<PAGE> 1
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CREDIT DEPOT CORPORATION.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined).
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(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing of which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
CREDIT DEPOT CORPORATION
700 WACHOVIA CENTER
GAINESVILLE, GEORGIA 30501
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 15, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Credit
Depot Corporation (the "Company") will be held at 10:00 am, local time, on
October 15, 1998 at the Lanier Centre Hotel, Gainesville, Georgia for the
following purposes:
1. To consider and act upon a proposed amendment to the Company's
Certificate of Incorporation (the form of which is attached
hereto as Exhibit A) to effect a reverse stock split in which
each five shares of the Company's Common Stock, par value
$.001 per share, will be reclassified and changed into one
share of new Common Stock, par value $.001;
2. Ratification of issuance of Series C 10% Convertible
Redeemable Preferred Stock and a Warrant to The Global
Opportunity Fund Limited
3. Approval of issuance of Preferred Stock and Warrants to
certain creditors of the Company
4. To consider and act upon such other matters as may properly
come before the meeting or any adjournment thereof.
Only shareholders of record at the close of business on September 2, 1998 will
be entitled to notice of and to vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
CHARLES D. FARRAHAR, SECRETARY
GAINESVILLE, GEORGIA
SEPTEMBER 22, 1998
IMPORTANT
IT IS IMPORTANT THAT AS MANY SHARES AS POSSIBLE BE VOTED IN PERSON OR BY PROXY.
THEREFORE, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE.
THE RETURN OF A PROXY WILL NOT AFFECT, IMPAIR OR RESTRICT YOUR RIGHTS AS A
SHAREHOLDER TO REVOKE THE PROXY OR TO ATTEND THE SPECIAL MEETING AND VOTE IN
PERSON. IT WILL HOWEVER, HELP TO AVOID ADDED PROXY SOLICITATION COSTS.
CERTAIN PROPOSALS TO BE VOTED UPON AT THE MEETING RELATE TO TRANSACTIONS WHICH
COULD RESULT IN THE ISSUANCE OF SUBSTANTIAL NUMBER OF SHARES OF COMMON STOCK.
SEE "POSSIBLE ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE TRANSACTIONS
DESCRIBED IN THE FOLLOWING TWO PROPOSALS" IN THE ACCOMPANYING PROXY STATEMENT.
<PAGE> 3
CREDIT DEPOT CORPORATION
WACHOVIA CENTER - SUITE 700
GAINESVILLE, GEORGIA 30501
PROXY STATEMENT
The enclosed proxy is being solicited by Credit Depot Corporation (the
"Company") for use at the Special Meeting of Shareholders to be held at 10:00 am
local time, on October 15, 1998 at the Lanier Centre Hotel, Gainesville, Georgia
and any adjournment or adjournments thereof. The Company has been advised by the
members of the Board of Directors that each of them intends to vote in favor of
the proposals described below. This Proxy Statement and the accompanying form of
Proxy are first being sent to shareholders on or about the date hereof.
OUTSTANDING VOTING SECURITIES
At the close of business on September 2, 1998 (the "record date"),
there were 5,748,575 shares of Common Stock of the Company ("Common Stock")
issued and outstanding. Each such share is entitled to one vote on each matter
submitted to shareholders. Additionally, on such date there were issued and
outstanding 16,740 shares of Series B 11% Convertible Preferred Stock (the
"Series B Preferred Stock") with voting rights equivalent to 931,537 shares of
Common Stock. Only shareholders of record at the close of business on the record
date are entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof.
The following table sets forth certain information as of August 28,
1998 with respect to any person who is known to the Company to be the beneficial
owner of more than 5% of class of voting securities and as to each class of the
Company's equity securities beneficially owned by its directors and by directors
and officers as a group:
1
<PAGE> 4
<TABLE>
<CAPTION>
APPROX-
AMOUNT OF IMATE
TITLE OF SHARES PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OF CLASS
OWNED (1) (1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Heiko H. Thieme (2) 989,577 (6) 15
Stock
Common Ralph J. DeBee, Jr. (3) 36,667 (7) *
Stock
Common Marvin V. Bolt (2) 12,240 (8) *
Stock
Common John R. Marshall (3) 10,000 (9) *
Stock
Common Carlos Munoz (3) 14,000 (10) *
Stock
Common John C. Thomas, Jr. (3) 45,517 (11) *
Stock
Common Arkansas Teachers Retirement System (4) 371,441 6
Stock
Common Ranier Heubach 365,817 6
Stock Unterbergstrasse 104 A-5084 Grossgmain
Salzburg Austria
Common The InterGroup Corp. (5) 323,550 (12) 5
Stock
Common Santa Fe Financial (5) 323,550 (12) 5
Stock
Common Jackt Holdings Corp. 500,000 (13) 8
Stock Avieneda Justo Arrosemena, Calle 32
Panama 5, Republic of Panama
Common Michigan Employees Retirement System (4) 807,925 12
Stock
Common VPM Verwaltungs AG 458,605 7
Stock Thierwilerstrasse 10 CH-4103
Bottingham, Switzerland
Common Lancer Partners, L.P. 680,975 11
Stock 237 Park Avenue
New York, NY 10017
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
APPROX-
AMOUNT OF IMATE
TITLE OF SHARES PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OF CLASS
OWNED (1) (1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common The Global Opportunity Fund Limited 653,999 (14) 10
Stock P.O. Box N-9024 Charlotte St.
