<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, For Use of the
[ ] Definitive proxy statement Commission only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
MEGO FINANCIAL CORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MEGO FINANCIAL CORP.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
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(4) Date Filed:
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<PAGE> 2
MEGO FINANCIAL CORP.
4310 PARADISE ROAD, LAS VEGAS, NEVADA 89109
-------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 2, 1999
-------------------------------------------------
To the Shareholders of Mego Financial Corp.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Mego Financial Corp., a New York corporation (the
"Company"), will be held at the offices of the law firm of Greenberg Traurig,
P.A., Met Life Building, 200 Park Avenue, New York, New York 10166, on Thursday,
September 2, 1999, at 10:00 a.m., local time, for the following purposes:
(1) To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation in order to effect a one-for-six
reverse stock split of the Company's outstanding shares of
Common Stock, par value $.01 per share; and
(2) To consider and take action upon such other business as may
properly come before the Special Meeting and any and all
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on August 6,
1999 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Special Meeting and any adjournments or postponements
thereof. The transfer books of the Company will not be closed.
Whether or not you expect to be present at the Special Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed pre-addressed envelope. No postage is required if mailed in the United
States.
By Order of the Board of Directors
JON A. JOSEPH
Vice President, General Counsel
and Secretary
August __, 1999
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE> 3
MEGO FINANCIAL CORP.
4310 PARADISE ROAD
LAS VEGAS, NEVADA 89109
-------------------------------------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
-------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Mego Financial Corp., a New York corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.01 per share (the "Common Stock" or "Common Shares"), to be voted at the
Company's Special Meeting of Shareholders (the "Special Meeting") to be held at
the offices of the law firm of Greenberg Traurig, P.A., Met Life Building, 200
Park Avenue, New York, New York 10166, on Thursday, September 2, 1999, at 10:00
a.m., local time, and at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Special Meeting of
Shareholders. Any shareholder giving such a proxy may revoke it by written
notice to the Secretary of the Company at the above address at any time before
it is exercised. Attendance at the Special Meeting will not have the effect of
revoking the proxy unless such written notice is given, or unless the
shareholder votes by ballot at the meeting.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is August __, 1999. The Company's
principal executive offices are located at 4310 Paradise Road, Las Vegas, Nevada
89109 and its telephone number is (702) 737-3700.
PURPOSES OF THE MEETING
At the Special Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) A proposal to amend the Company's Certificate of
Incorporation, as amended and restated (the "Certificate of
Incorporation") in order to effect a one-for-six reverse stock
split of the Company's outstanding Common Shares; and
(2) To transact such other business as may properly come before
the Special Meeting, including any adjournments or
postponements thereof.
VOTING SECURITIES
Holders of record of shares of the Company's Common Stock at the close
of business on August 6, 1999 (the "Record Date") are entitled to notice of and
to vote at the Special Meeting. Each Common Share is entitled to one vote upon
all matters to be acted upon at the Special Meeting. The presence, in person or
by proxy, of the holders of shares representing a majority vote of the
outstanding Common Shares will constitute a quorum. On August 6, 1999, an
aggregate of 21,009,506 Common Shares were issued and outstanding.
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Abstentions will be considered as shares present and entitled to vote
at the Special Meeting for purposes of determining the outcome of any matter
submitted to the shareholders for a vote, but will not be counted as votes cast
"for" or "against" any matter. Shares referred to as "broker or nominee
non-votes" (shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote and the
broker or nominee does not have discretionary voting power on a particular
matter) will be treated as shares that are present and entitled to vote at the
Special Meeting for purposes of determining the presence of a quorum. For
purposes of determining the outcome of any matter as to which the proxies
reflect broker or nominee non-votes, shares represented by such proxies will be
treated as not present and not entitled to vote on that subject matter and
therefor would not be considered as shares entitled to vote on that subject
matter and would not be considered when counting votes cast on the matter.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. If you attend the Special Meeting, you may vote by ballot at the
Special Meeting, thereby canceling any proxy previously given.
If the enclosed proxy is properly signed, dated and returned, the
shares represented thereby will be voted in accordance with the instructions
thereon. If no instructions are indicated, the shares represented thereby will
be voted FOR the proposal to amend the Company's Certificate of Incorporation in
order to effect a one-for-six reverse stock split of the Company's outstanding
Common Shares.
