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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
CREDITRUST 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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[LOGO OF CREDITRUST APPEARS HERE]
Office of the Chairman
April 29, 1999
Dear Stockholder:
I cordially invite you to attend our Annual Meeting of Stockholders to be
held at Harbor Court Hotel, 550 Light Street, Baltimore, Maryland 21202, on
Thursday, May 27, 1999, at 10:00 a.m., local time.
Information on the four incumbent directors, who have been nominated by the
Board of Directors to serve for another year, is included in the enclosed
proxy statement. This statement and the enclosed proxy card and 1998 Annual
Report form your 1999 annual meeting package. At the meeting, we will tabulate
and announce the proxy voting results, and then we will review our 1998
financial results and outlook for the future.
Please read this proxy statement carefully and vote your shares promptly
whether or not you plan to attend the annual meeting.
I look forward to seeing you on May 27.
Sincerely,
/s/ JOSEPH K. RENSIN
Joseph K. Rensin
Chairman of the Board and
Chief Executive Officer
<PAGE>
CREDITRUST CORPORATION
7000 SECURITY BOULEVARD
BALTIMORE, MARYLAND 21244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999
Notice is hereby given that the Annual Meeting of Stockholders of Creditrust
Corporation will be held at Harbor Court Hotel, 550 Light Street, Baltimore,
Maryland 21202, on Thursday, May 27, 1999, at 10:00 a.m., local time, to:
1. Elect four directors of Creditrust; and
2. Vote on any other business which properly comes before the meeting.
Stockholders who owned shares of Creditrust common stock as of April 22,
1999 are entitled to attend and vote at the meeting or any adjournments or
postponements thereof.
YOUR VOTE IS IMPORTANT. STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE
MEETING ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE
UNITED STATES.
By Order of the Board of Directors
/s/ JOHN L. DAVIS
John L. Davis
Secretary
Baltimore, Maryland
April 29, 1999
<PAGE>
PROXY STATEMENT
INTRODUCTION; PROXY VOTING INFORMATION
We are sending you this proxy statement and the accompanying proxy card in
connection with the solicitation of proxies by Creditrust's Board of Directors
for the meeting described in the notice and at any adjournments or
postponements. The purpose of the meeting is to elect directors of Creditrust
and act upon any other matters properly brought to the meeting. This proxy
statement, proxy card and our 1998 Annual Report to Stockholders (containing
Creditrust's financial statements and other financial information for the year
ended December 31, 1998) form your meeting package. We sent you this package
on or about April 29, 1999.
At the close of business on April 22, 1999, the record date of the meeting,
10,403,226 shares of Creditrust common stock, par value $.01 per share, were
outstanding and entitled to vote at the meeting. In electing directors,
stockholders may cast one vote per share owned for each director to be
elected; stockholders cannot use cumulative voting. If the number of votes
present or represented at the meeting are sufficient to achieve a quorum,
directors who receive a plurality of these votes (excluding abstentions and
broker non-votes) are elected to serve until the next annual meeting and until
their successors are elected and qualify. If a meeting proposal does not
involve the election of directors, stockholders may cast one vote per share
owned.
Creditrust will pay for the costs of soliciting proxies and preparing the
meeting materials. We ask securities brokers, custodians, nominees, and
fiduciaries to forward meeting materials to our beneficial stockholders as of
the record date, and will reimburse them for the reasonable out-of-pocket
expenses they incur. Directors, officers, and employees of Creditrust may
solicit proxies personally or by telephone or telegram, but will not receive
additional compensation.
The Board of Directors has selected Joseph K. Rensin to act as proxy. When
you sign and return your proxy card to American Stock Transfer & Trust
Company, our transfer agent, you appoint the proxy as your representative at
the meeting. If you wish to change your vote before the meeting, deliver a
letter revoking the proxy to Creditrust's Secretary (John L. Davis, Creditrust
Corporation, 7000 Security Boulevard, Baltimore, Maryland 21244) or properly
submit another proxy bearing a later date. Even if you vote your proxy before
the meeting, you may attend the meeting, file a notice of revocation for the
previously submitted proxy, and then vote again in person. The last proxy
properly submitted by you before the voting is closed at the meeting will be
counted.
