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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT: (DATE OF EARLIEST EVENT REPORTED): JULY 10, 1996
NAB ASSET CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 0-19391 76-0332956
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
5520 LBJ FREEWAY, SUITE 200
DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
214/701-6956
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective July 10, 1996, NAB Asset Corporation ("NAB" or the "Company")
acquired preferred stock and 80% of the voting common stock of CARS USA, Inc.
("CARS") for an aggregate purchase price of $500,000. The CARS preferred
stock acquired by NAB provides for cumulative dividends at the rate of 6% per
annum and has a liquidation preference over the CARS common stock equal to
the purchase price of the CARS preferred stock plus any accrued and unpaid
dividends. NAB also loaned CARS $1,000,000 in the form of a ten-year
subordinated note that will bear interest at an annual rate of ten percent
(10%). CARS is a newly-formed company that will acquire and operate
franchised automobile dealerships for both new and used vehicles. CARS plans
to utilize the extensive experience of its executive team in sub-prime auto
lending to serve the dealerships in reaching a broad market of purchasers.
CARS is in negotiation for the acquisition of its first dealership which it
anticipates will be completed by the end of July 1996.
Effective July 10, 1996, the Company also completed a series of
transactions involving Mortgage Portfolio Services, Inc. ("MPS"). First, NAB
acquired 80% of MPS common stock from Consumer Portfolio Services, Inc., a
principal stockholder of NAB, for $300,000. Second, MPS issued $2,250,000 of
its preferred stock to NAB, paid by conversation of debt to equity. Finally,
NAB has contributed approximately $250,000 to the capital of MPS. The
remaining common stock of MPS is owned by its management. MPS is a mortgage
banking company specializing in the purchase, origination and servicing of
residential mortgage loans that do not meet traditional secondary market
guidelines because the borrower has an imperfect credit history, is self
employed or has non-conforming property. MPS began funding mortgages in May
and has closed $1.35 million in loans through June 30, 1996.
A press release relating to the foregoing transactions, dated July 17,
1996, is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. As of the date hereof,
it is impracticable for the Company to file the required financial
statements of businesses acquired. The Company intends to file such
information as soon as it becomes available but in any event not later
than September 23, 1996.
(b) Pro forma financial information. As of the date hereof, it is
impracticable for the Company to file the required pro forma financial
information. The Company intends to file such information as soon as
it becomes available but in any event not later than September 23,
1996.
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(c) Exhibits.
EXHIBIT NO. EXHIBIT
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10.1 Subscription and Capital Contribution
Agreement dated July 10, 1996, between
NAB Asset Corporation and Mortgage
Portfolio Services, Inc. (Filed herewith.)
10.2 Stock Sale Agreement dated July 10,
1996, between NAB Asset Corporation
and Consumer Portfolio Services, Inc.
(Filed herewith.)
10.3 Subscription Agreement dated July 8,
1996 among CARS USA, Inc., NAB Asset
Corporation, Charles E. Bradley, Jr.,
Nicholas Carroll and Sandra C. Watt.
(Filed herewith.)
10.4 Subordinated Promissory Note of CARS
USA, Inc. dated July 8, 1996, in the
aggregate principal amount of $1,000,000.
(Filed herewith).
99.1 Press Release of NAB Asset Corporation
dated July 17, 1996. (Filed herewith.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 25, 1996
NAB ASSET CORPORATION
By: /s/ Michael W. Caton
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Michael W. Caton, President and
Chief Operating Officer
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EXHIBIT 10.1
SUBSCRIPTION AND CAPITAL
CONTRIBUTION AGREEMENT
This Agreement, dated as of July 10, 1996 is between NAB Asset
Corporation, a Texas corporation ("NAB"), and Mortgage Portfolio Services,
Inc., a Delaware corporation ("MPS").
RECITALS
a. NAB has acquired 8,000 shares of the common stock of MPS (the
"Common Shares") from Consumer Portfolio Services, Inc. ("CPS").
b. NAB desires to (1) subscribe for and purchase 2,250 shares of
the Preferred Stock of MPS and (2) make a contribution to the common
stock capital of MPS in the amount of $248,750.
c. On June 13, 1996 MPS redeemed and repurchased 1,050 shares of
the Preferred Stock of MPS from CPS for an aggregate price of
$1,055,638.89 (the "Repurchase Price").
d. MPS' sources of funds for the payment of the Repurchase Price
were the following: (1) a loan by NAB to MPS on June 13, 1996 in the
amount of $893,638.89 (the "First NAB Loan") and (2) $162,000 in cash in
MPS' account in Bank of America, account no. 1458925865.
e. At MPS' oral direction, NAB funded the First NAB Loan by wire
transferring on June 13, 1996 from its account at Charter National Bank
in Houston, Texas directly to CPS' account at Bank of America, account
no. 1458425131, the sum of $893,638.89, the same constituting both (1) a
loan to MPS and (2) MPS' payment of a portion of the Repurchase Price.
f. On June 13, 1996 NAB made another loan to MPS in the amount of
$1,605,111.11 (the "Second NAB Loan"). NAB funded the Second NAB Loan
by wire transfer of said amount from its account at Charter National
Bank to MPS' account no. 3940000981 at Guaranty Federal Bank in Dallas,
Texas.
g. As of the date hereof, the aggregate principal balance of the
First NAB Loan and Second NAB Loan is $2,498,750 (the "Principal
Balance").
NOW THEREFORE, the parties agree as follows:
1. NAB hereby subscribes for and agrees to purchase (the "Subscription")
2,250 (the "MPS Preferred Shares") shares of Preferred Stock, par value $0.01
per share, of MPS (the "Preferred Shares") for a purchase price of $1,000 per
share, or a total price of $2,250,000 (the "Subscription Price").
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2. NAB hereby makes a contribution of $248,750 to the common stock
capital of MPS (the "Capital Contribution").
3. MPS hereby accepts the Subscription and the Capital Contribution and
agrees to issue a certificate representing the MPS Preferred Shares to CPS.
4. NAB and MPS hereby agree that the Subscription Price and the Capital
Contribution are paid by applying the entire Principal Balance to such
payment on the date hereof, thereby reducing the Principal Balance to $-0-,
effective immediately.
5. MPS continues to be obligated to pay to NAB the accrued and unpaid
interest on the First NAB Loan and the Second NAB Loan.
