<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
GENERAL CREDIT 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: Common
Stock, par value $.001 per share ("Common Stock"), (2) Aggregate number
of securities to which transaction applies: _______ shares of Common
Stock (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):
$_______ per share.
(4) Proposed maximum aggregate value of transaction:
$________
(5) Total fee paid:
$_______ (1/50 of 1% of $_____)
[ ] 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> 2
GENERAL CREDIT CORPORATION
370 Lexington Avenue, Suite 2000
New York, New York 10017
May 12, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders of General Credit Corporation (the "Company"), which will be held
on June 19, 1998 at 2:00 p.m., local time, at the Women's Republican Club,
located at 3 West 51st Street, New York, NY.
At the Annual Meeting you will be asked to consider and vote upon the
election of the Board of Directors for the upcoming year, a proposal to approve
the 1998 General Credit Corporation Stock Option Plan, and the ratification of
the Company's selection of independent auditors. The enclosed notice and proxy
statement contain information concerning the business to be considered at the
Annual Meeting.
We sincerely hope that you will find it convenient to attend in person.
Whether or not you expect to attend, to assure representation at the Annual
Meeting and the presence of a quorum, please complete, sign, date and return the
accompanying proxy in the enclosed envelope.
A copy of the Company's 1997 Annual Report to Shareholders is also
enclosed.
Sincerely,
Irwin Zellermaier,
Chairman of the Board
<PAGE> 3
GENERAL CREDIT CORPORATION
370 Lexington Avenue, Suite 2000
New York, New York 10017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 1998
To the Shareholders of
General Credit Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
General Credit Corporation (the "Company") will be held on June 19, 1998
commencing at 2:00 p.m., local time, at the Women's Republican Club located at 3
West 51st Street, New York, NY for the following purposes:
1. Election of Directors. To elect a Board of Directors consisting of
five directors;
2. Stock Option Plan. To consider and vote upon a proposal to approve
the 1998 General Credit Corporation Stock Option Plan;
3. Ratification of Independent Auditors. To consider and vote upon a
proposal to ratify the action of the Board of Directors in selecting Cornick,
Garber & Sandler, LLP as independent auditors of the Company for the fiscal year
ending December 31, 1998; and
4. Other Business. To transact such other business as may properly come
before the Annual Meeting.
A copy of the Company's 1997 Annual Report to Shareholders is enclosed.
Only shareholders of record at the close of business on May 6, 1998 are
entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof. A list of such shareholders will be available for
inspection during normal business hours at the offices of the Company located at
370 Lexington Avenue, Suite 2000, New York, New York 10017 during the ten days
preceding the meeting. The election of the directors requires a plurality of the
votes represented in person or by proxy at the Annual Meeting. The affirmative
vote of the holders of a majority of the shares of Common Stock present and
entitled to vote at the Annual Meeting is necessary to approve the Stock Option
Plan and the ratification of auditors.
Whether or not you plan to attend the Annual Meeting, please complete,
date and sign the accompanying proxy card and mail it promptly in the enclosed
pre-addressed envelope, which requires no postage if mailed in the United
States.
By Order of the Board of Directors,
Irwin Zellermaier
Chairman of the Board
New York, New York
May 12, 1998
<PAGE> 4
GENERAL CREDIT CORPORATION
PROXY STATEMENT
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION......................................................................................................1
ADDITIONAL INFORMATION............................................................................................3
THE ANNUAL MEETING................................................................................................4
Purpose of Meeting.......................................................................................4
Date, Time and Place; Record Date........................................................................4
Vote Required............................................................................................4
Proxies ................................................................................................4
Solicitation.............................................................................................5
PRINCIPAL SHAREHOLDERS OF THE COMPANY.............................................................................5
Beneficial Owners........................................................................................5
Compliance with Section 16(a) of the Securities Exchange Act of 1934.....................................7
MANAGEMENT OF THE COMPANY.........................................................................................7
Information About Director Nominees And Executive Officers...............................................7
Board Meetings and Committees............................................................................8
Director Reimbursement...................................................................................9
Executive Compensation...................................................................................9
Certain Transactions....................................................................................10
Employment Agreements .................................................................................11
INDEPENDENT AUDITORS.............................................................................................12
Change in Accountants...................................................................................12
Presence of Accountants at Meeting......................................................................12
PROPOSAL 1: ELECTION OF DIRECTORS...............................................................................13
Nominees ...............................................................................................13
Vote Required; Recommendation of the Board of Directors.................................................13
PROPOSAL 2: RATIFICATION AND APPROVAL OF THE
1998 GENERAL CREDIT CORPORATION STOCK OPTION PLAN ......................................................14
Description of the Stock Option Plan....................................................................14
Federal Income Tax Consequences.........................................................................15
Incentive Options.......................................................................................15
Non-Qualified Options...................................................................................15
General.................................................................................................16
Section 280G of the Code................................................................................16
Section 162(m) of the Code..............................................................................16
Options Outstanding under the 1998 Stock Option Plan....................................................16
Recommendation of the Board of Directors................................................................16
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS ..................................................16
OTHER INFORMATION................................................................................................17
Other Business..........................................................................................17
Shareholders' Proposals for Next Annual Meeting.........................................................17
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
</TABLE>
-i-
<PAGE> 5
GENERAL CREDIT CORPORATION
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished to the shareholders of General
Credit Corporation, a New York corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors for use at the annual
meeting of shareholders to be held on June 19, 1998 (the "Annual Meeting"), at
the time and place set forth in the accompanying Notice of Annual Meeting of
Shareholders, and at any adjournment or adjournments thereof. Management
anticipates that the mailing to shareholders of this Proxy Statement and the
accompanying proxy materials, together with a copy of the Company's Annual
Report to Shareholders, will occur on or about May 12, 1998.
At the Annual Meeting, the shareholders of the Company will be asked to
(i) consider and vote upon the election of five directors to serve until the
1999 Annual Meeting of Shareholders; (ii) consider and vote upon a proposal to
approve the 1998 General Credit Corporation Stock Option Plan; (iii) consider
and vote upon a proposal to ratify the action of the Board of Directors in
selecting Cornick, Garber & Sandler, LLP, as the independent auditors for the
Company for the fiscal year ending December 31, 1998; and (iv) transact any
other business that may properly come before the Annual Meeting or any
adjournment or postponement thereof. See "Proposal 1: Election of Directors;"
"Proposal 2: Ratification and Approval of 1998 General Credit Corporation Stock
Option Plan;" and "Proposal 3: Ratification of Selection of Independent
Auditors."
If the accompanying Proxy is properly executed and returned, the shares
represented by the Proxy will be voted in accordance with the instructions
specified in the Proxy. In the absence of instructions to the contrary, such
shares will be voted in favor of (i) all of the nominees for election to the
Board of Directors listed in this Proxy Statement and named in the accompanying
Proxy; (ii) the Stock Option Plan; and (iii) the ratification of selection of
independent auditors. Any shareholder executing a Proxy has the power to revoke
it at any time prior to the voting thereof on any matter by delivering written
notice of revocation to the Secretary of the Company or by executing another
Proxy dated as of a later date, or by voting in person at the Annual Meeting.
Record holders of the Company's common stock, par value $.001 per share
(the "Common Stock"), at the close of business on May 6, 1998 (the "Record
Date") are entitled to one vote for each share held on all matters to be
considered at the Annual Meeting. At the Record Date, there were issued,
outstanding and eligible to vote 3,438,000 shares of Common Stock. The presence,
in person, or by Proxy, of shareholders entitled to cast a majority of all votes
entitled to be cast at the Annual Meeting shall constitute a quorum. Assuming a
quorum, the affirmative vote of the holders of a majority of the shares of
Common Stock present and entitled to vote is necessary to approve the Stock
Option Plan and the ratification of the independent auditors. The election of
the directors requires a plurality of the votes represented in person or proxy.
HOLDERS OF SHARES OF COMMON STOCK ARE REQUESTED TO COMPLETE AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO THE COMPANY
IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
<PAGE> 6
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF
THIS PROXY STATEMENT. HOWEVER, IF ANY MATERIAL CHANGE OCCURS DURING THE PERIOD
THAT THIS PROXY STATEMENT IS REQUIRED TO BE DELIVERED, THIS PROXY STATEMENT WILL
BE AMENDED AND SUPPLEMENTED ACCORDINGLY.
The date of this Proxy Statement is May 12, 1998.
[This Space Intentionally Left Blank]
2
<PAGE> 7
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and in
accordance therewith is required to file periodic reports, proxy statements and
other information with the Commission pursuant to the Exchange Act relating to
its business, financial statements and other matters. Such reports, proxy and
information statements and other information are available for inspection and
copying at the Commission's principal office, Room 1024, Judiciary Plaza at 450
Fifth Street, N.W., Washington, D.C. 20549; the Northeast Regional Office of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048; and
the Midwest Regional office of the Commission, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60611. Copies of such material may be
obtained upon payment of the fees prescribed by the Commission from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Such documents may also be obtained through the website maintained by the
Commission at http://www.sec.gov.
[This Space Intentionally Left Blank]
3
<PAGE> 8
THE ANNUAL MEETING
PURPOSE OF MEETING
At the Annual Meeting, the shareholders eligible to vote thereat will
be asked to consider and vote upon (i) the election of five directors of the
Company to serve until the 1999 Annual Meeting of Shareholders; (ii) the
proposal to ratify and approve the Stock Option Plan; (iii) the ratification of
selection of the independent auditors; and (iv) such other matters that may
properly come before the Annual Meeting.
DATE, TIME AND PLACE; RECORD DATE
The Annual Meeting is scheduled to be held on June 19, 1998 at 2:00
p.m., Eastern Standard Time, at the Women's Republican Club, located at 3 West
51st Street, New York, NY. The Board of Directors has fixed the close of
business on May 6, 1998 as the record date (the "Record Date") for the
determination of holders of Common Stock entitled to notice of and to vote at
the Annual Meeting. As of the date of this Proxy Statement, there were 3,438,000
shares of Common Stock (held by 18 persons of record) outstanding and entitled
to vote.
VOTE REQUIRED
Holders of Common Stock on the Record Date are entitled to one vote for
each share of Common Stock held by them on any matter that may properly come
before the Annual Meeting.
The presence, either in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting. The election of directors requires a
plurality of the votes represented in person or proxy at the Annual Meeting. The
affirmative vote of a majority of the shares of Common Stock present and
entitled to vote at the Annual Meeting is required to approve and adopt the
Stock Option Plan and the ratification of the independent auditors. Holders of
record of Common Stock on the Record Date are entitled to one vote for each
share held by them on any matter that may properly come before the Annual
Meeting.