If your shares are held in a brokerage account, you will receive a full
meeting package including a proxy card to vote your shares. Your brokerage
firm may also permit you to vote your proxy by telephone or via the internet.
We urge you to respond to your brokerage firm to ensure that your proxy voting
instructions are followed.
ELECTION OF DIRECTORS
Four directors serve on our Board of Directors. The Board has renominated
all directors to hold office until the next annual meeting of stockholders and
until their respective successors are elected and qualify.
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All properly executed proxies received in time to be tabulated for the
meeting will be voted FOR the election of the nominees named in the following
table, unless otherwise specifically instructed. If any nominee becomes unable
or unwilling to serve between now and the meeting, your proxies will be voted
FOR the election of a replacement designated by the Board of Directors.
Nominees for Director
The following are brief biographical sketches of the 4 nominees. Unless
otherwise indicated, the nominees have sole voting and disposition powers over
the shares beneficially owned by them.
The Board of Directors recommends that you vote FOR all of the following
nominees:
Joseph K. Rensin, age 33, co-founded Creditrust in 1991 and has served as
Chairman of the Board, President and Chief Executive Officer of Creditrust
since that time. Mr. Rensin was the initial developer of Creditrust's PAT and
Mozart systems and its extensive database, as well as the customer relations
approach to collections and recovery. He is the author of three books on
computers published by Prentice-Hall.
Frederick William Glassberg, age 65, has served as director of Creditrust
since 1997. Mr. Glassberg has been since 1991 president of Dornbush
Enterprises, Inc., d/b/a/ Crystal Hill Advisors or its predecessors, Columbia,
Maryland, which provides commercial real estate management advice and
financial advisory services to corporate and municipal clients. Mr. Glassberg
serves on the Board of Directors of three subsidiaries of The Enterprise
Foundation that own low- and moderate-income housing. Earlier in his career,
Mr. Glassberg served as Chief Financial Officer of a subsidiary of The Rouse
Company from 1973 to 1983.
John G. Moran, age 53, has served as director of Creditrust since 1997. Mr.
Moran has been Associate Dean and Executive-in-Residence of the Sellinger
School of Business and Management at Loyola College in Baltimore, Maryland
since 1995 and was President of The Moran Group, LTD, which offers management
consulting services to for-profit and not-for-profit organizations, from 1995
to 1998. From 1986 until 1995, Mr. Moran was President of Household Bank, FSB
(Eastern Division).
Michael S. Witlin, age 30, has served as director since 1991. Mr. Witlin co-
founded Creditrust in 1991 and served as Vice President of Creditrust until
1995. From 1995 to 1997, Mr. Witlin served as a consultant with the Company
Entier, providing business process re-engineering services to privately held
and public companies as well as federal agencies. Since 1998, Mr. Witlin has
been a consultant with RWD Technologies, Inc., providing management and
technology consulting services to Fortune 100 companies.
Board Committees
General. Creditrust's business is managed under the direction of the Board
of Directors. The Board meets on a regularly scheduled basis during
Creditrust's fiscal year to review significant developments affecting
Creditrust and to act on matters requiring Board approval. The Board also
holds special meetings when an important matter requires Board action between
scheduled meetings. During 1998, there were seven meetings of the Board. Each
director attended 100% of the combined total number of meetings of the Board
and Board committees of which he was a member.
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Audit Committee. The Board of Directors has an Audit Committee which
annually recommends to the Board the appointment of independent certified
public accountants for Creditrust, reviews the scope and fees of the annual
audit and any special audit, and reviews the results with the auditors.
Further, it reviews Creditrust's accounting practices and policies with the
auditors and the adequacy of Creditrust's accounting and financial controls
and submits recommendations to the Board regarding oversight and compliance
with accounting principles and legal requirements. The current members of the
Audit Committee are Messrs. Glassberg (Chairman), Moran and Witlin. During
1998, the Audit Committee met one time.