6. MPS represents and warrants to NAB that the following representations
and warranties are true and correct as of the date hereof, except with
respect to representations and warranties which are made with reference to
another specific date in which case MPS represents and warrants that such
representations and warranties are true and correct as of that date.
a. AUTHORITY AND ENFORCEABILITY. MPS is a corporation duly
organized and validly existing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its
business as currently conducted, and to own and operate the properties
owned and operated by it and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to
do business in all jurisdictions in which the charter of the properties
owned or the nature of the business conducted by it would make such
qualifications or licensing necessary. All corporate action on the part
of MPS, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance
of all obligations of MPS hereunder and the authorization, issuance and
delivery of the MPS Preferred Shares being sold hereunder has been
taken. This Agreement, together with all other agreements, documents
and instruments executed in connection herewith by MPS constitute valid
and legally-binding obligations of MPS, and are enforceable against MPS
in accordance with their terms, subject to bankruptcy, receivership,
insolvency, reorganization, moratorium or other similar laws affecting
or relating to creditors' rights generally and subject to general
principals of equity.
b. NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery
of this Agreement by MPS nor the performance by MPS of its obligations
hereunder will (a) violate or conflict with any provision of the charter
documents, or bylaws, as amended to date, of MPS, (b) violate or
conflict with any provision of any Laws (as hereinafter defined)
applicable to MPS, or its businesses or assets; (c) result in a breach
of, or constitute a default (or with notice or lapse of time or both
result in a breach of or constitute a default) under or otherwise give
any person the right to terminate or accelerate payment under or
performance of any note, bond, loan agreement, contract, lease, license,
franchise, permit, or other agreement or instrument to which MPS is a
party or to which any of its assets are subject; or (d) result in,
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or require the creation or imposition of any Encumbrance (as hereinafter
defined) of any nature upon or with respect to any of the assets of MPS. For
purposes of this Agreement, "Laws" mean any applicable statute, law, code,
ordinance, rule, regulation, order, permit, license, certificate, writ,
judgment, injunction or decree promulgated by any governmental authority,
including all laws relating to protection of the environment. For purposes of
this Agreement, "Encumbrance" means any security interest, mortgage, deed of
trust, pledge, lien, or other encumbrance of any nature whatsoever.
c. CAPITALIZATION OF MPS. As of the date hereof, (a) the authorized
capital stock of MPS consists of 10,000 shares of common stock, $.01 par
value per share, 9,500 of which are issued and outstanding, and 10,000 shares
of preferred stock, $.01 per value per share, none of which are issued and
outstanding, (1,050 such shares having been repurchased from CPS as described
in the Recitals above); (b) the MPS Shares which are being purchased
hereunder, when issued, sold, and delivered in accordance with the terms
hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable; (c) no shares of MPS stock will have
been, and the MPS Preferred Shares will not be, issued in violation of MPS'
charter documents or bylaws, or the preemptive rights of any person; and (d)
there will not be outstanding subscriptions, options, rights, warrants,
calls, preemptive rights, convertible securities, or other agreements or
commitments of any kind obligating MPS to sell, convey, issue, exchange,
transfer from treasury, or otherwise dispose of, any additional shares of any
class of MPS capital stock, or any other equity or debt security of MPS,
except that 500 shares of common stock may be issued to key employees of MPS
through the grant of options or otherwise.
d. FINANCIAL STATEMENTS. MPS has delivered to NAB its unaudited
financial statements (balance sheet and profit and loss statement) at and for
the five month period ended May 31, 1996 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting
principals applied on a consistent basis throughout the periods indicated and
with each other. The Financial Statements accurately set out and describe the
financial condition and operating results of MPS as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments.
Except as set forth in the Financial Statements, MPS has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to May 31, 1996 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principals to be reflected in
the Financial Statements, which in both cases, individually or in the
aggregate, are not material to the financial condition or operating results
of MPS. MPS maintains and will continue to maintain a standard system of
accounting established in accordance with generally accepted accounting
principles.
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e. CHANGES. Since May 31, 1996, there has not been:
i. any change in the assets, liabilities, financial condition or
operating results of MPS from that reflected in the Financial Statements,
except changes in the ordinary course of business which have not been, in
the aggregate, materially adverse;
ii. any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of MPS (as
such business is presently conducted and as it is proposed to be
conducted);
iii. any waiver by MPS of a material right or of a material debt
owed to it;
iv. any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by MPS, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of MPS ( as such
business is presently conducted and as it is proposed to be conducted);
v. any change or amendment to a material contract or arrangement
by which MPS or any of its assets or properties is bound or subject;
vi. any material change in any compensation arrangement or
agreement with any employee; or
vii. to MPS' knowledge, any other event or condition of any
character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of MPS (as
such business is presently conducted and as it is proposed to be
conducted).
f. LIABILITIES. MPS has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, except (a) as reflected or
reserved against in the Financial Statements, (b) obligations to perform
services or deliver goods in the ordinary course of business that are not
delinquent, and (c) obligations of liabilities incurred in the accordance
with the terms of this Agreement after the date of the Financial Statements.
g. DEFAULTS. MPS is not in default under, or in breach or violation
of, and no event has occurred which, with notice or lapse of time or action
by a third party, could reasonably be expected to result in a default under,
breach or violation of, or conflict with; (a) its charter documents, or
bylaws, as amended to date; (b) any lease, license, permit, Encumbrance, or
other agreement or instrument to which it is a party, or to which any of its
assets is subject; or (c) any laws applicable to it or its business or assets.
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h. LITIGATION. There is no lawsuit, action, arbitration,
mediation, administration proceeding, investigation by a governmental
authority, or other legal proceeding pending or, to the knowledge of
MPS, threatened against MPS or affecting its assets or financial
condition. MPS is not subject to any court order, writ, injunction,
court decree, settlement agreement, or judgment that contains or orders
any ongoing obligations (whether prohibitory or mandatory in nature) on
the part of MPS.
i. TITLE TO AND QUIET POSSESSION OF ASSETS. MPS has good and
valid title to all of its assets and interests in assets, whether real,
personal, mixed, tangible or intangible, that are disclosed herein, are
reflected in the Financial Statements, or that have been acquired since
May 31, 1996. All such assets are free and clear of all Encumbrances.