Nassau, Bahamas
Series B The InterGroup Corp. (5) 323,550 (12) 26
Preferred
Stock
Series B Yong S. Ahn 53,920 (15) 5
Preferred 219 Hidden Pond Road
Stock Franklin lakes, NJ 07417
Series B Portsmouth Square (5) 107,850 (16) 10
Preferred
Stock
Series B Santa Fe Financial (5) 323,550 (12) 26
Preferred
Stock
Series B Dennis Fortin 53,920 (15) 5
Preferred 26 Brookside Dr.
Stock Easton, CT 06612
Common Lancer Partners, L.P. 690,975 11
Stock 237 Park Avenue
New York, NY 10017
Common Directors and officers as a group (seven 480,252 (17) 8
Stock persons) (18)
</TABLE>
- ----------
* Less than 1%
- ------------------------------
(1) Unless otherwise noted below, the Company believes that all persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock beneficially owned by them. For purposes
hereof, a person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options or the conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that any such warrants, options or convertible
securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date
hereof, have been exercised.
(2) 1370 Avenue of the Americas, New York NY 10019
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(3) c/o Credit Depot Corporation, 700 Wachovia Center, Gainesville, GA
30501
(4) c/o Kennedy Capital Management, 10829 Olive Blvd., St. Louis MO
63141-7739
(5) P.O. Box 80037 San Diego CA 92138-0037
(6) Includes 335,578 shares which may be acquired upon exercise of warrants
held by Mr. Thieme and Thieme Consulting, Inc. Also includes 653,999
shares which are beneficially owned by The Global Opportunity Fund
Limited. Does not include shares which may not be acquired within 60
days by The Global Opportunity Fund Limited. Mr. Thieme disclaims any
beneficial interest in shares owned or which may be acquired by The
Global Opportunity Fund Limited.
(7) Represents shares which may be purchased upon exercise of options
granted under the Company's 1990 and 1993 Stock Option Plans (the
"Plans"). Does not include 33,333 shares which may be purchased upon
exercise of options not exercisable within 60 days.
(8) Represents 10,000 shares which may be purchased upon exercise of
options granted under the Plans and 2,240 shares which may be purchased
upon exercise of a warrant.
(9) Represents shares which may be purchased upon exercise of options
granted under the Plans.
(10) Represents 10,000 shares which may be purchased upon exercise of
options granted under the Plans and 4,000 shares which may be purchased
upon exercise of a warrant.
(11) Includes 10,000 shares which may be purchased upon exercise of options
granted under the Plans and 28,000 shares which may be purchased upon
exercise of a warrant.
(12) Includes 150,000 shares which may be purchased upon exercise of a
warrant.
(13) Represents 250,000 shares issuable upon the conversion of convertible
debt and 250,000 shares which may be purchased upon exercise of a
warrant.
(14) Includes 556,000 shares which may be purchased upon exercise of a
warrant. Does not include 7,000,000 shares which may be acquired upon
conversion of the Preferred Shares and the Warrant, as those terms are
hereinafter defined.
(15) Includes 25,000 shares which may be purchased upon exercise of a
warrant.
(16) Includes 50,000 shares issuable upon exercise of a warrant.
(17) Represents 102,917 shares which may be purchased upon exercise of
options granted under the Plans. Does not include 77,083 shares which
may be purchased upon exercise of options not exercisable within 60
days.
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(18) See Notes above.