[The remainder of this page has been intentionally left blank.]
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<PAGE> 5
SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of Common Shares by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding Common
Shares, (ii) each director of the Company, (iii) the Company's chief executive
officer and each of the four other executive officers whose annual salary and
bonus during the Company's fiscal year ended August 31, 1998 exceeded $100,000,
and (iv) all directors and executive officers of the Company as a group. Unless
otherwise noted, the Company believes that all persons named in the table have
sole voting and investment power with respect to all Common Shares beneficially
owned by them.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP OWNERSHIP
- ---------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Robert Nederlander(2)......................................................... 2,039,352 9.7%
Eugene I. Schuster and Growth Realty, Inc. (GRI)(3)........................... 1,505,038 7.2%
Jerome J. Cohen(4)............................................................ 1,104,464 5.3%
Herbert B. Hirsch(5).......................................................... 1,623,464 7.7%
Don A. Mayerson(6)............................................................ 829,555 3.9%
John E. McConnaughy, Jr.(7)................................................... 594,077 2.8%
Wilbur L. Ross, Jr.(8) ....................................................... 1,000 *
Friedman Billings Ramsey Group, Inc. and affiliates(9)........................ 3,216,323 15.3%
All Officers and Directors as a Group (9 persons)(10)......................... 7,720,950 36.7%
</TABLE>
- -------------------------
* Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the Record Date upon the
exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options and warrants that are
held by such person (but not those held by any other person) and that are
exercisable within 60 days from the applicable date have been exercised.
(2) 810 Seventh Avenue, 21st Floor, New York, New York 10019. Includes
250,000 shares held by an affiliate of Mr. Nederlander and 2,500 shares
issuable under an option granted pursuant to the Company's Stock Option
Plan. Does not include 100,000 shares of common stock owned by the Robert
E. Nederlander Foundation, an entity organized and operated exclusively
for charitable purposes (the "Foundation"), of which Mr. Nederlander is
President. Mr. Nederlander disclaims beneficial ownership of the shares
owned by the Foundation.
(3) 321 Fisher Building, Detroit, Michigan 48202. Consists of (i) 1,269,038
shares held of record by GRI, a wholly-owned subsidiary of Venture
Funding, Ltd. of which Mr. Schuster is a principal shareholder, Director
and Chief Executive Officer, (ii) 235,000 shares held of record by Growth
Realty Holdings L.L.C., a limited liability corporation owned by Mr.
Schuster, GRI and Mr. Schuster's three children, and (iii) 1,000 shares
issuable under an option granted pursuant to the Company's Stock Option
Plan.
(4) 1125 N. E. 125th Street, Suite 206, North Miami, Florida 33161. Includes
2,500 shares issuable under an option granted pursuant to the Company's
Stock Option Plan. Excludes 93,503 shares owned by Mr. Cohen's spouse and
500,000 shares owned by a trust for the benefit of his children over
which Mr. Cohen does not have any investment or voting power, as to which
he disclaims beneficial ownership. Also excludes 30,000 shares of common
stock owned by the Rita and Jerome J. Cohen Foundation, Inc., an entity
organized and operated exclusively for charitable purposes (the "Cohen
Foundation"), of which
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Mr. Cohen is President. Mr. Cohen disclaims beneficial ownership of the
shares owned by the Cohen Foundation.
(5) 230 East Flamingo Road, Las Vegas, Nevada 89109. Includes 1,000 shares
issuable under an option granted pursuant to the Company's Stock Option
Plan.
(6) 1125 N. E. 125th Street, Suite 206, North Miami, Florida 33161. Includes
1,000 shares issuable under an option granted pursuant to the Company's
Stock Option Plan. Mr. Mayerson retired from the Company as of December
31, 1998.
(7) 1011 High Ridge Road, Stamford, Connecticut 06905. Includes 1,000 shares
issuable under an option granted pursuant to the Company's Stock Option
Plan. Excludes 3,000 shares owned by a member of Mr. McConnaughy's
family, as to which Mr. McConnaughy does not have any investment or
voting power, and as to which he disclaims beneficial ownership.
(8) 1251 Avenue of the Americas, 51st Floor, New York, New York 10020.