Without limiting the generality of the foregoing, MPS has the exclusive
right, title and interest in and to any trademarks, service marks, trade
names, and copyrights currently used, and the continued use of any logo,
trade name, license, or other intangible by MPS does not and will not
violate or infringe upon the rights of any third party.
j. CONDITIONS OF ASSETS.
i. MPS' premises, fixtures, vehicles, and material equipment
are in a condition satisfactory to continue to operate MPS'
business in the manner conducted prior to the date hereof. There
is no change in the zoning or building ordinances directly
affecting the real property or leasehold interests of MPS, pending
or, to the knowledge of MPS, threatened.
ii. All contracts, leases, plans or other arrangements to
which MPS is a party, by which it is bound or to which it or its
assets are subject are in full force and effect, and constitute
valid and binding obligations of MPS. MPS is not, and no other
party to any such contract, lease, plan or other arrangement is, in
default thereunder, and no event has occurred which (with or without
notice, lapse of time, or the happening of any other event) would
constitute a default thereunder. No contract has been entered into in
terms which could reasonably be expected to have adverse effect on
MPS. MPS has received no information which would cause MPS to
conclude that any customer of MPS will (or is likely to) cease doing
business with MPS as a result of the consummation of the transactions
contemplated hereby.
k. NO ERISA PLANS OR LABOR ISSUES. MPS does not currently sponsor,
maintain or contribute to, and has not at any time sponsored, maintained or
contributed to any employee benefit plan which is or was subject to any of
the provisions of the Employee Retirement Income Security Act of 1974 in
which any of its employees are or were participants (whether or not on an
active or frozen basis). MPS has not engaged in any unfair labor practices
which could reasonably be expected to result in a material adverse effect
on MPS' financial condition. MPS does not have any dispute with any of its
existing or former employees. There are no labor disputes or to the
knowledge of MPS, any disputes threatened by current
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or former employees of MPS. Since May 31, 1996, MPS has not
granted or agreed to grant any bonus to any current employee, any
general increase in the rates of salaries or compensation of its
employees or any specific increase to any current employee, except
in accordance with regularly scheduled periodic bonuses and
increases, and has not provided for any new pension, retirement or
other employee benefits to any of its current employees or any
increases in any existing benefits.
l. TAXES. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenues, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental
agencies, domestic and foreign, by MPS for each period for which any
returns, reports, or estimates were due. All taxes shown by such
returns to be payable have been paid. All sales taxes, if any, have
been properly collected and accounted for through the date hereof by
MPS, and MPS has made all required deposits, if any, of such taxes with
all taxing authorities. The tax provision reflected in MPS' financial
statements as of May 31, 1996 is adequate to cover liability of MPS at
the date thereof for all taxes of any character whatsoever applicable to
MPS or its assets or business. No waiver of any statute of limitations
executed by MPS with respect to federal or state income tax or other tax
is in effect for any period. No deficiencies for any taxes have been
proposed, asserted or assessed against MPS, and no requests or waivers
of the time assess any such tax are pending. The federal income tax
returns of MPS have never been audited by the Internal Revenue Services.
No audit of any federal or state or other tax return of MPS is presently
in process nor has an appointment for, or notice of, any such audit been
requested or given by any taxing authority.
m. UNTRUE STATEMENTS. This Agreement, the agreements and
instruments to be entered into in connection herewith do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements made herein and therein not misleading
in any material respect.
7. NAB acknowledges that it is thoroughly familiar with the business,
prospects and financial condition of MPS by reason of the fact that NAB's
Chairman, Charles E. Bradley, and its President, Michael W. Caton, are
officers and directors of MPS, were founders of MPS and have been actively
involved in the management of MPS since its formation.
8. This Agreement (i) constitutes the entire agreement of the parties
with respect to the subject matter hereof, (ii) shall be governed and
construed in accordance with the laws of Delaware and (iii) may be executed in
multiple counterparts, each of which shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NAB ASSET CORPORATION
By: /s/ MICHAEL W. CATON
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Name: Michael W. Caton
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Title: President
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MORTGAGE PORTFOLIO SERVICES, INC.
By: /s/ JAMES A. HINTON
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Name: James A. Hinton
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Title: President
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EXHIBIT 10.2
STOCK SALE AGREEMENT
(MPS COMMON SHARES)
This Agreement dated as of July 10, 1996 is between NAB Asset
Corporation ("NAB"), a Texas Corporation, and Consumer Portfolio Services,
Inc. ("CPS"), a California corporation.
RECITALS
a. CPS owns 8,000 shares (the "MPS Shares") of the common stock of
Mortgage Portfolio Services, Inc., a Delaware corporation ("MPS") whose
principal place of business is in Dallas, Texas and which is engaged in
the business of originating, holding, selling and servicing mortgage loans.
b. CPS owned 1,050 shares of the Preferred Stock of MPS until the
redemption of such shares on June 13, 1996.
c. On or about June 5, 1996, CPS acquired approximately 38% of the
outstanding common shares of NAB.
d. CPS desires to sell, and NAB desires to purchase, the MPS
Shares on the terms hereinafter set forth.
NOW THEREFORE, the parties agree as follows:
1. CPS hereby sells, assigns, transfers and conveys the MPS Shares to
NAB for a purchase price of $300,000 in the aggregate. NAB is paying said
purchase price today by wire transfer of funds to CPS' account in accordance
with CPS' instructions.
2. CPS hereby represents and warrants to NAB as follows:
a. AUTHORITY AND ENFORCEABILITY. MPS is a corporation duly
organized and validly existing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its business
as currently conducted, and to own and operate the properties owned and
operated by it and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the charter of the properties owned or the nature of
the business conducted by it would make such qualifications or licensing
necessary. All corporate action on the part of MPS, its officers, directors
and stockholders necessary for the authorization, execution and delivery of
this Agreement, the performance of all obligations of MPS hereunder and the
sale of the MPS Shares being sold hereunder has been taken. This Agreement,
together with all other agreements, documents and instruments executed in
connection herewith by MPS constitute valid and legally-binding obligations
of MPS, and are enforceable against MPS in accordance with their terms,
subject to bankruptcy, receivership, insolvency, reorganization, moratorium
or other similar laws affecting or relating to creditors' rights generally
and subject to general principals of equity.
