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:
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PRELIMINARY COPIES
MONACO FINANCE, INC.
370 SEVENTEENTH STREET, SUITE 5060
DENVER, COLORADO 80202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _____________, 1998
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Monaco Finance, Inc., a Colorado corporation (the
"Company"), will be held at 370 Seventeenth Street, Suite 5060, Denver,
Colorado at 10:00 a.m. on __________, _________________, 1998, for the
following purposes:
1. To consider and approve the issuance of (i) 2,422,457 shares of
the Company's 8% Cumulative Convertible Preferred Stock, Series 1998-1, (ii)
811,152 shares of the Company's Class A Common Stock and (iii) a presently
unknown number of shares of Class A Common Stock, the issuance of which is
contingent upon future operations, to NAFCO Holding Company LLC, Advantage
Funding Group, Inc., and/or Pacific Southwest Bank, or their respective
designees, all of which are subsidiaries of Pacific USA Holdings Corp.
("Pacific USA"), as partial consideration for certain of the transactions
under the Amended and Restated Asset Purchase Agreement among the Company,
Pacific USA and those and other of its affiliates dated January 8, 1998.
2. To consider and approve an amendment to the Company's Articles of
Incorporation to (i) increase the number of authorized shares of Class A
Common Stock to 30,000,000 shares, and (ii) increase the number of authorized
shares of Preferred Stock to 10,000,000 shares having such preferences,
limitations and relative rights as may be determined by the Company's board of
directors; and
3. To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only the holders of record of shares of the Company's Class A Common
Stock, $.01 par value, and Class B Common Stock, $.01 par value, at the close
of business on _______________, 1998, are entitled to notice of and to vote at
the Special Meeting or any adjournment thereof.
You are cordially invited to attend the Special Meeting in person. All
shareholders, whether or not they plan to attend the Special 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
Special Meeting may revoke their proxies and vote in person as set forth in
the accompanying Proxy Statement.
By Order of the Board of Directors,
Irwin L. Sandler, Secretary
________________, 1998
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PRELIMINARY COPIES
MONACO FINANCE, INC.
370 SEVENTEENTH STREET, SUITE 5060
DENVER, COLORADO 80202
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD __________, 1998
INTRODUCTION
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 a Special Meeting of Shareholders of the Company (the "Special
Meeting") to be held on _________, _______________, 1998 at 10:00 a.m., local
time, at the offices of the Company located at 370 Seventeenth Street, Suite
5060, Denver, Colorado 80202. This Proxy Statement, the accompanying form of
proxy and the Notice of Special Meeting will be first given or mailed to the
Company's shareholders on or about ______________, 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
Special 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
Special 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 Common Stock, $.01 par value, and
Class B Common Stock, $.01 par value (collectively, the "Common Stock"),
represented by properly executed proxies received prior to the Special Meeting
will be voted at the Special Meeting in accordance with the instructions
marked thereon, unless such proxies have previously been revoked. All shares
represented by valid proxies will be voted, unless instructions to the
contrary are marked, in favor of the matters submitted for approval at the
Special Meeting described herein and in the discretion of the proxy holders
named therein with respect to such other matters as may properly come before
the Special Meeting. 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 Special Meeting. Any notice of revocation sent to
the Company must include the shareholder's name and must be received prior to
the Special Meeting to be effective.
Only persons holding Common Stock of record at the close of business on
___________, 1998 (the "Record Date") will be entitled to notice of and to
vote at the Special Meeting or any adjournment thereof. Holders of Class A
and Class B Common Stock will vote together as a group on all matters
submitted for stockholder approval at the Special Meeting. Holders of Class A
Common Stock will be entitled to one vote for each share held of record as of
the Record Date, and holders of Class B Common Stock will be entitled to three
votes for each share held of record as of the Record Date. As of the Record
Date, 7,203,479, shares of Class A Common Stock were issued and outstanding
entitled to cast an aggregate of 7,203,479 votes, and 1,273,715 shares of
Class B Common Stock were issued and outstanding entitled to cast an aggregate
of 3,821,145 votes. The presence, in person or by proxy, of holders of a
majority of the total combined voting power of the outstanding shares of Class
A and Class B Common Stock entitled to vote constitutes a quorum for the
transaction of business at the Special Meeting. Assuming the presence of a
quorum, approval of (i) the issuance of the 8% Cumulative Convertible
Preferred Stock, Series 1998-1 (the "Preferred Stock"), and the Class A Common
Stock (referred to herein with the Preferred Stock as the "Transaction
Shares") as contemplated by the Asset Purchase Agreement, (ii) the proposed
amendment to the Company's Articles of Incorporation and (iii) any other
matter properly considered and acted upon at the Special Meeting, requires the
affirmative vote by the holders of a majority of the total combined voting
power of the outstanding shares of Class A and Class B Common Stock present in
person or by proxy and entitled to vote.
The rights of holders of shares of the Class A Common Stock will not
change as a result of the issuance of the Transaction Shares except for a
decrease in the holders' percentage equity ownership of the Company.
Stockholders of the Company do not have dissenter's rights of appraisal with
respect to the issuance of the Transaction Shares or the amendment to the
Company's Articles of Incorporation.
Pacific USA Holdings Corp. ("Pacific USA") and those of its affiliates
which acquire Transaction Shares will be subject to the certain restrictions
on resale of the Transaction Shares. See "Item 1 - Approval of Issuance of
Transaction Shares - Preferred Stock and Registration Rights Agreement"
Votes cast by proxy at the Special Meeting will be tabulated by an
automatic system administered by the Company's transfer agent. Votes cast by
proxy or in person at the Special Meeting will be counted by the persons
appointed by the Company to act as election inspectors for the Special
Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present at the Special Meeting and are
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.
