cause.
In the event that Executive chooses to challenge in arbitration Employer's
determination of Cause and Executive prevails in such arbitration, Employer
agrees to reimburse Executive for his reasonable legal fees incurred in pursuing
and obtaining such determination.
5.3 BY EXECUTIVE FOR GOOD REASON. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement for "Good Reason" (as defined below) effective immediately. For
the purposes hereof, "Good Reason" means any of the following without
Executive's consent: (A) subject to Section 3 above, a material and adverse
change in the nature or scope of Executive's authority and duties from those
exercised or performed by Executive immediately after the Effective Date; (B) a
material breach of this Agreement by Employer; (C) the sale, transfer or
disposition by the Employer of all or substantially all of its assets in the
line or lines of business that Executive is primarily responsible for; or (D) a
change in the composition of the Board in which the individuals who constitute
the Board, as of the date hereof (the "Incumbent Board"), cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election was approved by a vote of at least a majority of the Incumbent
Board will be considered as though such individual were a member of the
Incumbent Board; provided, however, that the circumstances set forth in this
Section 5.3(A) and (B) will not be Good Reason if within 30 days of notice by
the Executive to the Employer, Employer cures such circumstances.
5.4 DISABILITY. During the Employment Period, if, as a result of
physical or mental incapacity or infirmity, Executive shall be unable to perform
his duties under this Agreement for (i)
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a continuous period of at least 120 days, or (ii) periods aggregating at least
180 days during any period of 12 consecutive months (each a "Disability
Period"), and at the end of the Disability Period there is no reasonable
probability that Executive can promptly resume his duties hereunder, Executive
shall be deemed disabled (the "Disability") and Employer, by notice to
Executive, shall have the right to terminate the Employment Period for
Disability at, as of or after the end of the Disability Period. The existence of
the Disability shall be determined by a reputable, licensed physician selected
by Employer in good faith, whose determination shall be final and binding on the
parties. Executive shall cooperate in all reasonable respects to enable an
examination to be made by such physician. Notwithstanding the foregoing,
Employer may conclusively determine Executive to be disabled and terminate the
Employment Period on account of Disability at any time after Executive has
commenced receiving benefits under the long-term disability insurance policy
obtained pursuant to Section 4.5 hereof.
5.5 DEATH. The Employment Period shall end on the date of Executive's
death.
6. TERMINATION COMPENSATION
6.1 TERMINATION WITHOUT CAUSE BY EMPLOYER OR FOR GOOD REASON BY
EXECUTIVE. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 5.1 hereof or by Executive pursuant to the provisions of
Section 5.3 hereof, Employer will pay to Executive (i) Executive's Base Salary
through the date of termination, (ii) within five (5) days following the date of
termination in one lump sum an amount equal to the Base Salary multiplied by the
number of years (and fractional portions thereof) remaining in the Employment
Period (the "Severance Period") and (iii) on the date due pursuant to the
provisions of Section 4.2 hereof, the bonus for the then current Bonus Year,
prorated for the period of time during the Bonus Year that Executive was
employed. All other benefits provided for in Sections 4.3, 4.4 and Section 4.5
(except for pension and retirement benefits) shall be continued at the expense
of Employer for the Severance Period. In the event that any such benefits cannot
be continued under the terms of the applicable benefit programs or Employer
chooses not to continue such benefits, the Employer shall pay to Executive a
lump sum amount having an equal value of such remaining benefits. In addition,
if the Employment Period is terminated by Employer pursuant to the provisions of
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Section 5.1 hereof or by Executive pursuant to the provisions of Section 5.3
hereof, (i) the restrictions with respect to all unvested shares of Restricted
Stock previously granted to Executive shall immediately lapse and such shares
shall become transferable and no longer subject to forfeiture and (ii) all
unvested portions of the Options previously granted to Executive shall
immediately become vested and exercisable. Employer shall have no obligation to
continue any other benefits provided for in Section 4 past the date of
termination.
