<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [x]
File by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
NAB ASSET CORPORATION
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
...........................................................................
2) Aggregate number of securities to which transaction applies:
...........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
...........................................................................
4) Proposed maximum aggregate value of transaction:
...........................................................................
5) Total fee paid:
...........................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..........................................................................
2) Form, Schedule or Registration Statement No.:
..........................................................................
3) Filing Party:
..........................................................................
4) Date Filed:
..........................................................................
<PAGE>
NAB ASSET CORPORATION
19200 VON KARMAN AVENUE, SUITE 950
IRVINE, CA 92612
714/475-4444
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 4, 1997
Notice is hereby given that the Annual Meeting of Shareholders of NAB
Asset Corporation (the "Company") will be held at 8:30 a.m. on Tuesday, November
4, 1997, at the offices of Consumer Portfolio Services, Inc., 2 Ada, Irvine, CA
92618, for the following purposes.
1. To elect four (4) persons to serve on the Company's Board of
Directors until the next annual meeting of shareholders and until
their successors are elected and qualify; and
2. To consider and take action upon any other matter that may
properly come before the Annual Meeting, or any adjournment or
postponement thereof.
Pursuant to the Company's By-laws, the Board of Directors has fixed the
number of directors of the Company at four (4), effective as of the completion
of the Annual Meeting, until such number is changed in accordance with the
Bylaws.
Holders of record of Common Stock at the close of business on October
1, 1997, will be entitled to notice of, and to vote at, the Annual Meeting or
any adjournment or postponement thereof. A list of the holders of record of
Common Stock as of October 1, 1997 will be open after October 24, 1997 to the
examination of any such shareholder for any purpose germane to the Annual
Meeting at the Company's offices at 19200 Von Karman Avenue, Suite 950, Irvine,
CA 92612, during usual business hours.
By order of the Board of Directors
Secretary
October 16, 1997
IMPORTANT
You are cordially invited to attend the Annual Meeting in person. Even
if you plan to be present, you are urged to mark, date, sign and return the
enclosed proxy at your earliest convenience in the envelope provided, which
requires no postage if mailed in the United States. If you attend the Annual
Meeting, you may vote either in person or by your proxy.
<PAGE>
NAB ASSET CORPORATION
19200 Von Karman Avenue, Suite 950, Irvine, CA 92612
714/475-4444
PROXY STATEMENT
INTRODUCTION
The accompanying proxy, mailed together with this Proxy Statement, is
solicited by and on behalf of the Board of Directors of NAB Asset Corporation, a
Texas corporation ("NAB or Company"), for use at the Annual Meeting of
Shareholders of NAB to be held on November 4, 1997 and any adjournments thereof
(the "Annual Meeting"), notice of which is attached hereto. This Proxy Statement
and the accompanying proxy and Annual Report have been first mailed to
shareholders on or about October 16, 1997. As used in this Proxy Statement, (1)
the term "CPS" means Consumer Portfolio Services, Inc., which owns 38% of the
outstanding shares of NAB Common Stock and (2) the term "MPS" means Mortgage
Portfolio Services, Inc., which is a subsidiary of NAB.
PURPOSES OF THE MEETING
At the Annual Meeting, action will be taken upon the following matters:
(1) Election of four (4) directors to serve until the next annual
meeting of shareholders; and
(2) Such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors of NAB does not know of any matters that may be
acted upon at the meeting other than the matters set forth in item (1), above.
RECORD DATE AND VOTING
The record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting is the close of business on October
1, 1997. At the close of business on such date, the issued and outstanding
capital stock of NAB consisted of 5,091,300 shares of Common Stock. A list of
the holders of record of Common Stock as of such date will be open during usual
business hours after October 24, 1997 to the examination of any such shareholder
for any purpose germane to the Annual Meeting at NAB's corporate offices at
19200 Von Karman Avenue, Suite 950, Irvine, CA 92612.
The holders of NAB Common Stock will be entitled to one vote per share
for each matter that may be properly brought before the Annual Meeting or any
adjournment thereof. Neither the Articles of Incorporation nor the By-laws of
NAB provide for cumulative voting rights. The Company's By-laws provide that the
presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote thereat will
constitute a quorum for the transaction of business. The directors shall be
elected by a plurality of the votes cast in the election by the holders of
Common Stock represented and entitled to vote at the Annual Meeting provided
that a quorum is present. Any other matters submitted to the shareholders shall
be approved by the affirmative vote of a majority of the shares entitled to vote
on such matter and represented in person or by proxy at the Annual Meeting,
provided that a quorum is present. Abstentions and "non-votes" will be counted
as present for purposes of determining whether the quorum requirement is
satisfied. Abstentions will not be counted either for or
1
<PAGE>
against the election of directors. A "non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner.
Shares represented by valid proxies will be voted at the meeting in
accordance with the directions given in the proxy. If the proxy card is signed
and returned without any direction given, the shares will be voted FOR the
election of the four nominees for director named in the proxy. The Board of
Directors does not intend to present, and has no information that others will
present, any business at the Annual Meeting other than as set forth in the
attached Notice of Annual Meeting of Shareholders. However, if other matters
requiring vote of shareholders come before the meeting, it is the intention of
the persons named in the accompanying form of proxy to vote the proxies held by
them in accordance with their best judgment on such matters. Any shareholder of
NAB has the unconditional right to revoke his proxy at any time prior to the
voting thereof by submitting a later-dated proxy, by attending the meeting and
voting in person or by written notice to NAB addressed to Alan Ferree,
Secretary, NAB Asset Corporation, 19200 Von Karman Avenue, Suite 950, Irvine, CA
92612. However, no such revocation shall be effective until received by NAB at
or prior to the meeting.