Compensation Committee. The Board of Directors has a Compensation Committee
which reviews and makes recommendations to the Board regarding salaries and
benefits of Creditrust's officers and administers Creditrust's incentive stock
option and employee stock purchase plans. The current members of the
Compensation Committee are Messrs. Moran (Chairman), Glassberg and Witlin.
During 1998, the Compensation Committee met two times.
Other. Creditrust does not have a nominating committee. The Board as a whole
performs the functions which are generally performed by a nominating
committee.
Compensation of Directors
Directors of the Company who are also employees of the Company do not
receive additional compensation for their services as directors. Non-employee
directors of the Company receive annual director compensation consisting of
shares of common stock with a value of $10,000 pursuant to the Company's 1998
Stock Incentive Plan and $5,000 in cash. Each non-employee director receives
$1,500 for each Board meeting attended in person and $500 for each Board
meeting attended telephonically. In addition, each non-employee director
receives $500 for each committee meeting attended in person and $300 for each
committee meeting attended telephonically. Non-employee directors also are
reimbursed for expenses incurred to attend meetings of the Board of Directors
and its committees. Further, Mr. Witlin was granted an option to purchase
32,258 shares of common stock on the same terms as the grants to executive
officers described below under "Compensation Pursuant to Plans."
Executive Compensation
The following table sets forth the compensation paid by Creditrust during
the fiscal years ended December 31, 1997 and December 31, 1998 to Creditrust's
Chief Executive Officer and all other executive officers receiving
compensation in excess of $100,000 in 1997 and 1998 (the "Named Executive
Officers").
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Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation
---------------- All Other
Name and Principal Position Year Salary Bonus Compensation(1)
- --------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
Joseph K. Rensin........................... 1998 $218,846 $ -- $1,295
Chairman and Chief Executive Officer 1997 150,010 -- --
John L. Davis.............................. 1998 150,010 5,000 1,195
Vice President, Business Development..... 1997 150,010 16,777 1,772
Jefferson B. Moore......................... 1998 150,010 128,728 1,615
Vice President, Acquisitions............. 1997 138,470 2,000 --
Richard J. Palmer.......................... 1998 150,010 42,584 1,444
Vice President and Chief Financial
Officer................................. 1997 150,010 118,589 188
Rick W. Chandler(2)........................ 1998 95,022 21,664 91,934(3)
Vice President, Recovery 1997 101,637 22,667 --
</TABLE>
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(1) Represents amounts contributed by the Company to the individuals'
accounts in the Company's 401(k) plan.
(2) Mr. Chandler was employed by the Company through September 1998. John D.
Frey became the Company's Vice President, Recovery in September 1998.
(3) Includes the amount paid to Mr. Chandler upon cancellation of his options
in connection with the termination of his employment with the Company.
Employment Agreements
The Company has entered into employment agreements with Messrs. Palmer,
Moore, Frey and Davis. The employment agreements entitle Messrs. Palmer and
Moore to annual incentive compensation in an amount up to $100,000 in the
discretion of the Compensation Committee, in addition to an annual base
compensation of $150,000. Mr. Davis receives annual compensation of $150,000.
Mr. Frey receives annual compensation of $150,000 and incentive compensation
based upon the performance of the Recovery Department. Effective April 14,
1998, the Compensation Committee increased Mr. Rensin's annual salary to
$250,000. Mr. Rensin is also entitled to incentive compensation in an amount
up to $100,000 annually in the discretion of the Compensation Committee.
Messrs. Palmer, Moore, Frey and Davis are entitled to all Company benefits
to which employees generally are eligible, and each is subject to a
confidentiality agreement that prohibits him from disclosing the Company's
proprietary information, removing Company documents or soliciting other
employees for outside employment for two years after he leaves the Company. In
the event of a breach of the confidentiality agreement, the Company is
entitled to liquidated damages of $100 per day for each day the agreement is
violated, among other remedies.
