13
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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MONACO FINANCE, INC.
--------------------
(Name of Registrant as Specified in Its Charter)
N/A
---
(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)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY COPIES
MONACO FINANCE, INC.
370 SEVENTEENTH STREET, SUITE 5060
DENVER, COLORADO 80202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 12, 1998
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Monaco Finance, Inc., a Colorado corporation (the
"Company"), will be held at 370 Seventeenth Street, Suite 5060, Denver,
Colorado at 10:00 a.m. on November 12, 1998, for the following purposes:
1. To consider and approve a proposal to amend the Company's Articles
of Incorporation with respect to its 8% Cumulative Convertible Preferred Stock
- - Series 1998-1 (the "Preferred Stock") to (i) change the Conversion Ratio of
the Preferred Stock from one share of Class A Common Stock for each two shares
of Preferred Stock that are converted to four shares of Class A Common Stock
for each two shares of Preferred Stock that are converted, and (ii) to provide
that the market price of the Class A Common Stock that causes automatic
conversion of the Preferred Stock into shares of Class A Common Stock shall be
proportionately adjusted in the event of any issuance of Class A Common Stock
as a dividend or other distribution or in the event of a subdivision or
combination of the outstanding shares of Class A Common Stock.
2. To consider and approve a proposal to authorize the Company's
Board of Directors to effect, in its discretion, a reverse split of the
outstanding shares of the Company's Class A Common Stock and Class B Common
Stock on the basis of one share for each five shares then outstanding (the
"Reverse Stock Split").
3. To consider and act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only the holders of record of shares of the Company's Class A Common
Stock, $.01 par value, Class B Common Stock, $.01 par value, and Preferred
Stock, no par value, at the close of business on September 25, 1998, are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof.
You are cordially invited to attend the Special Meeting in person. All
shareholders, whether or not they plan to attend the Special Meeting, are
requested to complete, date and sign the enclosed proxy and return it promptly
in the envelope provided for that purpose. Shareholders who attend the
Special Meeting may revoke their proxies and vote in person as set forth in
the accompanying Proxy Statement.
By Order of the Board of Directors,
-----------------------------------
Irwin L. Sandler, Secretary
October 8, 1998
<PAGE>
PRELIMINARY COPIES
MONACO FINANCE, INC.
370 SEVENTEENTH STREET, SUITE 5060
DENVER, COLORADO 80202
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 12, 1998
INTRODUCTION
SOLICITATION, EXERCISE AND REVOCABILITY OF PROXY
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Monaco Finance, Inc. (the "Company"), for
use at a Special Meeting of Shareholders of the Company (the "Special
Meeting") to be held on November 12, 1998, at 10:00 a.m., local time, at the
offices of the Company located at 370 Seventeenth Street, Suite 5060, Denver,
Colorado 80202. This Proxy Statement, the accompanying form of proxy and the
Notice of Special Meeting will be first given or mailed to the Company's
shareholders on or about October 8, 1998. All costs incurred in connection
with this proxy solicitation will be borne by the Company.
Because many of the Company's shareholders may be unable to attend the
Special Meeting in person, the Board of Directors solicits proxies by mail to
give each shareholder an opportunity to vote on all matters presented at the
Special Meeting. Shareholders are urged to: (i) read this Proxy Statement
carefully; (ii) specify their choice regarding each matter by marking the
appropriate box on the enclosed form of proxy; and (iii) sign, date and return
the form of proxy in the enclosed envelope.
All shares of the Company's Class A Common Stock, $.01 par value, and
Class B Common Stock, $.01 par value (collectively, the "Common Stock"), and
8% Cumulative Convertible Preferred Stock, Series 1998-1, no par value (the
"Preferred Stock"), represented by properly executed proxies received prior to
the Special Meeting will be voted at the Special Meeting in accordance with
the instructions marked thereon, unless such proxies have previously been
revoked. All shares represented by valid proxies will be voted, unless
instructions to the contrary are marked, in favor of the matters submitted for
approval at the Special Meeting described herein as to which such shares are
entitled to vote and, in the discretion of the proxy holders named therein,
with respect to such other matters as may properly come before the Special
Meeting. Any proxy may be revoked at any time prior to the exercise thereof
by submitting another proxy bearing a later date or by giving written notice
of revocation to the Company at the address indicated above or by voting in
person at the Special Meeting. Any notice of revocation sent to the Company
must include the shareholder's name and must be received prior to the Special
Meeting to be effective.
VOTING
One purpose of the Special Meeting is to consider and approve an
amendment to the Company's Articles of Incorporation to (i) change the
Conversion Ratio of the Preferred Stock from one share of Class A Common Stock
for each two shares of Preferred Stock that are converted to four shares of
Class A Common Stock for each two shares of Preferred Stock that are
converted, and (ii) to provide that the market price of the Class A Common
Stock that causes automatic conversion of the Preferred Stock into shares of
Class A Common Stock will be proportionately adjusted in the event of any
issuance of Class A Common Stock as a dividend or other distribution or in the
event of a subdivision or combination of the outstanding shares of Class A
Common Stock.
Another purpose of the Special Meeting is to consider and approve a
proposal to authorize the Company's Board of Directors to effect, in its
discretion, a reverse split of the outstanding shares of the Company's Class A
Common Stock and Class B Common Stock on the basis of one share for each five
shares then outstanding (the "Reverse Stock Split").
Only persons holding Common Stock or Preferred Stock of record at the
close of business on September 25, 1998 (the "Record Date") will be entitled
to notice of and to vote at the Special Meeting or any adjournment thereof.