VOTING PROCEDURE
Shares cannot be voted at the meeting unless the owner of record at the
close of business on the record date is present to vote in person or is
represented by a valid proxy. The enclosed proxy is a means by which a
shareholder may authorize the voting of his shares at the Special Meeting. All
shares represented by valid proxies received by the Company prior to the time
they are voted will be voted as specified by the shareholder. A proxy may be
revoked by the shareholder at any time prior to the time it is voted by the
delivery of written notice of the revocation to the Secretary of the Company or
by voting in person at the Special Meeting.
All votes, including ballots, will be counted by one or more inspectors
to be appointed by the Company prior to the Special Meeting. The Company will
reject a vote or proxy appointment if such inspectors, acting in good faith,
have reasonable doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder. Abstentions and broker
non-votes will be counted only for the purpose of determining if a quorum is
present.
The affirmative vote of a majority of the shares of Common Stock is
necessary to approve the proposed amendment to the Company's Certificate of
Incorporation to effect a reverse stock split in which each five shares of the
Company's common stock, par value $.001 per share, will be reclassified and
changed into one share of new common stock ("New Common Stock"), par value $.001
(the "Reverse Stock Split"). If a quorum is present, the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
is required to approve proposals Nos. 2 and 3. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. If a shareholder, present in person or represented
by proxy, abstains on any matter, the shareholder's Common Stock will not be
voted on such matter. Accordingly, an abstention from voting on a matter by a
person present in person or represented by proxy at the Meeting has the same
effect as a vote against the matter. Broker non-votes will also have the same
effect as a vote against the matters to be voted upon at the Special Meeting.
In the event that sufficient votes are not received for approval of any
of the proposals to be considered at the Special Meeting, persons named as
proxies may propose one or more adjournments of the Special Meeting aggregating
not more than 120 days to permit further solicitation of proxies. Any such
adjournment or adjournments will require the affirmative vote of the holders of
a majority of the Common Stock present in person or represented by proxy at the
Special Meeting. Persons named as proxies will vote in favor of such adjournment
those proxies which instruct them to vote in favor of the Reverse Stock Split
and will vote against any such adjournment those proxies which instruct them to
vote against or abstain from voting on the Reverse Stock Spit. The cost of such
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additional solicitation and of any adjourned session will be borne by the
Company.
PROXY SOLICITATION
Proxies will be solicited primarily by mail. The cost of the
solicitation will be borne by the Company. In addition to solicitation by mail,
certain officers and employees of the Company may solicit proxies by telephone,
facsimile transmission, telegraph or in person. These persons will receive no
compensation therefor but will be reimbursed by the Company for any expenses
incurred thereby. Arrangements will be made by the Company with brokers,
nominees, fiduciaries and other custodians to reimburse them for their charges
and expenses in forwarding proxy materials to the beneficial owners of shares
registered in their names.
The majority of the shares entitled to vote, present in person or
represented by proxy, constitutes a quorum at the Special Meeting.
PROPOSED AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE SPLIT
On August 28, 1998, the Board of Directors approved, subject to the
stockholder approval solicited hereby, a proposal to amend the Company's
Certificate of Incorporation to effect the Reverse Stock Split. The Board of
Directors has recommended to the shareholders that they approve the prosed
amendment to the Company's Certificate of Incorporation to effect the Reverse
Stock Split.
Although the Company's Board of Directors believes that as of the date
of this Proxy Statement the Reverse Stock Split is advisable, the Reverse Stock
Split may be abandoned by the Board of Directors at any time before it is
effected, including any such time before, during, or after the Special Meeting.
The ratio of the Reverse Stock Split was determined by the Company's Board of
Directors after considering the market price of the Common Stock and the Nasdaq
SmallCap Market ("Nasdaq") requirement of a minimum bid price, as described
below. Depending upon prevailing market conditions, the Board of Directors may
deem it advisable to implement the Reverse Stock Split and concurrently declare
a stock-for-stock dividend in a ratio to be determined by the Board of
Directors, the latter of which does not require stockholder approval. Depending
upon the amount of any such stock-for-stock dividend, the decrease in the number
of issued and outstanding shares resulting from the Reverse Stock Split would be
partially offset, potentially to the extent that the result will be the same as
if a one-for-four, one-for-three or other reverse stock split ratio had been
approved by the Company's stockholders. The ratio of any such stock-for-stock
dividend will be primarily dependant upon the market price of the Common Stock.
Unless there is a significant increase in such market price subsequent to the
date of this Proxy Statement, it is unlikely that the Company's Board of
Directors will declare a stock-for-stock dividend in the foreseeable future, if
at all. The net effect of implementation of the Reverse Stock Split and any
subsequent dividend declarations described herein will not result in more than
five shares of Common Stock being reclassified into each share of New Common
Stock.