PROXIES
If a shareholder attends the Annual Meeting, he or she may vote by
ballot. The Board of Directors is soliciting proxies so that each holder of
Common Stock on the Record Date has the opportunity to vote on the proposals to
be considered at the Annual Meeting whether or not in attendance. When a proxy
card is returned properly signed and dated, the shares represented thereby will
be voted in accordance with the instructions on the proxy card. Shareholders are
urged to mark the box on the proxy card to indicate how their shares are to be
voted. If a shareholder (other than a broker which holds shares in street name
for its customers) returns a signed proxy card, but does not indicate how his or
her shares are to be voted, the shares represented by the proxy card will be
voted FOR approval and adoption of the Stock Option Plan, for each of the
directors listed on the Proxy and for the ratification of the selection of the
independent auditors. If a signed proxy card is
4
<PAGE> 9
returned by a shareholder and expressly reflects an abstention upon any
proposal, the shares evidenced thereby will be counted towards the quorum
necessary to convene the Annual Meeting, but will not be counted towards the
requisite affirmative vote upon such proposal mandated by applicable New York
law or this Proxy Statement, as applicable. If a signed proxy card is returned
by a broker with no indication of how shares are to be voted, the shares
evidenced thereby will not be counted towards a quorum and will have no effect
on the vote for such proposals. The proxy card also confers discretionary
authority on the individuals appointed by the Board of Directors and named on
the proxy card to vote the shares represented thereby on any other matter that
is properly presented for action at the Annual Meeting.
Any shareholder who executes and returns a proxy card may revoke such
proxy at any time before it is voted by (i) notifying in writing the Secretary
of General Credit Corporation, 370 Lexington Avenue, Suite 2000, New York, New
York 10017; (ii) granting a subsequent proxy; or (iii) appearing in person and
voting at the Annual Meeting. Attendance at the Annual Meeting will not in and
of itself constitute revocation of a proxy.
SOLICITATION
The Company will bear the costs of the solicitation of proxies from its
shareholders. In addition to soliciting proxies by mail, proxies may be
solicited by directors, executive officers or regular employees of the Company,
without such person receiving additional compensation, in person, by letter or
by telephone, telegram or telefax. Arrangements have also been made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of Common Stock. The Company
will reimburse the persons with whom these arrangements have been made for
reasonable out-of-pocket expenses incurred by them in connection with this
solicitation in accordance with applicable rules. Further, the Company has
retained American Stock Transfer & Trust Company, the Company's transfer agent,
to assist it in the solicitation of proxies. The Company shall reimburse such
firm for its reasonable out-of-pocket expenses incurred by it in connection with
this solicitation.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
BENEFICIAL OWNERS
The following table sets forth information as of April 27, 1998, with
respect to the beneficial ownership of shares of Common Stock, in the aggregate,
the number of shares of Common Stock expected to be held by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock; (ii) each current director; (iii) each executive officer; and
(iv) all executive officers and directors as a group:
5
<PAGE> 10
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
Shares of Common Stock
Name and Address of Beneficial Owner Beneficially Owned(1)(2) Percent Owned
- ------------------------------------ ------------------------ -------------
<S> <C> <C>
Irwin Zellermaier
211 East 70th Street
New York, NY 10021 455,000 (3) 13.0%
Gerald Nimberg
1009 Owl Place
Cherry Hill, NJ 08003 180,000 (4)(8) 5.1%
David Bader
38 Milton Road
Babylon, NY 11702 80,000 (5) 2.3%
Vincent J. Putignano
907 Palmer Avenue
Mamaroneck, NY 10543 10,000 (6) 0.3%
Brien G. Reidy
Seven Miller Lane West
East Hampton, NY 11937 10,000 (7) 0.3%
ALL OFFICERS AND DIRECTORS AS A GROUP(5) 735,000 21.0%
</TABLE>
- ----------------------
(1) As used herein, "beneficial ownership" means the sole or shared power to
vote, or direct the voting of, a security, or the sole or shared power to
dispose, or direct the disposition, of a security. Except as otherwise
indicated, all persons named herein and therein have (i) sole voting power
and investment power with respect to their shares of the Company's Common
Stock, except to the extent that authority is shared by spouses under
applicable law; and (ii) record and beneficial ownership with respect to
their shares of the Company's Common Stock. For purposes of this table,
beneficial ownership is computed pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act"); the
inclusion of shares as beneficially owned should not be construed as an
admission that such shares are beneficially owned for purposes of the
Exchange Act. Under the rules of the Securities and Exchange Commission a
person is deemed to be a "beneficial owner"of a security if he or she has
or shares the power to vote or direct the voting of such security or the
power to dispose of or direct the disposition of such security.
Accordingly, more than one person may be deemed to be a beneficial owner of
the same security. Shares of Common Stock subject to options to be held by
persons listed in the table that are exercisable within 60 days of the
closing of the Merger are deemed beneficially owned by such person and
outstanding for the purposes of computing such person's beneficial
ownership and to the extent held by officers and directors listed in the
table, the beneficial ownership of all directors and executive officers
beneficial ownership as a group.
(2) Assumes no exercise of the 5,400,000 Common Stock Purchase Warrants
currently outstanding.
(3) Includes 75,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Zellermaier.
(4) Includes 65,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Nimberg.
(5) Includes 50,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Bader.
(6) Includes 10,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Putignano.
(7) Includes 10,000 shares of Common Stock to be issued upon exercise of
currently exercisable stock options held by Mr. Reidy.
(8) Does not include 1,500 shares of Common Stock or 3,000 warrants owned by
Ann Nimberg, Gerald Nimberg's
6
<PAGE> 11
wife, over which Gerald Nimberg disclaims beneficial ownership. Does not
include 10,000 shares of Common Stock owned by Richard Nimberg, Gerald
Nimberg's adult brother, over which Gerald Nimberg disclaims beneficial
ownership.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and the holders of 10% or more of the Company's Common Stock
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of equity securities of the Company. To the
Company's knowledge, for the fiscal year ended December 31, 1997, and for the
period ended April 27, 1998, no person who was a director, officer or beneficial
owner of more than ten percent of the Company's outstanding Common Stock or any
other person subject to Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") failed to file on a timely basis, reports required by Section
16(a) of the Exchange Act other than one late filed Form 4 filed by Gerald
Nimberg, the Company's President and Chief Operating Officer regarding an August
1997 gift of 10,000 shares by Mr. Nimberg to his adult brother.
MANAGEMENT OF THE COMPANY
INFORMATION ABOUT DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
The table below sets forth the names and ages of the director nominees
and executive officers of the Company as well as the positions and offices held
by such persons. A summary of the background and experience of each of these
individuals is set forth after the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Irwin Zellermaier(1) 73 Chairman, Chief Executive Officer, Director
Gerald Nimberg 54 President, Chief Operating Officer, Director
David Bader 54 Vice President, Secretary, Treasurer, Chief Financial Officer,
Director
Vincent J. Putignano(1)(2) 52 Director
Brien G. Reidy(1)(2) 46 Director
</TABLE>
- -------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Irwin Zellermaier, Chairman and Chief Executive Officer and Director of
the Company since February 1995, and President of the Company from February 1995
until May 2, 1997, has been engaged in investment banking and management
consulting as a sole proprietorship for more than five years. From January 1,
1990, through April 1997 he was associated as an independent contractor with
Eagle Funding, a mortgage broker with respect to commercial properties.
Gerald Nimberg, President and Chief Operating Officer and Director of
the Company since May 2, 1997, and Vice President and Chief Operating Officer of
NYPF since May 1993 until May 2, 1997. From May 1992 until May 1993, he was
Regional Manager of Exchange Mortgage, Inc.,
7
<PAGE> 12
a residential mortgage lending firm, and from May 1991 until May 1992, he was
Regional Manager of Gelt Funding, also a residential mortgage lending firm.
Previously, he was a manager of various divisions of Sun Oil.
David Bader, Vice President, Secretary, Treasurer and Chief Financial
Officer and Director of the Company since April 1996, was engaged in financial
and management consulting through Riz Business Consultants from 1988 through
April 1996.
Vincent J. Putignano, Director of the Company since July 1996, has
operated a securities brokerage and investment banking and consulting business
in New York State since 1978. Before March 1991, he was President and Chief
Executive Officer of United States Business Products, Inc., a business equipment
firm. Since March 1991, he has engaged in sales administration and consulting
with Minor & Casey, a commercial real estate firm.
Brien G. Reidy, Director of the Company since July 1996, has been
engaged in financial consulting and public relations in California and New York
since 1987.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held no meetings and acted by
unanimous written consent on three occasions during the fiscal year ended
December 31, 1997. The Board of Directors endeavors to hold regular quarterly
meetings and meets on other occasions when necessary. The Board of Directors
currently has two standing committees: the Compensation Committee and the Audit
Committee.
All members of the Board of Directors hold office until the next annual
meeting of shareholders or until their successors are elected and qualified.
Each executive officer is appointed to serve until the next annual meeting of
the Board of Directors and until his successor has been appointed and qualified.
The principal functions of the Compensation Committee are to approve or
in some cases to recommend to the Board of Directors, remuneration arrangements
and compensation plans involving the Company's directors and executive officers,
review bonus criteria and bonus recommendations, administer the Company's stock
option plans and review compensation of directors. The Compensation Committee
did not meet during the last fiscal year. The present members of the
Compensation Committee are Irwin Zelermaier, Vincent J. Putignano and Brien G.
Reidy.
The principal functions of the Audit Committee are to review the
Company's financial statements and management's disclosures, recommend to the
Board of Directors the appointment of independent public accountants to be
employed by the Company, confer with the independent public accountants
concerning the scope of their audit and, on completion of their audit, review
the accountants' findings and recommendations, review the adequacy of the
Company's systems of internal accounting controls, review areas of possible
conflicts of interest and sensitive payments and consider other appropriate
matters. The Audit Committee held one formal meeting during the last
8
<PAGE> 13
fiscal year. The present members of the Audit Committee are Vincent J. Putignano
and Brien G. Reidy.
The Board of Directors currently has no nominating committee and has
not actively solicited recommendations from holders of the Common Stock for
nominees for director, and has not established any procedures for this purpose.
The usual functions of a nominating committee are performed by the entire Board
of Directors.
DIRECTOR REIMBURSEMENT
The arrangement for director compensation is $150 for each meeting of
the Board of Directors of the Company. Since the Company has no had no formal
Board meetings, no amounts have been paid to directors for attendance at
meetings.
EXECUTIVE COMPENSATION
General. The following summary compensation table sets forth
information concerning compensation for services in all capacities awarded to,
earned by or paid to Irwin Zellermaier, the Chief Executive Officer. No other
employee of the Company was paid in excess of $100,000 for the fiscal year ended
December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying All Other
Other Annual Options/ Compensation ($)
Name and Principal Position Year Salary($) Bonus($) Compensation ($) SARs (#)
<S> <C> <C> <C> <C> <C> <C>
Irwin Zellermaier, Chairman, Chief 1997 101,298 -- 31,466(1) 75,000 / 0 0
Executive Officer and Director of the
Company since February 1995. President 1996 -- -- -- -- --
from February 1995 until May 1997.
