PRELIMINARY COPY
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant: |X|
Filed by a Party other than the Registrant: |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
RAC FINANCIAL GROUP, INC.
(Name of Registrant as Specified in Its Charter)
RAC FINANCIAL GROUP, INC.
(Name of Person(s) Filing Proxy Statement)
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:
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 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:
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RAC FINANCIAL GROUP, INC.
1250 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 5, 1997
To the Stockholders of RAC Financial Group, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") of RAC Financial Group, Inc., a Nevada corporation (the
"Company"), will be held at the offices of the Company on the 5th day of March,
1997, at 10:00 a.m. (local time) for the following purposes:
1. To elect six (6) directors to hold office until the next
annual election of directors by stockholders or until their respective
successors shall have been duly elected and shall have qualified;
2. To consider and act upon an amendment to the
Company's Amended and Restated Articles of Incorporation to change the
Company's name from "RAC Financial Group, Inc." to FIRSTPLUS FINANCIAL
GROUP, INC.;
3. To consider and act upon an amendment to the 1995
Employee Stock Option Plan for RAC Financial Group, Inc. to increase
the number of shares authorized for issuance under the Plan from
1,100,000 to 3,200,000 and to ratify certain grants of stock options
thereunder; and
4. To transact any and all other business that may
properly come before the meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on January 20,
1997 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at such meeting or any
adjournment(s) thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at such meeting. The stock
transfer books will not be closed. A list of stockholders entitled to vote at
the Annual Meeting will be available for examination at the offices of the
Company for ten (10) days prior to the Annual Meeting.
You are cordially invited to attend the meeting; WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, HOWEVER, YOU ARE URGED TO MARK, SIGN,
DATE, AND MAIL THE ENCLOSED FORM OF PROXY PROMPTLY SO THAT YOUR SHARES OF STOCK
MAY BE REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT
THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE MEETING. Your proxy will be
returned to you if you should be present at the meeting and should request its
return in the manner provided for revocation of proxies on the initial page of
the enclosed proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
Daniel T. Phillips, President
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January 28, 1997
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RAC FINANCIAL GROUP, INC.
1250 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 5, 1997
---------------------------
SOLICITATION AND REVOCABILITY
OF PROXIES
The accompanying proxy is solicited by the Board of Directors on behalf
of RAC Financial Group, Inc., a Nevada corporation (the "Company"), to be voted
at the 1997 Annual Meeting of Stockholders of the Company (the "Annual Meeting")
to be held on March 5, 1997, at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders (the
"Notice") and at any adjournment(s) thereof. WHEN PROXIES IN THE ACCOMPANYING
FORM ARE PROPERLY EXECUTED AND RECEIVED, THE SHARES REPRESENTED THEREBY WILL BE
VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE DIRECTIONS NOTED THEREON; IF
NO DIRECTION IS INDICATED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, IN FAVOR OF PROPOSAL 2 AND PROPOSAL 3 SET FORTH IN THE NOTICE AND THE
PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN
PROPOSAL 4 SET FORTH IN THE NOTICE.
The executive offices of the Company are located at, and the mailing
address of the Company is, 1250 West Mockingbird Lane, Dallas, Texas 75247.
Management does not intend to present any business at the Annual
Meeting for a vote other than the matters set forth in the Notice and has no
information that others will do so. If other matters requiring a vote of the
stockholders properly come before the Annual Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares represented
by the proxies held by them in accordance with their judgment on such matters.
This proxy statement (the "Proxy Statement") and accompanying form of
proxy are being mailed on or about January 28, 1997. The Company's Annual Report
is enclosed herewith, but does not form any part of the materials for
solicitation of proxies.
Any stockholder of the Company giving a proxy has the unconditional
right to revoke his proxy at any time prior to the voting thereof either in
person at the Annual Meeting by delivering a duly executed proxy bearing a later
date or by giving written notice of revocation to the Company addressed to
Daniel T. Phillips, President, RAC Financial Group, Inc., 1250 West Mockingbird
Lane, Dallas, Texas 75247; no such revocation shall be effective, however, until
such notice of revocation has been received by the Company at or prior to the
Annual Meeting.