The cost of solicitation of proxies for the meeting will be borne by
NAB. Solicitation may be made by mail, personal interview, telephone and/or
telegraph by officers and other employees of NAB, who will receive no additional
compensation therefor.
PROPOSAL
ELECTION OF DIRECTORS
Nominations
Pursuant to the Company's By-laws, the Board of Directors has fixed the
number of directors of the Company at four (4), effective as of the completion
of the Annual Meeting, until such number is changed in accordance with the By-
laws. The Board of Directors has nominated Charles E. Bradley, Sr., Charles E.
Bradley, Jr., James B. Gardner and Michael W. Caton for election as directors at
the Annual Meeting, and each has agreed to serve as such if elected. Directors
of the Company are elected annually to serve until the next annual meeting of
shareholders and until their successors are duly elected and qualified.
Set forth below is certain information regarding the nominees.
2
<PAGE>
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING
NAME AGE PAST FIVE YEARS
- ---- --- --------------------------
<S> <C> <C>
Charles E. Bradley, Sr. 68 Chairman of the Board and Chief Executive Officer of NAB since
June 1996. Chairman of the Board of CPS since its formation in
March 1991. One of the founders of Stanwich Partners, Inc.
("Stanwich"), a Connecticut investment firm which acquires
controlling interest in companies in conjunction with the
existing operating managment of such companies, and has been
President, a Director and a shareholder of that company since
its formation in 1982. Director of CPS, Zydeco Energy Corporation,
Audits & Surveys Worldwide, Inc., DeVieg-Bullard, Inc. Chatwins
Groups, Inc., General Housewares Corp, Sanitas, Inc., and Texon
Energy Corporation. Father of Charles E. Bradley, Jr. Director
of NAB since June 1996.
Charles E. Bradley, Jr. 37 President and Director of CPS since its formation March 1991. In
January 1992, appointed Chief Executive Officer of CPS. Director
of Chatwins Group, Inc., Texon Energy Corporation and Thomas Nix
Distributor, Inc. Director of NAB since June 1996.
Michael W. Caton 55 President and Chief Operating Officer of NAB since June 1996. From
1995 to 1996 as a consultant, developed business and strategic plans
for and organized MPS. Organizing founder, President and Chief
Executive of Crescent Mortgage Company and Crescent Banking Company,
from 1988 to 1995. Director of NAB since June 1996.
James B. Gardner 62 Managing Director of Service Asset Management Company since May 1994.
President and Chief Executive Officer of Pacific Southwest Bank, F.S.B.
from November 1991 to April 1994. Retired Vice Chairman of Banc One,
Texas, NA. Director of Century Telephone Enterprises, Inc., and Ennis
Business Forms, Inc. Director of NAB since November 1996.
</TABLE>
NAB's Board of Directors currently consists of six persons - the
nominees listed above, Robert Bettigole, and Emil A. Nakfoor. Mr. Nakfoor and
Mr. Bettigole have been directors of NAB since 1991 and 1996, respectively.
Their terms of office expire at the Annual Meeting.
Under a rule of the NASDAQ Stock Market adopted on August 22, 1997, the
Company will be required to have a minimum of two independent directors by
February 22, 1998. Of the nominees only Mr. Gardner is an independent director
within the meaning of this rule. Mr. Bradley, Sr. and Mr. Caton do not qualify
because they are employees of the Company, and, in Mr. Bradley, Sr.'s case,
because of his relationship with CPS. Mr. Bradley, Jr. appears not to qualify
because of his relationship with CPS. To bring the Company into compliance with
the NASDAQ rule, the nominees, if elected, intend to do the following by
February 22, 1998: (1) attempt to identify a qualified candidate for director
who would be considered an independent director of NAB (under the NASDAQ rule)
and would be willing to serve as
3
<PAGE>
such, (2) adopt a resolution to increase the number of directors to five and (3)
pursuant to their authority under the By-laws, elect such candidate as a
director (if any is identified who is willing to serve) of NAB for a term
expiring at the next annual meeting of shareholders, which is tentatively
scheduled for June 1998. The nominees have not as yet identified any such
candidate.
NOMINATIONS BY SHAREHOLDERS
Under the By-laws, a shareholder may nominate persons for election as
directors under certain conditions. For the procedures applicable to shareholder
nominations, see under "CONDUCT OF BUSINESS - SHAREHOLDER PROPOSALS," below
BOARD AND COMMITTEE MEETINGS
The Board of Directors met seven times during the 1996 fiscal year.
Standing committees of the Board include an Audit Committee and a Compensation
Committee, both of which met concurrently with the Board of Directors during the
period.
The Audit Committee is comprised of Messrs. Bettigole (Chairman),
Gardner and Nakfoor. All members are non-employee directors. The Committee
addresses matters which include, among other things, (1) making recommendations
to the Board of Directors regarding engagement of independent auditors, (2)
reviewing with the Company's financial management the plans for, and results of,
the independent audit engagement, (3) reviewing the adequacy of the Company's
system of internal accounting controls, (4) monitoring the Company's internal
audit program to assure that areas of potential risk are adequately covered and
(5) reviewing legal and regulatory matters that may have a material impact on
the Company's financial statements.