6.2 CERTAIN OTHER TERMINATIONS. If the Employment Period is terminated
by Employer pursuant to the provisions of Sections 5.2 or 5.4, or by death,
pursuant to the provisions of Section 5.5, Employer shall pay to Executive,
within thirty (30) days of the date of termination, Executive's Base Salary
through the date of termination. Provided the date of termination is after the
end of a calendar year for which a Bonus is payable, but prior to the date of
payment, Employer shall also pay to Executive, when due pursuant to provisions
of Section 4.2 hereof, the Bonus for such Bonus Year. Employer shall have no
obligation to continue any other benefits provided for in Section 4 past the
date of termination.
6.3 NO OTHER TERMINATION COMPENSATION. Executive shall not, except as
set forth in this Section 6, be entitled to any compensation following
termination of the Employment Period.
6.4 SEVERANCE LETTER OF CREDIT. Within 10 days hereof, Employer shall
secure a letter of credit or establish an escrow account (the choice of a letter
of credit or an escrow account to be at the discretion of the Employer),
mutually satisfactory to both parties, to provide for the payment of $300,000 in
partial satisfaction of Employer's obligations under Section 6.1 hereof, in the
event that the Employment Period is terminated by the Employer pursuant to
Section 5.1 hereof or by Executive pursuant to Section 5.3 hereof. The letter of
credit shall be kept in place by Employer for a period of 18 months following
the date hereof, at which point the letter of credit may be terminated.
7. PROFESSIONAL LIABILITY INSURANCE; INDEMNIFICATION
7.1 INSURANCE. The Employer will provide coverage for Executive under
the Employer's director and officer professional liability insurance policy.
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7.2 INDEMNIFICATION. Employer shall indemnify the Executive to the
fullest extent permitted by law in effect as of the date hereof, or as hereafter
amended, against all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, fines, penalties, ERISA excise taxes,
penalties and amounts paid in settlement) reasonably incurred by the Executive
in connection with a Proceeding. For the purposes of this Section, a
"Proceeding" shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which the Executive is made, or is
threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Employer or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Employer.
(a) NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Executive of notice of the commencement of any Proceeding, the Executive will,
if a claim in respect thereof is to be made against the Employer under this
Agreement, notify the Employer in writing of the commencement thereof; but the
omission to so notify the Employer will not relieve the Employer from any
liability that it may have to the Executive otherwise than under this Agreement.
Notwithstanding any other provision of this Agreement, with respect to any such
Proceeding as to which the Executive gives notice to the Employer of the
commencement thereof:
(i) The Employer will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided in this Section 7.2(a)(ii)
to the extent that it may wish, the Employer, jointly with any other
indemnifying party similarly notified, shall be entitled to assume the defense
thereof, with counsel satisfactory to the Executive. After notice from the
Employer to the Executive of its election to so assume the defense thereof, the
Employer shall not be liable to the Executive under this Agreement for any legal
or other expenses subsequently incurred by the Executive in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. The Executive shall have the right to employ the Executive's own
counsel in such Proceeding, but the fees and expenses of such counsel incurred
after notice from the Employer of its assumption of the defense thereof shall be
at the expense
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of the Executive unless (a) the employment of counsel by the Executive has been
authorized by the Employer, (b) the Executive shall have reasonably concluded
that there may be a conflict of interest between the Employer and the Executive
in the conduct of the defense of such Proceeding (which conclusion shall be
deemed reasonable if, without limitation, such action shall seek any remedy
other than money damages and the Executive would be personally affected by such
remedy or the carrying out thereof), or (c) the Employer shall not in fact have
employed counsel to assume the defense of the Proceeding, in each of which cases
the fees and expenses of counsel shall be at the expense of the Employer. The
Employer shall not be entitled to assume the defense of any Proceeding brought
against the Executive by or on behalf of the Employer or as to which the
Executive shall have reached the conclusion provided for in clause (b) above.
8. CONFIDENTIALITY
Unless otherwise required by law or judicial process, Executive shall
retain in confidence during the Employment Period and after termination of
Executive's employment with Employer pursuant to this Agreement all confidential
information known to the Executive concerning Employer and its businesses. The
obligations of Executive pursuant to this Section 8 shall survive the expiration
or termination of this Agreement.
