SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MONACO FINANCE, INC.
--------------------
(Name of Registrant as Specified in Its Charter)
N/A
---
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MONACO FINANCE, INC.
1998
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
<PAGE>
MONACO FINANCE, INC.
370 17TH STREET, SUITE 5060
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 30, 1998
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Monaco Finance, Inc., a Colorado corporation (the
"Company"), will be held at 370 17th Street, Suite 5060, Denver, Colorado at
10:00 a.m. on June 30, 1998, for the following purposes:
1. To consider and act upon the election of Morris Ginsburg, Irwin L.
Sandler, Bill C. Bradley, John R. Sloan, Bobby L. Hashaway, Robert D. Womack,
William P. Clark, Jr. and Leonard M. Snyder to the Board of Directors to serve
until the next annual meeting of Shareholders and until their successors are
elected and qualified;
2. To consider and approve an amendment to the Company's Articles of
Incorporation; and
3. To consider and ratify the appointment of Ehrhardt Keefe Steiner &
Hottman P.C. as the Company's certified independent public accountants for the
fiscal year ending December 31, 1998; and
4. To consider and act upon such other matters as may properly come
before the meeting or any adjournment thereof.
Only the holders of record of shares of the Company's Class A Common
Stock, $.01 par value, Class B Common Stock, $.01 par value, and 8% Cumulative
Convertible Preferred Stock, Series 1998-1, no par value, at the close of
business on May 22, 1998, are entitled to notice of and to vote at the meeting
or any adjournment thereof.
You are cordially invited to attend the Annual Meeting in person. All
Shareholders, whether or not they plan to attend the Annual Meeting, are
requested to complete, date and sign the enclosed Proxy and return it promptly
in the envelope provided for that purpose. Shareholders who attend the Annual
Meeting may revoke the Proxy and vote their Proxy in person as set forth in
the Proxy Statement.
By Order of the Board of Directors
/s/ Irwin L. Sandler
- -----------------------
Irwin L. Sandler, Secretary
May 26, 1998
<PAGE>
MONACO FINANCE, INC.
370 17th Street, Suite 5060
Denver, Colorado 80202
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held June 30, 1998
INTRODUCTION
SOLICITATION, EXERCISE AND REVOCABILITY OF PROXY
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Monaco Finance, Inc. (the "Company"), for
use at the Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on June 30, 1998, at 10:00 a.m. local time, at the
offices of the Company located at 370 17th Street, Suite 5060, Denver,
Colorado 80202. This Proxy Statement, the accompanying form of Proxy and the
Notice of Annual Meeting will be first given or mailed to the Company's
Shareholders on or about May 26, 1998. All costs incurred in connection with
this proxy solicitation will be borne by the Company.
Because many of the Company's Shareholders may be unable to attend the
Annual Meeting in person, the Board of Directors solicits proxies by mail to
give each Shareholder an opportunity to vote on all matters presented at the
Annual Meeting. Shareholders are urged to: (i) read this Proxy Statement
carefully; (ii) specify their choice regarding each matter by marking the
appropriate box on the enclosed form of Proxy; and (iii) sign, date and return
the form of Proxy in the enclosed envelope.
All shares of the Company's Class A and Class B Common Stock, $.01 par
value ("Common Stock"), and 8% Cumulative Convertible Preferred Stock, Series
1998-1 ("Preferred Stock"), no par value (collectively, the "Shares"),
represented by properly executed Proxies received in time for the Annual
Meeting will be voted at the Annual Meeting in accordance with the
instructions marked thereon or otherwise as provided therein, unless such
Proxies have previously been revoked. All Shares represented by valid Proxies
will be voted, unless instructions to the contrary are marked, FOR the
election of the nominees to the Board of Directors, FOR the amendment to the
Company's Articles of Incorporation (the "Amendment"), FOR the ratification of
the appointment of Ehrhardt Keefe Steiner & Hottman P.C. as the independent
public accountants for the Company for the fiscal year ending December 31,
1998, and, in the discretion of the persons named as Proxies, on such other
matters as may properly come before the Annual Meeting. However, Proxies voted
against a proposal will not be voted for any adjournment desired by management
to afford the Company the opportunity to seek additional proxies supporting
that proposal. Any Proxy may be revoked at any time prior to the exercise
thereof by submitting another Proxy bearing a later date or by giving written
notice of revocation to the Company at the address indicated above or by
voting in person at the Annual Meeting. Any notice of revocation sent to the
Company must include the Shareholder's name, and must be received prior to the
Annual Meeting to be effective.
VOTING
Only persons holding Shares (referred to herein as the "Shareholders") of
record at the close of business on May 22, 1998 (the "Record Date"), will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. Shareholders holding Class A Common Stock and Preferred Stock will be
entitled to one vote for each share then held, and Shareholders holding Class
B Common Stock will be entitled to three votes for each share then held. As of
the Record Date, 8,014,631 shares of the Company's Class A Common Stock were
issued and outstanding having an aggregate of 8,014,631 votes and 1,273,715
shares of the Company's Class B Common Stock were issued and outstanding
having an aggregate of 3,821,145 votes. As of the Record Date 2,433,457 shares
of Preferred Stock were issued and outstanding. The presence, in person or by
proxy, of a majority of the votes entitled to be cast on the matter by any
voting group entitled to vote at the Meeting constitutes a quorum for the
transaction of business by that group.
If a quorum is present, the affirmative vote by the holders of a majority
of the voting power of the Class A and the Class B Common Stock and the
Preferred Stock outstanding on the Record Date is required for the adoption of
the Amendment. So long as not less than 1,500,000 shares of Preferred Stock
are issued and outstanding, holders of the Preferred Stock have the right to
elect one director of the Company. Directors to be elected by the holders of
the Common Stock shall be elected by a plurality, i.e., the number of director
candidates equaling the number of directors to be elected, having the highest
number of votes cast in favor of their election, shall be elected to the board
of directors. If a quorum is present, the affirmative vote of the holders of a
majority of the shares of Preferred Stock outstanding on the Record Date is
required for the election of the one director.
Shareholders are not entitled to cumulate their votes in the election of
directors. Votes cast by proxy will be tabulated by an automatic system
administered by the Company's transfer agent. Votes cast by proxy or in person
at the Annual Meeting will be counted by the persons appointed by the Company
to act as election inspectors for the Annual Meeting. Abstentions and broker
non-votes are each included in the determination of the number of shares
present and voting. Each is tabulated separately. Abstentions are counted in
tabulations of the votes cast on proposals presented to Shareholders and will
have the same effect as negative votes, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
CHANGE IN VOTING CONTROL
As of the Record Date, Pacific USA Holdings Corp. ("Pacific USA") had
direct and indirect voting power over approximately 28.8% of the outstanding
shares of Class A Common Stock and 100% of the outstanding shares of Class B
Common Stock, or approximately 51.8% of the total combined voting power of the
outstanding shares of Common Stock. In addition, as of the Record Date Pacific
USA had direct and indirect voting power over 100% of the outstanding shares
of Preferred Stock. It is expected that Pacific USA will cast its votes in
favor of the proposals described in this Proxy Statement.
On or about December 4, 1997 (the "Effective Date"), Consumer Finance
Holdings, Inc., a wholly-owned subsidiary of Pacific USA ("CFH"), and Morris
Ginsburg, Sandler Family Partners, Ltd., and Irwin L. Sandler (collectively
the "Class B Shareholders") entered into an Option Agreement. Pursuant to the
Option Agreement, the Class B Shareholders granted a three-year option to CFH
(the "Call Option") to purchase all, but not less than all, of the 830,000
shares of Class B Common Stock owned by the Class B Shareholders (the "Option
Shares") at a purchase price of $4.00 per share. Concurrently, CFH granted to
each Class B Shareholder an option (the "Put Option") to sell that portion of
the Option Shares held by each Class B Shareholder at a price of $4.00 per
share. The Put Option is exercisable with respect to 50% of the Option Shares
during the 30-day period following the second anniversary of the Effective
Date and 50% during the 30-day period following the third anniversary of the
Effective Date. In the event that CFH or any of its affiliates exercises the
Call Option, and within 180 days after closing thereof, sells or agrees to
sell any portion of the Option Shares to a person who is not an affiliate of
CFH for a price greater than $4.00 per share, the seller shall be obligated to
pay the Class B Shareholders 50% of such excess. The Class B Shareholders
agreed not to pledge, sell or otherwise transfer the Option Shares at any time
during the term of the Call Option except to the extent of exercise of the Put
Option. The obligation of CFH under the Put Option is secured by funds in a
segregated bank account.
Pursuant to the Option Agreement, each Class B Shareholder granted CFH
the right to vote all Option Shares and to direct the exercise of all
consensual or other voting rights with respect to any additional shares of the
Company's capital stock as to which any Class B Shareholder holds a proxy
granted by a third party, subject to any fiduciary duty owed to the grantor of
any such proxy. The Class B Shareholders retain all other incidents of
ownership with respect to the Option Shares, including, but not limited to,
the right to receive dividends.