The Compensation Committee is comprised of Messrs. Nakfoor (Chairman),
Bettigole and Gardner. All members are non-employee directors. The Committee's
primary functions are to determine remuneration policies applicable to the
Company's executive officers and to determine the bases of the compensation of
the Chief Executive Officer, including the factors and criteria on which such
compensation is to be based. The Committee also administered the Company's two
stock option plans, which have now been terminated, as described under
"Executive Compensation - Termination of Stock Option Plans," below.
After the Annual Meeting, the Board of Directors will consist of four
directors. It is expected that the entire Board of Directors will then act as
the Audit Committee and the Compensation Committee until such time, if any, as
the number of directors is increased.
The incumbent directors attended all meetings of the Board of Directors
and all committee meetings of the Board of Directors held during the period or
(held during the period for which the incumbent was a director or a member of
such committee).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES NAMED IN THIS PROXY
STATEMENT.
INFORMATION REGARDING THE COMPANY
Executive Officers
The following persons are or may be deemed to be executive officers of the
Company:
Name Position
- ---- --------
Charles E. Bradley, Sr. Chairman and Chief Executive Officer
4
<PAGE>
Michael W. Caton President and Chief Operating Officer
Alan Ferree Senior Vice President, Chief Financial
Officer and Secretary
James E. Hinton President and Chief Executive Officer of
MPS
Information concerning the business backgrounds of Messrs. Bradley,
Sr., Bradley, Jr. and Caton is set forth in the table under "PROPOSAL - ELECTION
OF DIRECTORS," above.
Mr. Ferree, 38, has been an officer of NAB since January 1997. From
1995 to 1996 he served as Senior Vice President of Pacific Southwest Bank in
Dallas, Texas. From 1994 to 1995 he was an independent consultant. From 1989 to
1994 he was Executive Vice President of wholesale banking for Bluebonnet Savings
Bank FSB in Dallas, Texas.
Mr. Hinton, 46, has been President of MPS since 1996. From 1992 to 1996
he served as Executive Vice President in charge of the mortgage banking division
of Pacific Southwest Bank in Dallas, Texas.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned during 1994,
1995 and 1996 by (1) the Company's Chief Executive Officer, (2) all other
persons who may be deemed to be current executive officers of the Company and
(3) the two most highly compensated former executive officers of the Company who
served as such during a portion, but not as of the end of 1996.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------------------ ---------------------
Securities Underlying All Other
Fiscal Year Salary ($) Bonus ($)(1) Options/SAR's(#) Compensation($)(2)
<S> <C> <C> <C> <C> <C>
Charles E. Bradley, Sr.
Chairman of the Board and
Chief Executive Officer (3) 1996 42,000 - - -
1995 - - - -
1994 - - - -
Michael W. Caton,
President (4) 1996 108,000 80,000 120,000 3,300
1995 - - - -
1994 - - - -
Allan Ferrer,
Senior Vice President and
Chief Financial Officer 1996 - - - -
1995 - - - -
1994 - - - -
James Hinton, President
Mortgage Portfolio
Services, Inc. (5) 1996 144,000 - - -
1995 - - - -
1994 - - - -
Michael A. Hrebenar
President and Chief
Executive Officer (until June,
1996) 1996 111,708 - - -
1995 159,000 158,175 4,340 -
1994 159,000 158,175 4,340 -
Richard A. Durnham
Executive Vice President
(until June, 1996) 1996 81,902 - - -
1995 135,000 130,425 - -
1994 135,000 - - -
</TABLE>
(1) Cash bonuses for services rendered have been listed in the year earned, but
were actually paid in the following year.
(2) Car Allowance.
(3) Mr. Bradley's base salary is $100,000 per year.
(4) Mr. Caton has an employment agreement pursuant to which his minimum annual
salary commencing on December 1, 1996, is $160,000 for 1996, $185,000 for
1997 and $210,000 until June 30, 1999.
(5) Mr. Hinton's base salary is $175,000 per year.
Termination of Stock Option Plans
In June 1996 the Board of Directors adopted, subject to shareholder
approval, the 1996 Incentive Stock Option Plan (the "Incentive Plan") and the
1996 Non-Employee Director Stock Option Plan (the "Director Plan"). The
Incentive Plan provided for, among other things, the grant to key employees of
the Company of options to purchase shares of NAB Common Stock. The Director Plan
provided for, among
6
<PAGE>
other things, the grant of options to purchase shares of NAB Common Stock to
directors of the Company who were not also employees of the Company.
In 1996 and 1997, the following options were granted under the
Incentive Plan (to executive officers) and the Director Plan (to non-employee
directors), in each case at a price per share equal to the fair market value per
share on the date of grant and, in each case subject to shareholder approval of
the governing plan.