Holders of Class A Common Stock, Class B Common Stock and Preferred Stock will
vote as separate voting groups on the proposed amendment to the Articles of
Incorporation and holders of Class A Common Stock and Class B Common Stock
will vote as separate voting groups on the Reverse Stock Split. Holders of
Class A Common Stock and Class B Common Stock will vote together as a single
voting group on all other matters submitted for stockholder approval at the
Special Meeting. Holders of Class A Common Stock and the Preferred Stock will
be entitled to one vote for each share held of record as of the Record Date,
and holders of Class B Common Stock will be entitled to three votes for each
share held of record as of the Record Date. As of the Record Date, 12,772,788
shares of Class A Common Stock were issued and outstanding entitled to cast an
aggregate of 12,772,788 votes; 1,273,715 shares of Class B Common Stock were
issued and outstanding entitled to cast an aggregate of 3,821,145 votes; and
2,356,236 shares of Preferred Stock were issued and outstanding entitled to
cast an aggregate of 2,356,236 votes. The presence, in person or by proxy, by
the holders of a majority of the votes entitled to be cast on the matter by
any voting group entitled to vote at the Special Meeting constitutes a quorum
for the transaction of business by that group. If a quorum is present, (i) the
proposed amendment to the Articles of Incorporation requires approval by a
majority of all the votes entitled to be cast by the holders of the Class A
Common Stock, Class B Common Stock and Preferred Stock as separate voting
groups, and (ii) the Reverse Stock Split will be approved if the votes cast
favoring the action exceed the votes cast opposing the action by the holders
of the Class A Common Stock and Class B Common Stock as separate voting
groups.
Votes cast by proxy at the Special Meeting will be tabulated by an
automatic system administered by the Company's transfer agent. Votes cast by
proxy or in person at the Special Meeting will be counted by the persons
appointed by the Company to act as election inspectors for the Special
Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present at the Special Meeting and are
tabulated separately. Abstentions are counted in tabulations of the votes cast
on proposals presented to shareholders and will have the same effect as
negative votes, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
The relative rights of the holders of shares of Common Stock and
Preferred Stock (collectively referred to as the "Stockholders") will not
change as a result of implementation of the Reverse Stock Split. However, the
proposed amendment to the Articles of Incorporation will result in the number
of shares of Class A Common Stock issuable upon full conversion of the
Preferred Stock being increased by a factor of four. See "Item 1-Approval of
Amendment to Articles of Incorporation" for further discussion of the reasons
for and effect of the proposed amendment to the Articles of Incorporation.
Stockholders of the Company do not have dissenter's rights of appraisal with
respect to either of these actions.
As of the Record Date, Pacific USA Holdings Corp. ("Pacific USA") had
direct and indirect voting power over approximately 54.9% of the outstanding
shares of Class A Common Stock, 100% of the outstanding shares of Class B
Common Stock, approximately 65.3% of the total combined voting power of the
outstanding shares of Common Stock and 100% of the outstanding shares of
Preferred Stock. It is expected that Pacific USA will vote in favor of the
proposals described in this Proxy Statement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by the Company with the SEC can be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition, electronically
filed documents, including reports, proxy statements and other information
filed by the Company, can be obtained from the SEC's Web Site at
http://www.sec.gov. The Company's Class A Common Stock is quoted on the Nasdaq
National Market. Reports, proxy statements and other information concerning
the Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
_____________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROXY STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY BY ANY PERSON IN ANY JURISDICTION OR IN ANY
CIRCUMSTANCES IN WHICH SUCH SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROXY STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
ITEM 1-APPROVAL OF AMENDMENT TO
ARTICLES OF INCORPORATION
The Company's Board of Directors has unanimously approved a proposal to
amend the Company's Articles of Incorporation with respect to its Preferred
Stock to (i) change the Conversion Ratio of the Preferred Stock from one share
of Class A Common Stock for each two shares of Preferred Stock that are
converted to four shares of Class A Common Stock for each two shares of
Preferred Stock that are converted, and (ii) provide that the market price of
the Class A Common Stock that causes automatic conversion of the Preferred
Stock into shares of Class A Common Stock shall be proportionately adjusted in
the event of any issuance of Class A Common Stock as a dividend or other
distribution or in the event of a subdivision or combination of the
outstanding shares of Class A Common Stock.
As of the date of this Proxy Statement, the Company's Articles of
Incorporation provide that the Conversion Ratio (as defined therein) of the
Preferred Stock into shares of Class A Common Stock shall be proportionately
adjusted in the event of any issuance of Class A Common Stock as a dividend or
other distribution or in the event of a subdivision or combination of the
outstanding shares of Class A Common Stock. However, the Articles of
Incorporation are silent regarding the effect of any such action upon the
market price of the Class A Common Stock that causes automatic conversion of
the Preferred Stock into shares of Class A Common Stock. The proposed
amendment to the Articles of Incorporation will provide for automatic and
proportionate adjustment of such market price in the event of any issuance of
Class A Common Stock as a dividend or other distribution or in the event of a
subdivision or combination of the outstanding shares of Class A Common Stock.
The Articles of Incorporation presently provide that the market price
that causes automatic conversion of the Preferred Stock shall be $6.00 per
share of Class A Common Stock. No adjustment to this amount will be made if
the proposed amendment to the Articles of Incorporation is approved. However,
if the Reverse Stock Split subsequently is effected, then the market price of
the Class A Common Stock that causes automatic conversion of the Preferred
Stock will be increased to $30.00 per share of Class A Common Stock.
REASONS FOR AMENDMENT TO ARTICLES OF INCORPORATION
The Company entered into an Amended and Restated Asset Purchase Agreement
(the "Agreement") dated as of January 8, 1998, with Pacific USA Holdings
Corp., a Texas corporation ("Pacific USA") and certain of its wholly-owned or
partially-owned subsidiaries providing for, among other things, the purchase
by the Company of sub-prime automobile loans having an unpaid principal
balance of approximately $81,115,233 for a purchase price of $77,870,623 of
which $73,003,709 was paid in cash. The balance of the purchase price,
$4,866,914, was paid by the issuance of 2,433,457 shares of the Company's 8%
Cumulative Convertible Preferred Stock, Series 1998-1 (the "Preferred Stock").
Each share of Preferred Stock is convertible at any time into one-half share
of Class A Common Stock, or an aggregate of up to 1,216,728 shares of Class A
Common Stock. As of the Record Date and pursuant to the Agreement, Pacific USA
had repurchased delinquent loans sold to the Company's for the Company's cost
of $2.6 million. Also pursuant to the Agreement, Pacific USA has surrendered
77,221 shares of Preferred Stock to the Company for cancellation. Accordingly,
as of the record date, 2,356,236 shares of Preferred Stock are issued and
outstanding and are convertible into 1,178,118 shares of Class A Common Stock.
Pursuant to the Agreement, Pacific USA may, in the future, surrender
additional shares of Preferred Stock to the Company for cancellation.