1995 -- -- -- -- --
</TABLE>
- ---------------------
(1) Represents payments made for Mr. Zellermaier's and his dependents' medical
insurance, Mr. Zellermeier's automobile expense allowance and insurance covering
Mr. Zellermaier's life, the beneficiary of which is not the Company.
The following table sets forth information concerning stock option
grants made during 1997 to the executive officers of the Company.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Percent of
Number of Securities Total Options Granted Exercise
Underlying to Employees in Market Price on or
Name Options Granted(1) Fiscal Year Date of Grant(2) Base Price Expiration Date
------ -------------------- --------------------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Irwin Zellermaier 75,000 39.5% $2.125 $2.125 November 3, 2000
Gerald Nimberg 65,000 34.2% $2.125 $2.125 November 3, 2000
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
Percent of
Number of Securities Total Options Granted Exercise
Underlying to Employees in Market Price on or
Name Options Granted(1) Fiscal Year Date of Grant(2) Base Price Expiration Date
- ---------------------- -------------------- --------------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
David Bader 50,000 26.3% $2.125 $2.125 November 3, 2000
TOTAL 190,000 100%
- ---------------------
</TABLE>
1) All options are non-qualified options.
2) Based on the closing sales price of the Common Stock on November 4, 1997.
The following table sets forth certain summary information concerning
exercised and unexercised options to purchase the Company's Common Stock as of
December 31, 1997 held by the executive officers named in the "Summary
Compensation Table." None of these executives exercised any options during the
year ended December 31, 1997.
STOCK OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-money Options
Shares Acquired Options at FY-end at FY-end
Name on Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------- ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Irwin Zellermaier - - 75,000 / 0 $0 / $0
Gerald Nimberg - - 65,000 / 0 $0 / $0
David Bader - - 50,000 / 0 $0 / $0
TOTAL - - 190,000 / 0 $0 / $0
</TABLE>
CERTAIN TRANSACTIONS
Pursuant to the employment agreement between Gerald Nimberg and the
Company, at the Closing, Mr. Nimberg became entitled to borrow up to $250,000
(by amendment to his employment agreement in April 1998, Mr. Nimberg became
entitled to borrow up to $60,000), $60,000 of which has been loaned to date (the
"Closing Loan") which sum, with simple interest calculated on the basis of the
annual rate of 9% (which rate of interest prior to the amendment was 24% per
annum) is to be repaid by Mr. Nimberg to the Company through payroll deductions
over a period of time no longer than seven years, interest only being payable
during the first two years. Mr. Nimberg is current with respect to his repayment
obligations. Ann Nimberg has informed the Company that she owns approximately 8%
of the Affiliated General Partnership. Pursuant to the terms of the Long Term
Loan, the Affiliated General Partnership has established a credit facility in
favor of the Company in the aggregate principal amount of $2.6 million. For the
fiscal year ended December 31, 1997, there were no other material transactions
between the Company and any of its officers and/or directors which involved
$60,000 or more.
10
<PAGE> 15
EMPLOYMENT AGREEMENTS
In June 1996, Irwin Zellermaier entered into a ten-year employment
agreement with the Company, effective immediately. Under the terms of that
agreement, Mr. Zellermaier serves as the Chairman and Chief Executive Officer of
the Company and receives an annual base salary of $160,000. The employment
agreement with Mr. Zellermaier further provides that Mr. Zellermaier shall
receive bonuses and such other fringe benefits as are paid to other executive
officers of the Company. Such fringe benefits take the form of medical coverage
and an automobile expense allowance of $1,500 per month, the aggregate value of
which is estimated at approximately $20,800 per annum. Further pursuant to the
terms of his employment agreement, Mr. Zellermaier has agreed not to compete
with the Company during the term of his employment with the Company and for a
three-year period thereafter.
David Bader serves as the Vice President and Chief Financial Officer of
the Company pursuant to the terms of a ten-year employment agreement which
terminates in June 2006. Pursuant to the agreement, Mr. Bader is entitled to
receive an annual base salary of $85,000 per annum, effective as of May 2, 1997.
The employment agreement with Mr. Bader further provides for payment of bonuses
and for such other fringe benefits as are paid to other executive officers of
the Company. Such fringe benefits take the form of medical coverage and an
automobile expense allowance of $150 per month, the aggregate value of which is
estimated at approximately $7,240 per annum. Further pursuant to the terms of
his employment agreement, Mr. Bader has agreed not to compete with the Company
during the term of his employment with the Company and for a three-year period
thereafter.
Effective May 2, 1997, the date of the closing of the Company's initial
public offering of securities (the "Closing"), Gerald Nimberg and the Company
entered into a ten-year employment agreement which will terminate on May 2,
2007, pursuant to which Mr. Nimberg is to serve as the President and Chief
Operating Officer of the Company. The employment agreement with Mr. Nimberg
provides that Mr. Nimberg shall receive an annual base salary of $120,000 per
annum, commencing on May 2, 1997, with annual adjustments for increases in the
Consumer Price Index. The employment agreement with Mr. Nimberg further provides
for payment of bonuses and for such other fringe benefits as are paid to other
executive officers of the Company. Such fringe benefits take the form of medical
coverage, the aggregate value of which is estimated at approximately $5,440 per
annum. Pursuant to the employment agreement with Mr. Nimberg, on the date of the
Closing, Mr. Nimberg became entitled to borrow from the Company up to $250,000
(which amount has been decreased to $60,000 pursuant to an amendment to his
employment agreement), $60,000 of which has been borrowed to date, which sum,
with simple interest calculated on the basis of the annual rate of 9% (which
rate of interest prior to the amendment was 24% per annum), is to be repaid by
Mr. Nimberg to the Company through payroll deductions over seven years, interest
only being payable during the first two years. Further pursuant to the terms of
his employment agreement, Mr. Nimberg has agreed not to compete with the Company
during the term of his employment with the Company and for a three-year period
thereafter.
The agreement with each of Messrs. Zellermaier, Bader and Nimberg
provides that, if his employment is terminated by the Company for cause (as
defined in the agreement) or by voluntary
11
<PAGE> 16
unilateral decision by the employee without cause, then the employee is entitled
to his base salary under the agreement earned, accrued vacation, and
reimbursements of expenses, through the date of termination. In addition, the
agreement with each of Messrs. Zellermaier and Bader provides that, if his
employment is otherwise terminated, employee is entitled to receive, in one lump
sum payment, the employee's total compensation (base salary plus bonus) paid by
the Company to the employee for the six months prior to termination and all
applicable allowances and reimbursements to the date of termination.
INDEPENDENT AUDITORS
CHANGE IN ACCOUNTANTS
On September 5, 1997, the Company dismissed Coopers & Lybrand LLP
("Coopers & Lybrand") as the Company's independent auditors and retained
Cornick, Garber & Sandler, LLP as the Company's independent auditors for the
fiscal year ended December 31, 1997. The Company's decision to retain Cornick,
Garber & Sandler, LLP was approved by the Company's Board of Directors and the
Company's Audit Committee. In connection with the services rendered by Coopers &
Lybrand, the Company reported that for the fiscal years ended December 31, 1995,
December 31, 1996 and for the subsequent interim periods there were no
disagreements between the Company and Coopers & Lybrand on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Coopers & Lybrand, would have caused Coopers & Lybrand to make reference to the
subject matter of the disagreement. Further, the Company believes there are no
reportable events as defined by Item 304(a)(1)(iv)(B) of Regulation S-B.
Coopers & Lybrand's reports on the Company's financial statements for
the fiscal years ended 1996 and 1995 contained an explanatory paragraph to the
effect that the Company's ability to commence operations was dependent on the
Company obtaining adequate financial resources through a contemplated public
offering, or otherwise, which raised substantial doubts about its ability to
continue as a going concern.
A copy of Coopers & Lybrand's letter addressed to the U.S. Securities
and Exchange Commission was filed as an exhibit to the Company's Form 8-K filed
with the Commission on September 11, 1997.
PRESENCE OF AUDITORS AT MEETING
A representative of Cornick, Garber & Sandler, LLP is expected to be
present at the Annual Meeting, and will be provided the opportunity to make a
statement and be available to respond to appropriate questions.
12
<PAGE> 17
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES
The Board of Directors set the number of directors constituting the Board
of Directors at five directors. The persons named below, constituting all of the
incumbent directors, were designated by the Board of Directors as nominees for
election as directors to hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. Although
management does not anticipate that any nominee will be unable or unwilling to
serve as director, in the event of such an occurrence, proxies may be voted in
the discretion of the person named in the proxy for a substitute designated by
the Board of Directors, unless the Board of Directors determines to reduce the
number of directors constituting the Board of Directors.
Irwin Zellermaier
Gerald Nimberg
David Bader
Vincent J. Putignano
Brien G. Reidy
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
With respect to the election of directors, the five candidates receiving
the highest number of "for" votes shall be elected to the Company's Board of
Directors. An abstention will have the same effect as a vote withheld for the
election of directors, and, pursuant to New York corporate law, with respect to
a broker non-vote, the shares evidenced thereby will not be counted towards a
quorum and will have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES SET FORTH
HEREIN.
[This Space Intentionally Left Blank]
13
<PAGE> 18
PROPOSAL 2: RATIFICATION AND APPROVAL OF THE
1998 GENERAL CREDIT CORPORATION STOCK OPTION PLAN
Shareholders are being asked to consider the proposal to ratify and
approve the 1998 General Credit Corporation Stock Option Plan (the "Stock Option
Plan").
DESCRIPTION OF THE STOCK OPTION PLAN
The Stock Option Plan was unanimously approved by the Company's Board of
Directors in March 1998 to become effective upon shareholder approval, to
provide the Company with an effective means to attract, retain and motivate
persons affiliated with The Company. The Stock Option Plan is designed to comply
with the requirements of Section 16(b) the Exchange Act. A maximum of 500,000
shares of Common Stock (the "Option Shares") may be issued under the Stock
Option Plan. No options may be granted under the Plan after March 24, 2008.
The Stock Option Plan is to be administered by the Compensation Committee,
which, under the terms of the Stock Option Plan, must consist of at least two
"Non-Employee Directors within the meaning of Rule 16b-3 promulgated by the
Commission under the Exchange Act. The Committee has the authority to interpret
the provisions of the Stock Option Plan and to make all determinations deemed
necessary or advisable for its administration. If approved, Mr. Putignano and
Mr. Reidy, both members of the Compensation Committee, shall administer the
Stock Option Plan.
The Stock Option Plan provides for the issuance of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986 (the
"Code") and non-qualified stock options not intended to meet the requirements of
Section 422 of the Code. Incentive stock options may be granted to employees of
The Company and its subsidiaries, and non-qualified stock options may be granted
to employees, directors, independent contractors and agents of The Company and
its subsidiaries. Subject to the Stock Option Plan, the Committee determines the
persons to whom grants are made and the vesting, timing, amounts and other terms
of such grants. An optionee may not receive incentive stock options exercisable
in one calendar year for shares with a fair market value on the date of grant in
excess of $100,000. No quantity or dollar limitations apply to the grant of
non-qualified stock options.