In addition to the solicitation of proxies by use of the mail, officers
and regular employees of the Company may solicit the return of proxies, either
by mail, telephone, telegraph, or through personal contact. Such officers and
employees will not be additionally compensated but will be reimbursed for
out-of-pocket expenses. Brokerage houses and other custodians, nominees, and
fiduciaries will, in connection with shares of voting Common Stock, par value
$.01 per share (the "Common Stock"), registered in their names, be requested to
forward solicitation material to the beneficial owners of such shares of Common
Stock.
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<PAGE>
The cost of preparing, printing, assembling, and mailing the Annual
Report, the Notice, this Proxy Statement, and the enclosed form of proxy, as
well as the cost of forwarding solicitation materials to the beneficial owners
of shares of the Common Stock, and other costs of solicitation, are to be borne
by the Company.
QUORUM AND VOTING
The record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting was the close on business of January
20, 1997 (the "Record Date"). On the Record Date, there were 25,130,012 shares
of voting Common Stock and 4,440,676 shares of Non-Voting Common Stock issued
and outstanding.
Each holder of Common Stock shall be entitled to one vote for each
share of Common Stock on all matters to be acted upon at the meeting. Holders of
Non-Voting Common Stock shall not be entitled to voting rights, unless otherwise
required by applicable law. Neither the Company's Amended and Restated Articles
of Incorporation, as amended, nor its Amended and Restated Bylaws, as amended,
allow for cumulative voting rights. The Company's Amended and Restated Articles
of Incorporation specifically prohibit cumulative voting in an election of
directors or for any other matter(s) to be voted upon by the stockholders of the
Company. The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding Common Stock entitled to vote at the meeting is
necessary to constitute a quorum to transact business with respect to each
proposal, except as otherwise provided by statute or by the Company's Amended
and Restated Articles of Incorporation. If a quorum is not present or
represented at the Annual Meeting, the stockholders entitled to vote thereat,
present in person or represented by proxy, may adjourn the Annual Meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present or represented. Assuming the presence of a quorum, the
affirmative vote of the holders of (i) a plurality of the shares of Common Stock
voting at the meeting is required for the election of directors, (ii) a majority
of the outstanding shares of Common Stock is required for the amendment to the
Company's Amended and Restated Articles of Incorporation, and (iii) the
affirmative vote of the holders of a majority of the shares of Common Stock
present and voting at the meeting, in person or by proxy, is required for
approval of the amendment to the 1995 Employee Stock Option Stock Option Plan
for RAC Financial Group, Inc. (the "Stock Option Plan") and the ratification of
certain grants of stock options thereunder.
An automated system administered by the Company's transfer agent
tabulates the votes. Pursuant to the provisions of the Nevada General
Corporation Law, as amended, the Amended and Restated Bylaws of the Company, as
amended, provide that abstentions and broker non-votes will be counted for
purposes of determining a quorum, but shall not be counted as voting for
purposes of determining whether a proposal has received the necessary number of
votes for approval of the proposal.
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<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the Record Date by (i) each person known by the
Company to own beneficially five percent or more of the outstanding Common
Stock; (ii) each of the Company's directors; (iii) each of the executive
officers named in the Summary Compensation Table; and (iv) all directors and
executive officers of the Company as a group. The address of each person listed
below is 1250 Mockingbird Lane, Dallas, Texas 75247, unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
Percent
Name Number of Class
- ----------------------------------------- --------------- -------------
<S> <C> <C> <C>
Farm Bureau Life Insurance Company (2)... Non-Voting 805,742 18.1
Voting 316,052 1.3
Daniel T. Phillips (4)(5)................ Voting 4,348,774 17.3
Ronald M. Mankoff (4)(6)................. Voting 2,862,642 11.4
BOCP II, Limited Liability Company (7)... Non-Voting 3,362,154 75.7
Eric C. Green (4)(8)..................... Voting 448,228 1.8
Banc One Capital Partners V, Ltd. (9).... Non-Voting 272,780 6.1
James H. Poythress (4)(10)............... Voting 195,208 *
John Fitzgerald (3)...................... Voting 16,734 *
Dan Jessee (4)(11)....................... Voting 16,734 *
Paul Seegers (4)......................... Voting 16,734 *
Sheldon I. Stein (4)..................... Voting 13,334 *
Putnam Investments, Inc (12)............. Voting 1,389,926 5.5
All current directors and executive officers asVoting 4,860,538 19.5
group (6 persons) (4).................