On September 1, 1998, the Company entered into a Conversion and Rights
Agreement (the "Agreement") with Pacific USA. In June and July 1998, Pacific
USA loaned the Company the principal amount of $5,000,000. Pursuant to the
Agreement, $4,463,250 of the principal amount of the loan was converted,
effective July 1, 1998, into 4,698,157 shares of the Company's Class A Common
Stock at a conversion price of $.95 per share. The conversion price is the
book value per share of the Company's issued and outstanding Common Stock as
of June 30, 1998. The closing price of the Class A Common Stock on the Nasdaq
Stock Market was $.50 per share on June 30, 1998, and $.38 per share on
September 1, 1998. The unpaid principal balance of the loan, $536,750,
likewise is convertible into Class A Common Stock at a conversion price of
$.95 per share.
Concurrently, the Company and Pacific USA agreed, subject to shareholder
approval, to reduce the price for conversion of the Preferred Stock into
Class A Common Stock by a factor of four thereby increasing the number of
shares of Class A Common Stock issuable upon full conversion of the Preferred
Stock from 1,178,118 shares to 4,712,472 shares, an increase of 3,534,354
shares. As of the Record Date, approximately 14,046,503 shares of Common Stock
were issued and outstanding. Thus, the amendment to the Company's Articles of
Incorporation will have the potential of increasing the number of issued and
outstanding shares of Common Stock by approximately 25%. Accordingly, if the
amendment is approved by shareholders and effected, the additional shares of
Class A Common Stock issuable upon full conversion of the Preferred Stock
could result in substantial dilution to existing holders of the Common Stock.
Messrs. Cutrona, Bradley, Sloan, Hashaway and Clark, all of whom are
directors of the Company, also are directors and/or officers of Pacific USA or
one or more of its directly or indirectly owned subsidiaries. Mr. Cutrona also
is the Company's Chief Executive Officer. The remaining directors (Messrs.
Ginsburg, Sandler and Snyder) are not affiliated with Pacific USA or any of
its subsidiaries other than as a result of the ownership by Pacific USA and
certain of its subsidiaries of securities issued by the Company. See "Security
Ownership of Certain Beneficial Owners and Management."
The text of the proposed amendment to the Company's Articles of
Incorporation is attached hereto as Annex A. Stockholders are urged to read
the proposed amendment in its entirety.
VOTE REQUIRED
If quorums of the Class A Common Stock, the Class B Common Stock and the
Preferred Stock are present at the Special Meeting, the proposed amendment to
the Articles of Incorporation requires approval by a majority of all votes
entitled to be cast thereon by the holders of the Class A Common Stock, Class
B Common Stock and Preferred Stock as separate voting groups. Properly signed
proxies returned to the Company at or prior to the Special Meeting will be
voted in favor of the amendment to the Articles of Incorporation unless
contrary instructions are specified.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under Colorado law, Stockholders are not entitled to dissenters' rights
of appraisal with respect to the proposed amendment to the Articles of
Incorporation.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION AND APPROVAL OF THE PROPOSAL TO AMEND THE ARTICLES OF
INCORPORATION.
ITEM 2-APPROVAL OF POSSIBLE REVERSE STOCK SPLIT
The Company's Board of Directors has unanimously approved a proposal to
authorize the Board to effect, in the exercise of its business judgment, a
reverse split of the outstanding shares of the Company's Class A Common Stock
and Class B Common Stock on the basis of one share for each five shares then
outstanding (the "Reverse Stock Split"), as determined by the Board at any
time within one year after the date of the Special Meeting (the "Reverse Stock
Split Proposal"). The Reverse Stock Split will not be effected automatically
if approved by the Stockholders, but rather will require Board authorization.
No amendment will be required or made to the Company's Articles of
Incorporation.
REASONS FOR THE REVERSE STOCK SPLIT
ALTHOUGH THE BOARD OF DIRECTORS IS NOT PROPOSING TO IMPLEMENT THE REVERSE
STOCK SPLIT AT THIS TIME, THE BOARD OF DIRECTORS IS SEEKING STOCK-HOLDER
APPROVAL OF THE REVERSE STOCK SPLIT PROPOSAL IN ADVANCE OF A DECISION BY THE
BOARD OF DIRECTORS TO IMPLEMENT THE REVERSE STOCK SPLIT IN ORDER TO PROMPTLY
RESPOND TO DEVELOPMENTS THAT THE BOARD OF DIRECTORS, IN ITS BUSINESS JUDGMENT,
DETERMINES MAKES SUCH REVERSE STOCK SPLIT NECESSARY OR ADVISABLE.
The Company is engaged in the business of providing alternative financing
to purchasers of automobiles who do not qualify for traditional sources of
financing due to low income levels and/or adverse credit history. No single
financial institution has a significant market share of this "sub-prime"
credit market. Since 1994, competition in the sub-prime credit market has
increased markedly which has resulted in a substantial reduction in the number
of available loans which meet the Company's credit standards. However, during
this period of time the Company has maintained its credit standards and also
committed substantial resources to develop internal systems, including an
automated proprietary credit scoring system. While the Company's new and
enhanced systems enable it to support a larger loan portfolio, it has been
unable to obtain a sufficient number of loans meeting its credit standards to
allow profitable operations. As a result, the Company has incurred substantial
operating losses. Notwithstanding, the Company has been able to obtain debt
and equity financing.
Within the past few years, many companies in the industry have incurred
significant losses due to poor credit evaluation practices which led to
business failures and other financial problems. As a result, stock prices
decreased substantially and stock brokers and market analysts soured on the
industry. Accordingly, there has been little market support for the stock of
public companies in the sub-prime industry.
Notwithstanding, the sub-prime credit industry continues to grow. The
remaining competitors in this industry, including the Company, are relatively
strong. In 1997 and early 1998, the Company acquired, in portfolio purchases,
over $100 million in principal amount of sub-prime loans which allows the
Company to more fully utilize the various systems it has developed. Management
believes the Company is well positioned to significantly expand its market
share, without compromising its credit standards, through portfolio purchases
of loans and expansion of its network of dealers from which it acquires loans.