<TABLE>
<CAPTION>
No. of Shares
Date of Subject to Option Price per
Name of Optionee Grant Plan Option Share
- ----------------------- ------------------ ------------------ -------------------- ----------------------
<S> <C> <C> <C> <C>
Robert Bettigole 6/7/96 Director 15,000 $1.70
Charles E. Bradley, Jr. 6/7/96 Director 15,000 $1.70
Emil A. Nakfoor 6/7/96 Director 15,000 $1.70
Alan Ferree 1/10/97 Incentive 50,000 $3.50
James B. Gardner 11/8/96 Director 15,000 $2.02
Michael W. Caton 6/7/96 Incentive 120,000 $1.70
</TABLE>
The shareholders of NAB have not approved the Director Plan or the
Incentive Plan, as a meeting of shareholders has not been held since adoption of
the plans by the Board of Directors. In September 1997 the Board of Directors
terminated the Incentive Plan and the Director Plan, and, by agreement with the
optionees, terminated all outstanding options under both plans. Accordingly, the
Company currently has no employee or director stock option plans, and there are
no currently outstanding stock options held by any employee or director.
The Board of Directors expects to adopt an alternate form of incentive
compensation for NAB's key employees and non-employee directors, as a substitute
for the now terminated stock option plans. The nature and amount of such
compensation has not yet been determined.
Options and SAR Grants
The following table sets forth the only option granted to a named
executive officer during 1996 to purchase shares of NAB Common Stock. this
option, which was granted under the now terminated 1996 Incentive Stock Option
Plan, has been terminated and is no longer outstanding. The option or exercise
price per share for this option was the fair market value per share of NAB
Common Stock on the date of grant.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Appreciation for Option
Individual Grants Term
- ----------------------------------------------------------------------------------------------- ---------------------------
Number % of Total
of Securities Option/SAR's
Underlying Granted in
Options/SAR's Employees Exercise Price Expiration
Name Granted (#) In Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------ ------------- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Caton (2) 120,000 82.75% $1.703125 6/6/07 $128,530 $325,721
</TABLE>
Aggregated Option Exercises and Fiscal Year End Table
The following table sets forth, as of December 31, 1996, the number of
unexercised options held by each named executive officer, the number of shares
of NAB Common Stock subject to then exercisable and unexercisable options held
by such persons and the value, at December 31, 1996, of all unexercised options
held by such persons. The option referred to in the table is the same option
referred to in the preceding table and, as noted, has been terminated
unexercised. No stock options were exercised during 1996.
<TABLE>
<CAPTION>
Number of
Securities Underlying
Unexercised Value of Unexercised
Options/SARs In-The-Money
at year-End(1) Options/SAR's
Shares acquired Value ------------------------------- --------------------------------
Name On exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Caton - $ - - 120,000 $ - $260,624 (3)
</TABLE>
(1) Amounts set forth in the table reflect the number and value of shares and
options only, as NAB has issued no SAR's. Valuation is based upon the last
sales price on December 31, 1996 of $3.875 per share, as reported by
NASDAQ.
Employment Agreements
Mr. Caton has an Employment Agreement with NAB pursuant to which he is
serving as President of the Company for a term that ends on June 30, 1999 and
for a salary at the following annual rates: $160,000 for 1996; $185,000 for
1997; and $210,000 during the period from January 1, 1998 through June 30, 1999.
Under the agreement, he receives a car allowance of $550 per month and is
eligible to receive a bonus each year in an amount up to 50% of his salary for
such year, as determined by the Board of Directors. The agreement also provides
for the payment to him of an amount equal to 5% of the aggregate increase , if
any, in the value of NAB's equity investments in its subsidiaries, measured as
of the earlier of June 30, 2001 or the end of the month prior to the month in
which his employment terminates. If his employment with NAB is terminated
without cause or because of disability, NAB is obligated to continue to pay him
the salary specified in the agreement for a period ending on the later to occur
of June 30, 1999 or the first anniversary of the date of his termination, except
that, in the case of disability, the salary continuation is reduced by the
amount of any benefits he receives from disability insurance provided by NAB.
Mr. Hinton has an Employment Agreement with MPS, pursuant to which he
is serving as President and Chief Executive Officer of MPS for a term that ends
on March 18, 1999 and for a salary at the rate of $175,000 per year. Under the
agreement, he receives a car allowance of $550 per month and is eligible to
receive an annual bonus at the discretion of the Board of Directors of MPS. If
his employment
8
<PAGE>
with MPS terminates without cause or because of disability, MPS is obligated to
continue to pay him the salary specified in the agreement for a period ending on
the later to occur of March 18, 1999 or the first anniversary of the date of
his termination, except that, in the case of disability, the salary continuation
is reduced by the amount of any benefits he receives from disability insurance
provided by MPS.
Compensation of Directors
Directors who are officers or employees of the Company do not receive
any additional compensation for serving as directors or as members of committees
of the Board of Directors. Directors who are not officers or employees of the
Company each receive a annual retainer of $15,000 and a fee of $750 for each
meeting of the Board of Directors or committee of the Board of Directors which
he attends. Directors are reimbursed for out-of-pocket costs incurred in
connection with attending meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the last fiscal year the Compensation Committee was composed of Mr.
Nakfoor (as Chairman), Mr. Bettigole and Mr. Gardner. None of the members of
the Compensation Committee is a present or former employee of the Company.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors provides advice
and recommendations to the Board of Directors concerning the salaries and
bonuses of the officers of NAB. The Board of Directors approves those salaries
and bonuses. The Committee administered the Company's 1996 Incentive Stock
Option Plan and 1996 Non-Employee Director Stock Option Plan before such plans
were terminated in September 1997. This report describes the policies and
principals which shape the structure of NAB's executive compensation program.