- -----------
<FN>
* Represents less than one percent.
(1) Based on 25,130,012 shares of Common Stock and 4,440,676 shares of
Non-Voting Common Stock outstanding on the Record Date. Beneficial ownership is
determined in accordance with the rules of the Commission and generally includes
voting or investment power with respect to securities. Except as indicated in
the footnotes to this table and subject to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) The address of such beneficial owner is 5400 University Avenue, West
Des Moines, Iowa 50266. See "Certain Relationships and Related Party
Transactions - Relationships with Farm Bureau."
(3) Lenox Investment Corporation, which is owned by Daniel T. Phillips (0.5%),
and Merlene M. Phillips (0.5%) the general partner and the Daniel T. Phillips
Trust (the "Phillips Trust") (54.0%), Mr. Phillips (22.5%) and Merlene M.
Phillips (22.5%) are each limited partners of the Phillips Partnership. Mr.
Phillips has voting control over the shares of Common Stock owned by the
Phillips Partnership through an irrevocable five-year voting proxy. Lenox
Investment Corporation retains investment power with respect to such shares.
Ronald M. Mankoff is the trustee of the Phillips Trust.
(4) Includes options that are currently exercisable, or become exercisable
within 60 days of the Record Date, to purchase the number of shares of Common
Stock indicated for the following persons: Daniel T. Phillips (33,334), Ronald
M. Mankoff (33,334), Eric C. Green (30,388), James H. Poythress (30,388), John
Fitzgerald (3,334), Dan Jessee (3,334), Paul Seegers (3,334) and Sheldon I.
Stein (3,334).
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<PAGE>
(5) Includes 335,000 shares of Common Stock owned by the Phillips Partnership
but with respect to which Mr. Phillips has voting control. See Footnote 3.
(6) Includes 480,000 shares of Common Stock owned by the Mankoff Generation
Trust of which the trustee is Jerome J. Frank, Jr. Includes 120,000 shares of
Common Stock owned by the Mankoff Charitable Trust of which the trustee is
Jeffrey W. Mankoff, Mr. Mankoff's son, and Mr. Mankoff and his wife are the
income beneficiaries. Also includes 1,820,000 shares of Common Stock owned by
RJM Properties, Ltd., of which SFA Mortgage Company, which is owned by Mr.
Mankoff (50%) and the Mankoff Children's Trust (50.0%), is general partner
(1.0%) and Mr. Mankoff (48.0%), Joy Mankoff (48.0%), Mr. Mankoff's wife, and
Mankoff Irrevocable Trust (3.0%) are each limited partners. Also includes
100,000 shares of Common Stock owned by the Mankoff Irrevocable Trust of which
the trustee is Jerome J. Frank, Jr. and members of the Mankoff family are
beneficiaries. Mr. Mankoff is the sole trustee of the Donald Rubin Children's
Trust, which owns 381,760 shares of Common Stock, and, therefore, may be deemed
to beneficially own the shares of Common Stock held by such trust. Mr. Mankoff
disclaims beneficial ownership of such shares of Common Stock and such shares
are not included in Mr. Mankoff's total above.
(7) Beneficial ownership of the shares of Common Stock is held by the
members of BOCP II. The address of BOCP II is 10 West Broad Street, Columbus,
Ohio 43215. See "Certain Relationships and Related Party Transactions -
Relationship with Bank One."
(8) Includes 329,640 shares of Common Stock held by G.B. Kline Residuary
Trust, of which Beverly Sellers, Mr. Green's mother, is the trustee. Mr. Green
is an income beneficiary and Mr. Green's children have a remainder interest in
the G.B. Kline Residuary Trust. Also includes 2,000 shares of Common Stock held
by Mr. Green's wife.
(9) Beneficial ownership of the shares of Common Stock is held by the
general and limited partners of BOCP V. The address of BOCP V is 10 West Broad
Street, Columbus, Ohio 43215. See "Certain Relationships and Related Party
Transactions - Relationship with Bank One."