REASON FOR THE REVERSE STOCK SPLIT PROPOSAL - NASDAQ MINIMUM BID PRICE
REQUIREMENT
The Common Stock is currently listed on Nasdaq. The Board of Directors
believes that the continued listing of the Common Stock on Nasdaq is important
for the marketability of the Common Stock and the prestige of the Company in
the financial community.
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<PAGE> 9
Nasdaq requires, for continued listing, among other things, a minimum closing
bid price of $1.00 for thirty consecutive trading days. As of August 13, 1998,
the Company did not meet such requirement. Unless the Common Stock has a minimum
closing bid price of $1.00 for at least ten consecutive trading days ending
November 11, 1998, the Common Stock will be delisted from Nasdaq. The Board of
Directors believes that the Reverse Stock Split, by decreasing the number of
shares outstanding, should increase the bid price per share of Common Stock and
is necessary in order to permit the Company to meet the bid price requirement
for continued listing on Nasdaq. The Company believes that the increased share
price expected to result from the Reverse Stock Split will enable the Company to
comply with the minimum bid price requirement of Nasdaq. The decision is beyond
the control of the Company, however, and may depend on a number of factors in
addition to the quantitative criteria discussed herein, and there can be no
assurance that the Common Stock will be continue to be listed on Nasdaq even if
the Reverse Stock Split is effected and the other proposals described in this
Proxy Statement are approved. Furthermore, there can be no assurance that the
market price of the New Common Stock will increase to, or remain above $1.00 per
share after the Reverse Stock Split. The Company believes that following a
reverse stock split, a company's stock price will frequently fail to reach or
sustain a price equal to the pre-split price multiplied by the reverse split
multiple. On November 3, 1997, the Company effected a one-for five reverse stock
split in order to comply with the Nasdaq minimum bid price requirement. The
closing bid price for a share of Common Stock on such date and the day before
such reverse stock split was effectuated was $2.00 and $0.50, respectively. On
September 14, 1998, such closing price was $.313.
If the Company does not effect the Reverse Stock Split or is unable in the
future to satisfy the Nasdaq maintenance requirements, the Common Stock will be
delisted from Nasdaq. In such event, trading, if any, in the Common Stock or New
Common Stock, as the case may be, would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board." Consequently, the liquidity of such securities could be
severely adversely affected, not only in the number of shares which could be
bought and sold, but also through delays in the timing of transactions,
reduction in security analysts' and the news media's coverage of the Company and
lower prices for such securities than might otherwise be attained.
Theoretically, the number of shares outstanding should not, by itself,
affect the marketability of the Common Stock , the nature of investors who
acquire it, or the Company's reputation in the financial community. However, in
practice this is not necessarily the case, as certain investors view low-priced
stock as unattractive or, as a matter of policy, will not extend margin credit
on stock trading at low prices, although certain other investors may be
attracted to low-priced stock because of the greater trading volatility
sometimes associated with such securities. Many brokerage houses are reluctant
to recommend lower-priced stock to their clients or to hold it in their own
portfolios. Further, a variety of brokerage house policies and practices
discourage individual brokers within those firms from dealing in low-priced
stock because of the time-consuming procedures that make the handling of
low-priced stock unattractive to brokerage houses from an economic standpoint.
There can be no assurance that the market price of the New Common Stock
immediately after
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<PAGE> 10
implementation of the Reverse Stock Split will be maintained for any period of
time, that such market price will approximate five times (or some other multiple
of) the market price of the Common Stock before the Reverse Stock Split, or that
such market price of the Common Stock will exceed or remain in excess of the
current market price of the Common Stock or that the Common Stock will not be
delisted from Nasdaq.
CERTAIN EFFECTS OF THE REVERSE STOCK SPLIT
If the Reverse Stock Split is approved by the stockholders at the
Special Meeting and the Company's Board of Directors subsequently determines
that it is advisable to proceed with the Reverse Stock Split, the result
(without giving effect to the stock-for stock dividend, if any, referred to
above) would be that each stockholder of the Company who owns five or more
shares of Common Stock will receive one share of New Common Stock for each five
shares of Common Stock held at the close of business on the day that the
amendment to the Company's Certificate of Incorporation is duly filed with the
Secretary of State of the State of Delaware. No fractional shares or scrip would
be issued and the number of shares of Common Stock issuable to each stockholder
will be rounded up to the next whole number. If for any reason the Board of
Directors deems it advisable to do so, the Reverse Stock Split may be abandoned
by the Board of Directors at any time before, during, or after the Special
Meeting and prior to filing of the amendment to the company's Certificate of
Incorporation with the Secretary of State of the State of Delaware, without
further action by the stockholders of the Company.