NAB's executive compensation program is structured to achieve the
following objectives:
- - to attract, retain and motivate highly qualified, energetic and talented
executives;
- - to create an incentive to increase stockholder returns by establishing a
direct and substantial link between individual compensation and certain
financial measures which have a direct effect on stockholder values, and;
- - to create substantial long-term compensation opportunities for individual
executive officers based not only on long-term corporate performance but
also on sustained long-term individual performance.
To achieve its compensation objectives, NAB has structured an executive
compensation program using a combination of short-term and long-term elements:
(i) annual salary, (ii) annual bonus, and (iii) in some cases, long-term
contingent performance bonuses. In addition, the executive officers of NAB are
eligible to receive other benefits such as medical benefits which are generally
available to employees of NAB and its subsidiaries.
In structuring the specific components of executive compensation, NAB
is guided by the following principles:
- - annual compensation should be set within reasonable ranges of the annual
compensation for similar positions with similarly-sized and types of
companies which engage in one or more of the principal businesses in which
NAB engages.
- - bonus payments should vary with the individual's performance and NAB's
financial performance; and
9
<PAGE>
- - a significant portion of compensation should be in the form of long-term
incentive compensation which aligns the interests of executives with those
of the stockholders and which creates rewards for long-term sustained
company performance and the achievements of NAB's strategic objectives and
to the extent that a recipient exercises options which have vested by the
achievement of performance goals.
CEO Compensation
NAB's current Chief Executive Officer (Mr. Bradley, Sr.) receives a
salary at the rate of $100,000 per year. During 1996 he did not receive a bonus
or participate in any employee benefit programs of NAB. The salary of the Chief
Executive Officer was within or below the Compensation Committee's salary range
guidelines and objectives for the Company's officers.
THE COMPENSATION COMMITTEE
- --------------------------
Robert Bettigole
James Gardner
Emil A. Nakfoor
Company Stock Performance
The following graph shows a comparison, for the period June 6, 1996
through June 30, 1997, of the cumulative total return for the Company as
compared to the NASDAQ Composite Index and the NASDAQ Financial Industry Index .
Prior to June 6, 1996 the Company was engaged in a business (real estate
ownership and management) which is unrelated to its current business (financial
services). Further, the Company's management changed completely on June 6, 1996,
as part of a reorganization. The Company believes therefore that a comparison
covering the period prior to June 6, 1996 would not be meaningful and could be
misleading.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------------
COMPANY 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C>
NAB ASSET CORPORATION 100 132.11 120.96 227.82 176.15 154.42
PEER GROUP 100 100.21 108.70 120.65 125.86 146.57
BROAD MARKET 100 95.63 98.54 103.22 97.66 115.54
</TABLE>
THE PEER GROUP CHOSEN WAS:
NASDAQ FINANCIAL
THE BROAD MARKET INDEX CHOSEN WAS:
NASDAQ MARKET INDEX
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
NAB Common Stock (its only class of voting securities) owned beneficially as of
September 23, 1997 (i) by each person known to the Company to own beneficially
more than 5% of the outstanding Common Stock, (ii) by each director and
executive officer of the Company, and (iii) by all directors and executive
officers of the Company as a group. The table also sets forth the business
address of each such 5% beneficial owner. Except as otherwise indicated, and
subject to applicable community property and similar laws, each of the persons
named has sole voting and investment power with respect to the shares shown as
beneficially owned.
10
<PAGE>
<TABLE>
<CAPTION>
Number Percent
of Shares of Class
Name and Address Owned Beneficially Owner
---------------- --------- ------------------
<S> <C> <C>
Robert Bettigole 0 *
Charles E. Bradley, Jr. 1,934,706(1) 38.00%
c/o Consumer Portfolio Services, Inc.
2 Ada
Irvine, CA 92618
Charles E. Bradley, Sr. 1,934,706(1) 38.00%
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
Michael W. Caton 0 *
James B. Gardner 0 *
Emil A. Nakfoor 3,600(2) *
Alan Ferree 0 *
James Hinton 0 *
All officers and directors as a group 1,938,306(3) 38.07%
(eight persons)
Consumer Portfolio Services, Inc. 1,934,706 38.00%
2 Ada
Irvine, CA 92618
Thomas F. Steyer, et. al 347,590(4) 6.83%
c/o Farallon Capital Management, L.L.C.
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
Greenhaven Associates, Inc. 417,825(5) 8.21%
Three Manhattanville Road
Purchase, NY 10577
Central National-Gottesman, Inc., et al 339,825(6) 6.67%
Three Manhattanville Road
Purchase, NY 10577
</TABLE>
* Indicates less than 1%
11
<PAGE>
(1) These shares are owned by Consumer Portfolio Services, Inc. ("CPS"). The
named individual may be deemed to be a beneficial owner of such shares
because he is an executive officer and a director of CPS.
(2) Includes 225 shares which are owned by Mr. Nakfoor's wife and as to which
Mr. Nakfoor (i) has no voting or investment power and (ii) disclaims
beneficial ownership.
(3) Includes the shares as to which notes (1) and (2), above, apply.