The Option Agreement further provides that CFH shall vote or cause to be
voted shares of the Company's capital stock, including the Option Shares, to
maintain Messrs. Ginsburg and Sandler as directors of the Company. The Class B
Shareholders agreed to use their best efforts to provide CFH with the right to
designate four directors to the Company's board or such larger number as shall
then be sufficient to provide CFH with effective control of the board. In
April 1998, the number of members of the Board of Directors was expanded from
four to eight, two of the then directors resigned and the current members of
the board were appointed. Concurrently with execution of the Option Agreement,
Messrs. Ginsburg and Sandler entered into Executive Employment Agreements with
the Company. See "Proposal 1 - Election of Directors - Employment Agreements."
Prior and subsequent to the Effective Date, management of the Company and
representatives of Pacific USA and its affiliates engaged in extended
negotiations and investigations which resulted in the execution of the Asset
Purchase Agreement on or about January 8, 1998. See "Certain Relationships and
Related Party Transactions." Following approval at a special meeting of
shareholders of the Company held March 4, 1998, and pursuant to the terms of
the Asset Purchase Agreement, 2,433,457 shares of the Company's 8% Cumulative
Convertible Preferred Stock, Series 1998-1 (the "Preferred Stock") valued at
$2.00 per share and 811,152 shares of the Company's Class A Common Stock, also
valued at $2.00 per share, were issued to affiliates of Pacific USA. Each
share of Preferred Stock is convertible at any time into one-half share of
Class A Common Stock, or an aggregate of up to 1,216,729 shares of Class A
Common Stock. Thus, the effective cost of the Class A Common Stock issuable
upon conversion of the Preferred Stock will be $4.00 per share. The Company
may become obligated to issue additional shares of Class A Common Stock to
affiliates of Pacific USA depending upon satisfaction of certain conditions
described herein.
Pacific USA is the beneficial owner of 2,311,152 outstanding shares of
Class A Common Stock. As a result of the Option Agreement, it was granted the
power to vote the 830,000 shares of Class B Common Stock owned by the Class B
Shareholders and a limited power to direct the voting of shares subject to
proxies held by the Class B Shareholders. As of April 16, 1998, 8,014,631
shares of Class A Common Stock were issued and outstanding and 1,273,715
shares of Class B Common Stock were issued and outstanding. The Class A Common
Stock has one vote per share while the Class B Common Stock has three votes
per share. Accordingly, Pacific USA controls approximately 51.8% of the
combined total voting power of the Class A and Class B Common Stock and will
be able to elect all of the directors to be elected by the holders of the
Common Stock. Upon exercise of either the Put Option or the Call Option, the
shares of Class B Common Stock purchased by CFH will automatically convert
into the same number of shares of Class A Common Stock thereby reducing the
voting power of Pacific USA with respect to the Common Stock. Pacific USA also
is the beneficial owner of all of the outstanding shares of Preferred Stock
and, accordingly, will be able to elect the one director entitled to be
elected by the holders of the Preferred Stock.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors currently consists of eight members, all of whom
have been nominated for re-election. The nominees for re-election by the
holders of the Common Stock are Morris Ginsburg, Irwin L. Sandler, Bill C.
Bradley, John Sloan, Bobby L. Hashaway, Robert D. Womack and Leonard M.
Snyder. William P. Clark, Jr., is the nominee for re-election by the holders
of the Preferred Stock. The entire Board of Directors is elected to serve
until the next Annual Meeting of the Shareholders and until their successors
have been elected and qualify. It is intended that the Shares represented by
properly executed Proxies will be voted FOR the director nominees except where
authority has been withheld as to a particular nominee or as to all nominees.
If any candidate nominated in this Proxy Statement should for any reason
become unavailable for election, Proxies may be voted with discretionary
authority for any substitute designated by the Board of Directors. The
election of directors requires a majority of the votes entitled to be cast at
the Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The executive officers and director nominees of the Company are as follows:
Name Age Position
- ------------------------------------------------- --- ------------------------------------
<S> <C> <C>
Morris Ginsburg . . . . . . . . . . . . . . . . . 67 Chairman of the Board, President,
Chief Executive Officer, Principal
Financial and Accounting Officer
and Director
Irwin L. Sandler. . . . . . . . . . . . . . . . . 52 Executive Vice President, Secretary/
Treasurer and Director
Bill C. Bradley . . . . . . . . . . . . . . . . . 66 Director
John R. Sloan . . . . . . . . . . . . . . . . . . 50 Director
Bobby L. Hashaway . . . . . . . . . . . . . . . . 43 Director
Robert D. Womack. . . . . . . . . . . . . . . . . 55 Director
William P. Clark, Jr. . . . . . . . . . . . . . . 62 Director
Leonard M. Snyder . . . . . . . . . . . . . . . . 50 Director
Vann R. Martin. . . . . . . . . . . . . . . . . . 43 Senior Vice President
Mark Gengozian. . . . . . . . . . . . . . . . . . 46 Vice President
<FN>
</TABLE>
There are no family relationships among any of the executive officers or
directors of the Company. Pursuant to the Option Agreement described herein,
(i) CFH agreed to vote or cause to be voted certain shares of the Company's
capital stock, including the Option Shares (as defined in the Option
Agreement), to maintain Messrs. Ginsburg and Sandler as directors of the
Company, and (ii) Messrs. Ginsburg and Sandler agreed to use their best
efforts to provide CFH with the right to designate four directors to the
Company's board or such larger number as shall then be sufficient to provide
CFH with effective control of the board. In addition, so long as not less than
1,500,000 shares of Preferred Stock are issued and outstanding, holders of the
Preferred Stock have the right to elect one director of the Company. The four
board members designated by CFH are Messrs. Bradley, Sloan, Hashaway and
Womack. Mr. Clark was appointed by First CF Corp., an indirect wholly-owned
subsidiary of Pacific USA and the record owner of all of the Preferred Stock.
Morris Ginsburg - Mr. Ginsburg, a co-founder of the Company, has been
Chairman of the Board, President and Chief Executive Officer of the Company
since June 1, 1988. From 1955 to 1979, Mr. Ginsburg was chairman of the board,
president, chief executive officer and owner of Bluhill American, a producer
of condiments for the food service industry. Mr. Ginsburg sold Bluhill to the
Kellogg Company in 1979 and served as a director of Fearn International, a
division of Kellogg, from 1979 through 1983. In 1983, Mr. Ginsburg repurchased
Bluhill from Kellogg and shortly thereafter resold it to Dean Foods. In 1981,
Mr. Ginsburg formed Container Industries, Inc., a food container company in
Denver, Colorado for which he serves as chairman of the board. Since 1984, Mr.
Ginsburg has been president, chief executive officer and owner of Ginsburg
Investments, an asset lending company.
Irwin L. Sandler - Mr. Sandler, a co-founder of the Company, has been
Executive Vice President of the Company since April 1, 1993, and Senior Vice
President, Secretary, Treasurer and a Director of the Company since June 1,
1988. Since 1972, Mr. Sandler has been in the private practice of law in
Denver, Colorado emphasizing securities, corporate, contract and general
business law. From 1982 through 1985, Mr. Sandler served as president and a
director of a publicly held company engaged in both oil and gas exploration
and the investment banking business.
Bill C. Bradley - Mr. Bradley has been a Director of the Company since
April 1998. He has been the chief executive officer and a director of Pacific
USA Holdings Corp. since 1991 and is responsible for developing its investment
and operating strategies and plans. From 1968 to 1991 he was a partner of KPMG
Peat Marwick where he served on its board of directors. From 1980 to 1991 he
was responsible for its management consulting practice in the southwest region
of the United States.
John R. Sloan - Mr. Sloan has been a Director of the Company since April
1998. He joined Pacific USA Holdings Corp. in October 1997 as its chief
operating officer. From 1993 to 1997, Mr. Sloan served as president and chief
executive officer of J. Sloan & Co., a venture capital firm he founded to
invest in developmental stage companies. From 1989 to January 1995, Mr. Sloan
was a director of Lamonts Apparel, Inc., a public company engaged in the
retail clothing business. In January 1995, Lamonts filed a voluntary petition
under Chapter 11 of the Bankruptcy Code and its plan of reorganization became
effective in January 1998. He served as president and chief executive officer
of The Thompson Company from 1978 to 1992. The Thompson Company is a private
investment company engaged in leveraged buyouts, real estate and venture
capital investments. Mr. Sloan is a certified public accountant.
Bobby L. Hashaway - Mr. Hashaway has been a Director of the Company since
April 1998. Since 1992, he has been the executive vice president and chief
financial officer of Pacific Southwest Bank. From 1975 to 1992, he was
associated with Bank One, Texas, N.A., Dallas, Texas, with the final position
held being that of senior vice president - corporate planning. Mr. Hashaway is
a certified public accountant.
Robert D. Womack - Mr. Womack has been a Director of the Company since
April 1998. Since 1996, he has been the executive vice president and chief
financial officer of Pacific Consumer Funding, LLC ("PCF"), a company owned by
Pacific Southwest Bank and Stone Pine Pacific, LLC, and engaged in the
business of acquisitions, strategic investments and financing for companies
providing credit in the sub-prime finance markets. >From 1990 to 1995, Mr.
Womack held several executive positions with American General Corporation,
Houston, Texas, a diversified financial services company. From 1971 to 1978
and again from 1987 to 1990, he was associated with KPMG Peat Marwick LLP, in
areas including tax consulting for mergers, acquisitions and cross-border
transactions. Mr. Womack is a certified public accountant.