Consists of 1,000 shares issuable under an option granted pursuant to the
Company's Stock Option Plan. Excludes 15,000 shares owned by a member of
Mr. Ross' family and 250,000 shares owned by Rothschild, Inc., of which
Mr. Ross is a Managing Director, over which Mr. Ross does not have any
investment or voting power, and as to which he disclaims beneficial
ownership.
(9) 1001 19th Street North, Arlington, VA. 22209. Based upon a Schedule 13G
dated July 13, 1998, as amended, filed jointly by Friedman Billings
Ramsey Group, Inc., Friedman Billings Ramsey Group, Inc. Voting Trust,
Eric F. Billings, Emanuel J. Friedman and W. Russell Ramsey with the
Securities and Exchange Commission. Consists of 3,156,323 shares owned by
Friedman Billings Ramsey Group, Inc. and 60,000 shares owned personally
by Emanuel J. Friedman. The Company has been advised that Emanuel J.
Friedman, Eric F. Billings and W. Russell Ramsey are each control persons
with respect to Friedman Billings Ramsey Group, Inc. and are the sole
voting trustees of the Friedman Billings Ramsey Group, Inc. Voting Trust,
which has sole discretion to vote approximately 89.1% of the voting power
of Friedman Billings Ramsey Group, Inc.
(10) See Notes (2) - (8). Also includes 16,000 and 8,000 shares, respectively,
issuable under options granted to Jon A. Joseph and Charles Baltuskonis
pursuant to the Company's Stock Option Plan.
4
<PAGE> 7
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE
OUTSTANDING COMMON SHARES
GENERAL
The Board of Directors of the Company has unanimously adopted a
resolution approving, and recommending to the Company's shareholders for their
approval, an amendment to Article THIRD of the Company's Certificate of
Incorporation authorizing a one-for-six reverse stock split of the Company's
outstanding Common Shares (the "Reverse Stock Split"). The form of the proposed
amendment is annexed to this Proxy Statement as Annex A (the "Reverse Stock
Split Amendment"). The effect of the proposed Reverse Stock Split upon holders
of the Common Shares will be that the total number of Common Shares held by each
shareholder will be automatically converted into a number of whole Common Shares
(the "Post-Split Common Shares") equal to the number of Common Shares owned
immediately prior to the Reverse Stock Split divided by six, as adjusted, as
described below, for any fractional shares.
REASONS FOR THE REVERSE STOCK SPLIT AMENDMENT
The Company's Common Shares are currently listed on the Nasdaq National
Market system (the "Nasdaq NMS"). The Company has been advised by Nasdaq that
the continued listing requirements of the Nasdaq NMS requires, among other
things, that the Common Shares maintain a closing bid price in excess of $1.00.
As of the date of this Proxy Statement, the Company is not in compliance with
this requirement. The Company has been further advised by the Nasdaq NMS that it
is requiring the Company to be in compliance with the minimum bid price
requirement by September 3, 1999. In the event that the Common Shares do not
satisfy the $1.00 minimum bid price, they will be subject to delisting from the
Nasdaq NMS.
The Board of Directors has determined that continued listing of the
Common Shares on the Nasdaq NMS is in the best interests of the Company's
shareholders. If the Common Shares were delisted from the Nasdaq NMS system,
trading, if any, would thereafter be conducted on either the Nasdaq SmallCap
Market system (the "Nasdaq SmallCap Market") or the over-the-counter market on
an electronic bulletin board (commonly referred to as the "pink sheets")
established for securities that do not meet the Nasdaq NMS or Nasdaq SmallCap
Market inclusion/maintenance requirements. As with the Nasdaq NMS, one of the
maintenance requirements of the Nasdaq SmallCap Market is that securities
maintain a minimum bid price of $1.00. Accordingly, in the event that the
Company's Common Shares do not satisfy the $1.00 minimum bid price required by
the Nasdaq NMS, the Common Shares may not be eligible for inclusion on the
Nasdaq SmallCap Market. The Company's Board of Directors believes that a
delisting from the Nasdaq NMS could, among other things, decrease the liquidity
of the outstanding Common Shares and consequently, reduce the trading price and
increase the transaction costs of trading such shares.