The Company's Class A Common Stock presently is traded on the Nasdaq
National Market. Commencing February 23, 1998, the requirements for continued
trading of securities on the Nasdaq National Market and on the Nasdaq Small
Cap Market were changed to include requirements that (i) the minimum bid price
for common stock must be $1.00 or more per share, and (ii) the market value of
the public float must be $5 million or more for a National Market security and
$1 million or more for a Small Cap Market security. "Public float" is defined
as outstanding shares other than those held by officers, directors and
beneficial owners of more than ten percent of the total shares outstanding. If
a deficiency exists for a period of 30 consecutive business days, Nasdaq is
required to promptly notify the issuer, which will have a period of 90
calendar days from such notification to achieve compliance. Compliance can be
achieved by meeting the applicable standard for a minimum of ten consecutive
business days during the 90-day compliance period. From February 23, 1998, to
the date of this Proxy Statement, the bid price of the Class A Common Stock
has been less than $1.00 per share and the market value of the public float
has been less than $5 million, but greater than $1 million. As of the Record
Date, approximately 5,741,109 shares of Class A Common Stock comprise the
Company's public float. After the Reverse Stock Split, to meet the National
Market requirement of $5 million in public float, the market price would have
to be approximately $4.36 per share and to meet the Small Cap Market
requirement of $1 million in public float, the market price would have to be
approximately $.88 per share.
By letter dated February 27, 1998, Nasdaq advised the Company that it was
not in compliance with the new market value of public float and minimum bid
price requirements and that the Company had until May 28, 1998, to achieve
compliance. Since the Company did not meet the requirements, by letter dated
May 29, 1998, Nasdaq advised the Company that the Class A Common Stock would
be delisted unless the Company requested a hearing. The request, which was
made, had the effect of staying the delisting. By letter dated August 11,
1998, the Nasdaq Listing Qualifications Panel (the "Panel") denied the
Company's request for continued listing. The Company requested a hearing
before a new Panel, which will stay the Panel's delisting determination
pending the final determination of the new Panel.
If required by Nasdaq, the Company will effect the Reverse Stock Split.
However, that is the least desirable means of achieving compliance. While the
Reverse Stock Split may satisfy the requirement of a minimum bid price of
$1.00 per share, (i) it would reduce the number of shares in the public float
which may adversely affect liquidity of the Class A Common Stock, and (ii) it
would not satisfy the National Market requirement that the public float have a
market value of not less than $5 million. Management believes, however, that
implementation of the Reverse Stock Split would result in the Class A Common
Stock being eligible for trading on the Nasdaq Small Cap Market and that
trading on that market would not, in and of itself, have a materially adverse
effect upon the liquidity of the Class A Common Stock. In the event the $1.00
minimum bid price requirement cannot be achieved, the Class A Common Stock
probably would trade in the so-called "pink sheets" or on Nasdaq's OTC
Bulletin Board. The most likely result would be that the liquidity of the
Class A Common Stock would be further impaired.
If the market price of the Class A Common Stock increases to $1.00 or
more per share or if the Company is able to maintain listing of the Class A
Common Stock on the Nasdaq National Market or Small Cap Market without the
necessity of the Reverse Stock Split, it is possible that the Board of
Directors will not effect the split. On the one hand, a significantly higher
stock price may stimulate greater interest in the Class A Common Stock by the
financial community and the investing public, which may result in greater
trading volume and liquidity. On the other hand, it is possible that any
increase in the market price of the Class A Common Stock resulting from the
Reverse Stock Split may be proportionately less than the decrease in the
number of shares outstanding and that the liquidity of the Class A Common
Stock after the Reverse Stock Split may be adversely affected due to the
reduced number of shares of that class outstanding. Also, implementation of
the Reverse Stock Split will result in additional Class A Common Stockholders
owning "odd lots" (fewer than 100 shares) as to which brokerage commissions on
resale could be higher than the commissions on 100-share lots.
The Reverse Stock Split Proposal, if approved by Stockholders, will allow
the Board of Directors to promptly implement a Reverse Stock Split without the
delay and expense of calling a special meeting of Stockholders of the Company.
The Board of Directors believes this flexibility is important and in the best
interest of the Stockholders.
EFFECTS OF THE REVERSE STOCK SPLIT
The Reverse Stock Split will be implemented only in the event the Board
of Directors, in its business judgment exercised at any time within one year
after the date of the Special Meeting, determines that the Reverse Stock Split
is necessary or desirable. The Reverse Stock Split will become effective ten
calendar days (or such longer or shorter period as determined by the Board of
Directors) after the announcement of such stock split by the latest of
publication of a press release, filing of a Form 8-K with the Securities and
Exchange Commission and notification to The Nasdaq Stock Market (the
"Effective Date"). If the Reverse Stock Split Proposal is approved by the
Stockholders at the Special Meeting, no further authorization or approval by
the Stockholders will be required in order for the Board of Directors to
implement the Reverse Stock Split.
On the Effective Date, each five shares (the "Stock Split Ratio") of
Class A and Class B Common Stock then issued and outstanding ("Pre-Split
Common Stock") will be automatically exchanged for one share of the same class
of Common Stock ("Post-Split Common Stock"). From and after the Effective
Date, certificates representing shares of Pre-Split Common Stock will be
deemed to represent the number of shares of Post-Split Common Stock, rounded
up to the nearest whole share, into which the shares of Pre-Split Common Stock
were converted.
The following table summarizes the effect of the Reverse Stock Split on
the outstanding securities of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NUMBER OF OUTSTANDING SHARES OUTSTANDING SHARES
CLASS OF SECURITY. . AUTHORIZED SHARES BEFORE SPLIT AFTER SPLIT
- -------------------- ----------------- ------------------ ------------------
Class A Common Stock 30,000,000 12,772,788 2,554,558
Class B Common Stock 2,250,000 1,273,715 254,743
<FN>
</TABLE>
The number of authorized shares and par value of the Common Stock and
Preferred Stock will not change. The number of shares of Class A Common Stock
issuable upon exercise or conversion of outstanding stock options, stock
purchase warrants, convertible securities (including the Preferred Stock) and
other rights to purchase shares of Class A Common Stock will be reduced by the
Stock Split Ratio, and the exercise or conversion price will be increased by
the Stock Split Ratio. The effect is that the aggregate consideration payable
upon exercise or conversion of all such securities will remain the same before
and after the Reverse Stock Split and that, upon full exercise or conversion
of such securities, the holder will be entitled to purchase the same relative
amount of Class A Common Stock before and after the Reverse Stock Split. In
addition, the number of shares of Class A Common Stock authorized to be issued
under the Company's 1992 Stock Option Plan will be reduced by the Stock Split
Ratio.