As of the Record Date, Pacific USA has voting power over shares of Class
A and Class B Common Stock representing an aggregate of approximately 48.3% of
the total combined voting power of the outstanding Common Stock. It is
expected that Pacific USA will cast its votes in favor of the proposals
described in this Proxy Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by the Company with the SEC can be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition, electronically
filed documents, including reports, proxy statements and other information
filed by the Company, can be obtained from the SEC's Web Site at
http://www.sec.gov. The Company's Class A Common Stock is quoted on the Nasdaq
National Market. Reports, proxy statements and other information concerning
the Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Exchange Act. All statements other
than statements of historical facts included in or incorporated by reference
into this Proxy Statement, including, without limitation, statements under
"Item 1 - Approval of Issuance of Transaction Shares," regarding the financial
position, business strategy and plans and objectives of management of the
Company for future operations, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Factors that could cause actual results to
differ materially from those in any such forward-looking statement include,
without limitation, actual losses with respect to the loans acquired pursuant
to the Asset Purchase Agreement and the adequacy of related reserves, overall
economic conditions and various other risks as outlined in SEC filings of the
Company. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this section.
_____________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROXY STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY BY ANY PERSON IN ANY JURISDICTION OR IN ANY
CIRCUMSTANCES IN WHICH SUCH SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROXY STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
ITEM 1--APPROVAL OF ISSUANCE OF TRANSACTION SHARES
INTRODUCTION AND SUMMARY
Monaco Finance, Inc. (the "Company") is engaged in the business of
acquiring and servicing sub-prime installment automobile contracts from new
and used car dealerships and also acquires bulk portfolios utilizing its
proprietary credit evaluation system. The Company's strategy in acquiring bulk
portfolios is to price the purchase of such portfolios based upon
risk-adjusted yields using that system.
In connection with its bulk purchase strategy, the Company entered into
an Amended and Restated Asset Purchase Agreement dated as of January 8, 1998
(the "Asset Purchase Agreement"), with Pacific USA Holdings Corp., a Texas
corporation ("Pacific USA") and certain of its wholly-owned or partially-owned
subsidiaries - Pacific Southwest Bank ("PSB"), NAFCO Holding Company LLC, a
Delaware limited liability company ("NAFCO"), Advantage Funding Group, Inc., a
Delaware corporation ("Advantage") and PCF Service, LLC, a Delaware limited
liability company ("PCF") - 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. The balance of the purchase price, $4,866,914 is
payable either in the form of promissory notes or, if regulatory and
shareholder approvals are obtained (the "Approvals"), by the issuance 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. Each share of
Preferred Stock will be convertible at any time into one-half share of Class A
Common Stock, or an aggregate of up to 1,216,728 shares of Class A Common
Stock. Thus, the effective cost to Pacific USA of the Class A Common Stock
issuable upon conversion of the Preferred Stock will be $4.00 per share.
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 certain losses incurred by the Company in connection with the loans
acquired from NAFCO and Advantage. In consideration therefor, the Company
agreed to pay PSB an amount equal to 2% of the principal amount of the
acquired loans in the form of a promissory note or, if the Approvals are
obtained, in shares of the Company's Class A Common Stock valued at $2.00 per
share. This would amount to an aggregate of 811,152 shares of Class A Common
Stock.
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 2- times such pre-tax earnings in the form of
promissory notes or, if the Approvals are obtained, in 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.
The shares of Preferred Stock and the shares of Class A Common Stock issuable
in connection with the Asset Purchase Agreement are collectively referred to
herein as the "Transaction Shares."
The Company filed the required documents under the Hart-Scott-Rodino Act
("HSR Act") on or about January 15, 1998, and, as of the date hereof, has not
received any response. See "Description of Asset Purchase Agreement and
Related Transactions - Regulatory Approvals." The date on which either the
promissory notes or the Transaction Shares will be issued is the first
business day following: (i) the day both Approvals have been obtained; (ii) if
HSR Act approval is not obtained, the later of the date of HSR Act denial or
shareholder approval; or (iii) if shareholder approval is not obtained, the
date of the Special Meeting.
At the Special Meeting, shareholders will be asked to consider and
approve the issuance of the Transaction Shares. Pacific USA beneficially owns
and has the right to vote shares of the Company's Class A and Class B Common
Stock having 48.3% of the combined voting power of the Common Stock as of the
date of this Proxy Statement. Management is informed that Pacific USA intends
to cast all of its votes in favor of approval of the issuance of the
Transaction Shares. If such issuance is approved and consummated, Pacific USA
or its affiliates will own of record 2,311,152 shares of Class A Common Stock
(28.8% of that class), excluding the shares issuable upon conversion of the
Preferred Stock, and will be able to exercise approximately 51.8% of the
combined voting power of the Class A and Class B Common Stock. See
"Description of Asset Purchase Agreement and Related Transactions."
The effective cost to the holders of the 1,216,728 shares of Class A
Common Stock issuable upon conversion of the Preferred Stock included in the
Transaction Shares will be $4.00 per share. In addition, 811,152 shares of
Class A Common Stock included in the Transaction Shares will be issued at a
cost of $2.00 per share while an indeterminate number of shares may be issued
at the market price of the Class A Common Stock immediately prior to the
issuance thereof. As set forth herein under "Market for Common Equity and
Related Stockholder Matters," the closing bid price of the Class A Common
Stock on the Nasdaq Stock Market National Market System during 1997 ranged
from a high of $2.50 per share to a low of $0.625 per share. During 1997, the
closing bid price of the Class A Common Stock averaged approximately $1.461
per share and the closing price on the trading day preceding the date of this
Proxy Statement was $___ per share. Thus, any benefit to Pacific USA and its
affiliates will only be realized if the market price of the Class A Common
Stock appreciates substantially.
The terms of the Asset Purchase Agreement were heavily negotiated over a
significant period of time. Management believes that the terms agreed upon are
at least as favorable to the Company as terms that would have resulted from
arms' length negotiations.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ISSUANCE OF
THE TRANSACTION SHARES AND RECOMMENDS A VOTE "FOR" APPROVAL OF SUCH ISSUANCE
BY THE COMPANY'S SHAREHOLDERS. None of the directors have any affiliation or
association with Pacific USA or any of its affiliates.
The text of the resolution approving the issuance of the Transaction
Shares to be submitted to shareholders at the Special Meeting is attached
hereto as Annex A. If a quorum is present, approval of such resolution will
require the affirmative vote by the holders of a majority of the total
combined voting power of the outstanding shares of Class A and Class B Common
Stock present in person or by proxy and entitled to vote. Unless a contrary
direction is indicated, all proxies received will be voted in favor of such
issuance at the Special Meeting.