Messrs. Palmer, Moore, Frey and Davis each have agreed not to compete with
the Company for three years from the date he leaves the Company, subject to
certain geographic limitations. Pursuant to his employment agreement, the
Company reimbursed Mr. Moore for $15,000 in moving expenses in connection with
his
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relocation to Maryland and $10,000 for his temporary residence costs during
the first several months of his employment, as well as certain temporary
financial assistance in connection with his relocation. See "Certain
Transactions."
Compensation Pursuant to Plans
1998 Stock Incentive Plan. The Company has reserved a total of 800,000
shares of common stock for issuance pursuant to the Creditrust Corporation
1998 Stock Incentive Plan (the "Stock Plan"). The Stock Plan was established
to provide incentives to motivate and retain key employees of the Company. The
Stock Plan is administered by the Compensation Committee of the Board of
Directors and provides for the grant of incentive stock options and non-
qualified stock options, as well as stock appreciation rights, restricted or
unrestricted stock awards, phantom stock, performance awards, or any
combination of the foregoing. The Compensation Committee is authorized to
grant options under the Stock Plan to all eligible employees of the Company,
including executive officers. Directors who are not also employees of the
Company are eligible for grants under the Stock Plan. Options granted under
the Stock Plan are granted on such terms and at such prices as are determined
by the Compensation Committee, except that the per share exercise price of
incentive stock options granted under the Stock Plan cannot be less than the
fair market value of the common stock on the date of grant. Each option is
exercisable after the period or periods specified in the option agreement, but
no incentive stock option may be exercised after the expiration of 10 years
from the date of grant. No option may be granted under the Stock Plan after
July 29, 2008. Incentive stock options granted to an individual who owns (or
is deemed to own) 10% or more of the total combined voting power of all
classes of stock of the Company must have an exercise price of at least 110%
of the fair market value of the common stock on the date of grant, and a term
of no more than five years. The Board of Directors has the authority to amend
or terminate the Stock Plan, however certain amendments are subject to
stockholder approval.
Currently, there are 800,000 shares of common stock available for issuance
under the Stock Plan, of which 312,500 shares were subject to outstanding
options.
Option Grants In Last Fiscal Year
The following table sets forth information regarding non-qualified stock
options granted under the Stock Plan by Creditrust during the fiscal year
ended December 31, 1998 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------
Potential Realizable Value
at Assumed Annual
Number of Rates of Stock Price
Securities Percentage of Appreciation for Option
Underlying Total Options Term(4)
Options Granted in Exercise Expiration ---------------------------
Name Granted(1) Fiscal Year(2) Price(3) Date 5% 10%
- ---- ---------- -------------- -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph K. Rensin........ -- -- -- -- -- --
John L. Davis........... 64,516 20.65% $15.50 7/29/08 $ 628,893 $ 1,593,739
Jefferson B. Moore...... 64,516 20.65 15.50 7/29/08 628,893 1,593,739
Richard J. Palmer....... 64,516 20.65 15.50 7/29/08 628,893 1,593,739
</TABLE>
- --------
(1) Twenty percent of the options vested on the date of grant and the
remaining options vest at a rate of 20% on each anniversary of the date
of grant.
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(2) Based on an aggregate of 312,500 shares subject to options grant to
employees, officers and directors of Creditrust in the fiscal year ended
December 31, 1998, including the Named Executive Officers.
(3) The options were granted at an exercise price equal to the fair market
value of the common stock on the date of grant.
(4) As mandated by regulations promulgated by the Commission, the table
describes the hypothetical gains that would exist for the respective
options granted based on assumed rates of annual stock price appreciation
of 5% and 10% from date of grant to the end of the option term. These
hypothetical gains are based on assumed rates of appreciation and,
therefore, the actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock, overall stock
market conditions and the continued employment of the named individuals
with the Company. As a result, the amounts reflected in this table may
not necessarily be achieved.
Stock Purchase Plan. The Company has reserved a total of 100,000 shares of
common stock for issuance pursuant to the Creditrust Corporation 1998 Employee
Stock Purchase Plan (the "Stock Purchase Plan"). The Stock Purchase Plan was
established to promote the long-term success of the Company by providing
employees of the Company with a convenient opportunity to become stockholders.