The Company's Articles of Incorporation will not be amended in connection
with the Reverse Stock Split. At the date of this Proxy Statement, the
Articles of Incorporation provide that the ratio for conversion of the
Preferred Stock into shares of Class A Common Stock shall be proportionately
increased in the case of any combination of the outstanding shares of Class A
Common Stock on the date that any such combination shall become effective. The
proposed amendment to the Company's Articles of Incorporation (see Item 1
herein) will amend the Company's Articles of Incorporation to further provide
that the market price of the Class A Common Stock that causes automatic
conversion of the Preferred Stock into shares of Class A Common Stock shall be
proportionately increased in the case of a combination of the outstanding
shares of Class A Common Stock on the date that such combination shall become
effective. If the proposed amendment to the Company's Articles of
Incorporation (see Item 1 herein) is approved by the Stockholders, then on the
Effective Date, (i) the Conversion Ratio of the Preferred Stock automatically
will be changed from four shares of Class A Common Stock for each two shares
of Preferred Stock that are converted to one share of Class A Common Stock for
each 2.5 shares of Preferred Stock that are converted (the equivalent of
4/5ths of a share of Class A Common Stock for each two shares of Preferred
Stock that are converted), and (ii) the market price of the Class A Common
Stock that causes automatic conversion of the Preferred Stock into shares of
Class A Common Stock automatically will be increased from $6.00 per share to
$30.00 per share. These automatic adjustments to the conversion rights of the
Preferred Stock will not result in any changes to the relative rights and
preferences of the Common Stock and Preferred Stock.
In the unlikely event that the proposed amendment to the Company's
Articles of Incorporation is not approved, then automatic adjustment of the
conversion ratio with respect to the Preferred Stock will occur as of the
Effective Date. However, the market price of the Class A Common Stock which
triggers automatic conversion of the Preferred Stock will remain at $6.00 per
share.
The proposed amendment to the Articles of Incorporation, if effected, may
result in substantial dilution to the holders of the Common Stock. See "Item
1-Approval of Amendment to Articles of Incorporation" for further discussion
of the reasons for and effect of the proposed amendment to the Articles of
Incorporation.
If the Reverse Stock Split is implemented, then the decrease in the
number of shares of Class A Common Stock outstanding and reserved for issuance
pursuant to the exercise of outstanding options, warrants and convertible
securities will result in an increase in the number of shares of Class A
Common Stock available for issuance by the Board of Directors. The Board of
Directors will determine whether, when and on what terms the issuance of
shares of Class A Common Stock may be warranted. Like the presently authorized
but unissued shares of Class A Common Stock, the additional shares of Class A
Common Stock which will become available for issuance upon the implementation
of the Reverse Stock Split will be available for issuance without further
action by the Company's Stockholders, unless such action is required by
applicable law or the rules of the Nasdaq Stock Market or any other stock
exchange or stock market on which the Class A Common Stock may be listed in
the future. Holders of Class A Common Stock and Preferred Stock have no
preemptive rights to subscribe to or for any additional shares of the
Company's capital stock. Except in certain cases such as stock dividends, the
issuance of additional shares of Class A Common Stock would have the effect of
diluting the voting power of existing Class A and Class B Common Stockholders.
EXCHANGE OF CERTIFICATES
If the Reverse Stock Split is approved by the Common Stockholders and
implemented by the Board of Directors, then as soon as practicable after the
Effective Date Stockholders will be given the option, but will not be
required, to exchange their certificates representing shares of Pre-Split
Common Stock ("Pre-Split Certificates") for certificates representing the
number of whole shares of Post-Split Class A Common Stock ("Post-Split
Certificates") into which the shares of Pre-Split Common Stock have been
converted as a result of the Reverse Stock Split. After the Effective Date,
each Common Stockholder will receive a letter of transmittal from the
Company's transfer agent, American Stock Transfer & Trust Company, New York,
New York (the "Exchange Agent"), which will act as the Exchange Agent in the
exchange of stock certificates, containing the necessary materials and
instructions. In order to receive Post-Split Certificates, stockholders must
surrender their Pre-Split Certificates pursuant to the Exchange Agent's
instructions, together with properly executed and completed letters of
transmittal and such evidence of ownership of such shares as the Company or
the Exchange Agent may require, plus the applicable exchange fees. Pre-Split
Certificates not presented for surrender after the Effective Date will be
exchanged for Post-Split Certificates the first time they are presented for
transfer. From and after the Effective Date, each Pre-Split Certificate will,
until surrendered in exchange as described above, be deemed for all corporate
purposes after the Effective Date to evidence ownership of the whole number of
shares of Post-Split Class A Common Stock into which the shares evidenced by
such Pre-Split Certificate have been converted pursuant to the Reverse Stock
Split.
DO NOT SEND ANY STOCK CERTIFICATE TO THE COMPANY OR TO THE EXCHANGE AGENT AT
THIS TIME. NOTIFICATION OF THE DETAILED PROCEDURES FOR EFFECTING THE EXCHANGE
IF THE REVERSE STOCK SPLIT IS APPROVED AND IMPLEMENTED WILL BE PROVIDED AT A
LATER DATE.
ROUNDING UP OF FRACTIONAL SHARES
If the Reverse Stock Split is implemented, no fractional shares of
Post-Split Class A Common Stock will be issued. Rather, all fractional shares
will be rounded up to the nearest whole share. Management believes that the
Company presently has approximately 4,400 shareholders. Accordingly, fewer
than 4,400 additional shares of Class A Common Stock would be issued as a
result of the rounding up of fractional shares. This would amount to
approximately .03% of the 12,772,788 shares of Class A Common Stock
outstanding as of the Record Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the anticipated federal income tax
consequences of the Reverse Stock Split to Common Stockholders of the Company,
if the Reverse Stock Split is implemented. This summary is based upon the
Internal Revenue Code, the applicable treasury regulations promulgated
thereunder, judicial authority and administrative rulings and practice, all as
in effect on the date hereof. Legislative, judicial or administrative rules
and interpretations are subject to change, potentially on a retroactive basis,
at any time and therefore could alter or modify the statements and conclusions
set forth below. For the purpose of this discussion, it is assumed that the
shares of Common Stock are held as capital assets by stockholders who are
United States persons (i.e., citizens or residents of the United States or
domestic corporations). This summary does not purport to be complete and does
not address all aspects of federal income taxation that may be relevant to a
particular stockholder in light of such stockholder's personal investment
circumstances, stockholders holding Common Stock as security for borrowings or
those stockholders subject to special treatment under the federal income tax
laws (for example, life insurance companies, tax-exempt organizations, foreign
corporations and nonresident alien individuals). The summary also does not
discuss any consequence of the Reverse Stock Split under any state, local,
foreign, gift or estate tax laws.