REASON FOR SPECIAL MEETING
The Company is seeking shareholder approval of the issuance of the
Transaction Shares in order to comply with applicable rules of the Nasdaq
Stock Market National Market System on which the Company's Class A Common
Stock is traded. Such rules require a listed company, as a condition to
continued listing, to obtain the approval of its stockholders with respect to
the issuance of its securities in connection with the acquisition of assets
owned by another company if any director, officer or substantial shareholder
of the listed company has a 5% or greater interest (or such persons
collectively have a 10% or greater interest), directly or indirectly, in the
assets to be acquired or the consideration to be paid for the assets, and the
present or potential issuance of common stock or securities convertible into
or exercisable for common stock could result in an increase in outstanding
shares of common stock or voting power of 5% or more. Since Pacific USA
beneficially owns more than 5% of the outstanding common stock and has the
voting power in excess of 5%, shareholder approval of the issuance of the
Transaction Shares is required by Nasdaq rules.
In the unlikely event that shareholder approval is not obtained, the
Company will issue the promissory notes described herein to Pacific USA in
payment of the balance of the purchase price for the loans and the other
transactions contemplated by the Asset Purchase Agreement.
BACKGROUND OF THE TRANSACTION
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,
Consumer Finance Holdings, Inc., a wholly-owned subsidiary of Pacific USA
("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. Consumer 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
Consumer 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.
Thereafter, 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. In connection with
the Asset Purchase Agreement, the Company is paying to an unrelated third
party a finder's fee of $240,000 in twelve equal consecutive installments of
$20,000 each.
CHANGE IN CONTROL
On or about December 4, 1997 (the "Effective Date"), CFH and Morris
Ginsburg, Sandler Family Partners, Ltd., and Irwin L. Sandler (collectively
the "Shareholders") entered into an Option Agreement effective as of that
date. CFH is a wholly-owned subsidiary of Pacific USA. Pursuant to the Option
Agreement, the 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 Shareholders (the "Option Shares") at a
purchase price of $4.00 per share. Concurrently, CFH granted to each
Shareholder an option (the "Put Option") to sell that portion of the Option
Shares held by each 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
Shareholders 50% of such excess. The 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 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 Shareholder holds a proxy granted by a third
party, subject to any fiduciary duty owed to the grantor of any such proxy.
The 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
Shareholders agree 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. As of
the date hereof, the board consists of four members, none of which have been
appointed by CFH.
Pacific USA is the record owner of 1,500,000 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 Shareholders and a
limited power to direct the voting of shares subject to proxies held by the
Shareholders. As of the date hereof, 7,203,479 shares of Class A Common Stock
are issued and outstanding and 1,273,715 shares of Class B Common Stock are
issued and outstanding. The Class A Common Stock has one vote per share while
the Class B Common Stock has three votes per share. The Class A and Class B
Common Stock vote together as one class. Accordingly, Pacific USA controls
approximately 48.3% of the total voting power. 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. However, the issuance
of the Transaction Shares will increase the voting power of Pacific USA. See
"Security Ownership of Certain Beneficial Owners and Management."
On or about May 14, 1993, the Company, Sandler Family Partners, and
Messrs. Ginsburg and Sandler entered into a Buy-Sell Agreement giving the
Company the right to buy all shares of its capital stock owned by Mr. Ginsburg
upon his death and all shares of its capital stock beneficially owned by Mr.
Sandler upon his death. In addition, the Company had a right of first refusal
to purchase any such stock desired to be sold by Mr. Ginsburg or Sandler
Family Partners. This right of first refusal was exercisable by either the
Company or the non-selling Shareholder. 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.
Concurrently, 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. Mr. Sandler 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 an
annual base salary 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.
DESCRIPTION OF ASSET PURCHASE AGREEMENT AND RELATED TRANSACTIONS
THE TRANSACTION. Effective January 8, 1998, the Company acquired a
portfolio of loans secured by automobiles and/or light trucks ("Acquired
Loans") from NAFCO and Advantage (NAFCO and Advantage may be referred to
herein as the "Sellers"), each affiliates of Pacific USA. The Acquired Loans
were originated by certain third party originators ("Originators") pursuant to
origination agreements with the Sellers ("Origination Agreements"). The
obligors under the Acquired Loans have varying income levels and/or limited or
adverse credit histories; but management of the Company believes that, on the
whole, the obligors under the Acquired Loans present a reasonable credit risk.
On September 30, 1997, the Company entered into an Asset Purchase
Agreement with NAFCO, Advantage, and Pacific USA (the "Original Agreement")
pursuant to which the Company agreed to purchase the Acquired Loans and,
potentially, certain equity interests in various loan originators. Subsequent
to that date, the parties agreed to various changes in the structure of the
acquisition transaction that resulted in the Company, NAFCO, Advantage,
Pacific USA, PSB, and PCF entering into an Amended and Restated Asset Purchase
Agreement, dated as of January 8, 1998 (the "Asset Purchase Agreement"), that
amended and restated the Original Agreement in its entirety. PSB and PCF also
are affiliates of Pacific USA
Effective January 5, 1998, the board of directors of the Company reviewed
the terms and conditions of the transaction and authorized the officers of the
Company to enter into the transactions contemplated by the Asset Purchase
Agreement (and the various agreements and documents referenced therein). The
transaction closed on January 8, 1998 (the "Closing Date").
ASSETS ACQUIRED. Pursuant to the Asset Purchase Agreement, a Loan
Purchase Agreement (the "NAFCO Loan Purchase Agreement"), dated as of January
8, 1998, among the Company, NAFCO, Pacific USA, and PSB, and a Loan Purchase
Agreement (the "Advantage Loan Purchase Agreement"), dated as of January 8,
1998, among the Company, Advantage, Pacific USA, and PSB, the Company
purchased the Acquired Loans, which had an outstanding principal balance, as
of December 19, 1997 (the "Cut-Off Date"), of $81,115,232.89 (the "Outstanding
Principal Balance"). The Asset Purchase Agreement, the NAFCO Loan Purchase
Agreement, and the Advantage Loan Purchase Agreement required that none of the
Acquired Loans be ones where the obligors thereunder were more than fifty-nine
days delinquent in the payment of principal or interest. These documents
further required that Acquired Loans with respect to which the obligors
thereunder were between thirty-one and fifty-nine days delinquent could not
account for more than 12% of all of the Acquired Loans. As part of the
transaction, the Company is also to obtain from PCF stock and/or warrants
(collectively, the "Warrants") that comprise minority investments in various
loan originators, but only to the extent that NAFCO and PCF are able, in
conformance with applicable securities laws and various existing restrictions
on transfer relating to the Warrants, to transfer any or all of the Warrants
to the Company.