The exercise price of options may not be less than the fair market value
of the Common Stock on the date of grant, except that the exercise price of any
incentive stock option granted to the holder of more than 10% of the outstanding
Common Stock may not be less than 110% of the fair market value of the Common
Stock on the date of grant. The term of each option may not exceed ten years,
except the term of any incentive stock option granted to the holder of more than
10% of the outstanding Common Stock may not exceed five years. The Stock Option
Plan sets forth additional provisions with respect to the exercise of options by
optionees upon the termination of their employment and upon their death.
The number of shares of Common Stock covered by outstanding options, the
number of shares of Common Stock available for issuance under the Stock Option
Plan, and the exercise price per share of outstanding options, are
proportionately adjusted for any increase or decrease in the number
14
<PAGE> 19
of issued shares of Common Stock resulting from a stock split or stock dividend.
In the event of a merger, sale of all or substantially all of the assets or
other "change in control" of the Company (as defined in the Stock Option Plan),
all stock options will become immediately exercisable.
The Compensation Committee may amend or terminate the Stock Option Plan,
except that shareholder approval is required to increase the number of shares of
Common Stock subject to the Stock Option Plan, to change the class of persons
eligible to participate in the Stock Option Plan, or to materially increase the
benefits accruing to participants under the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences
of participation in the 1998 Plan:
INCENTIVE OPTIONS
Under current law, an employee will not realize any taxable income upon
the grant or exercise of incentive options. If the employee disposes of the
Common Shares acquired upon the exercise of an incentive option at least two
years after the date the option was granted and at least one year after the date
the shares are issued or transferred to such person upon the exercise of an
option, the employee will realize capital gain (which may be mid-term or
long-term gain, depending on the holding period) in an amount equal to the
excess, if any, of the selling price for the Common Shares over the option
exercise price, and the Company will not be entitled to any tax deduction
resulting from the issuance or sale of the shares. If an employee disposes of
the Common Shares acquired upon the exercise of an incentive option prior to the
expiration of two years from the date the option was granted, or prior to the
expiration of one year from the date the Common Shares were transferred to such
employee, any gain realized will be taxable at such time as follows: (1) as
ordinary income to the extent of the difference between the option exercise
price and the lesser of (a) the fair market value of the Common Shares on the
date the option was exercised or (b) the amount realized on such disposition,
and (2) as capital gain to the extent of any excess, which gain shall be treated
as short-term, mid-term or long-term capital gain depending upon the employee's
holding period for the Common Shares at the time of disposition. In such case,
the Company may claim an income tax deduction (as compensation) for the amount
taxable to the employee as ordinary income.
In general, the amount by which the fair market value of the Common
Shares acquired upon the exercise of an incentive stock option exceeds the
exercise price will constitute an item of adjustment for purposes of determining
alternative minimum taxable income and under certain circumstances may be
subject, in the year in which the option is exercised, to the alternative
minimum tax.
If an individual uses Common Shares which such employee owns to pay, in
whole or in part, the exercise price for optioned shares, (a) the individual's
holding period for the newly issued shares of Common Shares equal in number to
the shares of old Common Shares (the "exchanged shares") which were surrendered
upon the exercise shall include the period during which the surrendered shares
were held, (b) the employee's basis in such exchanged shares will be the same as
the employee's basis in the surrendered shares and (c) no gain or loss will be
recognized by the employee on the exchange of the surrendered shares for the
exchanged shares. Further, the employee will have a zero basis in the additional
shares received over and above the exchanged shares. However, if an employee
tenders Common Shares acquired pursuant to the exercise of an incentive option
to pay all or part of the exercise price under an incentive stock option, such
tender will constitute a disposition of such previously held Common Shares for
purposes of the one-year (or two-year) holding period requirement applicable to
such incentive option and such tender may be treated as a taxable exchange.
NON-QUALIFIED OPTIONS
An individual will not recognize any income at the time a non-qualified
stock option is granted. Generally, individuals will recognize ordinary income
at the time of the exercise of a non-qualified option in a total amount equal
to: (1) in the case of options which the individual exercises by payment in
cash, the excess of the then fair market value of the shares acquired over the
exercise price and (2) in the case of options which an individual exercises by
tendering previously owned shares, the then fair market value of the number of
shares issued in excess of the number of shares surrendered upon such exercise.
15
<PAGE> 20
If a director, officer or ten-percent shareholder receives shares
pursuant to the exercise of a non-qualified option, pursuant to Section 83(c) of
the Code such individual does not recognize any income until the date on which
such individual can sell such shares at a profit without being subject to
liability under Section 16(b) of the Exchange Act. Alternatively, a director,
officer or principal shareholder who would not otherwise be subject to tax on
the value of such individual's shares as of the date the shares are transferred
to him or her can file, within 30 days after the shares are acquired by such
individual, a written election pursuant to Section 83(b) of the Code to be taxed
as of the date of acquisition.
All income realized upon the exercise of any non-qualified -stock
option will be taxed as ordinary income. The Company may claim an income tax
deduction for the amount taxable to an employee in the same year as those
amounts are taxable to the individual. Shares issued upon the exercise of a
non-qualified option are generally eligible for capital gain or loss treatment
upon any subsequent disposition. Generally, an individual's holding period will
commence from the date such shares are issued and such individual's basis in
such shares will equal their fair market value as of that date. (The holding
period of a director, officer or principal shareholder begins on the date on
which such person recognizes income with respect to such shares, and such
individual's basis in the shares will be equal to the greater of the then fair
market value of the shares or the amount paid for such shares.) If an individual
uses Common Shares that such individual owns to exercise a non-qualified option,
(a) the individual's holding period for the newly-issued shares equal in number
to the exchanged shares shall include the period during which the surrendered
shares were held, (b) the individual's basis in such exchanged shares will be
the same as such individual's basis in the surrendered shams, and (c) no pin or
loss will be recognized by the individual on the exchange of the surrendered
shares for the exchanged shares.
GENERAL
An employee will be subject to wage withholding on the amount of
ordinary income realized by such employee, as described above. The Company may
require that the employee make funds available to the Company to satisfy the
withholding requirements.
SECTION 28OG OF THE CODE
Section 280G of the Code provides that if an officer, shareholder or
highly compensated individual receives a payment which is in the nature of
compensation, and which is contingent upon, a change in control of the employer,
and such payment equals or exceeds three times his "base salary" (as hereinafter
defined), then any amount received in excess of base salary shall be considered
an "excess parachute payment." An individual's "base salary" is equal to such
person's average annual compensation over the five-year period (period of
employment, if shorter) ending with the close of the individual's taxable year
immediately preceding the taxable year in which the change in control occurs. If
the taxpayer establishes, by clear and convincing evidence, that an amount
received is reasonable compensation for past or future services, all or a
portion of such amount may be deemed not to be an excess parachute payment.
Under certain circumstances, options under the 1998 Plan could give rise to
excess parachute payments. In any such case, in addition to any income tax which
would otherwise be owed on such payment, the individual will be subject to an
excise tax equal to 20% of such excess payment and the Company will not be
entitled to any tax deduction to which it otherwise would have been entitled
with respect to such payment.
SECTION 162(m) OF THE CODE
Under Section 162(m) of the Code, publicly-held companies generally may
not deduct compensation that exceeds $1 million to any proxy-named executive
officer with respect to the taxable year. Compensation which is
performance-based (as defined in Section 162(m) and regulations thereunder),
however, is not counted as subject to the deductibility limitations of Section
162(m). Options granted under the 1998 Plan are intended to qualify as
performance-based under Section 162(m) and related regulations.
OPTIONS OUTSTANDING UNDER THE 1998 STOCK OPTION PLAN
As of the date of this Proxy Statement, no options have been granted under
the Stock Option Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the best interests of the Company
will be served by the Company implementing the Stock Option Plan. The Board
believes that awards made under the Stock Option Plan will enable the Company to
better compete for qualified personnel, to retain such personnel in the employ
of the Company, and to motivate such personnel and align their long-term
interests with those of the Company's Shareholders. To remain competitive in
attracting and retaining qualified personnel and to continue to provide such
personnel proper motivation and incentives, the Board believes that the proposal
to ratify and approve the Stock Option Plan should be approved.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO RATIFY AND APPROVE THE STOCK OPTION PLAN.
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Cornick, Garber & Sander, LLP, independent certified public
accountants, has been the Company's auditor since 1997 and has advised the
Company that it does not have any direct financial interest or indirect
financial interest in the Company. The Board of Directors, on the recommendation
of the Company's Audit Committee, has selected Cornick, Garber & Sandler, LLP
16
<PAGE> 21
as the Company's independent certified public accountants for the year ending
December 31, 1998, subject to the approval of the shareholders. One or more
representatives of Cornick, Garber & Sandler, LLP will be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
shareholders.
The Board of Directors recommends that you vote "FOR" the proposal to
ratify the selection of Cornick, Garber & Sandler, LLP as the Company's
independent certified public accountants for the fiscal year ending December 31,
1998.
OTHER INFORMATION
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors knows of no
business to be presented at the Annual Meeting other than as set forth in this
proxy statement. If other matters properly come before the meeting, the persons
named as proxies will vote on such matters in their discretion.
SHAREHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders' proposals intended to be presented at the 1999 Annual
Meeting must be received by the Company no later than January 7, 1999 for
inclusion in the Company's proxy statement and form of proxy for that meeting.