William P. Clark, Jr. - Mr. Clark has been a Director of the Company
since April 1998 and has been a director of Pacific Southwest Bank since 1993.
Since 1974, he has been the president, chief executive officer, a director and
a majority shareholder of Lockhart Motor Company, which owns and operates a
Ford-Lincoln-Mercury dealership in Lockhart, Texas. In 1992 and 1993 he served
on the board of directors of the Texas Automobile Dealers Association. From
1969 to 1989 he served on the board of directors of Lockhart State Bank. Mr.
Clark is active in numerous civic and community service associations.
Leonard M. Snyder - Mr. Snyder has been a Director of the Company since
April 1998. Since 1995, Mr. Snyder has engaged in marketing, management and
financial consulting. From 1987 to October 1994, he was chairman of the board
and chief executive officer of Lamonts Apparel, Inc, a public company engaged
in the chain store apparel business. In January 1995, Lamonts filed a
voluntary petition under Chapter 11 of the Bankruptcy Code and its plan of
reorganization became effective in January 1998. Since April 1998, Mr. Snyder
has been a director of One Price Clothing Stores, Inc., a public company
engaged in the women's retail clothing business. From 1979 to 1987 he was
employed by Allied Stores Corporation, a department store chain. The final
position he held with Allied was that of corporate vice president and
executive group manager for all Midwestern United States stores.
Vann R. Martin - Mr. Martin has been Senior Vice President of the Company
since February 1998. From August 1997 to February 1998, he served as Executive
Vice President of Marketing and Operations for Search Financial Services, Inc.
From 1984 to February 1998, he was involved with a program which provided
automobile financing for marginal risk customers. From 1984 through 1993, the
program was owned and operated by First Jackson Savings Bank of Jackson,
Mississippi, where the last position held by Mr. Martin was Senior Vice
President. In 1993, the program was purchased by MS Financial, of which Mr.
Martin became President and Chief Operating Officer. In July 1997, that
company was acquired by Search Financial Services, Inc. From 1978 through
1984, Mr. Martin served in various financial and credit management positions
with Capital Bank of Louisiana and Ford Motor Credit Company.
Mark Gengozian - Mr. Gengozian has been Vice President, Information
Systems Director of the Company since August 1995. His previous work
experience as vice president, MIS Director and consultant include directing
major systems conversions with Capital Associates International, Inc. (April
1990 to August 1995), US WEST Financial Services (January 1989 to April 1990),
Citicorp, N.A. (July 1987 to January 1989), Security Pacific Leasing (July
1987 to January 1989) and Great Western Financial (July 1987 to January 1989).
Mr. Gengozian's twenty-two years of experience encompass software, hardware,
communications and network expertise on most computer systems.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Act") and the
rules thereunder require the Company's executive officers and directors, and
any persons who own more than ten percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of Forms 3, Forms 4 and Forms 5
received by it, or written representations from a reporting person that no
Form 5 is required for that person, the Company believes that, during the last
fiscal year, all Section 16(a) filing requirements applicable to its executive
officers, directors and ten-percent or more beneficial owners, were complied
with.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors
held two meetings and took action by unanimous written consent on eight
occasions. Significant matters were informally discussed among the directors
before the consents were signed. During 1997, no incumbent director attended
fewer than 75% of the aggregate of the total number of board meetings held
while he was a director and the total number of committee meetings of which he
was a member.
The Board of Directors has appointed a Stock Option Committee and an
Audit Committee but does not currently have standing nominating or
compensation committees. The Company's executive committee, which has broad
powers to act on behalf of the Company, consists of Messrs. Ginsburg and
Sandler. The executive committee meets informally on a regular basis.
The current members of the Stock Option Committee and the Audit Committee
are Leonard M. Snyder and William P. Clark, Jr. The Stock Option Committee was
established on June 30, 1992, and held no meetings in 1997. However, it took
action by unanimous written consent on two occasions in 1997. The Stock Option
Committee administers and interprets the Company's 1992 Stock Option Plan and
has authority to determine which persons shall be granted options under the
Company's 1992 Stock Option Plan and the terms and conditions of the stock
options granted. The Audit Committee was recently established and has held no
meetings. Previously, the full Board of Directors performed the functions of
an audit committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE TO GRANT
AUTHORITY "FOR" THE PROPOSAL TO ELECT MESSRS. GINSBURG, SANDLER, BRADLEY,
SLOAN, HASHAWAY, WOMACK, CLARK AND SNYDER AS DIRECTORS OF THE COMPANY.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning cash
compensation paid to the Company's Chief Executive Officer and any other
executive officer whose total annual compensation exceeded $100,000 for the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual
Compensation Awards
------------ -----------
Securities
Other Annual Underlying
Name and Principal Position. Year Salary Bonus Compensation Options (#)
- ---------------------------- ------------ ----------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Morris Ginsburg. . . . . . . 1997 $ 208,086 $ 6,317 $ 8,104 112,500(1)
President and. . . . . . . . 1996 $ 200,000 $37,891 $ 8,750 50,000(1)
Chief Executive Officer. . . 1995 $ 200,000 $37,891 $ 6,790 0
Irwin L. Sandler . . . . . . 1997 $ 160,330 $ 4,737 $ 10,134 112,500(1)
Executive Vice President,. . 1996 $ 150,000 $27,410 $ 10,632 50,000(1)
Secretary and Treasurer. . . 1995 $ 150,000 $28,418 $ 9,373 0
Michael Feinstein(2) . . . . 1997 $ 100,000 $ 2,499 $ 5,711 50,000(1)
Senior Vice President. . . . 1996 $ 100,000 $14,993 $ 7,579 10,000(1)
Chief Financial Officer. . . 1995 $ 48,333 $ 0 $ 0 0
Mark Gengozian . . . . . . . 1997 $ 105,500 $ 1,222 $ 2,000 80,000(1)
Vice President . . . . . . . 1996 $ 96,875 $ 9,045 $ 0 15,000(1)
1995 $ 36,939 $ 0 $ 0 0
<FN>
______________________
(1) Options to purchase Class A Common Stock of the Company.
(2) Mr. Feinstein is no longer employed by the Company effective April 1998.
</TABLE>
The Company granted the following stock options to its named executive
officers during the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name . . . . . . . . . . . . . . . . . . . . . . . . Granted (#) Fiscal Year Price Date
- ---------------------------------------------------- ------------- ------------- --------- ---------------
<S> <C> <C> <C> <C>
Morris Ginsburg, . . . . . . . . . . . . . . . . . . 112,500 16% $ 0.531 August 25, 2007
President and Chief Executive Officer
Irwin L. Sandler,. . . . . . . . . . . . . . . . . . 112,500 16% $ 0.531 August 25, 2007
Executive Vice President, Secretary and Treasurer
Michael Feinstein, . . . . . . . . . . . . . . . . . 50,000 7% $ 0.531 August 25, 2007
Senior Vice President and Chief Financial Officer(1)
Mark Gengozian,. . . . . . . . . . . . . . . . . . . 80,000 12% $ 0.531 August 25, 2007
Vice President
______________________
<FN>
(1) Mr. Feinstein is no longer employed by the Company effective April 1998.
</TABLE>
The following table sets forth the individual stock option exercises by
the named executive officers in and during the fiscal year ended December 31,
1997, and the stock option values at the end of such fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Value of Unexercised
Unexercised Options In-The-Money Options
at FY-End (#) at FY-End ($)
-------------------------- ----------------------------
Shares
Acquired on Value
Name . . . . . . . . Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ------------ ------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Morris Ginsburg. . . 0 $ 0 281,250 56,250 $ 12,319 $ 12,319
Irwin L. Sandler . . 0 $ 0 281,250 56,250 $ 12,319 $ 12,319
Mark Gengozian . . . 100 $ 113 54,900 40,000 $ 8,738 $ 8,760
Michael Feinstein(1) 0 $ 0 26,667 33,333 $ 3,650 $ 7,300
<FN>
______________________
(1) Mr. Feinstein is no longer employed by the Company effective April 1998.
</TABLE>
The Company's executive compensation is currently not affected by the
limitations on the deductibility of executive compensation amounts in excess
of $1,000,000 imposed by Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). However, in the future the Company intends to take
any actions it deems necessary with respect to executive compensation in
consideration of Section 162(m) of the Code.
EMPLOYMENT AGREEMENTS
On December 4, 1997, the Company entered into Executive Employment
Agreements with Messrs. Ginsburg and Sandler (the "Executives") whereby Mr.
Ginsburg is employed as president and chairman of the board and Mr. Sandler is
employed as executive vice president. He also presently serves as corporate
secretary and treasurer. The employment agreements each have a term of three
years, beginning December 4, 1997. The employment agreements provide for
annual base salaries for Messrs. Ginsburg and Sandler of $310,000 and
$290,000, respectively, and the same fringe benefits as are provided to other
executive level employees from time to time. Benefits include, without
limitation, the right to participate in stock option grants.