The Company purchased the Acquired Loans under the Advantage Loan
Purchase Agreement (the Acquired Loans purchased thereunder being the
"Advantage Loans") and under the NAFCO Loan Purchase Agreement (the Acquired
Loans purchased thereunder being the "NAFCO Loans") on, essentially, a
servicing released basis; provided that: (i) the Company, on the one hand, and
Advantage, Pacific USA, and PSB, on the other hand, did enter into an interim
servicing agreement, whereby Advantage agreed to service the Advantage Loans
(using sub-servicers) to a date no later than June 30, 1998; and (ii) the
Company, on the one hand, and NAFCO, Pacific USA, and PSB, on the other hand,
did enter into an interim servicing agreement, whereby NAFCO agreed to service
the NAFCO Loans (using sub-servicers) to a date no later than June 30, 1998.
Each of Advantage and NAFCO have delegated certain of their servicing
obligations to third party servicers (including First Performance, which is an
affiliate of NAFCO) pursuant to various pre-existing agreements with each of
Advantage and NAFCO. It is the Company's present intention to become the
servicer of all of the Acquired Loans as soon as possible.
Each of Advantage and NAFCO, as Seller, has made certain representations
and warranties with respect to each of the Acquired Loans it sold. If, with
respect to any Acquired Loan, certain enumerated representations and
warranties fail to be true or if the applicable Seller does not deliver
adequate documentation to the Company for the Company to perfect its lien in
the collateral securing such Acquired Loan, then such Seller is required to
repurchase such Acquired Loan by returning cash and a corresponding portion of
the promissory note or shares of Preferred Stock that will be delivered to
such Seller, all in accordance with the provisions of the relevant Loan
Purchase Agreement. Because each Seller has limited assets, each of Pacific
USA and PSB, an affiliate of each Seller, also agreed to be liable to
repurchase any such Acquired Loans.
PURCHASE PRICE. Pursuant to the Asset Purchase Agreement, the purchase
price payable by the Company to each of Advantage and NAFCO for its Acquired
Loans is 96% of the outstanding principal balance of the Acquired Loans as of
the Cut-Off Date plus interest determined and payable as follows:
On the Closing Date, the Company was to pay (and did in fact pay) to each of
Advantage and NAFCO an amount equal to (i) 90% of the outstanding principal
balance of the their respective Acquired Loans as of the Cut-Off Date, plus
(ii) accrued and unpaid interest on each such Acquired Loan through the
Cut-Off Date, plus (iii) interest on the foregoing amounts from the Cut-Off
Date to the Closing Date at a per annum rate equal to the Federal Funds Rate
(as defined in the Asset Purchase Agreement) plus 2.21%; and
On the Determination Date (as defined in the Asset Purchase Agreement), the
balance of the purchase price for the Acquired Loans is to be paid by the
issuance by the Company to Advantage (or its designee) and NAFCO (or its
designee), as appropriate: (i) if the Company does not receive the approval
of its shareholders to the Stock Issuances (as defined in the Asset Purchase
Agreement) or if, under the Hart-Scott-Rodino Act (the "HSR Act"), the United
States Department of Justice (the "USDOJ") and/or the Federal Trade Commission
(the "FTC") do not approve the transactions contemplated by the Asset Purchase
Agreement (the shareholder approval and the HSR Act approval are hereinafter
collectively referred to as the "Approvals"), a note for the balance of the
purchase price; or (ii) if the Company has received or has been deemed to have
received both of the Approvals, that number of shares of fully paid and
non-assessable Preferred Stock equal to 6% of the outstanding principal
balance of the Acquired Loans as of the Cut-Off Date, divided by $2.00.
The Company filed the required documents under the HSR Act on January 15,
1998, and, as of the date hereof, has not received any response. The
Determination Date is the first business day following (i) the day both
Approvals have been obtained; (ii) if the HSR Act approval is not obtained,
the later of the date of the HSR Act denial or shareholder approval; or (iii)
if shareholder approval is not obtained, the date of the Special Meeting.
In addition to the purchase price for the Acquired Loans, the Company is
obligated to make certain additional payments to NAFCO based upon the
performance of certain assets it acquired under the Asset Purchase Agreement
(i.e., the Warrants) and the effect of various agreements that the Company may
enter into with certain specified loan originators within the six month period
following the Closing Date (collectively, the "Designated NAFCO Operations").
Pursuant to the Asset Purchase Agreement, the Company will keep separate books
and records in order to determine the performance of the Designated NAFCO
Operations from the Closing Date through December 31, 1999 to permit the
calculation of NAFCO's share of the profits of such operations. The Company
has also agreed that it will not divert the business or assets of, or
otherwise shift expenses or earnings to or from, the Designated NAFCO
Operations. While this restriction could potentially restrict the Company's
ability to maximize its profits, in the opinion of the Company's management,
it is an appropriate restriction for this transaction. If there are earnings
from the Designated NAFCO Operations during the calendar years 1998 or 1999
(prior to making any deductions for taxes, amortization of goodwill, interest
expense, overhead and certain other adjustments), the Company must issue to
NAFCO (or its designee) either: (a) if the Company has received or has been
deemed to have received both of the Approvals, that number of shares of its
Class A Common Stock equal to two and one-half (2- ) times such "pre-tax"
earnings for each such calendar year divided by the average of the daily
closing sales price per share of such Class A Common Stock listed on NASDAQ on
the last ten days of each such calendar year; or (b) if the Company has not
received or has not been deemed to have received both of the Approvals, a
promissory note in an amount equal to two and one-half (2-1/2) such "pre-tax"
earnings for each such calendar year. It should be noted that, as of the
Closing Date, no Warrants were in fact transferred to the Company, and it is
unclear whether any Warrants will be able to be transferred to the Company.