9. NONCOMPETITION.
For one-year following his termination of employment hereunder for any
reason, including termination by the Employer without Cause or by the Executive
with Good Reason (such period referred to herein as the "Non-Compete Period"),
the Executive shall not directly or indirectly, engage in any Competitive
Activity (as defined below) in competition with the Employer. "Competitive
Activity" shall mean: (A) the development, providing, marketing, administration,
management, or acting as a consultant in the providing of, the business of
sub-prime auto finance or any other business in which the Employer is engaged at
the time, (B) the participation, directly or indirectly, in any business which
is the same as or substantially similar to or is or would be competitive with
the business of the Employer at the time; and (C) becoming an employee,
director, officer, consultant, independent contractor, lecturer or advisor of or
to, or otherwise providing services to, any business, individual, partnership,
firm, association or corporation, if the Executive's
-11-
<PAGE> 12
duties relate in any manner to the business of developing, providing, marketing,
administering, managing, or acting as a consultant in the providing of, the
business of sub-prime auto finance or any other business in which the Employer
is engaged at the time. Nothing herein, however, shall prohibit Executive from
acquiring or holding any issue of stock or securities of any business,
individual, partnership, firm, or corporation (collectively "Entity") which has
any securities listed on a national securities exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time he
and members of his immediate family do not own more than five percent of the
voting securities of any such Entity. The obligations of Executive pursuant to
this Section 9 shall survive the expiration or termination of this Agreement.
10. NONSOLICITATION.
During the Non-Compete Period, Executive shall not directly or
indirectly solicit to enter into the employ of any other Entity, or hire, any of
the employees of the Employer (or individuals who were employees of the Employer
within six months of termination of the Non-Compete Period). During the
Non-Compete Period, Executive shall not, directly or indirectly, solicit, hire
or take away or attempt to solicit, hire or take away (i) any customer or client
of the Employer or (ii) any former customer or client (that is, any customer or
client who ceased to do business with the Employer during the one (1) year
immediately preceding such date) of the Employer or encourage any customer or
client of the Employer to terminate its relationship with the Employer without
the Employer's prior written consent. The obligations of Executive pursuant to
this Section 10 shall survive the expiration or termination of this Agreement.
11. SUCCESSORS; BINDING AGREEMENT
This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by Executive and Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other beneficiary or, if there be
no such beneficiary, to Executive's estate.
-12-
<PAGE> 13
12. SURVIVORSHIP
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
13. MISCELLANEOUS
13.1 NOTICES. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail, postage paid (deemed given five days after
deposit in the U.S. mails) or personally or by facsimile transmission (deemed
given upon receipt), or at such other address as either party shall designate by
notice given to the other in the manner provided herein.
If to Employer: National Auto Credit, Inc.
30000 Aurora Road
Solan, Ohio 44139
Attn.: Secretary
If to Executive: Mr. Allen D. Rice
838 Panorama Drive 315
Palatine, IL 60067
13.2 TAXES. Employer is authorized to withhold (from any compensation
or benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
13.3 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
reference to the principles of conflicts of laws therein.
13.4 ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the city in which the Employer's main corporate headquarters is then located in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction.
-13-
<PAGE> 14
13.5 HEADINGS. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
13.6 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
13.7 SEVERABILITY. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
13.8 ENTIRE AGREEMENT AND REPRESENTATION. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NATIONAL AUTO CREDIT INC.
By:
-----------------------------
James J. McNamara
Chairman of the Board
---------------------------------
Allen D. Rice
-14-
<PAGE> 1
Exhibit 10(j)
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, 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
<PAGE> 2
Ernest C. Garcia II
May 10, 1999
Page 2
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
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.
<PAGE> 3
Ernest C. Garcia II
May 10, 1999
Page 3
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 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;
<PAGE> 4
Ernest C. Garcia II
May 10, 1999
Page 4
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.
Please confirm your agreement with the foregoing by signing where
indicated below and returning to the undersigned a copy of this Agreement.