The employment agreements contain confidentiality, non-competition and
non-solicitation covenants by the Executives which apply for a period of two
years following expiration of the Executive's employment for any reason other
than death. As consideration for these covenants, the Company agreed to pay
each Executive the sum of $300,000 in two equal installments without interest,
with the first installment due on the first anniversary date of the
commencement of the two-year period and the second installment due on the
second anniversary date thereof.
DIRECTOR COMPENSATION
Directors are currently not paid fees for attending meetings of the Board
of Directors or committees thereof. However, they are reimbursed for actual
travel and other expenses incurred in attending such meetings. The Company
intends to compensate outside directors for attendance at board and committee
meetings in the form of cash and/or stock options, awards, appreciation rights
or other equity incentives or compensation. As of the date hereof, the amount
or method of determining any such compensation has not been established.
As members of the Stock Option Committee, Messrs. Snyder and Clark will
be eligible to participate in the Company's 1992 Stock Option Plan. The
Company's 1992 Stock Option Plan provides that options for the purchase of
5,000 shares of Class A Common Stock shall be granted automatically each year
immediately following the annual meeting of the Company's shareholders to each
director who is a member of the Stock Option Committee on such date. The
options shall be fully exercisable six months following the date of grant and
shall be exercisable for ten years after the date of grant. The exercise price
of such options shall equal the closing bid price of the stock as quoted on
the Nasdaq Stock Market on the date of grant.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of April 16, 1998, with
respect to the beneficial ownership of shares of Class A Common Stock and
Class B Common Stock of the Company by (a) each person known by the Company to
be the beneficial owner of more than five percent of the outstanding shares of
Class A and Class B Common Stock; (b) each executive officer and director; and
(c) all executive officers and directors as a group. Except as noted below,
each person has sole voting and investment power over the shares indicated:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF % OF COMMON STOCK % OF VOTING
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OWNERSHIP POWER
- ---------------------------------------- ---------------------------- --------------------- -----------
CLASS A CLASS B COMBINED(2) CLASS B COMBINED(3)
------------- ------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Morris Ginsburg. . . . . . . . . . . . . 283,950(4) 580,000(5) 9.0% 45.5% *(6)
370 17th Street
Denver, CO 80202
Irwin L. Sandler . . . . . . . . . . . . 283,320(7) 250,000(5) 5.6% 19.6% *(6)
370 17th Street
Denver, CO 80202
Bill C. Bradley. . . . . . . . . . . . . 3,527,881(8) 1,273,715(8) 45.7% 100.0% 51.8%
5999 Summerside Dr., Suite 112
Dallas, TX 75252
John R. Sloan. . . . . . . . . . . . . . -- -- -- -- --
5999 Summerside Dr., Suite 112
Dallas, TX 75252
Bobby L. Hashaway. . . . . . . . . . . . 2,027,881(9) -- 19.3% - 6.9%
18524 Bay Pines Lane
Dallas, TX 75287
Robert D. Womack . . . . . . . . . . . . -- -- -- -- --
17103 Preston Road, Suite 100
Dallas, TX 75248
William P. Clark, Jr.. . . . . . . . . . 2,027,881(10) -- 19.3% - 6.9%
P.O. Box 208
Lockhart, TX 78644
Leonard M. Snyder. . . . . . . . . . . . -- -- -- -- --
6260 N. Desert Moon Loop
Tucson, AZ 85750
Vann R. Martin . . . . . . . . . . . . . 10,000 -- * -- *
370 17th Street
Denver, CO 80202
Mark Gengozian . . . . . . . . . . . . . 55,000(11) -- * -- *
370 17th Street
Denver, CO 80202
Michael Feinstein. . . . . . . . . . . . 26,667(12) -- * -- *
370 17th Street
Denver, CO 80202
Pacific USA Holdings Corp. . . . . . . . 3,527,881(13) 1,273,715(13) 45.7% 100.0% 51.8%
Pacific Electric Wire & Cable Co., Ltd.
Consumer Finance Holdings, Inc.
5999 Summerside Drive, #106
Dallas, TX 75252
Black Diamond Advisors, Inc. . . . . . . 1,716,667(14) -- 15.6% -- --
230 Park Avenue
New York, NY 10169
Heller Financial, Inc. . . . . . . . . . 392,717(15) -- 4.1% -- --
500 West Monroe Street
Chicago, IL 60661
Bud Karsh. . . . . . . . . . . . . . . . -- 443,715(5) --(5) 4.8%(6) --(5)
10000 E. Yale #60
Denver, CO 80231
All executive officers and . . . . . . . 4,186,818 1,273,715 49.0% 100.0% 51.8%
directors as a group (11 persons)
<FN>
* Represents less than one percent.
(1) Shares are considered beneficially owned, for purposes of this table, only if held by the person
indicated, or if such person, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares the power to vote, to direct the voting of and/or to dispose of or
to direct the disposition of, such security, or if the person has the right to acquire beneficial
ownership within 60 days, unless otherwise indicated. All shares are owned of record unless otherwise
indicated.
(2) Includes all shares of Class A Common Stock and Class B Common Stock outstanding and assumes
exercise of all outstanding options and warrants and conversion of all outstanding debentures beneficially
owned by the indicated person.
(3) Includes all shares of Class A Common Stock and Class B Common Stock outstanding. Each share of
Class A Common Stock has one vote per share while each share of Class B Common Stock has three votes per
share. The Class B Common Stock may be converted into Class A Common Stock on a share for share basis at
the option of the holder thereof, and shall automatically be converted in the event of its sale or
transfer (whether by sale, assignment, gift, bequest, appointment or otherwise) or upon death of the
holder. Excluded, however, from the automatic conversion are transfers of the Class B Common Stock for
estate planning purposes to or for the benefit of the original holder or members of his immediate family,
provided that the original holder retains both voting and investment power over the stock so transferred.
(4) Includes options to purchase 50,000 shares of Class A Common Stock at $2.125 per share,
exercisable at any time until January 3, 2002; options to purchase 125,000 shares of Class A Common Stock
at $3.00 per share, exercisable at any time prior to June 30, 2002; options to purchase 50,000 shares of
Class A Common Stock at $1.875 per share exercisable at any time prior to July 29, 2006; and options to
purchase 56,250 shares of Class A Common Stock at $0.531 per share exercisable at any time prior to August
25, 2007. Excludes 7,500 shares of Class A Common Stock owned by the spouse of Mr. Ginsburg as to which he
disclaims beneficial ownership.
(5) Messrs. Ginsburg, Sandler (through a family partnership of which he is sole general partner) and
Karsh own 580,000, 250,000 and 443,715 shares, respectively, of Class B Common Stock. Messrs. Ginsburg and
Sandler have granted an option to CFH to purchase all of their shares of Class B Common Stock exercisable
until December 4, 2000.
(6) Messrs. Ginsburg, Sandler and Karsh entered into an Agreement Among Certain Shareholders of Monaco
Finance, Inc., dated April 9, 1992, in which Mr. Karsh appointed Messrs. Ginsburg and Sandler as his proxy
and attorney-in-fact to each vote 50% of his Class B Common Stock. On December 4, 1997, Messrs. Ginsburg
and Sandler transferred their voting rights with respect to these shares to Pacific USA, which, since it
has sole voting power over those shares, may be deemed to be the beneficial owner thereof Mr. Karsh also
may be deemed to be the beneficial owner of these shares since he retains sole dispositive power with
respect thereto.
(7) Includes options to purchase 50,000 shares of Class A Common Stock at $2.125 per share,
exercisable at any time until January 3, 2002; options to purchase 125,000 shares of Class A Common Stock
at $3.00 per share, exercisable at any time prior to June 30, 2002; options to purchase 50,000 shares of
Class A Common Stock at $1.875 per share, exercisable at any time prior to July 29, 2006; and options to
purchase 56,250 shares of Class A Common Stock at $0.531 per share exercisable at any time prior to August
25, 2007. Of the remaining shares listed for Irwin L. Sandler, 2,070 shares were purchased by Mr. Sandler
through the custodial account of his Keogh Plan. Mr. Sandler may be deemed the beneficial owner of these
shares.
(8) As a director of Pacific USA, Mr. Bradley may be deemed to share voting and/or investment power
with respect to the following shares: 1,500,000 shares of Class A Common Stock owned of record by CFH;
811,152 shares of Class A Common Stock owned of record by First CF Corp.; and 1,216,729 shares of Class A
Common Stock issuable upon full conversion of the Preferred Stock owned by First CF Corp. In addition, Mr.
Bradley may be deemed to be the beneficial owner of 1,273,715 shares of Class B Common Stock as to which
CFH has sole voting power. CFH also owns an option to purchase the 830,000 shares of Class B Common Stock
owned by Messrs. Ginsburg and Sandler exercisable until December 4, 2000.
(9) As a director of First CF Corp., Mr. Hashaway may be deemed to share voting and/or investment
power over 811,152 shares of Class A Common Stock and 1,216,729 shares of Class A Common Stock issuable
upon full conversion of the Preferred Stock owned by that company.
(10) As a director of Pacific Southwest Bank, Mr. Clark may be deemed to share voting and/or
investment power over 811,152 shares of Class A Common Stock and 1,216,729 shares of Class A Common Stock
issuable upon full conversion of the Preferred Stock owned by First CF Corp., a wholly-owned subsidiary of
that bank.