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b. NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery
of this Agreement by CPS nor the performance by CPS of its obligations
hereunder will (a) violate or conflict with any provision of the charter
documents, or bylaws, as amended to date, of CPS or MPS, (b) violate or
conflict with any provision of any Laws (as hereinafter defined) applicable
to CPS or MPS, or its businesses or assets; (c) result in a breach of, or
constitute a default (or with notice or lapse of time or both result in a
breach of or constitute a default) under or otherwise give any person the
right to terminate or accelerate payment under or performance of any note,
bond, loan agreement, contract, lease, license, franchise, permit, or other
agreement or instrument to which CPS or MPS is a party or to which any of
its assets are subject; or (d) result in, or require the creation or
imposition of any Encumbrance (as hereinafter defined) of any nature upon
or with respect to any of the assets of CPS or MPS. For purposes of this
Agreement, "Laws" means any applicable statute, law, code, ordinance, rule,
regulation, order, permit, license, certificate, writ, judgment,
injunction or decree promulgated by any governmental authority, including
all laws relating to protection of the environment. For purposes of this
Agreement, "Encumbrance" means any security interest, mortgage, deed of
trust, pledge, lien, or other encumbrance of any nature whatsoever.
c. CAPITALIZATION OF MPS. As of the date hereof, (a) the
authorized capital stock of MPS consists of 10,000 shares of common stock,
$.01 par value per share, 9,500 of which are issued and outstanding, and
10,000 shares of preferred stock, $.01 per value per share, none of which
are issued and outstanding, (1,050 such shares having been repurchased from
CPS as described in the Recitals above); (b) the MPS Shares which are being
purchased hereunder, are duly and validly issued, fully paid and
nonassessable; (c) no shares of MPS stock have been issued in violation of
MPS' charter documents or bylaws, or the preemptive rights of any person;
and (d) there will not be outstanding subscriptions, options, rights,
warrants, calls, preemptive rights, convertible securities, or other
agreements or commitments of any kind obligating MPS to sell, convey,
issue, exchange, transfer from treasury, or otherwise dispose of, any
additional shares of any class of MPS capital stock, or any other equity or
debt security of MPS, except that 500 shares of common stock may be issued
to key employees of MPS through the grant of options or otherwise.
d. FINANCIAL STATEMENTS. MPS has delivered to NAB its unaudited
financial statements (balance sheet and profit and loss statement) at and
for the five month period ended May 31, 1996 (the "Financial Statements").
The Financial Statements are complete and correct in all material respects
and have been prepared in accordance with generally accepted accounting
principals applied on a consistent basis throughout the periods indicated
and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of MPS as of the
dates, and for the periods, indicated therein, subject to normal year-end
audit adjustments. Except as set forth in the Financial Statements, MPS has
no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to May 31, 1996 and
(ii) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principals to be reflected in the Financial Statements, which in both
cases, individually or in the aggregate, are not material to the financial
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condition or operating results of MPS. MPS maintains a standard system
of accounting established in accordance with generally accepted
accounting principles.
e. CHANGES. Since May 31, 1996, there has not been:
i. any change in the assets, liabilities, financial
condition or operating results of MPS from that reflected in the
Financial Statements, except changes in the ordinary course of
business which have not been, in the aggregate, materially
adverse;
ii. any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets,
properties, financial condition, operating results, prospects or
business of MPS (as such business is presently conducted and as
it is proposed to be conducted);
iii. any waiver by MPS of a material right or of a material
debt owed to it;
iv. any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by MPS, except in the
ordinary course of business and which is not material to the
assets, properties, financial condition, operating results or
business of MPS (as such business is presently conducted and as
it is proposed to be conducted);
v. any change or amendment to a material contract or
arrangement by which MPS or any of its assets or properties is
bound or subject;
vi. any material change in any compensation arrangement or
agreement with any employee; or
vii. to MPS' knowledge, any other event or condition of any
character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of
MPS (as such business is presently conducted and as it is
proposed to be conducted).
f. LIABILITIES. MPS has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, except (a) as reflected or
reserved against in the Financial Statements, (b) obligations to
perform services or deliver goods in the ordinary course of business
that are not delinquent, and (c) obligations of liabilities incurred in
accordance with the terms of this Agreement after the date of the
Financial Statements.
g. DEFAULTS. MPS is not in default under, or in breach or
violation of, and no event has occurred which, with notice or lapse of
time or action by a third party, could reasonably be expected to result
in a default under, breach or violation of, or conflict with; (a) its
charter documents, or bylaws, as amended to date; (b) any lease,
license, permit, Encumbrance, or other agreement or instrument to which
it is a party, or to which any of its assets is subject; or (c) any
laws applicable to it or its business or assets.
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h. LITIGATION. There is no lawsuit, action, arbitration,
mediation, administration proceeding, investigation by a governmental
authority, or other legal proceeding pending or, to the knowledge of
MPS, threatened against MPS or affecting its assets or financial
condition. MPS is not subject to any court order, writ, injunction,
court decree, settlement agreement, or judgment that contains or orders
any ongoing obligations (whether prohibitory or mandatory in nature) on
the part of MPS.
i. TITLE TO AND QUIET POSSESSION OF ASSETS. MPS has good and
valid title to all of its assets and interests in assets, whether real,
personal, mixed, tangible or intangible, that are disclosed herein, are
reflected in the Financial Statements, or that have been acquired
since May 31, 1996. All such assets are free and clear of all
Encumbrances. Without limiting the generality of the foregoing, MPS has
the exclusive right, title and interest in and to any trademarks,
service marks, trade names, and copyrights currently used, and the
continued use of any logo, trade name, license, or other intangible by
MPS does not and will not violate or infringe upon the rights of any
third party.
j. CONDITION OF ASSETS.
i. MPS' premises, fixtures, vehicles, and material
equipment are in a condition satisfactory to continue to operate
MPS' business in the manner conducted prior to the date hereof.
There is no change in the zoning or building ordinances directly
affecting the real property or leasehold interests of MPS,
pending or, to the knowledge of MPS, threatened.
ii. All contracts, leases, plans or other arrangements to
which MPS is a party, by which it is bound or to which it or its
assets are subject are in full force and effect, and constitute
valid and binding obligations of MPS. MPS is not, and no other
party to any such contract, lease, plan or other arrangement is,
in default thereunder, and no event has occurred which (with or
without notice, lapse of time, or the happening of any other
event) would constitute a default thereunder. No contract has
been entered into in terms which could reasonably be expected to
have adverse effect on MPS. MPS has received no information which
would cause MPS to conclude that any customer of MPS will (or is
likely to) cease doing business with MPS as a result of the
consummation of the transactions contemplated hereby.
k. NO ERISA PLANS OR LABOR ISSUES. MPS does not currently
sponsor, maintain or contribute to, and has not at any time sponsored,
maintained or contributed to any employee benefit plan which is or was
subject to any of the provision of the Employee Retirement Income
Security Act of 1974 in which any of its employees are or were
participants (whether or not on an active or frozen basis). MPS has not
engaged in any unfair labor practices which could reasonably be
expected to result in a material adverse effect on MPS' financial
condition. MPS does not have any dispute with any of its existing or
former employees. There are no labor disputes or to the knowledge of
MPS, any disputes threatened by current or former employees of MPS.