Options granted and shares of common stock purchased under the Stock Purchase
Plan are intended to qualify for the favorable tax treatment for employees
available under Section 423 of the Internal Revenue Code of 1986, as amended.
The Compensation Committee administers the Stock Purchase Plan. Under the
terms of the Stock Purchase Plan, all eligible employees of the Company have
the opportunity to purchase common stock through payroll deductions. The
purchase price is determined by the Compensation Committee but in no event
will it be lower than 85% of the lesser of (1) the fair market value of a
share of common stock on the offering date, or (2) the fair market value of a
share of common stock on the purchase date, provided that the price per share
is not less than par value. The fair market value on any offering date shall
be the average on that date of the high and low prices of a share of common
stock on the principal national securities exchange on which the common stock
is trading. The maximum number of shares for which each employee may purchase
options in each annual period is determined by the Compensation Committee
prior to the commencement of each offering period. The Stock Purchase Plan
limits purchases to $25,000 per participant for each calendar year. The
aggregate amount of shares of common stock that have been reserved under the
Stock Purchase Plan is subject to adjustment for recapitalization, stock
dividend, reorganization, merger, consolidation or other changes in capital
affecting the common stock.
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SECURITIES BENEFICIALLY OWNED
The following table provides certain information regarding the beneficial
ownership of the common stock, as of December 31, 1998, by: (1) each person
known by Creditrust to own beneficially more than 5% of the common stock; (2)
each of Creditrust's directors; (3) the Named Executive Officers; and (4)
Creditrust's directors and executive officers as a group. Except as otherwise
indicated, to the knowledge of Creditrust, the beneficial owners of the common
stock listed below have sole investment and voting power with respect to such
shares.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
-------------------------
Name of Beneficial Owner Number Percent
------------------------ ------------ ---------
<S> <C> <C>
Joseph K. Rensin................................... 5,191,289 50%
7000 Security Boulevard
Baltimore, MD 21244
Frederick W. Glassberg............................. 1,645 *
John G. Moran...................................... 645 *
Michael S. Witlin.................................. 7,097(1) *
John L. Davis...................................... 13,153(1) *
Jefferson B. Moore(2).............................. 13,153(1) *
Richard J. Palmer.................................. 13,253(1) *
SAFECO Corporation(3).............................. 562,000 5.4
SAFECO Plaza
Seattle, WA 98185
All directors and executive officers as a group (14
persons)(1)....................................... 4,657,574 50.3%
</TABLE>
- --------
* Less than 1%.
(1) Includes shares issuable upon the exercise of options which are currently
exercisable.
(2) Excludes 250 shares of common stock held by Mr. Moore's wife.
(3) This information is based upon a Schedule 13G, dated February 11, 1999,
as filed with the Commission by SAFECO Corporation, SAFECO Asset
Management Company and SAFECO Common Stock Trust (collectively, the
"SAFECO Filers"), as joint filers. The Schedule 13G states that SAFECO
Asset Management Company holds these shares on behalf of investment
advisory clients solely for investment purposes and not with the purpose
nor with the effect of changing or influencing control of Creditrust. The
information regarding the beneficial ownership of common stock by the
SAFECO Filers is included herein in reliance on their Schedule 13G,
except that the percentage of common stock beneficially owned after the
offering is based upon Creditrust's calculations.
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<PAGE>
CERTAIN TRANSACTIONS
Mr. Rensin had unconditionally and personally guaranteed Creditrust's former
bank credit facility, including attorneys' fees and expenses, incurred by the
bank in enforcing its rights under the guaranty. A portion of the proceeds of
Creditrust's securitization of defaulted consumer receivables completed in
June 1998 (the "Initial Securitization") was used to pay off and terminate
this facility, and, consequently the Guaranty has terminated.
Mr. Rensin had unconditionally and personally guaranteed the Subordinated
Notes issued by Creditrust in a private placement in April 1998. A portion of
the proceeds of the initial public offering was used to repay the Subordinated
Notes and consequently terminated this subordinated guaranty.