(11) Includes options to purchase 15,000 shares of Class A Common Stock at $1.875 per share any time
prior to July 29, 2006; and options to purchase 39,900 shares of Class A Common Stock at $0.531 per share
exercisable at any time prior to August 25, 2007.
(12) Includes options to purchase 10,000 shares of Class A Common Stock at $1.875 per share
exercisable for three months following his termination date; and options to purchase 16,667 shares of
Class A Common Stock at $0.531 per share exercisable for three months following his termination date. Mr.
Feinstein is no longer employed by the Company effective April 1998.
(13) The information contained in the table, in this footnote and elsewhere herein is derived from a
Schedule 13D dated March 16, 1998, filed by Pacific USA, Pacific Electric Wire & Cable Co., Ltd. ("Pacific
Electric") and CFH with the Securities and Exchange Commission with respect to the Option Agreement. See
"Introduction - Change in Voting Control." Pacific USA is a wholly-owned subsidiary of Pacific Electric.
CFH and First CF Corp. are direct and indirect wholly-owned subsidiaries of Pacific USA. Accordingly,
Pacific Electric and Pacific USA may be deemed to be the beneficial owners of all of the shares referred
to in Note (8) above.
(14) The information contained in the table and in this footnote is derived from a Schedule 13D dated
June 28, 1996, filed by Black Diamond Advisors, Inc. ("BDA") and others with the Securities and Exchange
Commission with respect to the issuance by the Company on January 9, 1996, of $5 million in principal
amount of 12% Convertible Subordinated Senior Notes due 2001 ("Convertible Notes"), convertible at any
time into approximately 1,250,000 shares of the Company's Class A Common Stock at a conversion price of
$4.00 per share. Concurrently, the Company agreed to issue up to an additional $5 million in principal
amount of Convertible Notes (the "Additional Notes") at a conversion price of $3.00 per share. If the
Additional Notes had been issued on December 31, 1996, the Additional Notes would have been convertible
into 1,666,667 shares of Class A Common Stock (the "Additional Shares"). In the Schedule 13D, BDA claims
that it is the beneficial owner of the Additional Shares. The Company expresses no opinion with respect to
this position. In addition, certain of the purchasers of the Notes have entered into a profit-sharing
agreement with BDA. Also, BDA has the right to purchase the Notes (and in one case the shares of Class A
Common Stock issuable upon conversion of the Notes) under certain circumstances not presently applicable.
Includes 50,000 shares of Class A Common Stock issuable upon conversion of Convertible Notes owned of
record by BDA and 1,666,667 Additional Shares assuming all of the Additional Notes are issued and the
conversion price of the Additional Notes is $3.00 per share. Stephen H. Deckoff and James E. Walker III
each is an officer, director and 50% shareholder of BDA. Each of Messrs. Deckoff and Walker disclaims
beneficial ownership of the shares of Class A Common Stock beneficially owned by BDA
212,500 shares of Class A Common Stock are issuable upon conversion of Convertible Notes owned of
record by BDC Partners I, L.P. ("BDC Partners I"). Messrs. Deckoff and Walker and James J. Zenni are the
only members of Black Diamond Capital Management L.L.C. ("BDCM"), the sole general partner of BDC Partners
I. Accordingly, BDCM and each of Messrs. Deckoff, Walker and Zenni may be deemed to be the beneficial
owner of all shares of Class A Common Stock beneficially owned by BDC Partners I. Also, Messrs. Deckoff,
Walker and Zenni beneficially own an additional 62,500, 62,500 and 50,000 shares, respectively, of Class A
Common Stock.
(15) Heller Financial, Inc. is the owner of Convertible Notes convertible into 750,000 shares of Class
A Common Stock, or approximately 8.1% of the Company's outstanding common stock However, pursuant to the
terms of the Indenture, if a holder of Notes is subject to federal banking regulations with respect to the
ownership of common stock, then the Notes held by such holder are only convertible to such extent as would
permit such holder to own at any one time no more common stock of the Company than would constitute 4.9%
of the outstanding capital stock of the Company. Such restrictions do not apply to any transferee of the
holder if such transferee is not subject to such federal banking regulations and such transfer would not
otherwise cause such holder to be otherwise in violation of federal banking regulations. Heller Financial,
Inc. has advised the Company that it is subject to such federal banking regulations and, accordingly, may
be deemed to beneficially own only up to 4.9% of the Company's Class A Common Stock.
</TABLE>
CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS
PACIFIC USA TRANSACTIONS
CONVERSION OF LOAN. On November 1, 1996, Pacific USA made a secured loan
of $3,000,000 to the Company which was scheduled to mature on November 16,
1998. On April 25, 1997, CFH and the holder of the note evidencing the
$3,000,000 loan converted the principal balance of the loan into 1,500,000
shares of Class A Common Stock valued at $2.00 per share. The closing bid
price of the Class A Common Stock on the Nasdaq Stock Market on that date was
$2.00 per share. CFH is a holding company engaged in consumer finance. As a
result of the conversion, Pacific USA, Pacific Electric Wire & Cable Co., Ltd.
("Pacific Electric"), and CFH acquired beneficial ownership of 1,500,000
shares of Class A Common Stock Pacific USA is a 100% owned subsidiary of
Pacific Electric. Concurrently, Pacific USA granted a proxy to vote 750,000
shares of Class A Common Stock to Morris Ginsburg, and a proxy to vote 750,000
shares of Class A Common Stock to Irwin Sandler.
CHANGE IN VOTING CONTROL. On or about December 4, 1997, Messrs. Ginsburg
and Sandler entered into a transaction which resulted in Pacific USA and
certain of its affiliates acquiring effective voting control of the Company.
See "Introduction - Change in Voting Control."
ASSET PURCHASE AGREEMENT. The Company entered into an Amended and
Restated Asset Purchase Agreement dated as of January 8, 1998 (the "Asset
Purchase Agreement"), with Pacific USA and certain of its wholly-owned or
partially-owned subsidiaries - Pacific Southwest Bank ("PSB"), NAFCO Holding
Company, L.L.C. ("NAFCO"), Advantage Funding Group, Inc. ("Advantage"), and
PCF Service, LLC - providing for, among other things, the purchase by the
Company of sub-prime automobile loans from NAFCO and Advantage having an
unpaid principal balance of approximately $81,115,233 for a purchase price of
$77,870,623 of which $73,003,709 was paid in cash. Financing was provided by
Daiwa Finance Corporation which also is entitled to receive warrants for the
purchase of 250,000 shares of Class A Common Stock. The Asset Purchase
Agreement amended and restated a similar agreement dated on or about September
30, 1997.
The Company's credit and risk departments screened the loans acquired
from NAFCO and Advantage. The credit department reviewed certain of the loan
files and verified, on a selected basis, information concerning the borrower,
the vehicle, as well as the contract terms. The credit department also matched
information contained in actual files with data transmitted to the Company
electronically. The function of the risk department is to use the Company's
proprietary risk analysis system to project cash flows from pools of loans to
determine estimated yield considering the purchase price, net of any discount;
coupon interest rate; estimated frequency and severity of defaults; and
estimated pre-payments. These investigations enabled the Company to establish
the terms for purchase of the contracts which management believes will satisfy
the Company's yield parameters and assisted in obtaining the financing
provided by Daiwa Finance Corporation. In addition, Daiwa performed an
independent review of the loan portfolio.
The balance of the purchase price, $4,866,914, was paid by the issuance
on or about March 9, 1998, of 2,433,457 shares of the Company's 8% Cumulative
Convertible Preferred Stock, Series 1998-1 (the "Preferred Stock") valued at
$2.00 per share. So long as not less than 1,500,000 shares of Preferred Stock
are issued and outstanding, the holders of the Preferred Stock, voting
separately as a class, are entitled to elect one member of the Company's Board
of Directors. Holders of the Preferred Stock otherwise have no voting rights
except as may be required by the laws of the State of Colorado and except with
respect to any amendment to the Company's Articles of Incorporation which
would change any of the rights or preferences enjoyed by such stock.
The holders of the Preferred Stock are entitled to receive when, as and
if declared by the Board of Directors, out of any funds of the Company legally
available for that purpose, cumulative dividends from the date of issuance at
the rate of 8% ($.16) per share of Preferred Stock per year, payable quarterly
in shares of the Company's Preferred Stock valued at $2.00 per share (or in
cash if no preferred shares are available for that purpose). Dividends on the
Preferred Stock are cumulative whether or not the Company is legally able to
pay such dividends in whole or in part. No dividends (other than those payable
solely in Common Stock) may be paid with respect to the Common Stock of the
Company unless all accumulated and unpaid dividends on the Preferred Stock
shall have been declared and paid.
The Preferred Stock may be converted in whole or in part at any time and
from time to time into shares of Class A Common Stock at the rate of one share
of Class A Common Stock for each two shares of Preferred Stock so converted
(the "Conversion Ratio"). In the event the closing price of the Class A Common
Stock on the Nasdaq Stock Market shall equal or exceed $6.00 per share on each
trading day during any period of 60 consecutive calendar days, all of the
Preferred Stock shall be automatically converted into shares of Class A Common
Stock at the Conversion Ratio. The Conversion Ratio shall be proportionately
adjusted as appropriate to reflect the effect of stock splits or combinations.