It should also be noted that, if for any year there are no "pre-tax" earnings
from the Designated NAFCO Operations, then the Company has no obligation to
either issue stock or issue a promissory note.
Pursuant to the Asset Purchase Agreement, to induce PSB to issue the Loan
Loss Reimbursement Agreement (as more fully described below), the Company must
issue to PSB (or its designee), on the Determination Date (as defined in the
Asset Purchase Agreement), either: (a) if the Company has received or has
been deemed to have received both of the Approvals, that number of shares of
its Class A Common Stock equal to two percent (2%) of the Outstanding
Principal Balance of the Acquired Loans as of the Cut-Off Date; or (b) if the
Company has not received or has not been deemed to have received both of the
Approvals, a promissory note in an amount equal to two percent (2%) of the
Outstanding Principal Balance of the Acquired Loans as of the Cut-Off Date.
The obligation of the Company to make the Stock Issuances or, in lieu
thereof, issue the notes contemplated by the Asset Purchase Agreement is
secured by the grant of a security interest in all of the Company's right,
title and interest in and to all of its shares of stock in MF Receivables
Corp. II, a Delaware corporation ("MFR II"). The promissory notes, if issued,
will bear interest at the prime lending rate plus one percent, with principal
and accrued and unpaid interest due and payable in full in three years.
PREFERRED STOCK. If both Approvals are obtained, the Company has agreed
to amend its Articles of Incorporation to create from its authorized preferred
stock the 2,433,457 shares of 8% Cumulative Convertible Preferred Stock,
Series 1998-1 (the "Preferred Stock") included in the Transaction Shares.
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 Any corporate action
that requires a vote of the holders of the Preferred Stock of the class shall
be deemed to have been approved upon the affirmative vote by the holders of a
majority of the issued and outstanding Preferred Stock unless a higher voting
requirement is imposed by Colorado law.
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.
REGISTRATION RIGHTS. The Company agreed to enter 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). The Company is not
required to effect more than two such registrations. If the Board of Directors
of the Company in its good faith judgment determines that any Valid Business
Reason (as defined in the Registration Rights Agreements) exists, then the
Company may postpone filing a registration statement for not longer than three
months.
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). Under certain
circumstances, the number of Registrable Securities to be included in the
registration statement can be reduced. 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 agreed to indemnify the selling RRA Holder and its affiliates for all
claims with respect to such registration, and all costs and expenses incurred
by the selling RRA Holder in connection therewith, except with respect to
information included in the registration statement in reliance upon and in
conformity with written information furnished expressly for such use by the
selling RRA Holder or any of its affiliates. Each selling RRA Holder similarly
agreed to indemnify and hold harmless the Company and its affiliates with
respect to any claims made and costs or expenses incurred in connection with
any such information. The indemnification obligation of the selling RRA Holder
is limited to the proportion that the net proceeds received by it under any
such registration statement bears to the total net proceeds from the sale of
all securities sold thereunder, but not to exceed the net proceeds actually
received by the selling RRA Holder or its affiliates. The Registration Rights
Agreements further provide that if indemnification is unavailable, then the
indemnifying party is obligated to contribute to reduce the damages incurred
by the indemnified party in such proportion as is appropriate to reflect their
relative faults. However, no person guilty of fraudulent misrepresentation is
entitled to contribution from any person who is not guilty of fraudulent
misrepresentation.
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.
LOAN LOSS REIMBURSEMENT AGREEMENT. In connection with the Asset Purchase
Agreement and the Loan Purchase Agreements, PSB, NAFCO, and Advantage
(collectively, the "Related Parties"), on the one hand, and the Company, on
the other hand, entered into a Loan Loss Reimbursement Agreement, dated as of
January 8, 1998 (the "Loan Loss Reimbursement Agreement"). Pursuant to that
agreement, the Related Parties have agreed to reimburse the Company for
certain losses which may be suffered by the Company in connection with the
Acquired Loans. The effect of the Loan Loss Reimbursement Agreement is to
protect the Company's return on its initial investment by establishing a
reserve for losses in respect of defaulted Acquired Loans ("Net Losses") in an
aggregate amount not to exceed 15% of the Outstanding Principal Balance of the
Acquired Loans as of the Cut-Off Date minus the Outstanding Principal Balance
of any Acquired Loans that are subsequently repurchased by the applicable
Seller as a result of a breach of certain specified representations and
warranties under the applicable Loan Purchase Agreement (the "Covered
Losses"). The Loan Loss Reimbursement Agreement provides that the Company
will be reimbursed for the first 7.5% of Net Losses in respect of the Acquired
Loans, with the next 10% of Net Losses being absorbed by the Company (and
management of the Company believes that these uncovered losses will likely be
paid out of the excess interest spread generated by the Acquired Loans).
Finally, the Company will be reimbursed for the next 7.5% of Net Losses under
the agreement. The reimbursement obligation of the Related Parties under the
agreement is supported by letters of credit (initially issued by Bankers Trust
Company), naming the Company (and various of its assignees, including MFR IV
(see below)) as beneficiary. The Company shall bear all losses on the
portfolio other than the Covered Losses.
FINANCING. Immediately upon the acquisition by the Company of the
Acquired Loans, the Company contributed and sold all of its right, title and
interest in and to the Acquired Loans and related rights in respect thereof
(including its rights under the Loan Loss Reimbursement Agreement) to its
special purpose wholly-owned subsidiary, MF Receivables Corp. IV, a Delaware
corporation ("MFR IV"). In order to acquire the Acquired Loans sold to MFR IV
by the Company, MFR IV obtained financing in the amount of approximately
$74,000,000 (the "Advance") from Daiwa Finance Corporation ("Daiwa") pursuant
to a Credit Agreement dated as of December 22, 1997, among MFR IV, the
Company, and Daiwa. MFR IV's obligations to Daiwa in respect of the Advance
are secured by MFR IV's interest in the Acquired Loans and related assets. In
consideration of the sale by the Company to MFR IV of the Acquired Loans and
related assets, MFR IV made the proceeds of the Advance available to the
Company to pay to NAFCO and Advantage in payment of the respective Acquired
Loans purchased by the Company from NAFCO and Advantage.