No ruling from the Internal Revenue Service or opinion of counsel will be
obtained regarding the federal income tax consequences to the Common
Stockholders of the Company as a result of the Reverse Stock Split.
ACCORDINGLY, EACH STOCKHOLDER IS ENCOURAGED TO CONSULT HIS TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT TO
SUCH STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN INCOME TAX LAWS.
The Company believes that the Reverse Stock Split, if implemented, would
be a tax-free recapitalization to the Company and its Common Stockholders. If
the Reverse Stock Split qualifies as a recapitalization described in Section
368(A)(1)(E) of the Code, (i) no gain or loss will be recognized by the
Company in connection with the Reverse Stock Split; and (ii) no gain or loss
will be recognized by holders of Common Stock who exchange their shares of
Pre-Split Common Stock for shares of Post-Split Common Stock, except that
holders of Common Stock whose fractional shares resulting from the Reverse
Stock Split are rounded up to the nearest whole share will recognize gain for
federal income tax purposes equal to the value of the additional fractional
share. The Company expects that rounding up of fractional shares will result
in an increase of less than .03% in the total number of shares of Class A and
Class B Common Stock outstanding after any Reverse Stock Split.
VOTE REQUIRED
If quorums of the Class A Common Stock and the Class B Common Stock are
present at the Special Meeting, the Reverse Stock Split will be approved if
the votes cast favoring the action exceed the votes cast opposing the action
by the holders of the Class A Common Stock and Class B Common Stock as
separate voting groups. Properly signed proxies returned to the Company at or
prior to the Special Meeting will be voted in favor of the Reverse Stock Split
Proposal unless contrary instructions are specified.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under Colorado law, Stockholders are not entitled to dissenters' rights
of appraisal with respect to the Reverse Stock Split Proposal.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION AND APPROVAL OF THE REVERSE STOCK SPLIT PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of September 15, 1998, with
respect to the beneficial ownership of shares of Class A Common Stock and
Class B Common Stock of the Company by (a) each person known by the Company to
be the beneficial owner of more than five percent of the outstanding shares of
Class A and Class B Common Stock; (b) each executive officer and director; and
(c) all executive officers and directors as a group. Except as noted below,
each person has sole voting and investment power over the shares indicated:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF % OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OWNERSHIP(2) % OF VOTING POWER
-------------- ------------- -------- -------- -------- -------- -----------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B COMBINED(3)
-------------- ------------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Cutrona . . . . . . . . . . - - - - - - -
370 17th Street
Denver, CO 80202
Morris Ginsburg . . . . . . . . . . . 863,950(4) 580,000(5) 6.3% 45.5% * - *(6)
370 17th Street
Denver, CO 80202
Irwin L. Sandler. . . . . . . . . . . 533,320(7) 250,000(5) 4.0% 19.6% * - *(6)
370 17th Street
Denver, CO 80202
Bill C. Bradley . . . . . . . . . . . 10,026,142(8) 1,273,715(8) 63.5% 100.0% 54.9% 100.0% 65.3%
5999 Summerside Dr., #112
Dallas, TX 75252
John R. Sloan . . . . . . . . . . . . - - - - - - -
5999 Summerside Dr., #112
Dallas, TX 75252
Bobby L. Hashaway . . . . . . . . . . 1,989,270(9) - 14.3% - 6.4% - 4.9%
18524 Bay Pines Lane
Dallas, TX 75287
William P. Clark, Jr. . . . . . . . . 1,999,270(10) - 14.3% - 6.4% - 4.9%
P.O. Box 208
Lockhart, TX 78644
Leonard M. Snyder . . . . . . . . . . 10,000 - * - * -*
6260 N. Desert Moon Loop
Tucson, AZ 85750
Vann R. Martin. . . . . . . . . . . . 10,000 - * - * -*
370 17th Street
Denver, CO 80202
Mark Gengozian. . . . . . . . . . . . 55,000(11) - * - * -*
370 17th Street
Denver, CO 80202
Michael Feinstein(12) . . . . . . . . - - - - - - -
370 17th Street
Denver, CO 80202
Pacific USA Holdings Corp.. . . . . . 10,026,142(13) 1,273,715(13) 63.5% 100.0% 54.9% 100.0% 65.3%
Pacific Electric
Wire & Cable Co., Ltd.
Consumer Finance
Holdings, Inc.
5999 Summerside Drive, #106
Dallas, TX 75252
Bud Karsh . . . . . . . . . . . . . . - 443,715(5) -(5) 34.9%(6) - - -(5)
10000 E. Yale #60
Denver, CO 80231
All executive officers and directors. 10,678,412 1,273,715 65.1% 100.0% 55.1% 100.0% 65.5%
as a group (11 persons)
<FN>
* Represents less than one percent.
(1) Shares are considered beneficially owned, for purposes of this table, only if held by the person indicated, or if
such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or
shares the power to vote, to direct the voting of and/or to dispose of or to direct the disposition of, such security, or if
the person has the right to acquire beneficial ownership within 60 days, unless otherwise indicated. All shares are owned of
record unless otherwise indicated. The table excludes the effect of approval and implementation of the proposed amendment to
the Company's Articles of Incorporation. The amendment will increase the number of shares of the Company's Class A Common
Stock beneficially owned by First CF Corp. from 1,178,118 shares to 4,712,472 shares on a pre-split basis. The effect will
be to increase the beneficial ownership of the Company's Class A Common Stock by Pacific USA and its subsidiaries to 70.1%.
However, its voting power with respect to the Class A Common Stock and with respect to the Class A and Class B Common Stock
as a single voting group will not change solely as a result of the amendment being effected.