17
<PAGE> 22
FINANCIAL STATEMENTS
F-1
<PAGE> 23
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
F-2
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
GENERAL CREDIT CORPORATION
We have audited the accompanying consolidated balance sheet of
GENERAL CREDIT CORPORATION AND SUBSIDIARIES as at December 31, 1997 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
General Credit Corporation and Subsidiaries as at December 31, 1997, and the
consolidated results of their operations and their cash flows for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Cornick, Garber & Sandler, LLP
----------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
NEW YORK, NEW YORK
MARCH 25, 1998
F-3
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
General Credit Corporation:
We have audited the accompanying statements of operations, shareholders'
deficiency, and cash flows of General Credit Corporation for the year ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of operations and cash flows are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit of the statements of operations,
shareholders' deficiency, and cash flows provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, shareholder's deficiency, and
cash flows of General Credit Corporation for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's ability to commence
operations is dependent on obtaining adequate financial resources through a
contemplated public offering, or otherwise, which raises substantial doubts
about its ability to continue as a going concern. If unsuccessful, the Company
may be unable to continue in its present form. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
/s/ COOPERS & LYBRAND, LLP
Melville, New York
March 14, 1997
F-4
<PAGE> 26
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 1,794,338
Restricted cash (Notes 2 and 7) .................................................. 2,300,000
Receivables from customers and agents (Note 8 ) .................... $ 731,728
Less allowance for doubtful accounts ............................... 40,000 691,728
------------
Prepaid expenses and other current assets ........................................ 69,308
-----------
Total current asserts ..................................................... 4,855,374
Fixed assets, at cost, less accumulated depreciation
and amortization (Notes 3 and 7) ................................................. 171,903
Notes receivable from officer (Note 5) ............................................... 50,000
Goodwill and other intangibles, net (Note 2) ......................................... 5,103,017
Other assets ......................................................................... 80,018
-----------
Total ..................................................................... $10,260,312
===========
LIABILITIES
Current liabilities:
Notes payable (Note 7) ........................................................... $ 299,483
Accounts payable and accrued expenses ............................................ 400,588
-----------
Total current liabilities ................................................. 700,071
Long-term portion of notes payable ................................................... 2,622,738
Commitments and contingencies (Notes 5 and 11)
SHAREHOLDERS' EQUITY
Shareholders' equity:
Common shares, $.001 par value, 20,000,000 shares
authorized, 3,435,000 shares issued and outstanding .............$ 3,435
Additional paid-in capital ......................................... 7,742,093
Deficit ............................................................ 808,025) 6,937,503
-------------- -----------
Total .................................................................... $10,260,312
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 27
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
Fee income, net ................................. $ 2,412,672 $ --
----------- -----------
Selling, general and administrative expenses .... 1,976,743 103,325
Depreciation and amortization ................... 220,886 871
----------- ------------
2,197,629 (104,196)
----------- -----------
Income (loss) from operations ........ 215,043 (104,196)
Other income (expenses):
Interest expense, net ....................... 456,013 108,296
Forfeiture of deposit on acquisition (Note 4) -- 200,000
----------- -----------
Loss before extraordinary item ....... (240,970) (412,492)
Extraordinary item - early extinguishment
of debt (Note 7) ............................ (154,150) --
----------- -----------
Net loss ............................. $ (395,120) $ (412,492)
=========== ===========
Loss per share:
Loss before extraordinary item .............. $ (.10) $ (.23)
Extraordinary item .......................... (.06) --
----------- -----------
Net loss ............................. $ (.16) $ (.23)
=========== ===========
Weighted average number of common
shares outstanding (Note 2) ................. 2,474,041 1,758,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 28
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Total
Shareholders'
Additional Deferred Equity
COMMON STOCK Paid-in Offering (Capital
SHARES AMOUNT CAPITAL DEFICIT COSTS DEFICIENCY)
--------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 ....... 1,758,000 $ 1,758 $ 196 $ (413) $ (5,000) $ (3,459)
Options issued in connection
with bridge financing
(Note 7) ................... 10,980 10,980
Payments for offering costs .... (378,462) (378,462)
Net loss for the year ended
December 31, 1996 .......... (412,492) (412,492)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 ..... 1,758,000 1,758 11,176 (412,905) (383,462) (783,433)
Redemption of common
shares (Note 9) ............ (1,198,000) (1,198) (1,198)
Units issued in public offering,
net of costs (Note 9) ...... 2,700,000 2,700 7,156,567 383,462 7,542,729
Shares issued in connection
with acquisition (Note 4) .. 125,000 125 385,250 385,375
Shares issued in connection
with the prepayment of
debt (Note 7) .............. 50,000 50 154,100 154,150
Options issued to consultants
(Note 9) ................... 35,000 35,000
Net loss for the year ended
December 31, 1997 .......... (395,120) (395,120)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 ..... 3,435,000 $ 3,435 $ 7,742,093 $ (808,025) $ -- $ 6,937,503
=========== =========== =========== =========== =========== ===========
</TABLE>
The above amounts have been restated to give retroactive effect to the plan of
recapitalization (see Note 1).
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 29
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net loss $ (395,120) $ (412,492)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ...................................... 220,886 70,351
Issuance of stock options .......................................... 35,000 10,980
Issuance of common stock relating to prepayment of debt ............ 154,150 --
Bad debt expense ................................................... 40,000 --
Change in assets and liabilities, net of effects of
acquisition of businesses:
Receivables from customers and agents ........................... (731,728) --
Prepaid expenses ................................................ (69,308) --
Other assets .................................................... (72,296) (5,425)
Accounts payable and accrued expenses ........................... 129,743 270,845
----------- -----------
Net cash used for operating activities ........................ (688,673) (65,741)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets ................................................. (123,891) --
Payment for purchases of businesses ...................................... (4,609,500) --
Loans to officer ......................................................... (50,000)
----------- -----------
Net cash used for investing activities ........................ (4,783,391) --
----------- -----------
Cash flows from financing activities:
Borrowings under long-term and short-term debt ........................... 2,550,000 --
Repayments of long-term and short-term debt .............................. (7,779) --
Borrowings under bridge financing ........................................ 366,390 518,000
Repayments of bridge financing ........................................... (884,390)
Net proceeds from issuance of units in public offering (less
offering costs paid of $557,271 in 1997 and $378,462 in 1996) ......... 7,542,729 (378,462)
Redemption of common stock ............................................... (1,198) --
Debt issue costs.......................................................... -- (68,480)
Repayment of loan payable to officer and shareholder ..................... -- (7,150)
Cash restricted for debt payments ........................................ (2,300,000) --
----------- -----------
Net cash provided by financing activities ..................... 7,265,752 63,908
----------- -----------
Net increase (decrease) in cash and cash equivalents ......................... 1,793,688 (1,833)
Cash and cash equivalents, beginning of year ................................. 650 2,483
----------- -----------
Cash and cash equivalents, end of year ....................................... $ 1,794,338 $ 650
=========== ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of the financial statements
F-8
<PAGE> 30
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
--------- --------
<S> <C> <C>
Supplemental information:
Interest paid during the year.................................................... $ 427,338 $ --
--------- --------
Income taxes paid during the year ............................................... $ -- $ --
--------- --------
Supplemental schedule of noncash investing and financing
activities:
Common stock issued in connection with
acquisition of business ................................................... $ 385,375
---------
Common stock issued in connection with
prepayment of debt ........................................................ $ 154,150
---------
Notes issued in connection with acquisition
of business ............................................................... $ 380,000
---------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-9
<PAGE> 31
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
General Credit Corporation (the "Company"), was incorporated in
February 1995, for the purposes of seeking out business opportunities, including
acquisitions. On May 2, 1997, the Company emerged from the development stage by
acquiring the operations of New York Payroll Factors, Inc. ("NYPF") (see Notes 2
and 4). Prior to May 2, 1997, the Company's activities were limited to
administrative activities.
Under its original certificate of incorporation, the Company was
authorized to issue 200 shares of its no par value common stock. Pursuant to a
plan of recapitalization, effective April 24, 1996, the Company increased the
number of authorized shares to 20,000,000 shares with a $.001 per share par
value and effected a 8,790 for one stock split in the form of a stock dividend
to shareholders of record. The accompanying financial statements have been
retroactively adjusted to reflect the foregoing recapitalization.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND OPERATIONS
The consolidated financial statements include the accounts of General
Credit Corporation and its subsidiaries, all of which are wholly-owned. The
Company is engaged in providing working capital financing to its customers
through the discounted purchase of checks made payable to the Company's
customers and, to a lesser extent, the discounted purchase of credit card sales
slips. Gross proceeds from the purchase of these checks and credit card sales
slips, since the acquisition of NYPF on May 2, 1997, are estimated to be
approximately $220 million in checks and $835,000 in credit card slips. The
Company's customers comprise numerous small and medium sized labor intensive
garment contracting firms located in the New York metropolitan area and other
northern New Jersey areas. Revenues, which are comprised of the discounted
portion of checks and credit card sales slips purchased, are recognized when
payment is made.
FIXED ASSETS
Fixed assets are recorded at cost. Expenditures for additions and
betterments are capitalized and expenditures for maintenance and repairs are
charged to operations as incurred. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets
(vehicles, 3 years, equipment, furniture and fixtures, 7 years). Upon retirement
or disposal, the asset cost and related accumulated depreciation and
amortization are eliminated from the respective accounts and the resulting gain
or loss, if any, is included in the results of operations for the period.
F-10
<PAGE> 32
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
The net assets of businesses acquired are recorded at their fair value
at the acquisition date and any excess of acquisition costs over the value of
identifiable net assets acquired is recorded as goodwill which is being
amortized on a straight-line basis over twenty years. At December 31, 1997,
goodwill was $4,577,351, net of accumulated amortization of $152,340 for the
period from May 2, 1997 to December 31, 1997.
Amounts paid for covenants not-to-compete are stated at cost and are
amortized using the straight-line method over the non-compete period of five
years. At December 31, 1997, covenants not-to-compete were $525,666, net of
accumulated amortization of $56,334.
The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscontinued projected net cash flows for each related business. Based upon
its most recent analysis, the Company believes that no impairment of goodwill
exists at December 31, 1997.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, purchased
with original maturities of three months or less, to be cash equivalents. At
December 31, 1997, the Company had $2,300,000 in restricted cash invested in
short-term, highly liquid investments. These investments collateralize a portion
of the Company's indebtedness (see Note 7).
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist of accounts receivable and cash deposits.
Cash balances are held principally at one financial institution and may, at
times, exceed FDIC insured amounts.
F-11
<PAGE> 33
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK (CONTINUED)
The Company believes the concentration of credit risk with respect to
receivables from customers is limited due to the large number of customers
comprising the Company's customer base and the fact that no single customer
represents more than 5% of the total. The Company performs ongoing informal
background and financial evaluations of its customers and does not require
collateral. The Company's agency agreements (see Note 8), have generated
approximately 21.2% of its fee income in 1997. The loss of these arrangements
could have a significant impact on the Company's financial position and results
of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents and receivables are reflected in the
accompanying balance sheets at amounts considered by management to reasonably
approximate fair value. It is not practicable to assess the fair value of the
Company's 10%, 22% and 24% notes payable (see Note 7) because management
believes such debt is not readily marketable due to the nature of its incurrence
and the Company's lack of operating history prior to 1997.
USES OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ those estimates.
LOSS PER SHARE
Loss per share has been computed by dividing net losses by the weighted
average number of common shares outstanding. The effect of outstanding stock
options and warrants are not included as they would be anti-dilutive.
Retroactive restatement has been made to all share and per share
amounts for the recapitalization discussed in Note 1.
F-12
<PAGE> 34
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. FIXED ASSETS
Fixed assets consist of the following at December 31, 1997:
Furniture, fixtures and office equipment ............ $ 158,519
Vehicles ............................................ 23,371
-----------
Total .......................................... 181,890
Less accumulated depreciation and amortization ...... (9,987)
-----------
Net ............................................ $ 171,903
===========
Depreciation expense for the year ended December 31, 1997 was $9,987.
There was no depreciation expense for the year ended December 31, 1996.