REGULATORY APPROVALS
Except as stated herein, the Company is not aware of any material
governmental approvals or consents that will be required in connection with
issuance of the Transaction Shares. Expiration or termination of the waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1996, as
amended (the "HSR Act"), is required before issuance of the Transaction
Shares. The Company and Pacific USA and its affiliates made required filings
under the HSR Act with the United States Department of Justice (the "USDOJ")
and/or the Federal Trade Commission (the "FTC") on or about January 16, 1998.
Early termination of the 30-day review period has been requested. At any time
before or after the issuance of the Transaction Shares, even if the waiting
period has expired, the USDOJ, the FTC or certain states could take any action
under the antitrust laws as it deems necessary or desirable including
enjoining issuance of the Transaction Shares or seeking divestiture of
substantial assets of the Company or Pacific USA or its affiliates. Under
certain circumstances, private parties may take legal action under the
antitrust laws. However, the Company believes that issuance of the Transaction
Shares can be effected in compliance with federal and state antitrust laws,
although no such assurance can be given.
INVESTIGATIONS UNDERTAKEN
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 analyze projected
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. The risk analysis system
consists of two modules:
One of the Company's proprietary systems predicts the frequency of borrower
defaults. The system uses "regression analysis" which is based on the
expectation that the contracts will statistically match the performance of
similar contracts acquired by the Company in the past.
The second system combines the severity and frequency of defaults, based on
their timing and magnitude, to predict the amount of loss and the risk
adjusted yield of pools of contracts.
Initially, the credit department reviewed certain loan samples and
screened the computerized data base covering all of the contracts provided to
the Company by the Sellers. Thereafter, the Company examined additional
samples, updated credit reports, made on-site file reviews, met with the loan
servicers and performed other procedures. 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.
CERTAIN EFFECTS OF THE TRANSACTION
The board of directors believes that issuance of the Transaction Shares
is in the best interests of the Company and its shareholders. The rights of
holders of shares of the Class A Common Stock will not change as a result of
the issuance of the Transaction Shares except for a decrease in the holders'
percentage equity ownership of the Company.
If the Approvals are obtained, the Company will issue 811,152 shares of
Class A Common Stock at a cost to the holder of $2.00 per share and will be
obligated to issue up to 1,216,728 additional shares of Class A Common Stock
upon conversion, if any, of the Preferred Stock, at a cost to the holder of
$4.00 per share of Class A Common Stock. The average cost of all such common
shares will be about $3.20 per share. In 1997, the high bid price for the
Class A Common Stock was $2.50 per share, the low bid price was $.625 per
share and the average closing price was $1.461 per share. As of the trading
day preceding the date of this Proxy Statement, the closing price was $___ per
share. Thus, the board of directors believes that the Transaction Shares will
be issued at prices advantageous to the Company.
In addition, the issuance of the Transaction Shares will increase
shareholders' equity. This will improve the Company's debt-to-equity ratio and
increase its net worth, both of which are major factors in maintaining and
obtaining lines of credit necessary to finance contract acquisitions.
Moreover, dividends on the Preferred Stock included in the Transaction Shares
may be paid in shares of Class A Common Stock, whereas interest on the
promissory notes would have to be paid in cash. Finally, the Company is under
no obligation to redeem the Preferred Stock, whereas the promissory notes
would have a three-year term. Conservation of cash is very important
considering that the Company's business is very capital-intensive. If the
Approvals are not obtained, the Company will be required to issue
approximately $6.5 million in principal amount of promissory notes, with
annual interest expense, based upon the current prime lending rate of 8.5% per
annum, of approximately $616,000.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE ISSUANCE OF THE TRANSACTION SHARES.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 23, 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
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A CLASS B COMBINED(2) CLASS B COMBINED(3)
----------------------- ------------- ------------------ -------- ------------
Morris Ginsburg 283,950(4) 801,858(5) 12.4% 63.0% *
370 17th Street
Denver, CO 80202
Irwin L. Sandler 283,320(6) 471,857(5) 8.6% 37.1% *
370 17th Street
Denver, CO 80202
Brian M. O'Meara 40,000(7) -- * -- *
400 W. 104th Avenue
Denver, CO 80234
David M. Ickovic 10,000(8) -- * -- *
6025 S. Quebec St., #220
Englewood, CO 80111
Richard Daugherty 95,500(9) -- * -- *
370 17th Street
Denver, CO 80202
Mark Gengozian 55,000(10) -- * - *
370 17th Street
Denver, CO 80202
Michael Feinstein 26,667(11) - * -- *
370 17th Street
Denver, CO 80202
Pacific USA Holdings Corp. 1,500,000 1,273,715(12) 32.7% 100.0% 48.3%
Pacific Electric Wire & Cable Co., Ltd.
Consumer Finance Holdings, Inc.
5999 Summerside Drive
#106
Dallas, TX 75252
William Harris Investors, Inc. 498,437(13) -- 5.6% -- 4.4%
William Harris & Co.
Employee Profit
Sharing Trust
Irving B. Harris
Steven A. Hirsh
Jerome Kahn, Jr.
2 North LaSalle Street
Suite 505
Chicago, IL 60602
Black Diamond Advisors, Inc. 1,716,667(14) -- 16.8% -- 13.5%
230 Park Avenue
New York, NY 10169
Heller Financial, Inc. 359,235(15) -- 4.2% -- 3.3%
500 West Monroe Street
Chicago, IL 60661
Bud Karsh -- 443,715(5) --(5) --(5) --(5)
10000 E. Yale #60
Denver, CO 80231
All executive officers and directors 794,437 1,273,715 22.4% 100.0% *
as a group (7 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 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.
(6) 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.
(7) Includes options to purchase up to 25,000 restricted shares of the Company's Class A Common Stock at $3.00 per share
exercisable any time until July 9, 2000; provided, however, that Mr. O'Meara be a director of the Company on the date of any
such exercise. Also includes options to purchase 5,000 shares of Class A Common Stock at $3.00 per share exercisable at any
time prior to June 30, 2002; options to purchase 5,000 shares of Class A Common Stock at $1.875 per share any time until
July 29, 2006; and options to purchase 5,000 shares of Class A Common Stock at $0.531 per share exercisable at any time
prior to August 25, 2007.