<PAGE> 5
Ernest C. Garcia II
May 10, 1999
Page 5
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
<PAGE> 6
APPENDIX I
----------
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 consensual 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> 1
Exhibit 10(k)
APPENDIX I
----------
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 consensual 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> 1
Exhibit 10(l)
APPENDIX II
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> 2
(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 instructions of
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<PAGE> 3
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
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<PAGE> 4
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:
<TABLE>
<S> <C>
(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 Steven D. Pidgeon, Esq.
2525 E. Camelback Road Snell & Wilmer L.L.P.
Suite 1150 One Arizona Center
Phoenix, Arizona 85011 Phoenix, Arizona 85004-0001
Facsimile: (602) 522-3160 Facsimile: (602) 382-6070
</TABLE>
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<PAGE> 5
(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.
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<PAGE> 6
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> 1
Exhibit 99(a)
FOR IMMEDIATE RELEASE:
April 22, 1999
CONTACT: Stephen F. Lee
Edward Howard & Co.
216-781-2400
NATIONAL AUTO CREDIT, INC.
QUESTIONS PROPRIETY OF INVESTOR EFFORT
SOLON, OH - APRIL 22, 1999 - National Auto Credit, Inc. (OTC BB:NAKD),
announced today that it had responded to an attempt by an investor group, led by
Ernest C. Garcia II, to join the Company's Board of Directors and obtain more
information regarding the Company's financial condition, operations and
prospects.
In a letter to the investor, counsel to National Auto Credit stated
that the Company and its Board have maintained open communication channels with
all shareholders, including the controlling shareholder group consisting of Mr.
Garcia and Sam Frankino, former Chairman of the Board and the majority
shareholder of the Company. Characterizing the group's actions as hostile and
misguided, the letter indicated that Mr. Garcia's efforts to force himself and
another individual onto the Board were null, void and without effect. In
particular, the Company's Board of Directors consists of five members and does
not have any vacancies. Similarly, Mr. Garcia's attempt to call a meeting of the
Board is without effect since only duly and validly elected Directors can take
action. Furthermore, as to corporate action requiring a stockholder vote, such
action may not be taken by consent, but only at a duly called and noticed
meeting of shareholders.
The Company also questioned the propriety of directly involving in the
Company anyone who has agreed to plead guilty to bank fraud, as disclosed in Mr.
Garcia's Schedule 13D filed with the Securities and Exchange Commission.
The Company emphasized that significant progress has been made to date
in stabilizing the affairs of the Company and that it would continue its policy
of open communications with all of its constituencies and shareholders. At the
same time, the Company will strive to preserve and maximize assets, ensure
proper financial controls and reporting, restore public confidence and position
itself for future growth.
This press release may include statements that constitute
forward-looking statements, usually containing the words "believe," "estimate,"
"project," " expects," or similar expressions. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. By making these forward-looking statements, the
Company undertakes no obligation to update these statements for revisions or
changes after the date of this press release.
<PAGE> 1
Exhibit 99(b)
FOR IMMEDIATE RELEASE:
MAY 12, 1999
CONTACT: Stephen F. Lee
Edward Howard & Co.
Media Inquiries Investor Inquiries
(216) 781-2400 (440) 349-1000, ext. 4495
NATIONAL AUTO CREDIT, INC.
RECEIVES COMMITMENT OF INVESTOR AND
ACQUIRES OPTION TO PURCHASE INVESTOR SHARES
SOLON, Ohio, May 12, 1999 -- National Auto Credit, Inc. (NAKD:OTC/BB) announced
today that it acquired an option to purchase 2,849,630 shares of National Auto
Credit common stock beneficially owned by Ernest C. Garcia II. The option is for
an initial term of 45 days and is exercisable at a price of $1.50 per share. In
consideration for the option, the Company paid $1 million, all of which will be
credited toward the aggregate exercise price payable by the Company upon
exercise of the option.
The agreement further provides that Mr. Garcia will not take 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 Board or (iv) efforts of the Board to preserve and maximize the Company's
assets, continue to stabilize operations, ensure proper financial and accounting
reporting and controls, and restore public confidence in the Company.