Since May 31, 1996, MPS has not granted or agreed to grant any bonus to
any current employee, any general increase in the rates of salaries or
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compensation of its employees or any specific increase to any current
employee, except in accordance with regularly scheduled periodic bonuses
and increases, and has not provided for any new pension, retirement or
other employee benefits to any of its current employees or any increases
in any existing benefits.
l. TAXES. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental
agencies, domestic and foreign, by MPS for each period for which any
returns, reports, or estimates were due. All taxes shown by such
returns to be payable have been paid. All sales taxes, if any, have
been properly collected and accounted for through the date hereof by
MPS, and MPS has made all required deposits, if any, of such taxes with
all taxing authorities. The tax provision reflected in MPS' financial
statements as of May 31, 1996 is adequate to cover liability of MPS at
the date thereof for all taxes of any character whatsoever applicable to
MPS or its assets or business. No waiver of any statute of limitations
executed by MPS with respect to federal or state income tax or other tax
is in effect for any period. No deficiencies for any taxes have been
proposed, asserted or assessed against MPS, and no requests or waivers
of the time assess any such tax are pending. The federal income tax
returns of MPS have never been audited by the Internal Revenue Services.
No audit of any federal or state or other tax return of MPS is
presently in process nor has an appointment for or notice of any such
audit been requested or given by any taxing authority.
m. UNTRUE STATEMENTS. This Agreement, the agreements and
instruments to be entered to in connection herewith do not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements made herein and therein not misleading
in any material respect.
n. CPS is the outright owner of the MPS Shares, free and clear of
all liens, claims and encumbrances.
o. The Board of Directors of CPS has authorized the sale of the
MPS Shares on the terms set forth in this Agreement.
p. CPS has full power and authority to sell the MPS Shares as
provided in this Agreement.
3. NAB acknowledges that, it is thoroughly familiar with the business
and financial condition of MPS because NAB's Chairman and its President are
officers and directors of MPS and have been actively involved in the business
of MPS since its formation.
4. This Agreement (i) constitutes the entire understanding of the
parties with respect to the subject matter hereof, (ii) shall be governed and
construed in accordance with the laws of the State of California and (iii)
may be executed in multiple counterparts, each of which shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NAB ASSET CORPORATION
By: /s/ MICHAEL W. CATON
----------------------------------
Michael W. Caton
President
CONSUMER PORTFOLIO SERVICES, INC.
By: /s/ JEFFREY P. FRITZ
----------------------------------
Jeffrey P. Fritz
Vice President
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EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
(CARS USA, INC.)
This Agreement dated as of July 8, 1996 is among CARS USA, INC., a
California corporation (the "Company"), NAB Asset Corporation, a Texas
Corporation, ("NAB"), Charles E. Bradley, Jr. ("Bradley, Jr."), Nicholas
Carroll ("Carroll") and Sandra C. Watt ("Watt").
1. NAB hereby subscribes for and agrees to purchase 80,000 shares (the
"Common Shares"), of the common stock, no par value (the "Common Stock"), of
the Company for a price of $1.25 per share. NAB also subscribes for and
agrees to purchase 100,000 shares (the "Preferred Shares") of preferred
stock, no par value (the "Preferred Stock"), of the Company for a price of
$4.00 per share. These subscriptions are made in reliance on the
representations and warranties made by the Company, Bradley, Jr., Carroll and
Watt in paragraph 3 hereof.
2. The Company hereby accepts the foregoing subscription and agrees to
issue the Common Shares and the Preferred Shares to NAB.
3. The Company, Bradley, Jr., Carroll and Watt hereby represent and
warrant to NAB that the following representations and warranties are true and
correct as of the date hereof, except with respect to representations and
warranties which are made with reference to another specific date in which case
such representations and warranties are true and correct as of that date.
a. AUTHORITY AND ENFORCEABILITY. The Company is a corporation duly
organized and validly existing under the laws of the State of California, has
full requisite corporate power and authority to carry on its business as
currently conducted, and to own and operate the properties owned and operated
by it and is duly qualified or licensed to do business and is in good
standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of the Company
hereunder and the authorization, issuance delivery of the Common Stock and
the Preferred Shares being sold hereunder has been taken. This Agreement,
together with all other agreements, documents and instruments executed in
connection herewith by the Company constitute valid and legally-binding
obligations of the Company, and are enforceable against the Company in
accordance with their terms, subject to bankruptcy, receivership, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors' rights generally and subject to general principles of equity.
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b. NO VIOLATION OR CONFLICTS. Neither the execution and delivery of
this Agreement by the Company nor the performance by the Company of its
obligations hereunder will (a) violate or conflict with any provision of the
charter documents, or bylaws, as amended to date, of the Company, (b) violate
or conflict with any provision of any Laws (as hereinafter defined)
applicable to the Company, or its businesses or assets; (c) result in a
breach of, or constitute a default (or with notice or lapse of time or both
result in a breach of or constitute a default) under or otherwise give any
person the right to terminate or accelerate payment, under or performance of
any note, bond, loan agreement, contract, lease, license, franchise, permit,
or other agreement or instrument to which the Company is a party or to which
any of its assets are subject; or (d) result in, or require the creation or
imposition of any Encumbrance (as hereinafter defined) of any nature upon or
with respect to any of the assets of the Company. For purposes of this
Agreement, "Laws" mean any applicable statute, law, code, ordinance, rule,
regulation, order, permit, license, certificate, writ, judgment, injunction
or decree promulgated by any governmental authority, including all laws
relating to protection of the environment. For purposes of this Agreement,
"Encumbrance" means any security interest, mortgage, deed of trust, pledge,
lien, or other encumbrance of any nature whatsoever.