Jefferson B. Moore, who has served as Creditrust's Vice President,
Acquisitions since January 22, 1997, received a loan of $78,000 on February
28, 1997 pursuant to his employment agreement. Creditrust issued the loan to
Mr. Moore and his wife to assist with their purchase of a residence in
Maryland. Mr. and Mrs. Moore paid a $38,000 installment on May 30, 1997,
leaving a balance of $40,000 which was repaid in June 1998.
Creditrust remitted payments on loans due participants (including interest)
of approximately $743,000 and $58,000 to Mr. Rensin and various investment
vehicles owned or controlled by Mr. Rensin during the years ended December 31,
1996 and 1997, respectively. The remaining amounts due to participants will be
repaid as the related receivables are liquidated.
Creditrust also remitted a payment of approximately $66,000 to a corporation
prior to the initial public offering, of which Mr. Glassberg is an executive
officer, as a finder's fee in connection with the contract for the receivables
that were serviced by Creditrust and included in the Initial Securitization.
Any future related-party transactions will be on terms at least as favorable
to Creditrust as available from third parties and will be approved by a
majority of the disinterested directors.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
Overview
Frederick W. Glassberg, John G. Moran and Michael S. Witlin are the members
of the Compensation Committee of the Board of Directors and each is an
independent director. The Compensation Committee reviews and makes
recommendations to the Board regarding the compensation and benefits provided
to Creditrust's executive officers, including its chief executive officer.
Creditrust faces extensive competition in hiring qualified officers and
employees from a number of industries, and attracting and retaining high
quality management is an important key to success. The Compensation Committee
employs an executive compensation policy calculated to enhance Creditrust's
ability to compete for top quality executive talent. Creditrust's executive
compensation policy is based on principles designed to:
. attract, retain, and promote the most talented executive officers;
. motivate executive officers to achieve high levels of performance;
. reward exemplary performance of executive officers; and
. enhance stockholder value by further aligning the interests of executive
officers with those of Creditrust's stockholders.
Compensation Policy for Executive Officers
General. The key components of Creditrust's executive compensation policy
are base salary, annual incentive compensation and long-term incentive
compensation in the form of stock options. The Compensation Committee annually
reviews the compensation of Creditrust's executive officers and compares it to
the compensation levels of other companies within and without Creditrust's
industry. Based upon this review, the Compensation Committee currently
believes that the compensation paid to Creditrust executive officers is
competitive.
Base Salary. An executive officer's base salary is determined by the level
of responsibility of the position held at Creditrust. In addition, the
Compensation Committee takes into account the general market conditions for
highly qualified executives. Creditrust has entered into employment agreements
with John L. Davis, John D. Frey, Jefferson B. Moore and Richard J. Palmer
which entitle each of them to receive annual compensation of $150,000. The
Compensation Committee considered generally available information concerning
compensation paid by those companies with whom Creditrust competes for
executive talent in order to determine the amount to pay Creditrust's
executive officers and to ensure that Creditrust will continue to be able to
attract and retain high quality talent to join its management team. Based upon
this review, the Compensation Committee believes that the compensation paid to
Creditrust's executive officers is competitive within the industry.
Annual Incentive Compensation. The Compensation Committee awards annual
incentive compensation in the form of cash bonuses based upon an executive
officer's individual performance for the year. The Compensation Committee
makes its determination based upon such criteria as the financial performance
of an
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executive officer's operating unit and the executive officer's individual
contribution to Creditrust's overall strategic goals. The Compensation
Committee does not assign any specific weighting to any of the foregoing
criteria. In connection with Creditrust's initial public offering, Creditrust
has entered into employment agreements with Messrs. Moore and Palmer which
entitle each of them to receive annual incentive compensation in an amount up
to $100,000 in the discretion of the Compensation Committee. Further, Mr. Frey
is entitled to receive annual incentive compensation based upon the
performance of Creditrust's recovery department. The calculation of Mr. Frey's
annual incentive compensation, as provided in his employment agreement, is
based on a sliding scale percentage of the amount collected on defaulted
consumer receivables by collectors in Mr. Frey's group. The amount of the
annual incentive compensation paid to Mr. Frey also depends upon the length of
employment of account officers in his group.