The Board of Directors believes that if the Reverse Stock Split is
approved by shareholders and thereafter effected, the bid price of the Common
Shares will likely increase over the $1.00 minimum bid price requirement thereby
permitting the Company to continue to list the Common Shares on the Nasdaq NMS.
There can be no assurance, however, that the market price of the Common Shares
will rise in proportion to the reduction in the number of outstanding shares
resulting from the Reverse Stock Split, that the market price of the Post-Split
Common Shares can be maintained above $1.00 or that the Common Shares would not
be delisted from the Nasdaq NMS for other reasons.
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<PAGE> 8
POTENTIAL EFFECTS OF THE REVERSE STOCK SPLIT
Pursuant to the Reverse Stock Split, each holder of six shares of
Common Stock, par value $.01 per share ("Old Common Shares"), immediately prior
to the effectiveness of the Reverse Stock Split would become the holder of one
share of Common Stock, par value $.01 per share ("New Common Shares"), after
consummation of the Reverse Stock Split.
Although the Reverse Stock Split will not, by itself, impact the
Company's assets or prospects, the Reverse Stock Split could result in a
decrease in the aggregate market value of the Company's equity capital. The
Board of Directors believes that this risk is outweighed by the benefits of the
continued listing of the Common Shares on the Nasdaq NMS.
If approved, the Reverse Stock Split will result in some shareholders
owning "odd-lots" of less than 100 Common Shares. Brokerage commissions and
other costs of transactions in odd-lots are generally somewhat higher than the
costs of transactions in "round-lots" of even multiples of 100 shares.
OUTSTANDING COMMON SHARES
The Company is currently authorized to issue a maximum of 50,000,000
Common Shares. As of the date of this Proxy Statement, there were 21,009,506
Common Shares outstanding. Although the number of authorized Common Shares will
not change as a result of the Reverse Stock Split, the number of outstanding
shares will be reduced to a number that will be approximately equal to (i) the
number of Common Shares outstanding immediately prior to the effectiveness of
the Reverse Stock Split, divided by (ii) six (6). In addition, the Company has
reserved approximately 868,500 Common Shares for issuance upon exercise of
outstanding options, warrants and other convertible securities and, upon the
effectiveness of the Reverse Stock Split, the exercise price and/or conversion
rate of such instrument will be proportionately adjusted to give effect to the
Reverse Stock Split.
With the exception of the number of outstanding shares, the rights and
preferences of the Common Shares prior and subsequent to the Reverse Stock Split
will remain the same. After the effectiveness of the Reverse Stock Split, it is
not anticipated that the financial condition of the Company, the percentage
ownership of management, the number of the Company's shareholders, or any aspect
of the Company's business would materially change as a result of the Reverse
Stock Split.
The Common Shares are currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The proposed Reverse Stock Split will not affect the
registration of the Common Shares under the Exchange Act.
INCREASE OF COMMON SHARES AVAILABLE FOR FUTURE ISSUANCE
As a result of the Reverse Stock Split, there will be a reduction in
the number of outstanding Common Shares and an associated increase in the number
of authorized shares which would be unissued and available for future issuance
after the Reverse Stock Split (the "Increased Available Shares"). The Increased
Available Shares could be used for any proper corporate purpose approved by the
Board of Directors of the Company including, among others, future financing
transactions.
Because the Reverse Stock Split will create the Increased Available
Shares, the Reverse Stock Split may be construed as having an anti-takeover
effect. Although neither the Board of Directors nor the management of the
Company views the Reverse Stock Split as an anti-takeover measure, the Company
could use the Increased Available Shares to frustrate persons seeking to effect
a takeover or otherwise gain control of the Company. For example, the Company
could privately sell all or a portion of the Increased Available Shares to
purchasers who might side with the Board of Directors in opposing a hostile
takeover bid or issue these shares to a holder which would, thereafter, have
sufficient voting power to assure that any proposal to amend or repeal the
provisions of the Company's charter documents would not receive the requisite
vote.