Upon liquidation, dissolution or winding up of the Company, the holders
of the Preferred Stock then issued and outstanding shall be entitled to
receive an amount equal to $2.00 per share of Preferred Stock plus any
accumulated but unpaid dividends before any payment or distribution of the
assets of the Company is made to or set apart for the holders of Common Stock.
The Company entered into a Registration Rights Agreement with each of
NAFCO, Advantage and PSB (the "RRA Holders") whereby each has the right under
certain circumstances to require that the Company register the shares of Class
A Common Stock ("Registrable Securities") owned by it for public resale (a
"demand" registration). In addition, if the Company determines to proceed with
the preparation and filing of a registration statement that would permit the
inclusion of the Registrable Securities, it is obligated to give written
notice thereof to each RRA Holder which has 30 days thereafter in which to
determine whether it wants all or any portion of its Registrable Securities to
be included in that registration statement (a "piggyback" registration). Also,
the Company has agreed to file a short form registration statement on Form S-3
upon demand by an RRA Holder so long as the reasonably anticipated aggregate
price to the public would exceed $1,000,000 and the Company is entitled to use
that short form registration. The RRA Holders are entitled to an unlimited
number of such registrations. The Company is obligated to pay all expenses
incurred in connection with the first demand registration and each piggyback
and Form S-3 registration excluding underwriters' discounts and commissions.
Each RRA Holder is obligated to pay all expenses incurred in connection with
its second demand registration.
The Company also agreed to make and keep public information available
within the meaning of Rule 144 under the Securities Act of 1933 and to use its
best efforts to timely file all reports required to be filed by it with the
Securities and Exchange Commission. The purpose of these covenants is to
enable the RRA Holders to sell shares of Class A Common Stock under Rule 144.
After a one-year holding period has been satisfied, that rule allows sales by
any single holder of the Company's common stock of up to 1% of the Company's
issued and outstanding Class A Common Stock during any 90-day period.
In connection with any registration of the Registrable Securities, the
Company and the selling RRA Holder have agreed to indemnify the other and the
other's affiliates for certain claims, costs and expenses with respect to such
registration. The registration rights may be transferred by each RRA Holder to
any person who acquires all its Registrable Securities or to any affiliate of
an RRA Holder.
As required by the Asset Purchase Agreement, PSB entered into a Loan Loss
Reimbursement Agreement whereby it agreed to reimburse the Company for up to
15% of any losses incurred by the Company in connection with the loans
acquired from NAFCO and Advantage. In consideration therefor, the Company paid
PSB an amount equal to 2% of the principal amount of the acquired loans in the
form of 811,152 shares of the Company's Class A Common Stock valued at $2.00
per share.
Also, the Company may be obligated to make additional payments to NAFCO
based on the performance of certain other assets acquired from NAFCO and the
results of operations, if any, with loan originators previously associated
with NAFCO. If there are any pre-tax earnings associated with these assets
and/or operations for calendar years 1998 and 1999, the Company is obligated
to pay NAFCO amounts equal to two times such pre-tax earnings in the form of
shares of the Company's Class A Common Stock valued at the average daily
closing price of such stock on the Nasdaq Stock Market for the last ten days
of such calendar year. The number of shares of Class A Common Stock which the
Company may be required to issue to NAFCO pursuant to these agreements cannot
be determined at present.
AUTO DEALERSHIP LEASE
Effective March 24, 1994, the Company entered into a triple net lease
(the "Lease") with GSC Ltd. Liability Company, a Colorado limited liability
company ("GSC"), pursuant to which the Company agreed to lease from GSC real
property at 890-894 S. Havana, Aurora, Colorado, including two buildings
located thereon with total square footage of approximately 13,375 square feet,
to be used by the Company as an automobile dealership lot. The Lease will
expire on March 23, 2001, unless sooner terminated or extended pursuant to the
terms of the Lease. In September 1995, the Company amended the lease to
include additional property (vacant land) resulting in an increase in the base
rent payable under the Lease from $12,750 per month to $13,738 per month. The
monthly rent increases to $14,238 for year three; $15,238 for year four;
$16,238 for year five; and $16,738 for years six and seven. Messrs. Sandler,
Caukin and Ginsburg, each a present or former director or executive officer of
the Company, are members of GSC. The Lease was approved by the disinterested
members of the Board of Directors. In the opinion of management, the terms of
the Lease are no less favorable to the Company than the terms which the
Company could have received from nonaffiliated third parties. Effective June
1, 1996, the Company entered into a sublease agreement on the property at 890
S. Havana, Aurora, Colorado, for the entire lease term at an amount
approximately equal to the Company's obligation.
SHAREHOLDER AGREEMENTS
A Buy-Sell Agreement dated May 14, 1993, by and among the Company, Morris
Ginsburg and Sandler Family Partners, Ltd. (the "Partnership"), provides that
(i) the Company has the obligation to purchase the shares of the Company's
common stock owned by Mr. Ginsburg or the Partnership upon the death of Mr.
Ginsburg or Irwin L. Sandler, General Partner of the Partnership,
respectively, to the extent of proceeds from insurance policies acquired by
the Company on their lives; (ii) the Company shall maintain insurance policies
in the amount of $2,000,000 each on the lives of Messrs. Ginsburg and Sandler
for the purpose of acquiring shares pursuant to the Buy-Sell Agreement; (iii)
the purchase price for any shares purchased shall be the greater of book value
or 80% of the average of the daily closing prices of the stock for the 30
consecutive trading days commencing 45 trading days prior to the date of death
of the insured; (iv) each of Mr. Ginsburg and the Partnership grant a first
right to the Company to acquire any shares which he or it may desire to sell
other than through Rule 144 under the Securities Act of 1933. In the event the
Company does not purchase any or all of the shares pursuant to such right, the
other shareholder has the option to acquire such shares; and (v) Messrs.
Ginsburg and Sandler appoint each other, upon the incapacity of either of
them, as his true and lawful attorney-in-fact and agent to vote the shares of
common stock of the Company beneficially owned by him and to exercise all
rights with respect thereto. The parties to the Buy-Sell Agreement have agreed
that the purchase rights and obligations under the Option Agreement shall
supersede the purchase and right of first refusal provisions contained in the
Buy-Sell Agreement during the term of the Option Agreement described herein
under "Introduction - Change in Voting Control."
In an Agreement Among Certain Shareholders of Monaco Finance, Inc. dated
April 9, 1992, Milton Karsh appointed Morris Ginsburg and Irwin L. Sandler,
both of whom are officers and directors of the Company, as his proxy and
attorney-in-fact to each vote 50% of the Company's Class B Common Stock owned
by him. See "Security Ownership of Certain Beneficial Owners and Management."
Such rights have been transferred to Pacific USA subject to any fiduciary
duties owed to third parties. See "Introduction - Change in Voting Control."
PROPOSAL 2 - APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
Shareholders will also be asked to ratify, confirm and approve an
amendment to the Company's Articles of Incorporation to (the "Amendment"). The
text of the resolution effecting the Amendment to be submitted to shareholders
at the Annual Meeting is attached hereto as Annex A. The form of the Amendment
is attached hereto as Annex B.
The Company was incorporated under a Colorado law which since has been
repealed. Thus, one purpose of the Amendment is to conform the Company's
Articles of Incorporation to the current governing law known as the Colorado
Business Corporation Act. THE FOLLOWING IS ONLY A BRIEF SUMMARY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF THE AMENDMENT ATTACHED
HERETO AS ANNEX B.
- - As under the existing Articles, the authorized capital stock of the
Company consists of two classes, common and preferred. The Common Stock is
divided into two series, Class A and Class B. 32,250,000 shares of Common
Stock are authorized, of which 30,000,000 are Class A Common Stock and
2,250,000 are Class B Common Stock. The Class A Common Stock has one vote per
share, while the Class B Common Stock has three votes per share. The Class B
Common Stock is convertible into Class A Common Stock on a share-for-share
basis. 10,000,000 shares of Preferred Stock are authorized. The board of
directors has the power to divide the class of Preferred Stock into series and
to fix and determine the relative rights and preferences of any such series.
- - As under the existing Articles, shareholders do not have preemptive
rights to purchase any unissued shares or securities of the Company.
- - As under the existing Articles, cumulative voting is not allowed in the
election of directors.
- - If a quorum is present at any meeting of shareholders, Major
Transactions (amendments to the articles of incorporation, a plan of merger or
share exchange, the disposition of substantially all of the property of the
Company, the granting of consent to the disposition of property by an entity
controlled by the Company, and the dissolution of the Company) shall be
approved by each voting group entitled to vote separately on the transaction
or matter by a majority of all the votes entitled to be cast on the
transaction or matter by that voting group. In an election of directors, that
number of candidates equaling the number of directors to be elected, having
the highest number of votes cast in favor of their election, shall be elected
to the Board of Directors. Any other matter requiring voting group approval is
approved if the votes cast favoring the action exceed the votes cast opposing
the action.
- - As allowed by the Colorado Business Corporation Act, directors and their
affiliates may contract with the Company under certain circumstances including
if the material facts are disclosed or known to the disinterested directors or
shareholders who approve or ratify the contract in good faith, or the
transaction is fair to the Company.