Long-Term Incentive Compensation. The Compensation Committee grants options
under the Creditrust Corporation 1998 Stock Incentive Plan as a long-term
incentive compensation plan. By granting options pursuant to the plan, the
Compensation Committee seeks to motivate and retain key employees, including
executive officers, and to enhance stockholder value by further aligning the
interests of executive officers with those of Creditrust's stockholders.
Grants are awarded based upon the same criteria used to determine awards of
annual incentive compensation. The Compensation Committee does not assign any
specific weighting to any of the criteria. In the case of Messrs. Davis,
Moore, and Palmer, the Compensation Committee determined to make option grants
at the time of Creditrust's initial public offering, in each case intended to
provide these executives long-term incentives with respect to Creditrust stock
valued at $1,000,000 at the time of the offering. In the case of Mr. Frey, who
joined Creditrust in September 1998, the Committee awarded an option to
purchase 16,129 shares at an exercise price of $15.50 per share; this
determination was made in the context of negotiating Mr. Frey's original
employment terms.
Options granted by the Compensation Committee typically vest over a period
of years, with the initial vesting occurring at the time of award. The purpose
of the vesting condition is to encourage talented executive officers to remain
with Creditrust for a long-term period.
Chief Executive Officer's Compensation for 1998
The general policies described above for the compensation of Creditrust's
executive officers also apply to the compensation recommendations made by the
Compensation Committee to the Board of Directors for the compensation of
Joseph K. Rensin as Creditrust's Chief Executive Officer.
During 1998, the Compensation Committee increased Mr. Rensin's annual base
salary to $250,000. In determining Mr. Rensin's salary, the Compensation
Committee analyzed the compensation paid to chief executive officers by other
companies in Creditrust's industry. Further, the Compensation Committee
considered the additional responsibilities that Mr. Rensin would have as a
chief executive officer of a public company.
Mr. Rensin may receive annual incentive compensation in the form of cash
bonuses up to $100,000 in the discretion of the Compensation Committee. Mr.
Rensin did not receive any annual incentive compensation in 1998. In addition,
the Compensation Committee did not award Mr. Rensin long-term compensation in
the form of stock option grants in 1998. The objective of awarding incentive
compensation and stock options to executives is to enhance stockholder value
by further aligning the interests of executive officers with those of
stockholders.
10
<PAGE>
Mr. Rensin's interests in the long-term future of Creditrust and in the
enhancement of stockholder value is already very closely aligned with the
interests of Creditrust's stockholders due to Mr. Rensin's significant stock
ownership. The Compensation Committee and Mr. Rensin do not believe that
additional incentives are necessary at the present time.
Policy Regarding Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits the deductibility of executive compensation which exceeds $1,000,000.
The Compensation Committee has considered the impact of Section 162(m), and
based upon the current compensation levels of Creditrust's executive officers,
the Compensation Committee believes that it will not have a material adverse
affect on Creditrust.
Submitted by the Compensation Committee of the Board of Directors.
John G. Moran, Chairman
Frederick W. Glassberg
Michael S. Witlin
11
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares, for the period from July 29, 1998, the date of
Creditrust's initial public offering of its shares of common stock, to
December 31, 1998, the cumulative stockholder return on Creditrust's common
stock with the cumulative total return on the Nasdaq Stock Market (U.S.
Companies) Index and an industry index selected by Creditrust's management
which includes public companies comprised of firms with SIC codes ranging from
7380 through 7389. The comparison assumes that $100 was invested on July 29,
1998 in Creditrust's common stock, the Nasdaq Stock Market (U.S. Companies)
Index and the industry index, and further assumes all dividends were
reinvested. The stock price performance on the following graph is not
necessarily indicative of future stock price performance.