c. CAPITALIZATION OF THE COMPANY. As of the date hereof (a) the
authorized capital stock of the Company consists of 100,000 shares of common
stock, no par value, 20,000 of which are issued and outstanding (of which
10,000 shares are owned by Bradley, Jr., 9,000 shares are owned by Watt and
1,000 shares are owned by Carroll), and 100,000 shares of preferred stock, no
par value, none of which are issued and outstanding; (b) the Common Shares
and the Preferred Shares which are being purchased hereunder, when issued,
sold, and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and
nonassessable; (c) no shares of the Company's Stock will have been, and the
Common Shares and the Preferred Shares will not be, issued in violation of
the Company's charter documents or bylaws, or the preemptive rights of any
person; and (d) there will not be outstanding subscriptions, options, rights,
warrants, calls, preemptive rights, convertible securities, or other agreements
or commitments of any kind obligating the Company to sell, convey, issue,
exchange, transfer from treasury, or otherwise dispose of, any additional shares
of any class of the Company's capital stock, or any other equity or debt
security of the Company.
d. FINANCIAL STATEMENTS. The company has delivered to NAB its
unaudited financial statement (balance sheet and profit and loss, statement)
at and for the six month period ended June 30, 1996 and for the year ended
December 31, 1995 (the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other. The
Financial Statements accurately set out and describe the financial condition
and operating results of the Company as of the dates, and for the periods,
indicated therein, subject to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1996, and (ii)
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obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually
or in the aggregate, are not material to the financial condition or operating
results of the Company. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
generally accepted accounting principles.
e. CHANGES. Since June 30, 1996, there has not been:
i. any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse;
ii. any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company
(as such business is presently conducted and as it is proposed to be
conducted);
iii. any waiver by the Company of material right to or of a
material debt owed to it;
iv. any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which is not material to the assets,
priorities, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be
conducted);
v. any change or amendment to a material contract or arrangement
by which the Company or any of its assets or properties is bound or subject;
vi. any material change in any compensation arrangement or
agreement with any employee; or
vii. to the Company's knowledge any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be
conducted).
f. LIABILITIES. The Company has no liabilities or obligations,
whether absolute, accrued, contingent or otherwise, except (a) as reflected
or reserved against in the Financial Statements, (b) obligations to perform
services or deliver goods in the ordinary course of business that are not
delinquent, and (c) obligations or liabilities incurred in accordance with
the terms of this Agreement after the date of the Financial Statements.
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g. DEFAULTS. The Company is not in default under, or in breach or
violation of, and no event has occurred which, with notice or lapse of time or
action by a third party, could reasonably be expected to result in a default
under, breach or violation of, or conflict with: (a) its charter documents,
or bylaws, as amended to date; (b) any lease, license, permit, Encumbrance,
or other agreement or instruments to which it is a party, or to which any of
its assets is subject; or (c) any laws applicable to it or its business or
assets.
h. LITIGATION. There is no lawsuit, action, arbitration, mediation,
administrative proceeding, investigation by a government authority, or other
legal proceeding pending or, to the knowledge of the Company, threatened
against the Company or affecting its assets or financial condition. The
Company is not subject to any court order, writ, injunction court decree,
settlement agreement, or judgment that contains or orders any ongoing
obligations (whether prohibitory or mandatory in nature) on the part of the
Company.
i. TITLE TO AND QUIET POSSESSION OF ASSETS. The Company has good and
valid title to all of its assets and interests in assets, whether real,
personal, mixed, tangible or intangible, that are disclosed herein, are
reflected in the Financial Statements, or that have been acquired since June
30, 1996. All such assets are free and clear of all Encumbrances. Without
limiting the generality of the foregoing, the Company has the exclusive
right, title and interest in and to any trademarks, service marks, trade
names, and copyrights currently used, and the continued use of any logo,
trade name, license, or other intangible by the Company does not and will not
violate or infringe upon the rights of any third party.
j. CONDITION OF ASSETS.
i. The Company's buildings, premises, fixtures, vehicles, and
material equipment and machinery are in a condition satisfactory to
continue to operate the Company's business in the manner conducted prior
to the date hereof. There is not change in the zoning or building
ordinances directly affecting the real property or leasehold interests of
the Company, pending or, to the knowledge of the Company, threatened.
ii. All contracts, leases, plans or other arrangements to which
the Company is a party, by which it is bound or to which it or its assets
are subject in full force and effect, and constitute valid and binding
obligations of the Company. The Company is not, and no other party to any
such contract, lease, plan or other arrangements is, in default
thereunder, and no event has occurred which (with or without notice, lapse
of time, or the happening of any other event) would constitute a default
thereunder. No contract has been entered into on terms which could
reasonably be expected to have an adverse effect on the Company. The
Company has received no information which would cause the Company to
conclude that any customer of the Company will (or is likely to) cease
doing
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business with the Company to conclude that any customer of the Company as
a result of the consummation of the transactions contemplated hereby.
k. NO ERISA PLANS OR LABOR ISSUES. The Company does not currently
sponsor, maintain or contribute to, and has not at any time sponsored,
maintained or contributed to any employee benefit plan which is or was
subject to any of the provisions of the Employee Retirement Income Security
Act of 1974 in which any of its employees are or were participants (whether
or not on an active or frozen basis). The Company has not engaged in any
unfair labor practices which could reasonably be expected to result in a
material adverse effect on the company's financial condition. The Company
does not have any dispute with any of its existing or former employees. There
are no labor disputes or to the knowledge of the Company, any disputes
threatened by current or former employees of the Company. Since June 30,
1996, the Company has not granted or agreed to grant any bonus to any current
employee, any general increase in the rates of salaries or compensation of
its employees or any specific increase to any current employee, except in
accordance with regularly scheduled periodic bonuses and increases and has
not provided for any new pension, retirement, or other employee benefits to
any of its current employees or any increases in any existing benefits.
l. TAXES. Proper and accurate federal, state and local income,
sales, use, franchise, gross revenue, turnover, excise, payroll, property,
employment, customs duties and any and all other tax returns, reports, and
estimates have been filed with appropriate governmental agencies, domestic
and foreign, by the Company for each period for which any returns, reports,
or estimates were due. All taxes shown by such returns to be payable have
been paid. All sales taxes have been properly collected and accounted for
through the date hereof by the Company, and the Company has made all required
deposits of such taxes with all taxing authorities. The tax provision
reflected in the Company's financial statements as of June 30, 1996 is
adequate to cover liability of the Company at the date thereof for all taxes
of any character whatsoever applicable to the Company or its assets or
business. No waiver of any statute of limitations executed by the Company
with respect to federal or state income or other tax is in effect for any
period. No deficiencies for any taxes have been proposed, asserted or
assessed against the Company, and no requests or waivers of the time to assess
any such tax are pending. The federal income tax returns of the Company have
never been audited by the Internal Revenue Service. No audit of any federal
or state or other tax return of the Company is presently in process nor has
an appointment for or notice of any such audit been requested or given by any
taxing authority.
m. UNTRUE STATEMENTS. This Agreement, the agreements and instruments
to be entered into in connection herewith do not include any untrue statement
of a material fact necessary to make statements made herein and therein not
misleading in any material respect.