4. ACQUISITIONS
NYPF
In 1996, the Company entered into a definitive agreement to acquire
NYPF and made non-refundable payments of $200,000. Since the acquisition did not
close by November 15, 1996, the closing date stipulated in the original
agreement, the deposit of $200,000 was expensed to operations during fiscal
1996. On January 13, 1997, the Company and NYPF entered into a new agreement to
acquire NYPF for $4,500,000 in cash and 125,000 shares of common stock. The
acquisition of NYPF was closed in May 1997 upon the conclusion of the public
offering (Note 9). The value assigned to the shares issued was $3.083 a share,
which equals their value in the public offering. This acquisition was treated as
a purchase for accounting purposes and the operations of NYPF have been included
in the consolidated statement of operations from May 2, 1997. The Company
recorded goodwill of $4,497,691 and a covenant not-to-compete of $350,000
relating to the NYPF acquisition.
ACE VENTURE, INC. ("ACE")
On September 30, 1997 the Company acquired the operations of Ace (an
exclusive sales agent of the Company) for $489,500 (which Includes legal costs
of $9,500). The purchase price was paid for by the Company by its issuance of
notes totalling $380,000 and cash of $109,500. The notes bear interest at 10% a
year and are payable in equal monthly installments of $7,040 for principal and
interest over 72 months to October 2003. This acquisition was treated as a
purchase for accounting purposes and the operations of Ace have been included in
the consolidated statement of operations from October 1, 1997. The Company
recorded goodwill of $232,000 and a covenant not-to-compete of $232,000 relating
to the Ace acquisition.
In addition, the Company entered into a ten year employment agreement
with the president of Ace at a base annual salary of $130,000, plus bonuses, if
certain sales volume is achieved. The base salary increases each year by 5% or
the increase in the consumer price index, whichever is greater.
F-13
<PAGE> 35
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
The following unaudited pro forma results of operations assume each of
these acquisitions occurred as of January 1, 1996:
DECEMBER 31,
------------------------
1997 1996
---------- ----------
Net revenue ........................ $3,500,387 $2,605,549
Net income ......................... 264,342 298,180
Earnings per share (diluted) ....... .10 .12
The information utilized above for NYPF is based upon its audited
financial statements for the year ended December 31, 1996 and unaudited
financial information for the period from January 1, 1997 to May 1, 1997. The
information for Ace is based upon unaudited information for the period
commencing March 1, 1996 (inception) through December 31, 1996 and for the
period from January 1, 1997 to September 30, 1997. Pro forma per share amounts
are based on pro forma net income divided by the sum of average shares
outstanding each year, plus the number of shares issued to one seller and the
number of shares and warrants issued in the initial public offering to generate
net cash proceeds equal to the cash purchase price. The above pro forma
information does not purport to be indicative of the results of operations that
would have occurred had the transaction taken place at the beginning of the
periods presented, nor is it indicative of the future results of operations.
5. NOTES RECEIVABLE OFFICER
On November 12, 1997 and December 29, 1997, the Company advanced
$20,000 and $30,000, respectively, to one of its officers. The advances are
evidenced by unsecured notes due three years after issuance and bear interest at
24% a year. Interest income on these notes was $400 in 1997. These advances are
in connection with this officer's employment agreement under which the Company
has agreed to lend up to $250,000 to him.
6. OTHER ASSETS
Other assets are comprised of:
DECEMBER 31,
-------------------------
1997 1996
---------- ----------
Deposits ................................$ 26,490 $ 4,603
Prepaid consulting fee (see Note 9) ..... 48,000 --
Other ................................... 5,528 159
---------- ----------
Total $ 80,018 $ 4,762
========== ==========
F-14
<PAGE> 36
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Notes payable are comprised of the following at December 31, 1997:
2% over prime rate note payable to a bank (A) .......... $ 250,000
24% note payable to a partnership originally
due June 1999 (B) ................................... 1,400,000
22% note payable to a partnership originally
due February 1998 (B) ............................... 900,000
10% notes payable relating to the
acquisition of Ace (see Note 4) due
October 2003. Monthly payments
of principal and interest total $7,040 .............. 372,221
-------------
Total 2,922,221
Less current maturities ................................. 299,483
-------------
Noncurrent portion of long-term debt .................... $ 2,622,738
=============
</TABLE>
F-15
<PAGE> 37
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. NOTES PAYABLE (CONTINUED)
Maturities of the noncurrent portion of long-term debt are as follows:
Year Ending December 31:
1999. . . . . . . . . . . . . . . . $ 54,664
2000. . . . . . . . . . . . . . . . 60,388
2001. . . . . . . . . . . . . . . . 2,366,712
2002. . . . . . . . . . . . . . . . 73,697
2003. . . . . . . . . . . . . . . . 67,277
------------
$ 2,622,738
============
(A) The Company has a $500,000 unsecured credit facility with a
bank, of which $250,000 is available for direct borrowings and
the balance can be borrowed against uncollected checks. The
note is currently being continuously renewed on a monthly
basis.
(B) A portion ($200,000) of the 24% notes is owed to the wife of
one of the Company's officers who is a partner in the
partnership. The notes are collateralized by receivables and
certain fixed assets and require the Company to maintain
collateral, in the form of checks or cash equal to the amount
of the loans. Interest on these notes was approximately
$242,000 in 1997.
In February 1998, the above 24% and 22% notes were combined
and an additional $300,000 was borrowed. The new note for
$2,600,000 is due in February 2001 and bears interest at 24% a
year, payable monthly. The loan has the same collateral
requirements as above and contains a covenant which limits
losses before depreciation expense and amortization of
goodwill to an amount not greater than $50,000 a year or in
any two consecutive quarters. In addition, there is a
prepayment penalty of $312,000 if the note is paid prior to
its due date.
During January and February 1997 and in 1996, the Company obtained
$66,390 and $518,000, respectively, of bridge financing to provide
interim working capital and pay for costs associated with the
public offering (see Note 9). These uncollateralized notes bore
interest at 12% a year and were paid upon closing of the public
offering. In addition, in 1996 certain bridge lenders received
options to purchase a total of 198,000 shares of the Company's
common stock at $1 per share for a term of one year from the
closing of the public offering. The options issued in connection
with the bridge financing were valued at approximately $11,000.
During February 1997, the Company borrowed $300,000 through the
issuance of notes to ten unrelated parties. These unsecured notes
bore interest at 18% a year and were paid upon closing of the
public offering. Interest was to be paid monthly commencing June 1,
1997 with the principal and all unpaid interest due on December 31,
2001. The notes contained prepayment clauses which were calculated
based on the provisions in the notes. The Company issued 50,000
shares of its common stock with a value (at the public offering
price per share of $3.083) totalling $154,150 to prepay the notes.
The $154,150 has been reflected in the consolidated statements of
operations as an extraordinary item for the early extinguishment of
debt.
F-16
<PAGE> 38
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
In addition to the employment contract discussed in Note 4, the Company
has employment contracts with its three executive officers that expire at
various dates through April 2007. The aggregate salary pursuant to these
contracts aggregates $365,000 a year excluding bonuses, fringe benefits and cost
of living increases. One of the officers is entitled to annual salary
adjustments for increases in the Consumer Price Index. These officers are
entitled to receive a lump sum payment equal to the employee's total
compensation paid for the six month period prior to termination if their
employment is terminated for other than cause or by their unilateral decision.
The Company is obligated under noncancelable real property operating
lease agreements. Minimum rents under these obligations are as follows:
Year Ending December 31:
1998 . . . . . . . . . . . .. . . . . . . . . . .$122,485
1999 . . . . . . . . . . . .. . . . . . . . . . . 132,245
2000 . . . . . . . . . . . .. . . . . . . . . . . 121,672
2001 . . . . . . . . . . . .. . . . . . . . . . . 45,516
2002 . . . . . . . . . . . .. . . . . . . . . . . 23,580
2003 . . . . . . . . . . . .. . . . . . . . . . . 3,667
These leases contain clauses with respect to related operating costs.
Rent expense was $56,977 and $-0- for fiscal 1997 and 1996, respectively.
The Company is contractually obligated pursuant to two agency
agreements with unrelated entities. These agreements provide that the entities
will refer certain check factoring customers to the Company for fees ranging
from 40% to 50% of the net fees revenues received. These agreements terminate in
January 2001. The Company makes noninterest bearing advances to these agents for
use in their check cashing activities. These advances are evidenced by notes and
are partially collateralized by personal assets of the agents; at December 31,
1997, such advances totaled approximately $253,000.
9. SHAREHOLDERS' EQUITY
COMMON STOCK REDEMPTION
In February 1997, the Company redeemed 1,198,000 common shares from its
shareholders for $1,198. The repurchased shares, which were cancelled, are
available for future issuance.
F-17
<PAGE> 39
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
PUBLIC OFFERING
In April 1997 the Company sold 900,000 units to the public for $10 per
unit. Each unit consists of three shares of common stock and six redeemable
common stock warrants. Each warrant entitles to holder to purchase one
additional share of common stock at an exercise price of $3.375 from the
effective date of the offering through April 24, 2002. Upon certain conditions,
the Company is entitled to call all or a portion of the warrants for a
redemption price of $.25 per warrant upon 30 days prior written notice to the
holders.
In connection with the offering, the Company granted the underwriter an
option to purchase up to 90,000 units at $16.50 a unit, exercisable during a
five-year period commencing on the effective date.
As additional compensation for the underwriter's services in connection
with the offering, the Company paid the underwriter a nonaccountable expense
allowance of 3% of the total purchase price and engaged the underwriter as a
financial advisor for a three-year period from the closing of the offering at a
total cost of $108,000 which was paid at closing.
The net proceeds to the Company after deducting the expenses of the
offering was $7,159,267.
NONQUALIFIED STOCK OPTIONS
On November 4, 1997, the Company issued to its three executive officers
options to purchase a total of 190,000 shares of the Company's stock. These
options are exercisable until November 3, 2000 at $2.125 per share. The Company
may receive income tax benefits for these options when they are exercised. Such
income tax benefits are credited to additional paid-in capital when realized. No
options have been exercised as of December 31, 1997.
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation," for stock options granted to employees, officers and directors
and, therefore, applies Accounting Principles Board Opinion No. 25. Accordingly,
no compensation cost has been recognized for the stock options granted. If the
Company had elected to recognize compensation cost for the nonqualified options
granted based upon their fair values at the grant date consistent with the
method of SFAS No. 123, the net loss and loss per share on a pro forma basis for
the year ended December 31, 1997 would be as follows:
Net loss:
As reported $ (395,120)
Pro forma $ (619,928)
Loss per share:
As reported $(.16)
Pro forma $(.25)
F-18
<PAGE> 40
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SHAREHOLDERS' EQUITY (CONTINUED)
NONQUALIFIED STOCK OPTIONS (CONTINUED)
The fair value of the Company's stock options used to compute the pro
forma net loss and net loss per share disclosures are their estimated present
values at grant date using the Black-Scholes option pricing model with the
following assumptions: expected volatility of 80.84%, risk free interest of
5.715% and an expected holding period of three years.
In addition, options to purchase a total of 30,000 shares of stock
were issued to three outside consultants in 1997 under the same terms described
above. The fair value of these options was $35,000 on the date of grant using
the Black-Scholes option pricing model utilizing the same assumptions described
above. This amount was charged to operations.