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
7/29/98 8/31/98 9/30/98 10/31/98 11/30/98 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Creditrust Corporation 100.00 90.66 91.83 107.00 129.18 158.76
Nasdaq Stock Market (U.S. Companies) 100.00 79.88 90.99 94.92 104.52 118.07
Industry Index 100.00 73.81 83.46 85.73 121.68 132.61
</TABLE>
12
<PAGE>
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Creditrust's Board of Directors has approved the selection of Grant Thornton
LLP to be our independent public accountants for the year ending December 31,
1999. A representative of Grant Thornton LLP will be present at the meeting.
He or she will have the opportunity to make a statement and respond to
appropriate questions from stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
We believe that our directors and executive officers and other stockholders
who may own more than 10% of Creditrust common stock have complied with the
requirements of the Securities and Exchange Commission to report ownership and
transactions which reflect a change of beneficial ownership.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Qualified stockholders who want to have proposals presented at the 2000
annual meeting must deliver them to Creditrust by December 30, 1999, in order
to be considered for inclusion in next year's proxy statement and proxy.
The deadline for submitting stockholder proposals to be presented at the
2000 annual meeting, but which will not be included in the proxy statement and
form of proxy relating to the meeting, is March 28, 2000. Any such proposal
received by Creditrust's principal executive officers after such date will be
considered untimely and the persons named in the proxy for such meeting may
exercise their discretionary voting power with respect to such proposal.
OTHER MATTERS
We know of no other matters to be presented to you at the meeting other than
the election of directors. As stated in an earlier section, if other matters
are considered at the meeting, the proxy will vote on these matters in
accordance with his judgment of the best interests of Creditrust.
By Order of the Board of Directors
/s/ JOHN L. DAVIS
John L. Davis
Secretary
Baltimore, Maryland
April 29, 1999
13
<PAGE>
CREDITRUST CORPORATION
Proxy for Annual Meeting of Stockholders
SOLICITED BY THE BOARD OF DIRECTORS
May 27, 1999
The undersigned hereby appoints Joseph K. Rensin as proxy with full power
of substitution, with the powers the undersigned would possess if personally
present, to vote, as designated below, all shares of the Common Stock held by
the undersigned in Creditrust Corporation (the "Company") at the Annual Meeting
of Stockholders to be held on May 27, 1999 (the "Annual Meeting"), and at any
adjournments or postponements thereof.
This proxy is solicited on behalf of the Board of Directors of the Company
and will be voted FOR Proposal 1 below unless otherwise indicated.
You are encouraged to specify your choices by marking the appropriate box,
SEE REVERSE SIDE. The proxy cannot vote your shares unless you sign and return
this card.
(continued and to be SIGNED on the other side)
FOLD AND DETACH HERE
<PAGE>
Please mark your
vote as in this example
[X]
1. To elect four directors of the Company to serve until the next Annual
Meeting and until their respective successors are duly elected and
qualified.
FOR all nominees WITHHOLD AUTHORITY
[_] [_]
OR to withhold authority to vote for any individual nominee, do not mark any
box above and strike out the nominee's name: Joseph K. Rensin, Frederick W.
Glassberg, John G. Moran and Michael S. Witlin.
2. In his discretion, the proxy is authorized to vote upon any other matter
that may come before the Annual Meeting or any adjournments or postponements
thereof.
This proxy, if properly executed, will be voted in accordance with the
undersigned's direction as set forth herein. If no direction is made, this
proxy will be voted FOR Proposal 1 and in the sole discretion of the proxy
on any other matter that may come before the Annual Meeting. This proxy may
be revoked in writing prior to its exercise. The undersigned hereby revokes
any proxies heretofore given to vote upon or act with respect to such
shares.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME OR NAMES APPEAR HEREON. JOINT
OWNERS SHOULD EACH SIGN PERSONALLY.
WHEN SIGNING AS AN ATTORNEY,
EXECUTOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE AS SUCH.
Dated: ________________________, 1999
_____________________________________
Signature
_____________________________________
Signature (see note above)
IMPORTANT: PLEASE SIGN, DATE AND
RETURN PROMPTLY
FOLD AND DETACH HERE