(2) Includes all shares of Class A Common Stock and Class B Common Stock outstanding and assumes exercise of all
outstanding options and warrants and conversion of all outstanding debentures beneficially owned by the indicated person.
(3) Includes all shares of Class A Common Stock and Class B Common Stock outstanding. Each share of Class A Common Stock
has one vote per share while each share of Class B Common Stock has three votes per share. The Class B Common Stock may be
converted into Class A Common Stock on a share for share basis at the option of the holder thereof, and shall automatically
be converted in the event of its sale or transfer (whether by sale, assignment, gift, bequest, appointment or otherwise) or
upon death of the holder. Excluded, however, from the automatic conversion are transfers of the Class B Common Stock for
estate planning purposes to or for the benefit of the original holder or members of his immediate family, provided that the
original holder retains both voting and investment power over the stock so transferred.
(4) Includes options to purchase 50,000 shares of Class A Common Stock at $2.125 per share, exercisable at any time
until January 3, 2002; options to purchase 125,000 shares of Class A Common Stock at $3.00 per share, exercisable at any
time prior to June 30, 2002; options to purchase 50,000 shares of Class A Common Stock at $1.875 per share exercisable at
any time prior to July 29, 2006; options to purchase 56,250 shares of Class A Common Stock at $0.531 per share exercisable
at any time prior to August 25, 2007; and 580,000 shares of Class A Common Stock issuable upon conversion of the same number
of shares of Class B Common Stock. Excludes 7,500 shares of Class A Common Stock owned by the spouse of Mr. Ginsburg as to
which he disclaims beneficial ownership.
(5) Messrs. Ginsburg, Sandler (through a family partnership of which he is sole general partner) and Karsh own 580,000,
250,000 and 443,715 shares, respectively, of Class B Common Stock. Messrs. Ginsburg and Sandler have granted an option to
Consumer Finance Holdings, Inc. ("CFH") to purchase all of their shares of Class B Common Stock exercisable until December
4, 2000.
(6) Messrs. Ginsburg, Sandler and Karsh entered into an Agreement Among Certain Shareholders of Monaco Finance, Inc.,
dated April 9, 1992, in which Mr. Karsh appointed Messrs. Ginsburg and Sandler as his proxy and attorney-in-fact to each
vote 50% of his Class B Common Stock. On December 4, 1997, Messrs. Ginsburg and Sandler transferred their voting rights with
respect to these shares to Pacific USA, which, since it has sole voting power over those shares, may be deemed to be the
beneficial owner thereof. Mr. Karsh also may be deemed to be the beneficial owner of these shares since he retains sole
dispositive power with respect thereto.
(7) Includes options to purchase 50,000 shares of Class A Common Stock at $2.125 per share, exercisable at any time
until January 3, 2002; options to purchase 125,000 shares of Class A Common Stock at $3.00 per share, exercisable at any
time prior to June 30, 2002; options to purchase 50,000 shares of Class A Common Stock at $1.875 per share, exercisable at
any time prior to July 29, 2006; options to purchase 56,250 shares of Class A Common Stock at $0.531 per share exercisable
at any time prior to August 25, 2007; and 250,000 shares of Class A Common Stock issuable upon conversion of the same number
of shares of Class B Common Stock. Of the remaining shares listed for Irwin L. Sandler, 2,070 shares were purchased by Mr.
Sandler through the custodial account of his Keogh Plan. Mr. Sandler may be deemed the beneficial owner of these shares.
(8) Mr. Bradley, as a director of Pacific USA, may be deemed to share voting and/or investment power with respect to the
following shares: 6,198,157 shares of Class A Common Stock owned of record by CFH; 811,152 shares of Class A Common Stock
owned of record by First CF Corp.; 1,178,118 shares of Class A Common Stock issuable upon full conversion of the Preferred
Stock owned by First CF Corp.; and 565,000 shares of Class A Common Stock issuable upon full exercise of a promissory note
due December 31, 1998, in the principal amount of $536,750 held by Pacific USA. In addition, Mr. Bradley may be deemed to be
the beneficial owner of 1,273,715 shares of Class B Common Stock as to which CFH has sole voting power. CFH also owns an
option to purchase the 830,000 shares of Class B Common Stock owned by Messrs. Ginsburg and Sandler exercisable until
December 4, 2000.
(9) As a director of First CF Corp., Mr. Hashaway may be deemed to share voting and/or investment power over 811,152
shares of Class A Common Stock and 1,178,118 shares of Class A Common Stock issuable upon full conversion of the Preferred
Stock owned by that company.
(10) As a director of Pacific Southwest Bank, Mr. Clark may be deemed to share voting and/or investment power over
811,152 shares of Class A Common Stock and 1,178,118 shares of Class A Common Stock issuable upon full conversion of the
Preferred Stock owned by First CF Corp., a wholly-owned subsidiary of that bank.
(11) Includes options to purchase 15,000 shares of Class A Common Stock at $1.875 per share any time prior to July 29,
2006; and options to purchase 39,900 shares of Class A Common Stock at $0.531 per share exercisable at any time prior to
August 25, 2007.
(12) Mr. Feinstein is no longer employed by the Company effective April 1998.
(13) Except as stated below, the information contained in the table, in this footnote and elsewhere herein is derived
from a Schedule 13D dated March 16, 1998, filed by Pacific USA, Pacific Electric Wire & Cable Co., Ltd. ("Pacific Electric")
and CFH with the Securities and Exchange Commission. Pacific USA is a wholly-owned subsidiary of Pacific Electric. CFH and
First CF Corp. are direct and indirect wholly-owned subsidiaries of Pacific USA. Accordingly, Pacific Electric and Pacific
USA may be deemed to be the beneficial owners of all of the shares referred to in Note (8) above. On September 1, 1998,
effective as of July 1, 1998, Pacific USA converted $4,463,250 in principal amount of a $5,000,000 loan into 4,698,157
shares of Class A Common Stock at a conversion price of $.95 per share. The conversion price is the book value per share of
the Company's issued and outstanding Common Stock as of June 30, 1998. The closing price of the Class A Common Stock on the
Nasdaq Stock Market was $.50 per share on June 30, 1998, and $.38 per share on September 1, 1998.
</TABLE>
PROXY SOLICITATION
In addition to soliciting proxies by mail, directors, executive officers
and employees of the Company, without receiving additional compensation, may
solicit proxies by telephone, by telegram or in person. Arrangements will
also be made with brokerage firms and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of
shares of Class A Common Stock and the Company will reimburse such brokerage
firms and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with forwarding such
materials.