STOCK OPTION PLAN:
In March 1998, the Company adopted, subject to shareholder approval,
the 1998 Stock Option Plan ("Plan") which provides for the granting of options
to purchase up to 500,000 shares of common stock. The Plan provides for the
issuance of incentive stock options (as defined in the Internal Revenue Code)
and nonqualified options. The exercise price cannot be less than the fair market
value of the common stock on the date of grant, except options granted to the
holder of more than 10% of the outstanding common stock may not be less than
110% of the fair market value of the common stock on the date of grant. The term
of each option may not exceed ten years, except the term of incentive stock
options granted to a holder of more than 10% of the outstanding common stock may
not exceed five years. No options may be granted under the Plan after March 24,
2008. No options have been granted under this Plan.
10. INCOME TAXES
At December 31, the Company has net operating loss carryforwards of
approximately $702,000 for federal income tax purposes. These carryforwards
expire in 2011 and 2012. As a result of the public offering, in April 1996, the
amount of loss carryforwards which can be utilized to offset future taxable
income are limited to approximately $553,000 a year, plus any loss carryforwards
incurred after April 25, 1997.
While generally accepted accounting principles permit the recognition
of a deferred tax asset for the benefit of net operating loss carryforwards,
they also require the recognition of a valuation allowance against such asset
when it is more likely than not that such benefit will not be realized. As a
result of the Company's losses since inception and its relatively brief
operating history, it has recorded a valuation allowance equal to its net
deferred tax asset account.
F-19
<PAGE> 41
GENERAL CREDIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Deferred taxes relate to the following carryforwards and temporary
differences at December 31, 1997:
Deferred tax assets:
Net operating loss carryforwards $ 323,000
Allowance for doubtful accounts 18,000
------------
Total 341,000
------------
Less deferred tax liabilities:
Accelerated depreciation of property
and equipment 5,000
Accelerated amortization of intangible
assets 6,000
------------
Total 11,000
------------
Balance 330,000
Less valuation allowance 330,000
------------
Net deferred income tax assets after valuation
allowance $ --
============
11. PENDING CLAIM
A former bridge loan lender to the Company has claimed that he is owed
750,000 shares of the Company's stock and has threatened a lawsuit if his claim
is not satisfied. In management's opinion, this claim is without merit.
F-20
<PAGE> 42
Appendix A
GENERAL CREDIT CORPORATION
STOCK OPTION PLAN
ARTICLE I
Purpose
The purpose of the Stock Option Plan (the "Plan") is to enable General
Credit Corporation (the "Company") to offer employees, directors and consultants
of the Company and its subsidiaries, options to acquire equity interests in the
Company, thereby attracting, retaining and rewarding such persons, and
strengthening the mutuality of interests between such persons and the Company's
stockholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "AWARD" shall mean an award under the Plan of any Stock Option.
2.2 "BOARD" shall mean the Board of Directors of the Company.
2.3 "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following: (i) the Company sells substantially all of its assets to a purchaser
other than a Subsidiary, (ii) the sale of all outstanding shares of capital
stock of the Company for cash, or (iii) the merger or consolidation of the
Company in which the holders of the Company's outstanding capital stock
possessing the voting power (under ordinary circumstances) to elect the
Company's Board of Directors immediately prior to the merger do not continue to
own a majority of the capital stock possessing the voting (under ordinary
circumstances) to elect the surviving entity's Board of Directors immediately
after such transaction.
2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "COMMITTEE" shall mean the Compensation and Stock Option Committee
of the Board consisting of two or more Non-Employee Directors of the Company.
2.6 "COMMON STOCK" shall mean the Common Stock, par value $.0001 per
share, of the Company.
2.7 "CONSULTANT" shall mean any individual who is a consultant or
advisor to the Company or a Subsidiary.
2.8 "DIRECTOR" shall mean any individual who is a member of the Board
or member of the Committee of the Board of Directors of the Company or a
Subsidiary.
1
<PAGE> 43
2.9 "DISABILITY" shall mean a disability that results in the
termination of a Participant's employment with the Company or a Subsidiary, as
determined pursuant to standard Company procedures.
2.10 "FAIR MARKET VALUE" for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the average of the high and low sales
prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or traded on any such exchange, The Nasdaq Stock Market
("Nasdaq"), or, if such sales prices are not available, the average of the bid
and asked prices per share reported on Nasdaq, or, if such quotations are not
available, the fair market value as determined by the Board, which determination
shall be conclusive.
2.11 "INCENTIVE STOCK OPTION" shall mean any Stock Option awarded under
the Plan intended to be and designated as an n Incentive Stock Option" within
the meaning of Section 422 of the Code.
2.12 RESERVED.
2.13 "NON-EMPLOYEE DIRECTOR" shall have the meaning as set forth in
Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
2.14 "NON-QUALIFIED STOCK OPTION" shall mean any Stock Option awarded
under the Plan that is not an Incentive Stock Option.
2.15 "PARTICIPANT" shall mean any person, including an employee,
Director or Consultant to whom an Award has been made pursuant to the Plan.
2.16 "STOCK OPTION" or "OPTION" shall mean any option to purchase
shares of Common Stock granted pursuant to Article VI.
2.17 "SUBSIDIARY" shall mean any subsidiary of the Company, 51 or more
of the voting stock of which is owned, directly or indirectly, by the Company.
2.18 "TERMINATION FOR CAUSE" shall mean a Termination of Employment
that has been designated as a "termination for cause" pursuant to standard
Company procedures.
2.19 "TERMINATION OF EMPLOYMENT" shall mean a termination of employment
with, or service as a Director or Consultant with the Company and all of its
Subsidiaries for reasons other than a military or personal leave of absence
granted by the Company or any Subsidiary.
ARTICLE III
Administration
3.1 THE COMMITTEE. The Plan shall be administered and interpreted by
the Committee.
2
<PAGE> 44
3.2 AWARDS. The Committee shall have full authority to grant Stock
Options, pursuant to the terms of the Plan, to persons eligible under Article V.
In particular, the Committee shall have the authority:
(a) to select the persons to whom Stock Options may from time
to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options and Non- Qualified Stock Options, or any combination thereof, are to be
granted hereunder to one or more persons eligible to receive Awards under
Article V;
(c) to determine the number of shares of Common Stock to be
covered by each such Award granted hereunder; and
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder (including, but not
limited to, the option price, the term of the option, and any provision
affecting the exercisability or acceleration of, any Award.
3.3 GUIDELINES. Subject to Article VII hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall, from time to time, deem advisable;
to interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award granted in
the manner and to the extent it shall deem necessary to carry the Plan into
effect. Notwithstanding the foregoing, no action of the Committee under this
Section 3.3 shall impair the rights of any Participant without the Participant's
consent, unless otherwise required by law.
3.4 DECISIONS FINAL. Any decision, interpretation or other action made
or taken in good faith by the Committee arising out of or in connection with the
Plan shall be final, binding and conclusive on the Company, all Participants and
their respective heirs, executors, administrators, successors and assigns.
ARTICLE IV
Share Limitation
4.1 SHARES. The maximum aggregate number of shares of Common Stock
which may be issued under the Plan shall be 500,000 shares of Common Stock
(subject to any increase or decrease pursuant to Section 4.2), which may be
either authorized and unissued Common Stock or issued Common Stock reacquired by
the Company. If any Option granted, under the Plan shall expire, terminate or be
canceled for any reason without having been exercised in full, the number of
unpurchased shares shall again be available for the purposes of the Plan.
4.2 CHANGES. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a dividend or its equivalent which is
credited to a Participant or a regular cash dividend), stock split, or other
change in corporate structure affecting the Common Stock, such substitution or
adjustment shall be made in the maximum aggregate number of shares which may
3
<PAGE> 45
be issued under the Plan, in the number and option price of shares subject to
outstanding Options granted under the Plan as may be determined to be
appropriate by the Committee, in its sole discretion, provided that the number
of shares subject to any Award shall always be a whole number.
ARTICLE V
Eligibility
5.1 EMPLOYEES. Employees, Officers and other employees of the Company
and its Subsidiaries are eligible to be granted Awards under the Plan.
5.2 DIRECTORS AND CONSULTANTS. Directors and Consultants are eligible
to be granted Awards under the Plan, provided that Directors and Consultants who
are not employees of the Company or a Subsidiary may not be granted Incentive
Stock Options.
ARTICLE VI
Stock Options
6.1 OPTIONS. Each Stock Option granted under the Plan shall be either
an Incentive Stock Option or a Non-Qualified Stock Option.
6.2 GRANTS. The Committee shall have the authority to grant to any
person eligible under Article V one or more Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options. To the extent that
any Stock Option does not qualify as an Incentive Stock Option (whether because
of its provisions or the time or manner of its exercise or otherwise), such
Stock Option or the portion thereof which does not qualify as an Incentive Stock
Option shall constitute a separate Non-Qualified Stock Option.
6.3 INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422.
6.4 TERMS OF OPTIONS. Options granted under the Plan shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee
shall deem desirable:
(a) STOCK OPTION CONTRACT. Each Stock Option shall be
evidenced by, and subject to the terms of, a Stock Option Contract executed by
the Company and the Participant. The Stock option Contract shall specify whether
the Option is an Incentive Stock Option or a Non-Qualified Stock Option, the
number of shares of Common Stock subject to the Stock Option, the option price,
the option term, and the other terms and conditions applicable to the Stock
Option.
4
<PAGE> 46
(b) OPTION PRICE. Subject to section (1) below, the option
price per share of Common Stock purchasable upon exercise of a Stock Option
shall be determined by the Committee at the time of grant but shall be not less
than 100% of the Fair Market Value of the Common Stock on the date of grant if
the Stock Option is intended to be an Incentive Stock Option.
(c) OPTION TERM. Subject to section (1) below, the term of
each Stock Option shall be fixed by the Committee, but no Stock Option shall be
exercisable more than ten years after the date it is granted.
(d) EXERCISABILITY. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at the time of grant; provided, however, that the Committee may
waive any installment exercise or waiting period provisions, in whole or in
part, at any time after the date of grant, based on such factors as the
Committee shall deem appropriate in its sole discretion.
(e) METHOD OF EXERCISE. Subject to such installment exercise
and waiting period provisions as may be imposed by the Committee, Stock Options
may be exercised in whole or in part at any time during the option term by
giving written notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased and the option price therefor. The notice of
exercise shall be accompanied by payment in full of the option price in such
form as the Committee may accept and, if requested, by the representation
described in Section 9.2. The option price may be paid in cash or check
acceptable to the Company or by any other consideration as the Committee deems
acceptable. Unless otherwise determined by the Committee in its sole discretion
at or after grant, payment in full or in part may be made in the form of Common
Stock duly owned by the Participant (and for which the Participant has good
title free and clear of any liens and encumbrances), based on the Fair Market
Value of the Common Stock on the last trading date preceding payment. Upon
payment in full of the option price, as provided herein, a stock certificate or
stock certificates representing the number of shares of Common Stock to which
the Participant is entitled shall be issued and delivered to the Participant. A
Participant shall not be deemed to be the holder of Common Stock, or to have the
rights of a holder of Common Stock, with respect to shares subject to the
Option, unless and until a stock certificate or stock certificates representing
such shares of Common Stock are issued to such Participant.