The Reverse Stock Split would not affect any stockholder's percentage
ownership interest in the Company or proportional voting power, except for minor
differences resulting from the rounding up of fractional shares. In addition,
the Reverse Stock Split is not expected to reduce the number of stockholders of
the Company. The voting rights and other privileges of the holders of Common
Stock would not be affected substantially by adoption of the Reverse Stock Split
or subsequent implementation thereof.
THE BOARD OF DIRECTORS HAS CONCLUDED THAT THE POTENTIAL BENEFITS OF THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO THE COMPANY AND ITS
SHAREHOLDERS OUTWEIGH THE POSSIBLE DISADVANTAGES.
POSSIBLE ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE TRANSACTIONS DESCRIBED
IN THE FOLLOWING TWO PROPOSALS.
The following two proposals relate to transactions which result in the
issuance of an aggregate of 16,565,218 shares of Common Stock, plus any
additional shares that may be paid as dividends. See "Ratification of Issuance
of Series C 10% Convertible Redeemable Preferred Stock and a Warrant Issued to
the Global Opportunity Fund Limited -- The Preferred Shares." If such 16,565,218
shares had been issued on September 14, 1998, they would have represented
approximately 74% of the shares of Common Stock outstanding on that date.
Furthermore, if such issuance had occurred, the remaining shares of outstanding
Common Stock would have constituted approximately 26% of the then outstanding
shares. Such issuance would have resulted from the conversion of preferred stock
and exercise of warrants issued upon conversion of indebtedness aggregating
$3,200,000. In connection with the exercise of such warrants $4,021,667 would
have been paid to the Company. Because the book value attributable to a share of
Common Stock was a negative amount on September 14, 1998, any conversion of such
preferred stock or exercise of such warrants would have resulted in either a
decrease in the amount of such negative book value or an positive such book
value, depending upon the amount of securities so converted or exercised.
RATIFICATION OF ISSUANCE OF SERIES C 10% CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND A WARRANT ISSUED TO THE GLOBAL OPPORTUNITY FUND LIMITED
Prior to June 5, 1998, the Global Opportunity Fund Limited (the
"Global") held secured promissory notes issued by the Company in the aggregate
principal amount of $2,100,000, each of which provided for interest at the
annual rate of 10% (the "Notes"). The following table sets forth certain
information with respect to the each of Notes immediately prior to their
conversion:
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<PAGE> 11
<TABLE>
<CAPTION>
Face Amount Maturity Date (1) Conversion Price per Share
of Common Stock (2)
===================================================================================
<S> <C> <C>
$ 350,000 July 31, 1998 $ 2.00
250,000 July 31, 1998 2.00
250,000 July 31, 1998 2.00
250,000 July 31, 1998 2.00
1,000,000 June 30, 2001 12.50
</TABLE>
On June 5, 1998, Global converted the Notes into 21,000 shares of the
Company's Series C 10% Convertible Redeemable Preferred Stock (the "Preferred
Shares") and a Common Stock Purchase Warrant (the "Warrant"). The terms of the
Preferred Shares and the Warrant, which are described below, were determined by
the Company's Board of Directors after a proposal had been made by Global. Such
terms included a then conversion price for the Preferred Shares equivalent to
75% and an exercise price of the Warrant of 125% of the closing bid price on the
date of such conversion, respectively. The Board of Directors' determination
that such terms were fair to the Company and is otherwise unaffiliated
shareholders was based upon the then trading price of the Common Stock, the
Company's inability to fulfill the terms of the Notes and the extent of the
collateral securing the Notes. On June 4 and June 5, 1998, the closing bid
prices of the Common Stock on Nasdaq were $.875 and $1.00, respectively.
If Global had converted all of the preferred Shares and exercised the
Warrant in full on the date of this Proxy Statement, Global would have paid the
Company $3,500,000 and received 7,000,000 shares of Common Stock. Such
shares would have represented approximately 55% of the outstanding shares of
Common Stock. Global has not exercised the Warrant or converted any Preferred
Shares and there can be no assurance that it will do so in the future.