- - As under the existing Articles, officers, directors and other members of
management of the Company are required to make available to the Company
corporate opportunities within its area of interest. If the opportunity is
rejected by a majority of the disinterested directors, then such persons may
take advantage of the opportunity.
- - As under the existing Articles, the Company is required to indemnify, to
the fullest extent allowed by law, directors or officers of the Company in
their capacities as such and in other capacities as requested by the Company.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT
AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
ARTICLES OF INCORPORATION.
Approval of the Amendment will require the affirmative vote, in person or
by proxy, of a majority of the voting power of the shares of Class A and Class
B Common Stock and a majority of the outstanding shares of Preferred Stock.
Unless a contrary direction is indicated, all proxies received will be voted
in favor of the Amendment.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Ehrhardt Keefe Steiner & Hottman P.C.
as the Company's independent public accountants for the fiscal year ending
December 31, 1998. A representative of Ehrhardt Keefe Steiner & Hottman P.C.
will be present at the Annual Meeting. Such representative will have the
opportunity to make a statement if he desires to do so and will be available
to respond to appropriate questions. An affirmative vote by the holders of a
majority of the votes entitled to be cast at the Annual Meeting is necessary
to ratify the appointment of Ehrhardt Keefe Steiner & Hottman P.C.
There is no legal requirement for submitting this proposal to the
Shareholders. The Board of Directors, however, believes that it is of
sufficient importance to seek ratification. Whether the proposal is approved
or defeated, the Board of Directors may reconsider its appointment of Ehrhardt
Keefe Steiner & Hottman P.C.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF
RATIFYING THE APPOINTMENT OF EHRHARDT KEEFE STEINER & HOTTMAN P.C. AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
SUBMISSION OF PROPOSALS BY SHAREHOLDERS
In order to be eligible for inclusion in the Company's proxy statement
for the 1999 annual meeting of Shareholders, any proposal of a Shareholder
must be received by the Company at its principal offices in Denver, Colorado
by January 15, 1999.
PROXY SOLICITATION
In addition to soliciting Proxies by mail, directors, executive officers
and employees of the Company, without receiving additional compensation, may
solicit Proxies by telephone, by telegram or in person. Arrangements will also
be made with brokerage firms and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of shares of the Class
A Common Stock and the Company will reimburse such brokerage firms and other
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with forwarding such materials.
ANNUAL REPORT
The Company will, upon written request and without charge, provide to any
person solicited hereunder a copy of the Company's Annual Report on Form
10-KSB, for the year ended December 31, 1997, as filed with the Securities and
Exchange Commission on March 31, 1998, and as amended on or about April 29,
1998. The Company will provide copies of exhibits to the Form 10-KSB upon
payment of a fee of $.03 per page, which is management's estimate of the
Company's reasonable related expenses. Requests should be addressed to the
Corporate Secretary, at the principal executive office of the Company, 370
17th Street, Suite 5060, Denver, Colorado 80202.
OTHER BUSINESS
The Board of Directors does not know of any business to be presented for
consideration at the Annual Meeting other than that stated in the notice. It
is intended, however, that the persons authorized under the Board's proxies
may, in the absence of instructions to the contrary, vote or act in accordance
with their judgment with respect to any other proposal properly presented for
action at such meeting.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial owners
of the Shares for which proxies are being solicited from you, and, if so, the
number of copies of this Proxy Statement and other soliciting materials you
wish to receive in order to supply copies to the beneficial owners of the
Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHAREHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING
YOUR PROXY PROMPTLY YOU CAN HELP THE COMPANY AVOID THE EXPENSE OF FOLLOW-UP
MAILINGS TO ENSURE A QUORUM SO THAT THE ANNUAL MEETING CAN BE HELD.
SHAREHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE A PRIOR PROXY IN PERSON
AS SET FORTH IN THIS PROXY STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Irwin L. Sandler
- -----------------------
Irwin L. Sandler, Secretary
Denver, Colorado
May 26, 1998
<PAGE>
ANNEX A
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
RESOLVED, that the Company is authorized to amend its Articles of
Incorporation in the form included in the Company's Proxy Statement dated May
26, 1998; and further
RESOLVED, that the officers of the Company are authorized and directed,
on behalf of the Company, to execute and deliver Articles of Amendment to its
Articles of Incorporation and to cause such Articles of Amendment to be filed
with the Colorado Secretary of State; and further
RESOLVED, that the officers of the Company are authorized and directed,
on behalf of the Company, to take such other and further actions and to
execute and deliver such documents as they shall deem necessary or desirable
in the best interests of the Company and its stockholders in connection with
the amendments to the Company's Articles of Incorporation and the transactions
contemplated thereby.
<PAGE>
ANNEX B
MAIL TO: SECRETARY OF STATE
CORPORATIONS SECTION
1560 BROADWAY, SUITE 200
DENVER, CO 80202
(303) 894-2251
MUST BE TYPED FAX (303) 894-2242
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
---
ARTICLES OF AMENDMENT
PLEASE INCLUDE A TYPED TO THE
SELF-ADDRESSED ENVELOPE ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is MONACO FINANCE, INC.
------------------------
SECOND: The following amendment to the Articles of Incorporation was adopted
on JUNE 30, 1998, as prescribed by the Colorado Business Corporation Act, in
---------------
the manner marked with an X below:
No shares have been issued or Directors Elected - Action by Incorp-
- -----
orators.
No shares have been issued but Directors Elected - Action by Directors
- ------
Such amendment was adopted by the board of directors where shares have
- ------
been issued and shareholder action was not required.
X Such amendment was adopted by a vote of the shareholders. The
- -----
number of shares voted for the amendment was sufficient for approval.
SEE EXHIBIT A ATTACHED HERETO AND INCORPORATED HEREIN.
THIRD: If changing corporate name, the new name of the corporation is
- ------------------------------------------------------------------------------
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows: NONE.
If these amendments are to have a delayed effective date, please list that
date:
-----------------------------------------------------------------------
(Not to exceed ninety (90) days from the date of filing)
MONACO FINANCE, INC.
Signature____________________________
Morris Ginsburg, President
<PAGE>
EXHIBIT A
---------
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
MONACO FINANCE, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
Articles II through XII of the Articles of Incorporation of the
Corporation are hereby deleted and the following Articles II through XI
substituted therefor. This Amendment shall have no effect whatsoever on the
Preferences, Limitations and Relative Rights of 8% Cumulative Convertible
Preferred Stock, Series 1998-1, previously filed with the Colorado Secretary
of State, which shall remain in full force and effect.
ARTICLE II.
PERIOD OF DURATION
This Corporation shall exist in perpetuity unless dissolved according to
law.
ARTICLE III.
PURPOSES
The purpose for which this Corporation is organized is to transact any
lawful business for which corporations may be incorporated pursuant to the
Colorado Business Corporation Act.
ARTICLE IV.
AUTHORIZED CAPITAL
1. Common Shares The aggregate number of Common Shares which this
-------------
Corporation shall have authority to issue is thirty-two million two hundred
fifty thousand (32,250,000) shares, $.01 par value, of which 30,000,000 shall
be a series designated "Class A Common Stock," and 2,250,000 shares shall be a
series designated "Class B Common Stock." Each share of Class B Common Stock
may be converted at any time at the option of the original holder thereof into
one (1) share of the Corporation's Class A Common Stock. Each share of Class B
Common Stock shall convert automatically into one (1) share of Class A Common
Stock upon the death of the original holder thereof. Each share of Class B
Common Stock shall also convert automatically into one (1) share of Class A
Common Stock upon the sale or transfer of Class B Common Stock; provided,
however, that the Class B Common Stock shall not automatically convert into
Class A Common Stock as provided herein upon any transfer by the original
holder for estate planning purposes to or for the benefit of the original
holder and/or members of the immediate family of the original holder so long
as, and only so long as, all voting and investment power over the shares of
Class B Common Stock so transferred remain in the original holder. The Class B
Common Stock shall in all other respects be identical to the Class A Common
Stock of the Corporation except that on every matter for which one (1) share
of Class A Common Stock of the Corporation is entitled to one (1) vote, each
share of Class B Common Stock shall be entitled to three (3) votes.
2. Preferred Shares. The aggregate number of Preferred Shares which
----------------
this Corporation shall have authority to issue is ten million (10,000,000)
shares, no par value, which shares shall be designated "Preferred Stock." The
Board of Directors of this Corporation shall have authority to divide the
class of Preferred Shares into series and to fix and determine the relative
rights and preferences of the shares of any such series established to the
full extent permitted by the laws of the State of Colorado in respect of,
among other things: (a) the number of Preferred Shares to constitute such
series and the distinctive designations thereof; (b) the rate and preference
of dividends, if any, the time of payment of dividends, whether dividends are
cumulative and the date from which any dividends shall accrue; (c) whether
Preferred Shares may be redeemed and, if so, the redemption price and the
terms and conditions of redemption; (d) the liquidation preferences payable on
Preferred Shares in the event of involuntary or voluntary liquidation; (e)
sinking fund or other provisions, if any, for redemption or purchase of
Preferred Shares; (f) the terms and conditions by which Preferred Shares may
be converted, if the Preferred Shares of any series are issued with the
privilege of conversion; and (g) voting rights, if any.