4. This agreement (i) contains the entire understanding of the
parties with regard to the subject matter hereof, (ii) supersedes all prior
agreements and
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understandings regarding such subject matter, (iii) shall inure to the
benefit of and be binding upon the parties and their respective successors,
assigns, heirs and personal representatives, (iv) shall be governed and
construed in accordance with the laws of California without regard to
principles of conflicts of laws, and (v) may be executed in one or more
counterparts each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year first above written.
CARS USA, INC. NAB ASSET CORPORATION
By: /s/ Charles E. Bradley, Jr. By: /s/ Michael W. Caton
-------------------------------- ---------------------------------
Charles E. Bradley, Jr. Michael W. Caton
President President and Chief Operating
Officer
By: /s/ Charles E. Bradley, Jr.
--------------------------------
Charles E. Bradley, Jr.
/s/ Sandra C. Watt
- -----------------------------------
Sandra C. Watt
/s/ Nicholas Carroll
- -----------------------------------
Nicholas Carroll
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EXHIBIT 10.4
SUBORDINATED PROMISSORY NOTE
$1,000,000 July 8, 1996
CARS USA, Inc., a California corporation ("Cars"), for value received,
hereby promises to pay to the order of NAB Asset Corporation ("NAB") at 2
Ada, Suite 200, Irvine, California 92618 or such other place as the holder
hereof may from time to time designate, the principal sum of one million
dollars ($1,000,000) or such lesser amount as may be outstanding, together
with interest at the interest rate set forth below, which shall accrue
beginning on the date hereof and continue before and after maturity until
this Note is paid in full, and together with costs of collection and costs of
defending, preserving and enforcing the rights of the holder hereof under
this Note and under any other documents evidencing or securing the
indebtedness evidenced by this Note, including without limitation reasonable
counsel fees with respect thereto.
Interest only shall accrue on this Note at the rate of 10% per annum
and shall be payable quarterly in arrears. After maturity or the occurrence
of any Event of Default hereunder, the interest rate accruing on this Note
shall be increased by 3% per annum over the otherwise applicable rate or to
the maximum amount allowed by law, whichever is less.
The principal balance due shall be payable in the amount of $200,000
annually commencing six years from the date of this Note and annually
thereafter until the principal amount is paid in full.
CARS agrees that it shall constitute an Event of Default hereunder (i)
if CARS fails to pay when due any amount payable hereunder, or (ii) if CARS
shall suffer or permit the filing by or against it of any petition for
adjudication, arrangement, reorganization or the like under any bankruptcy or
insolvency law, make an assignment for the benefit of creditors or suffer or
permit the appointment of a receiver for any part of its property. Upon the
happening of any such event, the entire indebtedness with accrued interest
thereon due under this Note shall, at the option of the holder hereof,
accelerate and become immediately due and payable without notice. Failure to
exercise such option shall not constitute a waiver of the right to exercise
the same in the event of any subsequent default.
The holder hereof shall have a lien and right of setoff upon and against
all of the deposits, credit, collateral and property of CARS now or hereafter
in the possession or control of such holder or in transit to it. The holder
hereof may, in the Event of Default, apply or set off the same, or any part
thereof, to any liability of CARS.
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This Note shall be governed by and construed in accordance with the laws
of the State of California. The parties agree that the courts of California
shall have exclusive jurisdiction over any action concerning this note.
SUBORDINATION PROVISIONS.
By acceptance of this Note, the holder hereof consents and agrees that
the payment of the principal of and interest on this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right
of payment to the prior payment in full of all Senior Indebtedness (as
hereinafter defined in subparagraph (v)).
(i) Upon any distribution of assets of CARS upon dissolution,
winding up, liquidation or reorganization (whether in bankruptcy, insolvency
or receivership proceedings, or upon an assignment for the benefit of
creditors, or any other marshaling of the assets and liabilities of CARS or
otherwise), then in any such case:
(A) the holders of all Senior Indebtedness shall first be
entitled to receive payment in full of the principal thereof and the premium,
if any, and the interest accrued and unpaid thereon before the holder of this
Note shall be entitled to receive any payment upon the principal of or
interest on this Note.
(B) the principal amount of this Note shall, if not already due
and payable, become due and payable, with interest accrued thereon, but any
payment or distribution of any character whether in cash, securities or other
property (except securities of CARS or any other entity provided for by a
plan or reorganization or readjustment giving due recognition to the
subordination provision hereof, in respect of which no payments of principal
are required or permitted prior to the payment in full in money or money's
worth of all Senior Indebtedness outstanding at the time of the issue of such
securities), which would otherwise (but for the provisions of this paragraph
(B)) be payable or deliverable in respect of this Note shall be paid or
payable or delivered to the holder or holders of Senior Indebtedness, as
their interests may appear, at the time outstanding, until all Senior
Indebtedness shall have been paid in full.
(C) the holder of this Note irrevocably authorizes and empowers
each holder (and his representative) of Senior Indebtedness at the time
outstanding to demand, sue for, collect and receive all such payments and
distributions and to receipt therefor, and in connection therewith to file
and prove all such claims and take all such other action, in the name of any
holder of this Note or otherwise, as such holder of Senior Indebtedness (or
his representative) may determine to be necessary or appropriate to implement
the provisions of this paragraph.
(ii) In case any direct or indirect-payment or distribution shall
be received by the holder of this Note, in contravention of the provisions of
this paragraph, then and in such event such payment or distribution shall be
deemed to be held in trust
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for and shall be paid over or delivered to the holders of the Senior
Indebtedness, as their interests may appear, until all Senior Indebtedness
shall have been paid in full.