(8) Includes options to purchase 5,000 shares of Class A Common Stock at $1.875 per share any time until July 29, 2006;
and options to purchase 5,000 shares of Class A Common Stock at $0.531 per share exercisable at any time prior to August 25,
2007.
(9) Includes options to purchase 40,000 shares of Class A Common Stock at $2.437 per share any time until January 6,
2007; and options to purchase 40,000 shares of Class A Common Stock at $0.531 per share, exercisable at any time prior to
January 6, 2007.
(10) 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.
(11) Includes options to purchase 10,000 shares of Class A Common Stock at $1.875 per share any time prior to July 29,
2006; and options to purchase 16,667 shares of Class A Common Stock at $0.531 per share exercisable at any time prior to
August 25, 2007.
(12) The information contained in the table and in this footnote is derived from a Schedule 13D dated December 12, 1997,
filed by Pacific USA Holdings Corp. ("Pacific USA"), Pacific Electric Wire & Cable Co., Ltd. and Consumer Finance Holdings,
Inc. ("Consumer") with the Securities and Exchange Commission with respect to an Option Agreement, dated December 4, 1997
(the "Option Agreement"), by and among Consumer and Mr. Ginsburg, Sandler Family Partners, Ltd. ("Sandler FP"), and Mr.
Sandler. Pursuant to the terms of the Option Agreement, Consumer acquired the right to purchase all, but not less than all,
of 830,000 shares of Class B Common Stock, $.01 par value (the "Option Shares"), at an exercise price of $4.00 per share at
any time prior to December 4, 2000. The Option Agreement terminates on December 4, 2000, unless earlier consummated or
terminated. Pursuant to the Option Agreement, each optionor has a right to cause Consumer to purchase (the "Put") one half
of the Class B Common Stock held by such optionor to Consumer during the 30 day periods following each of December 4, 1999,
and December 4, 2000, at a price of $4.00 per share. Messrs. Ginsburg and Sandler and Sandler FP have agreed not to pledge,
sell or otherwise transfer the Option Shares at any time during the term of the Option except to the extent of exercise of
the Put. Upon exercise of either the Option or the Put, the Class B Common Stock purchased by Consumer will, pursuant to
its terms, automatically convert into Class A Common Stock thereby reducing the voting power of Reporting Person.
Also, pursuant to the terms of the Option Agreement, Consumer obtained irrevocable proxies coupled with an interest
from Mr. Ginsburg and Sandler FP whereby Consumer has the right to vote all of the Option Shares on all matters presented to
the shareholders during the term of the Option Agreement. Further, pursuant to the terms of the Option Agreement, Consumer
acquired the right to direct the exercise of all consensual or other voting rights with respect to 443,715 additional shares
of the Issuer's Class B Common Stock as to which Mr. Ginsburg and Mr. Sandler hold a proxy to vote, subject to the fiduciary
duty owed to the grantor of any such proxy.
(13) Includes 404,941 shares of Class A Common Stock issuable upon conversion of the Company's 7% Convertible
Subordinated Notes due March 1, 1998, at a conversion price of $3.42 per share. Of the securities beneficially owned by the
group (within the meaning of Rule 13d-5 promulgated under the Securities Exchange Act of 1934, as amended) listed in the
table, William Harris Investors, Inc. may be deemed to beneficially own and to have shared voting power with respect to
187,761 shares; William Harris & Co. Employee Profit Sharing Trust may be deemed to beneficially own and to have shared
voting power with respect to 175,438 shares; Irving B. Harris may be deemed to beneficially own and to have shared voting
power with respect to 175,864 shares; Steven A. Hirsh may be deemed to beneficially own 288,011 shares, to have sole voting
power with respect to 112,573 shares, and to have shared voting power with respect to 175,430 shares; and Jerome Kahn, Jr.
may be deemed to beneficially own 385,894 shares, to have sole voting power with respect to 22,695 shares, and to have
shared voting power with respect to 363,199 shares.
(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 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 10.8% 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>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the range of the high and low closing bid
prices of the Class A Common Stock as reported for the periods indicated. The
prices represent quotations between dealers without retail mark-ups,
mark-downs, or commissions and may not necessarily represent actual
transactions. The quotations were provided by the Nasdaq Stock Market and the
National Quotation Bureau.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
<S> <C> <C>
Low Bid High Bid
-------- ---------
Quarter Ending 03/31/97 $ 1.750 $ 2.500
Quarter Ending 06/30/97 $ 1.125 $ 2.063
Quarter Ending 09/30/97 $ 0.625 $ 1.250
Quarter Ending 12/31/97 $ 0.688 $ 1.938
Quarter Ending 03/31/96 $ 3.000 $ 5.000
Quarter Ending 06/30/96 $ 2.125 $ 3.625
Quarter Ending 09/30/96 $ 1.625 $ 4.000
Quarter Ending 12/31/96 $ 2.313 $ 3.375
<FN>
</TABLE>
As of January __, 1998, there were approximately ___ record holders of
the Company's Class A Common Stock and ___ record holders of Company's Class B
Common Stock. The Company's Class A Common Stock is traded on the National
Market System of the Nasdaq Stock Market under the symbol "MONFA".
The Board of Directors currently intends to retain earnings to finance
the Company's operations. The Company has never paid cash dividends on its
Common Stock and does not anticipate a change in this policy in the
foreseeable future. Certain of the Company's loan agreements contain
covenants that restrict the payment of cash dividends on the Common Stock.
ITEM 2--APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
At the Special Meeting, shareholders will also be asked to approve an
amendment to the Company's Articles of Incorporation to (i) increase the
number of authorized shares of Class A Common Stock to 30,000,000 shares, and
(ii) increase the number of authorized shares of preferred stock to 10,000,000
shares having such preferences, limitations and relative rights as may be
determined by the Company's board of directors (the "Amendment"). The text of
the resolution effecting the Amendment to be submitted to shareholders at the
Special Meeting is attached hereto as Annex A. The form of the Amendment is
attached hereto as Annex B.