3. Dividends. Dividends in cash, property or shares of the
---------
Corporation may be paid, as and when declared by the Board of Directors, out
of funds of the Corporation and to the extent and in the manner permitted by
law.
4. Distribution in Liquidation. Upon any liquidation, dissolution or
---------------------------
winding up of the Corporation, and after paying or adequately providing for
the payment of all its obligations, the remainder of the assets of the
Corporation shall be distributed, either in cash or in kind, pro rata to the
holders of the Common Stock.
5. Assessment. The Capital Stock of the Corporation shall not be
----------
subject to assessment, but shall be issued as fully paid and nonassessable.
ARTICLE V.
VOTING BY SHAREHOLDERS
1. Voting Rights Each outstanding share of Class A Common Stock is
-------------
entitled to one (1) vote and each fractional share of Class A Common Stock is
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders. Each outstanding share of Class B Common Stock is entitled to
three (3) votes and each fractional share of Class B Common Stock is entitled
to a corresponding fractional vote on each matter submitted to a vote of
shareholders.
2. No Preemptive Rights. No holder of any shares of the Corporation,
--------------------
whether now or hereafter authorized, shall have any preemptive rights or
preferential right to acquire any unissued shares or securities of the
Corporation, including shares or securities held in the treasury of the
Corporation or securities convertible into shares or carrying stock purchase
warrants or privileges.
3. Quorum. A majority of the votes entitled to be cast on a matter by
------
a voting group shall constitute a quorum of that voting group for action on
that matter at any meeting of shareholders.
4. Voting; No Cumulative Voting
-------------------------------
(a) Except as is otherwise provided by the Colorado Business
Corporation Act with respect to action on amendment to these articles of
incorporation, on a plan of merger or share exchange, on the disposition of
substantially all of the property of the Corporation, on the granting of
consent to the disposition of property by an entity controlled by the
Corporation, and on the dissolution of the Corporation (collectively referred
to as "Major Transactions"), action on a matter other than the election of
directors is approved if a quorum exists and if the votes cast favoring the
action exceed the votes cast opposing the action.
(b) Major Transactions shall be approved by each voting group
entitled to vote separately on the transaction or matter by a majority of all
the votes entitled to be cast on the transaction or matter by that voting
group.
(c) Cumulative voting shall not be allowed in the election of
Directors of the Corporation and every shareholder entitled to vote at such
election shall have the right to vote all of the shareholder's votes for as
many persons as there are directors to be elected, and for whose election the
shareholder has a right to vote. In an election of directors, that number of
candidates equaling the number of directors to be elected, having the highest
number of votes cast in favor of their election, shall be elected to the Board
of Directors.
(d) Any bylaw adding, changing, or deleting a greater quorum or
voting requirement for shareholders shall meet the same quorum requirement and
be adopted by the same vote required to take action under the quorum and
voting requirements then in effect or proposed to be adopted, whichever are
greater.
ARTICLE VI.
RIGHT OF DIRECTORS TO CONTRACT WITH CORPORATION
1. Conflicting Interest Transactions. No conflicting interest
-----------------------------------
transaction (as that term is defined in the Colorado Business Corporation Act)
shall be void or voidable or be enjoined, set aside or give rise to an award
of damages or other sanctions in a proceeding by a shareholder or by or in the
right of the Corporation, solely because the conflicting interest transaction
involves a director of the Corporation or an entity in which a director of the
Corporation is a director or officer or has a financial interest or solely
because the director is present at or participates in a meeting of the
Corporation's Board of Directors or of the committee of the Board of Directors
which authorizes, approves or ratifies the conflicting interest transaction or
solely because the director's vote is counted for such purpose if:
(a) The material facts as to the director's relationship or
interest and as to the conflicting interest transaction are disclosed or are
known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes, approves or ratifies the conflicting
interest transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors are less than
a quorum; or
(b) The material facts as to the director's relationship or
interest and as to the conflicting interest transaction are disclosed or are
known to the shareholders entitled to vote thereon, and the conflicting
interest transaction is specifically authorized, approved or ratified in good
faith by a vote of the shareholders; or
(c) The conflicting interest transaction is fair as to the
Corporation.
2. Quorum. Common or interested directors may be counted in
------
determining the presence of a quorum at a meeting of the Board of Directors or
a committee thereof which authorizes, approves or ratifies such contract or
transaction.
ARTICLE VII
CORPORATE OPPORTUNITY
The officers, directors and other members of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
Board of Directors as evidenced by resolutions appearing in the Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors, and other members of management of this Corporation shall
first be made available to the Corporation and, if rejected by a majority of
the disinterested members of the Corporation's Board of Directors, any of such
persons shall be free to engage in such areas of interest on their own. This
doctrine shall not limit the right of any officer, director or other member of
management of this Corporation to continue a business existing prior to the
time that such area of interest is designated by the Corporation. This
provision shall not be construed to release any employee of this Corporation
(other than an officer, director or member of management) from any duties
which he may have to this Corporation.
ARTICLE VIII.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person, and the estate and
personal representative of any such person, against all liability and expense
(including attorneys' fees) incurred by reason of the fact that he is or was a
director or officer of the Corporation or, while serving as a director or
officer of the Corporation, he is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of, or in any similar managerial or fiduciary position of, another
domestic or foreign corporation or other individual or entity or of an
employee benefit plan. The Corporation shall also indemnify, any person who is
serving or has served the Corporation as director, officer, employee,
fiduciary, or agent, and that person's estate and personal representative, to
the extent and in the manner provided in any bylaw, resolution of the
shareholders or directors, contract, or otherwise, so long as such provision
is legally permissible.
ARTICLE IX.
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation is 370
Seventeenth Street, Suite 5060, Denver, Colorado 80202, and the name of the
registered agent at such address is Irwin L. Sandler. Either the registered
office or the registered agent may be changed in the manner permitted by law.
ARTICLE X.
BOARD OF DIRECTORS
The corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the
direction of, a board of directors The directors shall be elected at each
annual meeting of the shareholders, provided that vacancies may be filled by
election by the remaining directors, though less than a quorum, or by the
shareholders at a special meeting called for that purpose. Despite the
expiration of his or her term, a director continues to serve until his or her
successor is elected and qualifies.
ARTICLE XI.
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of
fiduciary duty as a director; except that this provision shall not eliminate
or limit the liability of a director to the Corporation or to its shareholders
for monetary damages otherwise existing for (i) any breach of the director's
duty of loyalty to the Corporation or to its shareholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) acts specified in Section 7-108-403 of the
Colorado Business Corporation Act; or (iv) any transaction from which the
director directly or indirectly derived any improper personal benefit. If the
Colorado Business Corporation Act is hereafter amended to eliminate or limit
further the liability of a director, then, in addition to the elimination and
limitation of liability provided by the preceding sentence, the liability of
each director shall be eliminated or limited to the fullest extent permitted
by the Colorado Business Corporation Act as so amended. Any repeal or
modification of this Article IX shall not adversely affect any right or
protection of a director of the Corporation under this Article IX. as in
effect immediately prior to such repeal or modification, with respect to any
liability that would have accrued, but for this Article IX, prior to such
repeal or modification.
Dated this day of ______________, 1998.
MONACO FINANCE, INC.
By: ____________________________
Morris Ginsburg, President
<PAGE>
PROXY APPENDIX A
-----------
MONACO FINANCE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
MONACO FINANCE, INC.
The undersigned hereby appoints Morris Ginsburg and Irwin L. Sandler, and
each of them, as proxies for the undersigned, each with full power of
appointment and substitution, and hereby authorizes them to represent and to
vote, as designated below, all shares of the $0.01 par value Class A Common
Stock of Monaco Finance, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Company to be
held on June 30, 1998 (the "Meeting"), or at any postponements, continuations
or adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be voted
(i) FOR the election of Messrs. Ginsburg, Sandler, Bradley, Sloan, Hashaway,
Womack and Snyder to the Board of Directors of the Company, (ii) FOR the
proposal to amend the Company's Articles of Incorporation, (iii) FOR the
proposal to ratify the Board of Directors' appointment of Ehrhardt Keefe
Steiner & Hottman P.C. as the Company's independent public accountants for the
fiscal year ending December 31, 1998, and (iv) on such other matters as may
properly come before the Meeting.
1. Election of Directors
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Morris Ginsburg Irwin L. Sandler
Bill C. Bradley John R. Sloan
Bobby L. Hashaway Robert D. Womack
Leonard M. Snyder
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.)
- -----------------------------------
- -----------------------------------
<PAGE>
2. Proposal to amend the Company's Articles of Incorporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the Board of Directors' appointment of Ehrhardt
Keefe Steiner & Hottman P.C. to serve as the Company's independent public
accountants for the fiscal year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting or at any postponements,
continuations or adjournments thereof.
Please sign exactly as your name appears hereon. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign partnership name by authorized person. When signing
as trustee, please give full title as such.
Dated,_____1998
------------------------------------------
Authorized Signature
------------------------------------------
Title
Please mark boxes /X/ in ink. Sign, date and return this Proxy Card promptly
using the enclosed envelope.