(10) Mr. Poythress retired from the Company in May 1996 and served as a
consultant to the Company until January 1997.
(11) Does not include the 3,362,154 shares of Non-Voting Common Stock held by
BOCP II and 272,780 shares of Non-Voting Common Stock held by BOCP V, which, in
limited circumstances, may be exchanged for shares of Common Stock on a
share-for-share basis. See "Description of Capital Stock - Registration Rights."
Mr. Jessee is Vice-Chairman of BOCC, an affiliate of BOCP II and BOCP V, and
disclaims beneficial ownership of these shares.
(12) The address of such beneficial owner is One Post Office Square, Boston,
Massachusetts 02109. Based on a Schedule 13G, dated December 5, 1996, filed with
the commission by Putnam Investments, Inc. ("Putnam") on behalf of itself and
several related entities. The Schedule 13G discusses that Putnam Investment
Management, Inc. ("PIM") beneficially owns 1,360,626 shares of Common Stock,
with shares voting power over 16,300 shares of Common Stock and shared
dispositive power over 1,360,626 shares of Common Stock and that The Putnam
Advisory Company, Inc. ("PAC") beneficially owns 29,300 shares of Common Stock,
with shared voting power over not
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<PAGE>
shares of Common Stock and shared dispositive power over 29,300 shares of Common
Stock. PIM is the investment advisor for the Putnam family of Mutual Funds and
PAC is the investment advisor to Putnam family of Mutual Funds, Putnam OTC
Emerging Growth Fund beneficially owns 778,900 shares.
</FN>
</TABLE>
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<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Amended and Restated Bylaws, as amended, of the Company provide
that the number of directors that shall constitute the whole board shall be not
less than three (3) nor more than ten (10). By resolution of the Board of
Directors, at its meeting on October 15, 1996, the number of directors
comprising the Board of Directors has been set at six (6).
NOMINEES
Unless otherwise directed in the enclosed proxy, it is the intention of
the persons named in such proxy to nominate and to vote the shares represented
by such proxy for the election of the following named nominees for the office of
director of the Company, to hold office until the next annual meeting of
stockholders or until their respective successors shall have been duly elected
and shall have qualified. Proxies cannot be voted for a greater number of
persons than the nominees named.
Information regarding each nominee is set forth in the table and text
below:
PRESENT
NOMINEE AGE OFFICE(S) HELD
Daniel T. Phillips 47 Chairman of the Board,
President, Chief
Executive Officer and
Director
Eric C. Green 42 Executive Vice President
and Chief Financial
Officer
John Fitzgerald (1) 48 Director
Daniel J. Jessee (1) 43 Director
Paul Seegers (1) 66 Director
Sheldon I. Stein (1) 43 Director
(1) Member of the Audit Committee and the Compensation Committee.
All officers are appointed by and serve at the discretion of the Board
of Directors. Directors serve for one-year terms or until their successor is
duly elected and qualified.
Daniel T. Phillips - Mr. Phillips has served as President and Chief
Executive Officer of the Company since October 1994 and as Chairman of the
Board since October 1996. Mr. Phillips served
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<PAGE>
as President and Chief Executive Officer of SFAC from March 1993 to October
1994. During the period from October 1992 to March 1993, Mr. Phillips was
self-employed, primarily engaging in the purchase and sale of consumer
receivables. From February 1989 to October 1992, Mr. Phillips served as
President and Chief Executive Officer of LinCo Financial Corporation, a
factoring firm, in Sacramento, California. In March 1993, LinCo Financial
Corporation commenced a Chapter 11 proceeding under the federal bankruptcy laws,
which was converted to a Chapter 7 proceeding in April 1993. Such proceeding is
still ongoing. From November 1986 to October 1988, Mr. Phillips served as
President and Chief Executive Officer of American Equities Financial
Corporation.
Eric C. Green - Mr. Green has served as Executive Vice President and
Chief Financial Officer of the Company since March 1995 and President of
FIRSTPLUS Financial since October 1996. For approximately four years prior to
beginning his tenure with the Company, Mr. Green operated his own tax consulting
practice where his responsibilities included consulting with the Company in
connection with the Combination and the Company's first securitization
transaction. Prior to consulting, Mr. Green worked for Arthur Young & Company
and Grant Thornton & Company as a Certified Public Accountant for approximately
10 years.