The Company has agreed to use its best efforts to effect the
registration under the Securities Act of 1933 (the "Act") and registration or
qualification under all applicable state securities laws of the Common Stock
issuable, or other securities that may become issuable, upon conversion of the
Preferred Shares and exercise of the Warrant before September 30, 1998 at the
expense of the Company. The Company is delinquent in such obligation although
the Company does not believe that such delinquency will materially adversely
affect the Company. The Company believes that such expense will be approximately
$20,000.
Heiko H. Thieme is the President of both Global and its investment
advisor and sole shareholder of such investment advisor. Marvin Bolt is a Vice
President of such investment advisor. Global's investment advisor receives
compensation which is based upon the value of Global's assets and Global's
performance. Messrs. Thieme and Bolt are both members of the Company's Board of
Directors and Mr. Thieme is the Chairman of such Board of Directors. Because of
the conflict of interest of Messrs. Thieme and Bolt, neither of them
participated in the Company's determination to accept Global's offer to convert
the Notes to Preferred Shares and the Warrant and neither of them voted upon
such proposal.
THE PREFERRED SHARES
The holders of the Preferred Shares are entitled to receive cumulative
dividends at the rate of $10 per share payable quarterly, when and if declared
by the Company's Board of Directors. No dividends may be paid on any shares of
capital stock ranking pari passu with or junior to the Preferred Shares
(including the Common Stock or New Common Stock if the Reverse Split is
effectuated) unless and until all accumulated and unpaid dividends on the
Preferred Shares have been declared and paid in full. Until July 1, 1999,
dividends per share are payable, at the Company's option, either (i) in cash or
(ii) in shares of Common Stock at a rate equal to the average market value of
the Common Stock for the period of twenty consecutive trading days prior to the
record date. Thereafter, dividends shall continue to payable as set forth above
except that the rate with respect to dividends paid in Common Stock will be 75%
of the then average market value of the Common Stock.
The Company may issue, in the future, without the consent of holders of
the Preferred
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<PAGE> 12
Shares, other series of preferred stock which rank on parity with or junior to
the Preferred Shares as to dividend and/or liquidation rights. The consent of
the holders of two-thirds of the outstanding Preferred Shares is required for
the issuance of any series of preferred stock which is senior as to dividend
and/or liquidation rights to the Preferred Shares.
The Company may, at its option, redeem any or all of the Preferred
Shares upon duly given notice to the holders at a redemption price of $.01 per
share payable in cash plus then unpaid dividends, subject to adjustment, if (a)
the shares of Common Stock underlying the Preferred Shares shall have been
registered under the Act and such registration is then current and effective,
and (b) the average of the closing sales price of the Common Stock as reported
by Nasdaq shall, for twenty consecutive trading days ending within ten days of
the date of such notice, equals or exceeds 200% of the then current conversion
price.
Each of the Preferred Shares is presently convertible, at the option of
the respective holders, into 200 shares of Common Stock, subject to adjustment.
Dividends accrued and payable at the time of conversion shall be paid, at the
Company's option, either cash or in Common Stock.
Upon any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of the Preferred Shares shall be entitled
to receive, before any distribution may be made or set apart for the holders of
Common Stock or any other security junior to the Preferred Shares in respect to
liquidation of distributions from assets of the Company legally available for
such purposes, cash equal to the greater of (a) $100 per share, subject to
adjustment or (b) the amount that would have been paid to the holders of the
Preferred Shares had the Preferred Shares been converted into shares of Common
Stock immediately prior to such an event, plus accrued and unpaid dividends. A
merger or consolidation shall be considered a liquidation except in the event
that in such a transaction, the holders of the Preferred Shares receive
securities of the surviving corporation having substantially similar rights as
the Preferred Shares and the stockholders of the Company immediately prior to
such transaction are holders of at least a majority of the voting securities of
the surviving corporation immediately thereafter.
The holders of the Preferred Shares shall have no right to vote for any
purpose, except as specifically required by the General Corporation Law of the
State of Delaware.
THE WARRANT
The Warrant entitles the holder to purchase a maximum of 2,800,000
shares of the Common Stock at $1.25 per share at any time or from time to time
until June 10, 2003. The number of shares and the price to be paid for each such
share are subject to adjustment. The Warrant can be exercised on a "cashless"
basis in the event of appreciation in the market price of the Company's Common
Stock.
The Company may, at its option, redeem all or a portion of the Warrant
upon notice duly given to the holder(s) at a redemption price of $.01 per share
underlying the Warrant, subject to
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adjustment, if (a) the Common Stock underlying the Warrant shall have been
registered under the Act and such registration shall then be current and
effective, and (b) the average of the closing sales price of the Common Stock as
reported by Nasdaq shall, for twenty consecutive trading days ending within ten
days of the date of such notice, equals or exceeds 200% of the then current
exercise price.