Presently, the Company is authorized to issue 5,000,000 shares of
preferred stock, none of which are issued and outstanding. Upon obtaining the
Approvals, the Company will be obligated to issue 2,433,457 shares of
Preferred Stock in connection with the Asset Purchase Agreement. Thus, the
Amendment is not required to meet the terms of the Asset Purchase Agreement
with respect to the issuance of the Preferred Stock. Otherwise, the Company
has no plans to issue additional shares of preferred stock. Subject to
applicable law, the board of directors of the Company may issue, in its sole
discretion, shares of authorized preferred stock without further stockholder
action. The preferred stock may be issued in one or more series and may have
such powers, including voting powers, and such designations, preferences and
relative rights, qualifications and limitations as the board may fix by
resolution at the time of issuance. It may be possible for the board to use
its authority to issue preferred stock in a way which could deter or impede
the completion of a tender offer or other attempt to gain control of the
Company of which the board does not approve.
As of the date of this Proxy Statement, the Company is authorized to
issue 17,750,000 shares of Class A Common Stock, of which 7,203,479 are issued
and outstanding and 4,968,138 are reserved for issuance pursuant to
outstanding options, warrants and convertible securities. If the Approvals are
obtained, an additional 811,152 shares of Class A Common Stock will be
required to be issued pursuant to the Asset Purchase Agreement, and 1,216,728
shares will be required to be reserved for issuance upon conversion of the
Preferred Stock. This would leave the Company with only 5,578,383 shares of
Class A Common Stock available for future issuance. Although the Company
presently has no plans to issue any of such shares, the board of directors
believes it is advisable that the Company have sufficient authorized shares to
enable it to engage in any future acquisitions, financings or other
transactions.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT
AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT AT THE
SPECIAL MEETING.
Approval of the Amendment will require the affirmative vote, in person or
by proxy, of a majority of the total combined voting power of the shares of
Class A and Class B Common Stock present or represented at the Special Meeting
and constituting a quorum. Unless a contrary direction is indicated, all
proxies received will be voted in favor of the Amendment.
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 be the beneficial owners of
shares of 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.
OTHER BUSINESS
The Board of Directors does not know of any business to be presented for
consideration at the Special Meeting other than that stated in the attached
Notice of Special Meeting. In the event that other business properly comes
before the Special Meeting, the proxy holders identified in the form of proxy
are authorized to vote or act in accordance with their judgment with respect
to any such matter.
PROPOSALS BY STOCKHOLDERS
Proposals by stockholders of the Company intended to be presented at the
next annual meeting of stockholders of the Company must be received at the
Company's executive offices no later than ______________, 1998, to be included
in the Company's proxy statement and form of proxy relating to that 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 Common Stock for which proxies are being solicited from you, and, if
so, the number of copies of the Proxy Statement and other soliciting materials
you wish to receive in order to supply copies to the beneficial owners of the
Common Stock.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE,
WHETHER OR NOT THEY EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON. BY
RETURNING YOUR PROXY PROMPTLY YOU CAN HELP THE COMPANY AVOID THE EXPENSE OF
FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE SPECIAL MEETING CAN BE
HELD. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE A PRIOR PROXY
AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors,
Irwin L. Sandler, Secretary
Denver, Colorado
___________, 1998
<PAGE>
ANNEX A
APPROVAL OF ISSUANCE OF TRANSACTION SHARES
RESOLVED, that the Company is authorized to issue (i) 2,422,457 shares of
the Company's 8% Cumulative Convertible Preferred Stock, Series 1998-1, (ii)
811,152 shares of the Company's Class A Common Stock and (iii) a presently
unknown number of shares of Class A Common Stock, the issuance of which is
contingent upon future operations, as partial consideration for certain of the
transactions under the Amended and Restated Asset Purchase Agreement among the
Company, Pacific USA Holdings Corp. and those and certain of its affiliates
dated January 8, 1998; 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 issuance of the Transaction Shares and the transactions contemplated
thereby.
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
RESOLVED, that the Company is authorized to amend its Articles of
Incorporation to (i) increase the number of authorized shares of Class A
Common Stock to 30,000,000 shares, and (ii) increase the number of authorized
shares of Preferred Stock to 10,000,000 shares having such preferences,
limitations and relative rights as may be determined by the Company's board of
directors; 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
Form of Articles of Amendment to Articles of Incorporation
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 ,
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
Incorporators
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.
The Articles of Incorporation shall be amended by striking the existing first
sentence of Section 1 of Article IV and inserting in lieu thereof the
following new sentence:
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 designated
"Class A Common Stock," and 2,250,000 shares shall be designated "Class B
Common Stock."
The Articles of Incorporation shall be amended by striking the existing first
sentence of Section 2 of Article IV and inserting in lieu thereof the
following new sentence:
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."
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
Title
<PAGE>
C:\LAW\MONACO\NAFCO\PROXY97.008
APPENDIX A
PRELIMINARY COPIES
PROXY
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 Special Meeting of Shareholders of the Company to
be held on __________, 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 proposal approving the issuance of the Transaction Shares;
(ii) FOR the proposal to amend the Company's Articles of Incorporation; and
(iii) on such other matters as may properly come before the Meeting.
1. Proposal to approve the issuance of (i) 2,433,457 shares of the
Company's 8% Cumulative Convertible Preferred Stock, Series 1998-1, (ii)
811,152 shares of the Company's Class A Common Stock and (iii) a presently
unknown number of shares of Class A Common Stock, the issuance of which is
contingent upon future operations, in accordance with and as partial
consideration for certain of the transactions under the Amended and Restated
Asset Purchase Agreement among the Company, Pacific USA Holdings Corp. and
certain of its affiliates dated January 8, 1998. [CHECK ONE BOX]
FOR [ ] AGAINST [ ] ABSTAIN [
]
2. Proposal to approve an amendment to the Company's Articles of
Incorporation to (i) increase the number of authorized shares of Class A
Common Stock to 30,000,000 shares, and (ii) increase the number of authorized
shares of Preferred Stock to 10,000,000 shares having such preferences,
limitations and relative rights as may be determined by the Company's board of
directors. [CHECK ONE BOX]
FOR [ ] AGAINST [ ] ABSTAIN [
]
3. 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, limited liability company or trust, please sign entity name
by authorized person indicating full title.
Dated ___________________, 1998
----------------------------------
Authorized Signature
----------------------------------
Title
Please mark boxes /X/ in ink. Sign, date and return this Proxy Card promptly
using the enclosed envelope.