EFFECTIVENESS OF THE REVERSE STOCK SPLIT
The Reverse Stock Split, if approved by the Company's shareholders,
would become effective (the "Effective Date") upon the filing with the
Department of State of the State of New York of a Certificate of Amendment of
the Company's Certificate of Incorporation in substantially the form of the
Reverse Stock Split Amendment attached to this Proxy Statement as Annex A. It is
expected that such filing will take place on the date of the Special Meeting,
assuming shareholders approve the Reverse Stock Split. However, the exact timing
of the filing of such Certificate of
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Amendment will be determined by the Board of Directors based upon its evaluation
as to when such action will be most advantageous to the Company and its
shareholders, and the Board of Directors reserves the right to delay the Reverse
Stock Split Amendment for up to twelve months following shareholder approval
thereof. In addition, the Board of Directors reserves the right, notwithstanding
shareholder approval and without further action by the shareholders, to elect
not to proceed with the Reverse Stock Split Amendment if, at any time prior to
filing such Reverse Stock Split Amendment, the Board of Directors, in its sole
discretion, determines that it is no longer in the best interests of the Company
and its shareholders.
Commencing on the Effective Date, each currently outstanding Common
Share certificate will be deemed for all corporate purposes to evidence
ownership of the reduced number of Common Shares resulting from the Reverse
Stock Split and any cash which may be payable in lieu of fractional shares. As
soon as practicable after the Effective Date, shareholders will be notified as
to the effectiveness of the Reverse Stock Split and instructed as to how to
surrender their certificates representing Old Common Shares in exchange for
certificates representing New Common Shares (and, if applicable, cash in lieu of
fractional shares). The Company intends to use its transfer agent, American
Stock Transfer & Trust Company, as its exchange agent in effecting the exchange
of certificates following the effectiveness of the Reverse Stock Split.
On the Effective Date, the interest of each shareholder of record who
owns fewer than six shares of Common Stock will thereby be terminated, and he,
she or it will have no right to vote as a shareholder or share in the assets or
any future earnings of the Company.
FRACTIONAL SHARES
The Company will not issue fractional shares in connection with the
Reverse Stock Split. Instead, holders of Old Common Shares who would otherwise
be entitled to receive a fractional share of New Common Shares because they hold
a number of Old Common Shares that is not evenly divisible by the Authorized
Number will be entitled to receive from the Company a cash payment equal to the
fair market value, as determined by the Board of Directors, of any fractional
New Common Shares resulting from the Reverse Stock Split. The fair market value
shall be based on the average of the closing prices for the Old Common Shares as
reported by the Nasdaq NMS on each of the five trading days preceding the date
on which the Reverse Stock Split becomes effective.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizing certain federal income tax
consequences is based on the Internal Revenue Code of 1986, as amended, the
applicable Treasury Regulations promulgated thereunder, judicial authority and
current administrative rulings and practices in effect on the date of this Proxy
Statement. This discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers or insurance companies). Shareholders are urged to
consult their own tax advisors to determine the particular consequences to them.
The receipt of New Common Shares solely in exchange for Old Common
Shares will not generally result in recognition of gain or loss to the
shareholders. The adjusted tax basis of a shareholder's New Common Shares will
be the same as the adjusted tax basis of the shares of Old Common Shares
exchanged therefor, and the holding period of the New Common Shares will include
the holding period of the Old Common Shares exchanged therefor. Shareholders who
receive cash in lieu of fractional shares will be treated as if they had
received such fractional shares and then sold them to the Company, and such
shareholders will recognize gain or loss equal to the difference between the
amount of cash received and their basis in the Common Shares exchanged. No gain
or loss will be recognized by the Company as a result of the Reverse Stock
Split.
DISSENTERS' RIGHTS
Pursuant to the New York Business Corporation Law, the Company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the proposed Reverse Stock Split Amendment.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of all outstanding
Common Shares entitled to vote at the Special Meeting, in person or by proxy, is
required for approval of the proposed Reverse Stock Split Amendment.
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<PAGE> 10
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors recommends a vote FOR the proposal to
amend the Company's Certificate of Incorporation in order to effect the
one-for-six Reverse Stock Split of the outstanding Common Shares.
GENERAL
The Company and the Board of Directors do not know of any matters other
than those stated in this Proxy Statement that are to be presented for action at
the Special Meeting. If any other matters should properly come before the
Special Meeting, proxies will be voted on these other matters in accordance with
the judgment of the persons voting the proxies. Discretionary authority to vote
on such matters is conferred only by the granting of such proxies.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy materials that may be sent to shareholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Common Shares held by such persons. The Company will
reimburse such persons for reasonable out-of-pocket expenses incurred by them.