REASON FOR SHAREHOLDER RATIFICATION
Nasdaq requires, among other things, that in order for the Company to
maintain its Nasdaq listing, the sale by the Company of Common Stock or
securities convertible into or exchangeable for Common Stock, such as the
Preferred Shares and the Warrant, equal to 20% or more of the outstanding shares
of Common Stock for less than the greater of book or market value of the Common
Stock, must be approved by shareholders (the "20% Requirement"). Accordingly,
Global has agreed that it will not convert any of the Preferred Shares or
exercise the Warrant prior to the earlier of December 31, 1998 or the time that
such approval is obtained. On the day that the Notes were converted into the
Preferred Shares and the Warrant, the closing bid price of the Common Stock on
Nasdaq was $1.00 and the book value per share was less than such price.
THE BOARD OF DIRECTORS HAS CONCLUDED THAT THE POTENTIAL BENEFITS OF THE
RATIFICATION OF THE ISSUANCE OF THE PREFERRED SHARES AND WARRANT TO GLOBAL TO
THE COMPANY AND ITS SHAREHOLDERS OUTWEIGH THE POSSIBLE DISADVANTAGES.
APPROVAL OF ISSUANCE OF PREFERRED STOCK AND WARRANTS TO
CERTAIN CREDITORS OF THE COMPANY
Among other obligations of the Company are five 10% promissory notes in
the aggregate face amount of $1,100,000 (the "Promissory Notes"). Jackt Holdings
Corp. is a holder of one of the Promissory Notes in the face amount of $500,000.
See "Outstanding Voting Securities".
Each of the holders of the Promissory Notes was introduced to the
Company by Mr. Thieme. Mr. Thieme has advised the Company that he believes some,
if not all, of such holders, would accept shares of a new series of the
Company's Preferred Stock (the "New Preferred Shares") and a Warrant (each, a
"New Warrant" and, collectively, the "New Warrants"). The Company's Board of
Directors can authorize and issue the New Preferred Shares and issue the
Warrants without shareholder approval in exchange for the Promissory Notes on
such terms and conditions as it determines. The Company believes, however, that
if a significant portion of the Promissory Notes are converted into New
Preferred Shares and New Warrants (a "Conversion"), the 20% Requirement will
require approval by shareholders. In the event that the Conversion is subject to
the 20% Requirement, the Company will not issue any New Preferred Shares and New
Warrants upon a Conversion unless they are substantially identical in terms and
conditions to the Preferred Shares and the Warrant, except for their respective
conversion and exercise prices. Furthermore such prices will not represent a
greater discount or a lesser premium, respectively from the then current bid
price of the Common Stock as was the case at the time
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<PAGE> 14
of Global's conversion of the Notes. Because the proposed terms of the New
Preferred Shares and New Warrants will be not less favorable to the Company,
based upon then current market prices, than were such terms in the transaction
with Global, the Company's Board of Directors has recommended that shareholders
vote in favor of the proposal.
If the Conversion had taken place on September 14, 1998 and the
percentage of discount and premium were the same as those with respect to the
Preferred Shares and the Warrant received upon the conversion of the Notes by
Global, respectively, the holders would have paid the Company $521,667 and
received 5,593,184 shares of Common Stock. Such shares would have represented
approximately 49% of the outstanding shares of Common Stock. If, however, the
average closing sale price of the Common Stock for any period of twenty
consecutive trading days prior to December 31, 1998 is less than or equal to
$.235 per share, the holders would receive 7,723,109 shares of Common Stock. If
the holders had received that number of shares on September 14, 1998, they would
have received approximately 57% of the then outstanding shares of Common Stock.
Subject to the foregoing limitation, the terms of any Conversion will be
determined by the Company's Board of Directors using their business judgment.
Although Messrs. Thieme and Bolt have advised the Company that they do not
believe that they have any conflict of interest with respect to such
determination, they will nevertheless abstain from voting thereon. There can be
no assurance that any holder of the Promissory Notes will agree to a Conversion
or that the Company's net tangible assets will be sufficient to comply with the
Nasdaq requirement even if all the holders so agree.
THE BOARD OF DIRECTORS HAS CONCLUDED THAT THE POTENTIAL BENEFITS OF THE
CONVERSION TO THE COMPANY AND ITS SHAREHOLDERS OUTWEIGH THE POSSIBLE
DISADVANTAGES.