(f) DEATH. If a Participant's association with the Company or
a Subsidiary terminates by reason of death, unless otherwise determined by the
Committee at the time of grant, any Stock Option held by such Participant which
was exercisable at the date of death may be exercised by the legal
representative of the Participant's estate at any time or times during the
period beginning on the date of death and ending one year after the date of
death or until the expiration of the stated term of such Stock Option, whichever
period is shorter, and any Stock Option not exercisable at the date of death
shall be forfeited.
(g) DISABILITY. If a Participant's association with the
Company or a Subsidiary terminates by reason of Disability, unless otherwise
determined by-the Committee at the time of grant, any Stock Option held by such
Participant which was exercisable on the date of such Termination of Employment
may thereafter be exercised by the Participant at any time or times during the
period beginning on the date of such termination and ending one year after the
date of such termination or until the expiration of the stated term of such
Stock Option, whichever period is shorter, and any Stock Option not exercisable
on the date of such Termination of Employment
5
<PAGE> 47
shall be forfeited. If an Incentive Stock Option is exercised after the
expiration of the exercise period that applies for purposes cf Section 422 of
the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
option.
(h) TERMINATION OF EMPLOYMENT. In the event of a Termination
of Employment by reason of retirement or for any reason other than death,
Disability, Termination for Cause or in accordance with paragraph (k) below,
unless otherwise determined by the Committee at the time of grant, any Stock
Option held by such Participant which was exercisable on the date of such
Termination of Employment may be exercised by the Participant at any time or
times during the period beginning on the date of such Termination of Employment
and ending one month after such date or until the expiration of the stated term
of such Stock Option, whichever period is shorter, and any Stock Option not
exercisable on the date of such Termination of Employment shall be forfeited.
(i) TERMINATION FOR CAUSE. In the event of a Termination for
Cause, any Stock Option held by the Participant which was not exercised prior to
the date of such Termination for Cause shall be forfeited.
(j) CHANGE OF CONTROL. In the event of a Change of Control,
all outstanding Stock Options shall immediately become fully exercisable, and
upon payment by the Participant of the option price (and, if requested, delivery
of the representation described in Section 9.2), a stock certificate or
certificates representing the Common Stock covered thereby shall be issued and
delivered to the Participant.
(k) TERMINATION IN CONNECTION WITH CHANGE OF CONTROL. In the
event of a Termination of Employment (i) by the Company or any surviving or
successor entity in connection with or within six months after a Change of
Control (other than a Termination for Cause) or (ii) by any Participant within
six months after a Change of Control as a result of any material adverse change
in the compensation or employment responsibilities of such Participant, all
outstanding Stock Options held by the terminated Participant shall become fully
exercisable, and upon payment by the Participant of the option price (and, if
requested, delivery of the representation described in Section 9.2), a stock
certificate or certificates representing the Common Stock covered thereby shall
be issued and delivered to the Participant.
(l) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that
the aggregate Fair Market Value (determined as of the date of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by the Participant during any calendar year under the Plan and/or
any other stock option plan of the Company or any subsidiary or parent
corporation (within the meaning of Section 424 of the Code) exceeds $100,000,
such Options shall be treated as Options which are not Incentive Stock Options.
Should the foregoing provisions not be necessary in order for
the Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the stockholders of the
Company.
(m) TEN-PERCENT STOCKHOLDER RULE. Notwithstanding any other
provision of the Plan to the contrary, no Incentive Stock Option shall be
granted to any person who, immediately prior to the grant, owns stock possessing
more than ten percent of the total combined voting power of all
6
<PAGE> 48
classes of stock of the Company, unless the option price is at least 110% of the
Fair Market Value of the Common Stock on the date of grant and the Option, by
its terms, expires no later than five years after the date of grant.
ARTICLE VII
Termination or Amendment
7.1 TERMINATION OR AMENDMENT OF THE PLAN. The Committee may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of a Participant with respect to
Awards granted prior to such amendment, discontinuance or termination, may not
be impaired without the consent of such Participant and, provided further,
without the approval of the Company's stockholders, no amendment may be made
that would (i) materially increase the aggregate number of shares of Common
Stock that may be issued under the Plan (except by operation of Section 4.2);
(ii) materially modify the requirements as to eligibility to participate in the
Plan; or (iii) materially increase the benefits accruing to Participants.
7.2 AMENDMENT OF AWARDS. The Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but, subject to Article IV,
no such amendment or other action by the Committee shall impair the rights of
any holder without the holder's consent. The Committee may also substitute new
Stock Options for previously granted Stock Options having higher option prices.
ARTICLE VIII
Unfunded Plan
8.1 UNFUNDED STATUS OF PLAN. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.
ARTICLE IX
General Provisions
9.1 NON-ASSIGNMENT. Except as otherwise provided in the Plan or under
applicable law, Awards made hereunder and the rights and privileges conferred
thereby shall not be sold, transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of such Award, right or privilege
contrary to the provisions hereof, or upon the levy of any attachment or similar
process thereon, such Award and the rights and privileges conferred hereby shall
immediately terminate and the Award shall immediately be forfeited to the
Company.
7
<PAGE> 49
9.2 LEGEND. The Committee may require each person acquiring shares
pursuant to an Award under the Plan to represent to the Company in writing that
the Participant is acquiring the shares without a view to distribution thereof.
- -The stock certificates representing such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange or
stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
9.3 OTHER PLANS. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
9.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the grant of any Award
hereunder shall give any Participant or other employee any right with respect to
continuance of employment by the Company or any Subsidiary, nor shall there be a
limitation in any way on the right of the Company or any Subsidiary by which a
Participant is employed to terminate such Participant's employment at any time.
Neither the Plan nor the grant of any Award hereunder shall give any Director or
Consultant any right with respect to continued service as a director or
consultant, nor shall the Plan impose any limitation on the right of the Company
to terminate a Consultant's services at any time or constitute evidence of any
agreement or understanding by the Company's stockholders that the Company will
nominate any director for reelection.
9.5 WITHHOLDING OF TAXES. The Company shall have the right to reduce the
number of shares of Common Stock otherwise deliverable pursuant to the Plan by
an amount that would have a Fair Market Value equal to the amount of all
Federal, state and local taxes required to be withheld, or to deduct the amount
of such taxes from any cash payment otherwise to be made to the Participant. In
connection with such withholding, the Committee may make such arrangements are
consistent with the Plan as it may deem appropriate.
9.6 LISTING AND OTHER CONDITIONS.
(a) If the Common Stock is listed on a national securities
exchange, the issuance of any shares of Common Stock pursuant to an Award shall
be conditioned upon such shares being listed on such exchange. The Company SHALL
HAVE NO obligation to issue such shares unless and until such shares are so
listed, and the right to exercise any Option shall be suspended until such
listing has been effected.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock pursuant to an Award
is or may in the circumstances be unlawful or result in the imposition of excise
taxes under the statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make such sale or delivery, or to make
any application or to effect or to maintain any qualification or registration
under the Securities
8
<PAGE> 50
Act of 1933, as amended, or otherwise with respect to shares of Common Stock or
Awards, and the right to exercise any Option shall be suspended until, in the
opinion of such counsel, such sale or delivery hall be lawful or shall not
result in the imposition of excise taxes.
(c) Upon termination of any period of suspension under this
Section 9.6, any Award affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available during
the period of such suspension, but no such suspension shall extend the term of
any Option.
9.7 GOVERNING LAW. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of New
York.
9.8 CONSTRUCTION. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.9 LIABILITY OF THE BOARD AND THE COMMITTEE. No member of the Board or
the Committee nor any employee of the Company or any of its subsidiaries shall
be liable for any act or action hereunder, whether of omission or commission, by
any other member or employee or by any agent to whom duties in connection with
the administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself.
9.10 OTHER BENEFITS. No payment pursuant to an Award under the Plan
shall be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Subsidiary nor affect any benefits under
any other benefit plan now or hereafter in effect under which the availability
or amount of benefits is related to the level of compensation.
9.11 COSTS. The Company shall bear all expenses incurred in
administering the Plan, including expenses of issuing Common Stock upon the
exercise of Options granted.
9.12 SEVERABILITY. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
9.13 SUCCESSORS. The Plan shall be binding upon and inure to the
benefit of any successor or successors of the Company.
9.14 HEADINGS. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.
9
<PAGE> 51
ARTICLE X
Effective Date of Plan
10. 1 The Plan shall be effective as of the date of its approval by the
Company's stockholders.
ARTICLE XI
Term of Plan
11.1 No Stock Option shall be granted pursuant to the Plan on or after
the tenth anniversary of its approval by the Company's stockholders, but Awards
granted prior to such tenth anniversary may extend beyond that date.
10
<PAGE> 52
Appendix B
------------------
PROXY
------------------
General Credit Corporation
370 Lexington Avenue, Suite 2000
New York, New York 10017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Irwin Zellermaier, as proxy of the
undersigned, with the power to appoint his substitute, and hereby authorizes him
to vote as designated hereon, all the shares of Common Stock, par value $.001
per share, of General Credit Corporation (the "Company") held of record by the
undersigned at the close of business on May 6, 1998, at the Annual Meeting of
Shareholders to be held on June 19, 1998, and at any adjournment or adjournments
of such meeting, and, in his discretion, to vote such shares upon such other
business as may properly come before the meeting.
WHEN PROPERLY EXECUTED AND RETURNED, THIS PROXY WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES.
PLEASE COMPLETE, SIGN, AND DATE THIS PROXY ON THE REVERSE SIDE, AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
1. Election of Directors
[ ] FOR each nominee listed (except as indicated) [ ] WITHHOLD AUTHORITY
to vote for all nominees listed:
Irwin Zellermaier, Gerald Nimberg, David Bader, Vincent J. Putignano,
and Brien G. Reidy
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided above.)
2. 1998 Stock Option Plan. To approve the 1998 General Credit Corporation
Stock Option Plan.
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
3. Ratification of Independent Auditors. To ratify the action of the Board of
Directors in selecting Cornick, Garber & Sandler, LLP as independent auditors of
the Company for the fiscal year ending December 31, 1998; and
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
4. Other Business. To transact such other business as may properly come before
the Annual Meeting.
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] ABSTAIN
The undersigned acknowledges receipt of the
accompanying Notice of Annual Meeting of
Shareholders and Information Statement for
the June 19, 1998 meeting.
Dated: , 1998
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
---------------------------------------
(Please sign exactly as name or names appear
hereon. Full title of one signing in
representative capacity should be clearly
designated after signature. Names of all
joint holders should be written even if
signed by only one.)