OTHER BUSINESS
The Board of Directors does not know of any business to be presented for
consideration at the Special Meeting other than that stated in the attached
Notice of Special Meeting. In the event that other business properly comes
before the Special Meeting, the proxy holders identified in the form of proxy
are authorized to vote or act in accordance with their judgment with respect
to any such matter.
PROPOSALS BY STOCKHOLDERS
Proposals by stockholders of the Company intended to be presented at the
next annual meeting of stockholders of the Company must be received at
the Company's executive offices no later than January 15, 1999, to be included
in the Company's proxy statement and form of proxy relating to that meeting.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial owners
of the Common Stock for which proxies are being solicited from you, and, if
so, the number of copies of the Proxy Statement and other soliciting materials
you wish to receive in order to supply copies to the beneficial owners of the
Common Stock.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
SHARE-HOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE,
WHETHER OR NOT THEY EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON. BY
RETURNING YOUR PROXY PROMPTLY YOU CAN HELP THE COMPANY AVOID THE EXPENSE OF
FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE SPECIAL MEETING CAN BE HELD.
SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE A PRIOR PROXY AS SET
FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors,
- ------------------------------
Irwin L. Sandler, Secretary
Denver, Colorado
October 8, 1998
<PAGE>
ANNEX A
Form of Articles of Amendment to Articles of Incorporation
if Reverse Stock Split is effected
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is MONACO FINANCE, INC.
----------------------
SECOND: The following amendment to the Articles of Incorporation was adopted
on November 12, 1998, as prescribed by the Colorado Business Corporation Act,
in the manner marked with an X below:
No shares have been issued or Directors Elected - Action by
Incorporators
No shares have been issued but Directors Elected - Action by
Directors
Such amendment was adopted by the board of directors where shares
have been issued and shareholder action was not required.
X Such amendment was adopted by a vote of the shareholders. The
- ----
number of shares voted for the amendment was sufficient for approval.
- --
The Articles of Incorporation shall be amended by striking the existing
Section 4.1 of the Preferences, Limitations And Relative Rights of 8%
Cumulative Convertible Preferred Stock, Series 1998-1 and inserting in lieu
thereof the following new section:
4.1 VOLUNTARY CONVERSION. The Preferred Stock may be converted in
whole or in part at any time and from time to time into shares of Class A
Common Stock ("Voluntary Conversion") at the rate of four shares of Class A
Common Stock for each two shares of Preferred Stock so converted (the
"Conversion Ratio"). The Conversion Ratio is subject to automatic adjustment
as provided in Section 4.8.
The Articles of Incorporation shall be amended by striking the existing
Section 4.8 of the Preferences, Limitations And Relative Rights of 8%
Cumulative Convertible Preferred Stock, Series 1998-1 and inserting in lieu
thereof the following new section:
4.8 STOCK SPLITS AND STOCK DIVIDENDS. In case the Corporation shall
at any time issue Class A Common Stock -by way of dividend or other
distribution on any stock of the Corporation or subdivide or combine the
out-standing shares of Class A Common Stock, the Conversion Ratio and the
market price of the Class A Common Stock that causes Automatic Conversion of
the Preferred Stock into shares of Class A Common Stock as provided in Section
4.2 herein shall be decreased in the case of such issuance (on the day
following the date fixed for determining sharehold-ers entitled to receive
such dividend or other distribution) or decreased in the case of such
subdivision or increased in the case of such combination (on the date that
such subdivi-sion or combination shall become effective) in same proportion as
the increase or decrease in the outstanding shares of Class A Common Stock.
THIRD: If changing corporate name, the new name of the corporation is
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows: None
If these amendments are to have a delayed effective date, please list that
date:
(Not to exceed ninety (90) days from the date of filing)
MONACO FINANCE, INC.
Signature
----------------------------
Morris Ginsburg, President
<PAGE>
PROXY APPENDIX A
-----------
MONACO FINANCE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
MONACO FINANCE, INC.
The undersigned hereby appoints Morris Ginsburg and Irwin L. Sandler, and
each of them, as proxies for the undersigned, each with full power of
appointment and substitution, and hereby authorizes them to represent and to
vote, as designated below, all shares of the $0.01 par value Class A Common
Stock of Monaco Finance, Inc. (the "Company") which the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Company to be
held on November 12, 1998 (the "Meeting"), or at any postponements,
continuations or adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be voted
(i) FOR the proposal to amend the Company's Articles of Incorporation with
respect to its 8% Cumulative Convertible Preferred Stock, Series 1998-1; (ii)
FOR the proposal to authorize the Company's Board of Directors to effect a
reverse split of the outstanding shares of the Company's Class A Common Stock
and Class B Common Stock on the basis of one share for each five shares then
outstanding; and (iii) on such other matters as may properly come before the
Meeting.
1. Proposal to amend the Company's Articles of Incorporation with
respect to its 8% Cumulative Convertible Preferred Stock , Series 1998-1 (the
"Preferred Stock") to (i) change the Conversion Ratio of the Preferred Stock
from one share of Class A Common Stock for each two shares of Preferred Stock
that are converted to four shares of Class A Common Stock for each two shares
of Preferred Stock that are converted, and (ii) to provide that the market
price of the Class A Common Stock that causes automatic conversion of the
Preferred Stock into shares of Class A Common Stock will be proportionately
adjusted in the event of any issuance of Class A Common Stock as a dividend or
other distribution or in the event of a subdivision or combination of the
outstanding shares of Class A Common Stock.
____FOR ____AGAINST ____ABSTAIN
2. Proposal to authorize the Company's Board of Directors to effect,
in its discretion, a reverse split of the outstanding shares of the Company's
Class A Common Stock and Class B Common Stock on the basis of one share for
each five shares then outstanding.
____FOR ____AGAINST ____ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting or at any
postponements, continuations or adjournments thereof.
Please sign exactly as your name appears hereon. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign partnership name by authorized person. When signing
as trustee, please give full title as such.
Dated,________________1998
---------------------
Authorized Signature
---------------------
Title
Please mark boxes /X/ in ink. Sign, date and return this Proxy Card promptly
using the enclosed envelope.