John Fitzgerald - Mr. Fitzgerald has served as a Director of the
Company since September 1995. Mr. Fitzgerald is Executive Vice President of
Dexter & Company, an independent insurance agency and has held that position
since 1989. Prior to joining Dexter & Company in 1989, Mr. Fitzgerald was a
professional football player with the Dallas Cowboys for 12 years.
Daniel J. Jessee - Mr. Jessee has served as a Director of the Company
since September 1995. Mr. Jessee currently serves as Vice Chairman of Banc One
Capital Corporation ("BOCC") and has managed its Structured Finance Group since
1990. Mr. Jessee has been employed in senior and other investment banking
capacities with Rotan Mosle Inc., Meuse, Rinker, Chapman, Endres and Brooks and
E.F. Hutton & Co.
Paul Seegers - Mr. Seegers has served as a Director of the Company
since September 1995. Mr. Seegers currently serves as President of Seegers
Enterprises, a company engaged in ranching, farming, oil and gas, real estate
and general investments. He is also a Director and Chairman of the Executive
Committee of Centex Corporation, the largest homebuilder in the United States
and a Director of Oryx Energy Company. Mr. Seegers retired as Chairman of the
Board from Centex Corporation in 1991, where he held various senior executive
positions during his 30-year tenure including Chief Executive Officer and
President.
Sheldon I. Stein - Mr. Stein has served as a Director of the Company
since April 1996. Mr. Stein has served as a Senior Managing Director of Bear,
Stearns & Co. Inc. since August 1986. Mr. Stein is a director of Cinemark USA,
Inc., AMRE, Inc., Fresh America Corp., CellStar Corporation, The Men's
Wearhouse, Inc. and Tandycrafts, Inc.
If elected as a director of the Company, each director will hold office
until next year's annual meeting of stockholders, expected to be held in March
1998, or until his respective successor is elected and has qualified.
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<PAGE>
The Board of Directors does not contemplate that any of the above-named
nominees for director will refuse or be unable to accept election as a director
of the Company, or be unable to serve as a director of the Company. Should any
of them become unavailable for nomination or election or refuse to be nominated
or to accept election as a director of the Company, then the persons named in
the enclosed form of proxy intend to vote the shares represented in such proxy
for the election of such other person or persons as may be nominated or
designated by the Board of Directors. No nominee is related by blood, marriage,
or adoption to another nominee or to any executive officer of the Company or its
subsidiaries or affiliates.
OTHER SIGNIFICANT EMPLOYEES
Dave Berry - Mr. Berry, age 45, has served as a Senior Vice President
of Affinity Marketing Relationships since October 1996. From 1968 to September
1996, Mr. Berry served in various capacities with Bank of America - Texas
including President and Chief Operating Officer.
Duncan Y. Chiu - Mr. Chiu, age 43, has served as Senior Vice President
- - Servicing since June 1996. From January 1992 to June 1996 Mr. Chiu served as
Vice President - Loan and Administration Department for Beal Banc, S.A. From
October 1989 to January 1992 Mr. Chiu served as Vice President/District Manager
of Republic Realty Services, Inc.
Christopher J. Gramlich - Mr. Gramlich, age 26, has served as Senior
Vice President Structured Finance since October 1995. From March 1991 to October
1995 Mr. Gramlich served as Assistant Vice President for Banc One Capital Corp.
Scott Hahn - Mr. Hahn, age 34, has served as Senior Vice President -
Management Information Systems since October 1995. From November 1991 to October
1995 Mr. Hahn served as Director of Data Processing for West Capital Financial
Services Corp. From March 1988 to October 1991 Mr. Hahn was Management
Information Systems Manager for First Associates Mortgage.
Cinda Knight - Ms. Knight, age 38, has served as Senior Vice President
and Controller since July 1995. From September 1993 to July 1995, Ms. Knight
served as Vice President and Controller of AccuBanc Mortgage Company. From
November 1990 to September 1993, Ms. Knight served as Vice President and
Controller of Foster Mortgage Corporation.