In addition to the solicitation of proxies by use of the mails, officers and
regular employees of the Company may solicit proxies without additional
compensation, by telephone or telegraph. The Company does not expect to pay any
compensation for the solicitation of proxies.
By Order of the Board of Directors,
JON A. JOSEPH
Vice President, General Counsel
and Secretary
August __, 1999
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<PAGE> 11
ANNEX A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
MEGO FINANCIAL CORP.
UNDER SECTION 805 OF THE
BUSINESS CORPORATION LAW
The undersigned, being the Chairman of the Board and Secretary of MEGO
FINANCIAL CORP., a New York corporation (the "Corporation"), hereby certify:
1. The name of the Corporation is MEGO FINANCIAL CORP.
2. The Corporation's Certificate of Incorporation was filed with the
Department of State of the State of New York on November 19, 1968, as amended
and restated.
3. The Certificate of Incorporation, as previously amended and
restated, is further amended to add the following paragraph to paragraph
"THIRD":
All of the shares of Common Stock of the Corporation issued
and outstanding, or held as treasury shares, immediately prior
to the time this Amendment becomes effective shall be and are
by this means automatically reclassified and changed (without
further act) into fully paid and nonassessable shares of
Common Stock, the number of which shall equal the number of
shares obtained by dividing (i) the total number of shares of
Common Stock issued and outstanding, or held as treasury
shares, immediately prior to the time this Amendment becomes
effective by (ii) six (6). The shares of Common Stock returned
to the Corporation as a result of the reclassification and
change shall become effective without increasing or decreasing
the amount of stated capital or paid-in-surplus of the
Corporation, and shall constitute a one-for-six reverse stock
split, provided no fractional shares of less than one share
shall be issued. The holders of fractional share interests of
less than one share shall be paid in cash by the Corporation
the value of their fractional share based upon the average of
the closing prices of the Corporation's Common Stock as
reported on the Nasdaq National Market System during each of
the five (5) trading days preceding the effective date of this
Amendment.
4. The foregoing amendment to the Certificate of Incorporation was
authorized by a vote of the Board of Directors of the Corporation and by a vote
of the holders of a majority of all outstanding shares entitled to vote thereon
in accordance with Section 803 of the Business Corporation Law.
A-1
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have subscribed to and affirm as
true the statements made herein under penalties of perjury this ____ day of
September, 1999.
--------------------------------------------------
Robert Nederlander, Chairman of the Board
--------------------------------------------------
Jon A. Joseph, Vice President, General Counsel and
Secretary
A-2
<PAGE> 13
MEGO FINANCIAL CORP.
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY -- SPECIAL MEETING OF SHAREHOLDERS - SEPTEMBER 2, 1999
The undersigned, a holder of Common Stock of Mego Financial Corp., a
New York corporation (the "Company"), does hereby appoint Robert Nederlander and
Jerome J. Cohen, and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders of the Company to be held at the offices of the law firm
of Greenberg Traurig, P.A., Met Life Building, 200 Park Avenue, New York, New
York 10166 on Thursday, September 2, 1999, at 10:00 A.M. local time, and at any
adjournment(s), or postponement(s) thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION IN ORDER TO EFFECT A ONE-FOR-SIX REVERSE STOCK SPLIT OF
THE COMPANY'S OUTSTANDING COMMON STOCK.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on reverse side)
<PAGE> 14
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN.
The undersigned hereby revokes any proxy or proxies heretofore given,
and ratifies and confirms all that the proxies appointed hereby, or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue thereof. The undersigned hereby acknowledges receipt of a copy of the
Notice of Special Meeting of Shareholders and Proxy Statement, both dated
September 2, 1999.
Dated: , 1999
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Signature
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Signature
NOTE: Your signature should appear
exactly the same as your name appears
hereon. If signing as partner, attorney,
executor, administrator, trustee or
guardian, please indicate the capacity in
which signing. When signing as joint
tenants, all parties in the joint tenancy
must sign. When a proxy is given by a
corporation, it should be signed by an
authorized officer and the corporate seal
affixed. No postage is required if mailed
within the United States.