(iii) For all purposes this Note, the Senior Indebtedness shall
not be deemed to have been paid in full, nor shall provision be deemed to
have been made for such payment, unless the holders thereof shall have
received cash or other property (taken at its then market value) or both,
equal to the amount of all Senior Indebtedness at the time outstanding.
(iv) (A) Upon the maturity of any Senior Indebtedness by
lapse of time, acceleration or otherwise, then all principal of and interest
on all such matured Senior Indebtedness shall first be paid in full, or such
payment shall be duly provided for, before any payment on account of
principal or interest or premium, if any, is made upon this Note.
(B) Upon receipt by CARS and the holder hereof from a holder
of Senior Indebtedness of notice of the occurrence of a default in the
payment of principal or premium or interest with respect to any Senior
Indebtedness, then unless and until such default shall have been cured to
waived or shall have ceased to exist, no payment shall be made by CARS with
respect to the principal or interest on this Note. In the event that,
notwithstanding the foregoing, CARS shall make any payment on this Note,
after the happening of such default and receipt of such notice, then, unless
and until such default shall have been cured or waived or shall have ceased
to exist, such payments shall be deemed to be held in trust for the benefit
of, and shall be paid over to, the holders of the Senior Indebtedness or
their representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing the Senior Indebtedness
may have been issued, as their respective interests any appear, for
application to the payment of all Senior Indebtedness remaining unpaid until
all such Senior Indebtedness shall have been paid in full, after giving
effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
(v) The term "Senior Indebtedness" shall mean (A) all
indebtedness for money borrowed by CARS or any of its Subsidiaries, if
guaranteed by CARS, from one or more banks, insurance companies and other
institutional lenders, including Mitsubishi Motors Credit of America, Inc.,
together with the premium, if any, and interest on all such indebtedness; and
(B) any deferrals, renewals or extensions of any such Senior Indebtedness or
debentures, notes or other evidences of indebtedness issued in exchange for
such Senior Indebtedness; except any such indebtedness which is, by its
terms, either specifically subordinated to at least the same extent as is
this Note or stated not be Senior Indebtedness.
(vi) Subject to the prior payment in full of the Senior
Indebtedness, the holder of this Note shall be subrogated, ratably, to the
rights of the holders of the Senior Indebtedness to receive payments or
distributions of cash, property or securities of CARS applicable to the
Senior Indebtedness until the principal and interest on this note shall be
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paid in full, and for purposes of such subrogation (i) no such payments or
distribution to the holders of this Note of cash, property or securities
otherwise distributable in respect to the Senior Indebtedness shall, as
between CARS, its creditors other than the holders of the Senior
Indebtedness, and the holders this Note, be deemed to be a payment by CARS on
account of this Note, and (ii) payments or distributions to holders of Senior
Indebtedness of cash, property or securities which otherwise would be payable
to the holders of this Note shall, as between CARS and its creditors other
than the holders of the Senior Indebtedness and the holder of this Note, or
as between such creditors and the holder of Senior Indebtedness, be deemed to
be a payment by CARS on account of the Senior Indebtedness.
(vii) The provisions of the subordination provisions of this
Note are solely for the purpose of defining the relative rights of the
holders of Senior Indebtedness on the one hand, and the holder of this Note
on the other hand, and nothing herein shall impair, as between CARS and the
holder of this Note, the obligation of CARS, which is absolute and
unconditional, to pay to the holder hereof, the principal amount of this
Note and interest and premium on this Note in accordance with its terms, nor
shall anything herein prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon any Event of
Default, subject to the rights, if any, under this paragraph of the holders
of Senior Indebtedness to receive cash, property or securities otherwise
payable or deliverable to the holder of this Note.
CARS USA, INC.
By: /s/ Charles E. Bradley, Jr.
----------------------------------
Charles E. Bradley, Jr.
Its President
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EXHIBIT 99.1
NAB ASSET CORP. ANNOUNCES INVESTMENT IN MORTGAGE PORTFOLIO
SERVICES INC. AND CARS USA INC.
DALLAS--NAB Asset Corp. (NASDAQ:NABC) Wednesday announced that it has
acquired majority ownership and control of Mortgage Portfolio Services Inc.
(MPS).
MPS is a mortgage banking company with headquarters in Dallas that
specializes in the purchase, origination and servicing of residential
mortgage loans that do not meet traditional secondary market guidelines due
to credit or employment history of borrower, debt to income ratios, or nature
of the collateral.
MPS began funding mortgages in May and has closed $1.35 million in loans
through June 30, 1996.
NAB acquired 80 percent of the voting common stock of MPS for a purchase
price of $300,000 from Consumer Portfolio Services Inc., a principal
stockholder of NAB. NAB also acquired $2.25 million of MPS preferred stock
through conversion of debt to equity and contributed approximately $250,000
to the capital of MPS. The remaining common stock of MPS is owned by its
management.
NAB also announced that it has acquired preferred stock and 80 percent of the
voting common stock of CARS USA Inc. (CARS) for an aggregate purchase price
of $500,000. The CARS preferred stock acquired by NAB provides for cumulative
dividends at the rate of 6 percent per annum and has a liquidation preference
over the CARS common stock equal to the purchase price of the CARS
preferred stock plus any accrued and unpaid dividends.
NAB further stated that it has agreed to loan CARS $1 million in the form of
a 10-year subordinated note that will bear interest at an annual rate of 10
percent.
CARS is a newly formed company that will acquire and operate franchised
automobile dealerships for both new and used vehicles. CARS will utilize the
extensive experience of its executive team in sub prime auto lending to serve
the dealerships in reaching a broad market of purchasers. CARS is in
negotiation for the acquisition of its first dealership, which it anticipates
will be completed by the end of July 1996.
Mike Caton, president and chief operating officer of NAB, stated "I believe
that the equity investments in MPS and CARS present good opportunities for
NAB to further develop its strategy of establishing independent, yet
complementary business units that are focused on consumer needs for housing,
automobiles and related financial services."
For further information, contact Michael W. Caton, president and chief
operating officer of NAB, at 706/579-2777.
CONTACT: NAB Asset Corp. Michael W. Caton, 706/579-2777.
"Copyright(c) 1996, Business Wire"
"Provided by Dow Jones & Company, Inc."
Business Wire, 7/17, 8:22 AM
NABC