(4) Farallon Partners, L.L.C. ("FPLLC") is the general partner of 4
partnerships which collectively own 296,032 shares of NAB Common Stock (the
"Partnerships' Shares") for their own accounts. Farallon Capital
Management, L.L.C. ("FCMLLC") is an investment advisor to certain managed
accounts which collectively own 51,558 such shares (the "Managed Account
Shares"). As managing members of FPLLC and FCMLLC, Enrique H. Boilini,
David I. Cohen, Joseph F. Downes, Jason M. Fish, Andrew B. Fremder, William
F. Mellin, Stephen L. Millham, Meridee A. Moore and Thomas F. Steyer have
shared voting and investment power as to, and may be deemed to be
beneficial owners of, the Partnership's Shares and the Managed Account
Shares for purposes of Rule 13d-3 under the Securities Exchange Act of 1934
("Rule 13d-3"). As a managing member of FPLLC, Fleur E. Fairman has shared
voting and investment power as to, and may be deemed to be the beneficial
owner of, the Partnerships' Shares for purposes of Rule 13d-3. Each of
such individuals has disclaimed beneficial ownership of such shares. The
foregoing information is based solely upon the information contained in
the joint Amendment No. 10 to Schedule 13D dated August 19, 1997, filed
with the Securities and Exchange Commission (the "SEC") by FPLLC, FCMLLC,
the individuals referred to in this Note (4) and certain others.
(5) Greenhaven Associates, Inc. ("Greenhaven"), an investment adviser under the
Investment Advisers Act of 1940 that is owned and controlled by Edgar
Wachenheim, III, has sole voting and investment power with respect to
131,025 such shares and shared investment power with respect to 286,800
such shares held in other customers' accounts managed by Greenhaven. No
such client has an interest that relates to more than 5% of the outstanding
shares of Common Stock. The above information is based upon information
contained in Amendment No. 7 to a Schedule 13G dated January 6, 1997, filed
with the SEC by Greenhaven.
(6) The following entities and individuals have filed with the SEC a joint
Amendment No. 3 to Schedule 13G dated January 30, 1997 as to these shares:
Central National Gottesman, Inc., Asgot Securities, Inc., Central National
Gottesman Profit Sharing Trust, Sue and Edgar Wachenheim Foundation, Cenwac
Securities, Inc., Cenro Corporation, Sejak Corporation, Edgar Wachenheim
III, James G. Wallach, Kate W. Cassidy, Kenneth L. Wallach and Mary & James
G. Wallach Foundation. The filing states that all persons and entities
making the filing have shared power to vote and dispose of the shares
covered by such filing, except that Mr. Wachenheim has sole power to vote
and dispose of 21,375 of such shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1996 the Company acquired from CPS 84% percent of the
outstanding voting common stock of MPS for a purchase price of $300,000 in cash.
The purchase price was determined by negotiation between Charles E. Bradley, Sr.
for CPS and Michael W. Caton for NAB based upon the franchise value and
anticipated future earnings capacity of MPS. CPS had acquired such MPS stock
from Stanwich Partners, Inc. in June 1996 for $25,000 pursuant to an option to
purchase.
The Company also acquired $2.25 million of MPS preferred stock from MPS
in July 1996 through conversion of debt to equity and contributed approximately
$249,000 to the additional paid-in capital of MPS. In June, 1996, MPS used a
portion of the proceeds from a loan by NAB (subsequently converted by NAB to
preferred equity, as described above) to redeem certain shares of MPS preferred
stock then owned by CPS for $1,056,000, the amount specified for redemption of
such shares in MPS's Certificate of Incorporation.
In July 1996 the Company (1) purchased from CARS USA, Inc. ("CARS") 80%
of the common stock and 100% of the preferred stock of CARS for a total of
$500,000 and (2) made a $1,000,000 subordinated loan to CARS. Mr. Charles E.
Bradley, Jr., a NAB director, then owned a 10% equity interest in CARS. In June,
1997, after CARS had incurred losses of approximately $1,394,000 since July
1996, the Company sold its debt and equity interests in CARS to a company owned
by Mr. Bradley, Sr., and Mr. Bradley, Jr., for a purchase price of $1,500,000,
consisting of $200,000 in cash and a $1,300,000
12
<PAGE>
promissory note. The promissory note is payable in installments of $500,000 in
June 1998 and $800,000 in June 1999, and it bears interest at the rate of 9% per
annum payable quarterly in arrears.
When it was a NAB subsidiary, CARS had a $800,000 used car flooring
line of credit with CPS. The borrowings had an interest rate of 11% per annum.
Interest paid under the line totaled $15,000 in 1996. During the year ended
December 31, 1996, CARS purchased used vehicles from CPS totaling $725,000. At
December 31, 1996 the Company had a liability to CPS totaling $275,000 for
investment banking and management services assistance related to the acquisition
and operations of CARS and MPS. As noted in the preceding paragraph, NAB has
sold its interest in CARS.
During 1991, Mr. Emil Nakfoor, a director of the Company, was retained
by the Company as a consultant on a month by month basis to assist management
with respect to various matters. Mr. Nakfoor was paid a consulting fee of $3,750
per month from which he reimbursed the Company $250 per month in rent. Mr.
Nakfoor received a net amount of $42,000 for his services in 1994 and 1995. In
1996, Mr. Nakfoor received $19,000 for his services until June, 1996.
The Company advanced to Mr. Caton $80,000 for his relocation expenses
upon his employment in 1996. The advance is due in 1999, bears no interest and
is unsecured. In January 1997, Mr. Caton repaid $25,000 of this advance.