SHAREHOLDER PROPOSALS FOR THE COMPANY'S NEXT
ANNUAL MEETING OF SHAREHOLDERS
The deadline for submitting shareholder proposals for inclusion in the
Company's proxy statement and form of proxy relating to the next Annual Meeting
of Shareholders is October 15, 1998. In order to avoid controversy, shareholders
should submit their proposals by means, including electronic means, that permit
them to prove the date of delivery. The Company may exclude a proposal, but only
after it has notified the shareholder of the problem, and the shareholder has
failed to adequately correct it. Within 14 calendar days of receiving the
proposal, the Company must notify the shareholder in writing of any procedural
or eligibility deficiencies, as well as the time frame for the response. The
response must be postmarked, or transmitted electronically, no later than 14
days from the date the Company's notification is received. The Company need not
provide such notice of a deficiency if the deficiency cannot be remedied, such
as a failure to submit a proposal by the Company's properly determined deadline.
If the Company intends to exclude the proposal, it will later have to make a
requisite submission under and provide the shareholder with a copy.
OTHER MATTERS
The Company's management does not know of any other matters to be
presented at the Special Meeting other than those stated above. If any other
business should come before the Special Meeting, proxies will be voted thereon
in accordance with the views of the Company's management.
DATED: SEPTEMBER 22, 1998
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BY ORDER OF THE BOARD OF DIRECTORS
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<PAGE> 16
EXHIBIT A
CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF
CREDIT DEPOT CORPORATION
CREDIT DEPOT CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation,
a resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that, each issued and outstanding share of the
Common Stock and each share held in treasury shall be, without
any further action on the part of the Corporation or any
stockholder, automatically changed and reclassified into
one-fifth of a share of Common Stock of the Corporation (the
"Recapitalization") and each certificate representing
outstanding shares of Common Stock shall automatically and
without further action on the part of the holder thereof
represent the number of shares of Common Stock issuable with
respect to the number of shares of Common Stock represented by
such certificate. No fractional shares of Common Stock shall
be issued in connection with the Recapitalization and the
number of shares of Common Stock issuable in connection with
the Recapitalization shall be rounded up to the next highest
whole number. The Recapitalization shall be deemed to be
effectuated at 5 P.M., New York City time, on the day of the
filing of this Amendment.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of stockholders of the Corporation was duly called
and held, upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation. has caused this certificate to be
signed by its President, this _______ day of __________, 1998.
-----------------------------------
Ralph J. DeBee, Jr., President
<PAGE> 17
APPENDIX
CREDIT DEPOT CORPORATION
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
OCTOBER 15, 1998
The undersigned hereby constitutes and appoints Ralph. J. DeBee, Jr.
and Charles D. Farrahar and each of them as attorney and proxy with full power
of substitution, to attend and vote all of the shares which the undersigned is
entitled to vote at the Special Meeting of Shareholders of Credit Depot
Corporation (the "Company") to be held at 10:00 am, local time, on October 15,
1998 at the Lanier Centre Hotel, Gainesville, Georgia and at any and all
adjournments thereof, with the same force and effect as if the undersigned were
personally present, and the undersigned hereby instructs said attorneys and
proxies to vote as follows with respect to the matters described in the Proxy
Statement:
1. FOR |_| AGAINST |_| ABSTAIN |_|
An amendment to the Company's Certificate of Incorporation to
effect a reverse stock split in which each five shares of the
Company's common stock, par value $.001 per share, will be
reclassified and changed into one share of new common stock,
par value $.001;
2. FOR |_| AGAINST |_| ABSTAIN |_|
Ratification of issuance of Series C 10% Convertible
Redeemable Preferred Stock and a Warrant to the Global
Opportunity Fund Limited
3. FOR |_| AGAINST |_| ABSTAIN |_|
Approval of issuance of Preferred Stock and Warrants to
certain creditors of the Company.
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY,
WHICH RECOMMENDS A VOTE FOR ITEMS 1, 2 AN 3 WHICH HAVE BEEN PROPOSED BY THE
COMPANY. AS TO ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING, SAID
PROXIES WILL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT.
<PAGE> 18
THIS PROXY when properly executed will be voted in the manner directed herein.
If no direction is given, the proxy will be voted FOR the Item herein.
DATED: , 1998
------------
----------------------------
(SIGNATURE)
----------------------------
(SIGNATURE)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS CARD.
JOINT OWNERS SHOULD EACH SIGN PERSONALLY. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, PERSONAL REPRESENTATIVE,
TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL TITLE AS SUCH.
PLEASE SIGN DATE AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