Gene O'Bryan - Mr. O'Bryan, age 41, has served as Executive Vice
President and Chief Production Officer of FIRSTPLUS Financial since April 1996.
From April 1994 to April 1996, Mr. O'Bryan served as Senior Vice President -
Sales and Marketing of CountryWide Funding, a first mortgage originator. Mr.
O'Bryan served as President and Chief Operating Officer of Alliance Costal
Credit Corporation, a home-equity lender, from June 1992 to April 1994, and
served as President of Spring Mountain Credit Corporation, an auto finance
lender, from December 1987 to June 1992.
Janie Osborne - Ms. Osborne, age 42, has served as Senior Vice
President of Loan Control and Dealer Monitoring of FIRSTPLUS Financial since
August 1995. From June to August 1995, Ms. Osborne served as Senior Vice
President of Funding and Document Control of the Company. Prior to joining the
Company, Ms. Osborne served as a loan officer for Ameritex Residential
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<PAGE>
Mortgage from July 1994 to June 1995 and for Banc Plus Mortgage Corporation from
April 1994 to July 1994. Ms. Osborne served as Vice President of Acquisitions,
Sales and Escrow Services and various other positions at Foster from June 1984
to December 1993.
Charles T. Owens - Mr. Owens, age 60, has served as President of FPCFI
since June 1996. Prior to joining the Company, Mr. Owens held various positions
with Associates Financial Services from October 1959, including Senior Vice
President - Acquisitions.
Jeffrey A. Peiper - Mr. Peiper, age 50, has served as Senior Vice
President - Administration since March 1996. From June 1994 to March 1996 Mr.
Peiper served as President and Chief Executive Officer of First American Savings
Bank, SSB. From December 1990 to March 1994 Mr. Peiper served as President and
Chief Executive Officer of Beal Banc, S.A.
Kirk R. Phillips - Mr. Phillips, age 34, has served as President of
FIRSTPLUS East since November 1995. From 1991 to October 1995, Mr. Phillips
served as President and Chief Executive Officer of First Security Mortgage Corp.
Jim Pressler - Mr. Pressler, age 49, has served as Chief Financial
Officer of FIRSTPLUS Consumer Finance, Inc. since July 1996. Prior to joining
the Company, Mr. Pressler held various accounting and finance positions with
Associates Financial Services Company, Inc. ("The Associates") from June 1976.
Most recently he served as Senior Vice President for planning and acquisitions
with The Associates.
Jack Roubinek - Mr. Roubinek, age 54, has served as the Senior Vice
President of Wholesale Loan Production since March 1995. From February 1993 to
March 1995, Mr. Roubinek served as Vice President of Direct Lending and Vice
President of Secondary Marketing for the Company and SFAC. Prior to February
1993, Mr. Roubinek was a mortgage banking consultant to various companies and
individuals.
Jim Roundtree - Mr. Roundtree, age 40, has served as Chief Financial
Officer of FIRSTPLUS Financial since August 1996. Prior to joining the Company,
Mr. Roundtree worked for Ernst & Young LLP from September 1986 to August 1996 in
their financial services industry group and practiced as a certified public
accountant.
Ken Sacknoff - Mr. Sacknoff, age 43, has served as Senior Vice
President of Corporate Risk since April 1996. Mr. Sacknoff served as Director of
Corporate Risk for Residential Funding Corporation in Minneapolis from March
1995 to March 1996 and as Vice President of Risk Management Information &
Analysis for Associates Corporation from July 1992 to March 1995. Mr. Sacknoff
served as Vice President of Risk Management at Beneficial National Bank from
November 1990 to July 1992 and as Director of Centralized Operations at
Beneficial Corporation from September 1989 to November 1990. Prior thereto, Mr.
Sacknoff was employed by G.E. Capital in various management positions from 1979
to 1989.
Barry S. Tenenholtz - Mr. Tenenholtz, age 39, has served as Senior Vice
President and Treasurer since January, 1995. From July 1990 to February 1993 Mr.
Tenenholtz served as Corporate
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Tax Manager for TIC United Corp. From June 1988 to June 1990 Mr. Tenenholtz
served as corporate tax manager for Dalfort Corporation.