Mr. Bradley, Sr. and Mr. Bradley, Jr., together own 85% of the
outstanding common stock of Stanwich Financial Services Corp. ("SFSC"). In June
1997 SFCS made an $800,000 loan to NAB. The loan bears interest at the rate of
14% per annum and is payable on October 31, 1997. The purpose of the loan was to
provide short-term working capital for NAB and its subsidiaries.
In August 1997 SFSC provided a line of credit to NAB under which NAB
may borrow up to $5,000,000 from SFSC through July 31, 2000. NAB's obligation
under the line of credit are evidenced by a promissory note (the "First Credit
Line Note"). In August 1997, SFSC made an initial advance to NAB under the First
Credit Line Note in the amount of $3,500,000. NAB used the entire proceeds of
such initial advance to make a loan to MPS, which loan is subordinated to the
indebtedness of MPS to its senior secured bank lender. NAB is obligated to use
the proceeds of any future advances under the First Credit Line Note to make
loans to MPS. The principal amount outstanding at any time under the First
Credit Line Note bears interest at the rate of 16% per annum payable quarterly
in arrears. The First Credit Line Note is payable on the earlier to occur of
September 30, 2000 or the date, if any, on which NAB ceases to own more than 80%
of the outstanding shares of MPS. NAB has the right to prepay the principal of
the First Credit Line Note at any time in multiples of $250,000 without penalty.
In September 1997, SFSC made a $2,500,000 loan to NAB. The loan bears
interest at the rate of 14% per annum, payable quarterly in arrears. The
principal is payable on September 30, 2000. NAB has the right to prepay the
principal of this loan at any time in multiples of $250,000 without penalty. NAB
is also obligated to pay SFSC a closing fee of $25,000 (1%) in connection with
this loan. NAB used the proceeds of this loan to make a $2,500,000 advance to
its subsidiary NAFCO, Inc., which is in the business of providing financing to
rent-to-own businesses.
NAB owns 80% of the authorized shares of common stock of MPS. Mr.
Hinton and certain other key employees of MPS (the "MPS Managers") own or have
options to acquire from MPS 20% of such authorized shares. In addition, the MPS
Managers have options, exercisable only if certain conditions are satisfied, to
acquire from NAB up to 20% of such authorized shares. Pursuant to agreements
entered into in 1997, if certain conditions are satisfied, from March 2001 (or
earlier under certain circumstances) to December 2005, such shares owned or
acquired by the MPS Managers are subject to put and call options which if
exercised, will obligate MPS, or will give MPS the right, to purchase such
shares. The put and call options are exercisable at various times during the
period. The purchase price payable by MPS for these shares depends upon several
factors, including the future earnings and value of MPS, but in no event will
the aggregate price result in a gain for the MPS Managers in an amount that is
more than 40% of the total value of MPS as of the applicable determination date,
and such price may be substantially less than that
13
<PAGE>
amount or even nominal. Mr. Hinton's share of the total amount payable to the
MPS Managers for their MPS shares is 37.5%, unless certain events, such as early
termination of his employment, occur, in which case his share may be
substantially less. Under certain conditions, NAB has the right under the
agreements to assume MPS's obligation to purchase the MPS Managers' shares, and
if it does so, NAB may pay the purchase price in cash or in shares of NAB Common
Stock.
CPS has expressed an interest in acquiring MPS from NAB, and
discussions about such a transaction have been held and are continuing between
representatives of NAB and CPS. If terms are agreed upon, the transaction will
be subject to approval by a majority of NAB's directors other than Mr. Bradley,
Sr. and Mr. Bradley, Jr., who have stated that they would abstain from voting on
this matter as NAB directors because they are affiliates of CPS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Company's
directors and executive officers, and holders of more than 10% of the Company's
Common Stock to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Such officers, directors and 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of such forms that it received, or written
representations from reporting persons that no Forms 5 were required for such
person, the Company believes that, during fiscal 1996, Section 16(a) filing
requirements were satisfied on a timely basis except as follows: Each of Messrs.
Bettigole, Bradley, Jr., Caton, Ferree and Nakfoor filed his initial report on
Form 3 on a timely basis, but did not include in such filing a contingent stock
option, now terminated, which was granted to him at or about the time he first
became a director or executive officer of NAB. Each subsequently reported such
transaction in a Form 5.
Each of Mr. Gardner and Timothy G. Hanson (NAB's Controller) filed late
his initial report on Form 3 and reported late a contingent stock option (now
terminated) which was granted to him at or about the time he first became a
director or employee of NAB. Each subsequently reported such transaction in a
Form 5. All transactions and holdings of which the Company has knowledge have
now been reported.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick, LLP served as the Company's independent accountants
for the fiscal year ended December 31, 1996. The Board of Directors expects that
representatives of KPMG Pear Marwick LLP will be present at the Annual Meeting
of Stockholders, will be given an opportunity to make a statement at such
meeting if they desire to do so and will be available to respond to appropriate
questions.
CONDUCT OF BUSINESS AT ANNUAL MEETINGS-SHAREHOLDER PROPOSALS
Under NAB's By-laws, at an annual meeting of shareholders only such
business may be conducted as shall have been properly brought before the
meeting. Business is considered properly brought before the meeting if it is (1)
specified in the notice of the meeting given by or at the direction of the Board
of Directors, (2) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (3) properly brought before the meeting
by a shareholder of the Company.