Concurrent with the grant of the option, an independent director of the
Company's Board of Directors obtained a proxy to vote all of the shares subject
to the option. In addition, Mr. Garcia agreed to cooperate with the Company and
its Board of Directors, as well as with all governmental authorities, in
connection with all inquiries and proceedings in which the Company is involved.
The agreement also prohibits Mr. Garcia from acquiring additional shares of the
Company without the consent of the Company's Board.
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In the event that the Company does not exercise the option, the Company granted
Mr. Garcia the right to purchase an additional 2,849,630 shares at a price equal
to the lower of $1.50 per share or the average price of the shares for the
ten-day period preceding the option term, and the right to designate one member
to the Board, subject to the Board's approval.
National Auto Credit, Inc. is a specialized financial services company providing
funding, receivables management and collection services to automobile dealers
who sell and finance the purchase of vehicles to retail consumers with limited
access to consumer credit.
This press release may include statements that constitute forward-looking
statements, usually containing the words "believe," "estimate," "project,"
"expects," or similar expressions. These statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
By making these forward-looking statements, the Company undertakes no obligation
to update these statements for revisions or changes after the date of this press
release.
<PAGE> 1
Exhibit 99(c)
FOR IMMEDIATE RELEASE
CONTACT: Media Inquiries: Investor Inquiries:
Stephen F. Lee (440) 349-1000, ext. 4401
Edward Howard & Co.
(216) 781-2400
NATIONAL AUTO CREDIT NAMES GE CAPITAL EXECUTIVE
AS PRESIDENT
SOLON, OHIO, MAY 20, 1999 -- National Auto Credit, Inc. (OTC/BB: NAKD) announced
today that it has appointed Allen D. Rice, formerly an executive with General
Electric Capital Services Inc., as President. Mr. Rice will assume his position
and operating responsibilities of National Auto Credit, effective immediately.
Mr. Rice previously served as Vice President of Marketing for GE Capital's
Customized Auto Credit Services and participated in the successful
reorganization of the business into GE Capital's Auto Financial Services (AFS)
unit. In his position as Vice President and Director of Loan Products for AFS,
Mr. Rice led the repositioning which greatly strengthened the company's
sub-prime automobile finance business. GE Capital Auto Financial Services is one
of the largest originators of sub-prime automobile loans in the United States.
Mr. Rice's extensive experience in the sub-prime automobile financing industry
also includes serving as vice president and chief marketing officer of First
Merchants Acceptance Corporation, Chicago, where he directed the growth of the
company's portfolio of automobile receivables by more than six-fold over a
30-month period. He also established and managed the company's first consumer
lending subsidiary in the United Kingdom -- First Merchants Capital Limited,
London.
Prior to joining First Merchants, Mr. Rice founded Aegis International, a
management consulting firm that specializes in strategic planning, product
development, risk management and marketing for financial services and
manufacturing companies. He previously served for nine years in senior
management positions with Transco Inc., a Chicago-based, multinational provider
of equipment leasing, manufacturing and engineering services.
<PAGE> 2
A graduate of the University of Utah, Mr. Rice also earned a master's degree in
business administration from DePaul University. He is active with the American
Management Association and the American Marketing Association.
"We are pleased with the outcome of our national search, undertaken by A.T.
Kearney," said James J. McNamara, Chairman of the Board of Directors. "The
caliber and extent of Allen's experience will serve National Auto Credit well as
we continue to stabilize the affairs of the Company and implement strategic
initiatives to position it for future growth."
National Auto Credit, Inc. is a specialized financial services company providing
funding, receivables management and collection services to automobile dealers
who sell and finance the purchase of vehicles to retail consumers with limited
access to credit.
# # #
This press release may include statements that constitute forward-looking
statements, usually containing the words "believe," "estimate," "project,"
"expects," or similar expressions. These statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
By making these forward-looking statements, the Company undertakes no obligation
to update these statements for revisions or changes after the date of this press
release.