Business is considered properly brought before an annual meeting by a
shareholder if he gives timely notice of such business in writing to the
Company's Secretary and if such business is not of a type that could be omitted
by the Company from its proxy statement under the applicable rules and
regulations of the Securities and Exchange Commission. To be timely, a
shareholder's notice must be received at the
14
<PAGE>
Company's principal executive offices not less than 60 days nor more than 180
days prior to the anniversary date of the preceding annual meeting, except that,
if the date of an annual meeting is more than 45 days later than the anniversary
date of the preceding annual meeting, the shareholder's notice must be received
not later than the close of business on the tenth day following the date of
mailing of the notice of the annual meeting or public disclosure of the meeting.
If the business proposed to be brought before the meeting by a
shareholder is his nomination for the election of one or more persons as
directors, to be effective, his notice of such business to the Company must set
forth (a) the name and address of such shareholder; (b) a representation that
the shareholder is a holder of record of NAB Common Stock entitled to vote at
the meeting and intends to appear in person at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the shareholder and each nominee and each other person
(naming each) pursuant to which the nomination is to be made; (d) such other
information regarding the nominees as would be required to be included in a
proxy statement filed under the proxy rules of the Securities and Exchange
Commission if the nominee had been nominated by the Board of Directors; and (e)
the consent of each nominee to serve as a director if elected. A shareholder who
is not entitled to vote in the election of directors may not nominate a person
for election as a director.
A shareholder's notice of any other business to be brought before an
annual meeting by him shall set forth, as to each of his proposed items of
business, (a) a brief description of such business, (b) his name and address as
they appear on the Company's books, (c) the number of shares of NAB Common Stock
which he beneficially owns and (d) any material interest which he has in such
business.
If a shareholder's ownership of shares of NAB Common Stock (as set
forth in his notice) is solely beneficial (i.e. his shares are held for him in
the name of another person or entity), documentary evidence of his ownership
must be included with his notice.
This year's Annual Meeting is being held more than 45 days later than
the anniversary date of the last annual meeting, and the notice of the meeting
is being mailed on October 16, 1997. Therefore, a shareholder's notice of his
intention to bring any business before the Annual Meeting must be received by
the Company at or before the close of business on October 26, 1997.
The Board of Directors knows of no matters, other than the election of
directors, which are to be brought to a vote at the Annual Meeting. However, if
any other matter does come before the Annual Meeting, the persons appointed in
the proxy accompanying this Proxy Statement will vote in accordance with their
best judgment on such matters.
The Company expects to hold its 1998 annual meeting of shareholders in
June 1998. If a shareholder wishes to have a proposal considered for inclusion
in the Company's proxy statement and form of proxy for the 1998 annual meeting,
he should submit the proposal to the Company prior to March 15, 1998.
Shareholders notices and proposals, which, as noted above, must be in
writing, should be sent to Alan Ferree, Secretary, NAB Asset Corporation, 19200
Von Karman Avenue, Suite 950, Irvine, CA 92612. Notices and proposals should be
delivered to the Company personally or by certified United States mail, return
receipt requested, postage prepaid.
ADDITIONAL INFORMATION
The Company is using its Annual Report on Form 10-K for the year ended
December 31, 1996 (excluding Amendment No. 1 to the Form 10-K) as filed with the
Securities and Exchange Commissions, as its Annual Report to Shareholders for
such year. This Report is being mailed with this Proxy Statement to all
Shareholders entitled to vote at the Annual Meeting. The information
15
<PAGE>
required to be included in Amendment No. 1 to the Form 10-K (regarding
Directors, Officers, Control Persons and Section 16(a) Beneficial Ownership
Reporting Compliance; Executive Compensation; Security Ownership of Certain
Beneficial Owners and Management; and Certain Relationships and Related
Transactions) is included in this Proxy Statement.
The Company will furnish without charge a copy of its Form 10-K to any
shareholder upon request to Alan Ferree, Secretary, NAB Asset Corporation, 19200
Von Karman Avenue, Suite 950, Irvine, California 92612.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED
PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
16
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
NAB ASSET CORPORATION
NOVEMBER 4, 1997
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes as in this example.
FOR all of the NOMINEES WITHHOLD AUTHORITY
for director listed at right to vote for election
(except as indicated to the of all nominees
contrary above) for director.
(1) ELECTION OF DIRECTORS: [_] [_]
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that person's name in
the space provided below.)
____________________________________________________
NOMINEES: Charles E. Bradley, Sr.
Michael W. Caton
Charles E. Bradley, Jr.
James B. Gardner
(2) To consider and take action upon any other matter which may properly
come before the meeting or any adjournment or postponement thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR each of the nominees listed herein or, if any one or more of the nominees
becomes unavailable, FOR another nominee or other nominees to be selected by the
Board of Directors.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE______________________________________ DATE_________________, 1997
SIGNATURE______________________________________ DATE_________________, 1997
Note: Please sign your name exactly as it appears hereon. Joint owners must each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as it appears thereon.
<PAGE>
NAB ASSET CORPORATION
PROXY -- ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, NOVEMBER 4, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of NAB Asset Corporation (the
"Company") hereby appoints Michael W. Caton and Alan Ferree, or any of them,
proxies of the undersigned with full power of substitution, to vote at the
Annual Meeting of Shareholders of the Company to be held on Tuesday, November 4,
1997, at 8:30 a.m., PST, at 2 Ada, Irvine, CA 92618, and at any adjournment or
postponement thereof, the number of votes that the undersigned would be entitled
to cast if personally present.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