BOARD COMMITTEES AND MEETINGS
The Board of Directors has established two standing committees: the
Compensation Committee and the Audit Committee. Messrs. Fitzgerald, Jessee,
Stein and Seegers serve on the Compensation Committee and the Audit Committee.
The Compensation Committee is responsible for recommending to the Board of
Directors the Company's executive compensation policies for senior officers and
administering the Stock Option Plan and the Company's Employee Stock Purchase
Plan (the "Purchase Plan"). See "- Stock Option Plan" and "- Employee Stock
Purchase Plan." The Compensation Committee held three meetings during the fiscal
year ended September 30, 1996.
The Audit Committee is responsible for recommending independent
auditors, reviewing the audit plan, the adequacy of internal controls, the audit
report and management letter, and performing such other duties as the Board of
Directors may from time to time prescribe. The Audit Committee held four
meetings during the fiscal year ended September 30, 1996.
The Board of Directors does not have a standing Nominating Committee.
The Board of Directors held four meetings during the fiscal year ended
September 30, 1996. During fiscal 1996, each director attended all of the
meetings of the Board of Directors during the time that he served as director.
All directors attended all meetings of the Committees on which they served.
DIRECTOR COMPENSATION
The Company pays each nonemployee director a fee of $2,500 for each
meeting of the Board of Directors that he attends. The Company reimburses each
director for ordinary and necessary travel expenses related to such director's
attendance at Board of Director and committee meetings. In addition, the 1995
Director Plan provides for the grant of certain nonqualified stock options to
the nonemployee directors of the Company. As of January 20, 1997, Messrs.
Fitzgerald, Seegers, Jessee and Stein had received 3,334 shares each pursuant to
such plan.
Options under the 1995 Director Plan ("Director Options") are granted
only to nonemployee directors of the Company. Director Options are automatically
granted to each nonemployee director. Each person serving as a nonemployee
director of the Company on the date of adoption of the 1995 Director Plan
received a Director Option under the 1995 Director Plan exercisable for 5,000
shares of Common Stock at an exercise price of $15.81 per share (an "Initial
Option"). Subsequently, on the date of each annual meeting of stockholders of
the Company after such director's Initial Option has fully vested, such director
shall receive a nonqualified stock option to purchase 1,000 shares of Common
Stock, with an exercise price per share equal to the fair market value per share
of the Common Stock on the date of grant (a "Subsequent Option"). Each Director
Option expires 10 years after its date of grant. An aggregate of 20% of the
total number of shares subject to such Initial Option vest on the date of each
annual meeting of stockholders of the Company (at which such nonemployee
director is reelected to the Board of Directors) held after the date of grant of
the Initial
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<PAGE>
Option. In addition, shares subject to a Subsequent Option vest in full on the
date of grant of such Subsequent Option. Shares subject to a Director Option
vest as to all shares then subject to the Director Option upon the occurrence of
a Major Corporate Event.
COMPENSATION OF EXECUTIVE OFFICERS
The total compensation paid for each of the fiscal years ended
September 30, 1996, and September 30, 1995 to the President and Chief Executive
Officer, Daniel T. Phillips, and to the other most highly paid executive
officers who received cash compensation in excess of $100,000 for the fiscal
year ended September 30, 1996 (collectively, the "Named Executive Officers"), is
set forth below in the following Summary Compensation Table:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION (1)
AWARDS PAYOUTS
OTHER
ANNUAL RESTRICTED OPTIONS ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION STOCK SARS LTIP COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ----------------------------- ------- ------------ ----------- --------------- ------------- --------------- ------- ---------
<S> <C> <C> <C> <C>
Daniel T. Phillips........... 1996 $401,605 800,000 -- -- 100,000 -- --
Chairman of the Board, 1995 221,333 225,000 -- -- -- -- --
President, Chief Executive
Officer and Director
Ronald M. Mankoff (2)........ 1996 321,394 320,000 -- -- 100,000 -- --
General Counsel and Director 1995 216,047 225,000 -- -- -- -- --
Eric C. Green (3)............ 1996 227,990 300,000 -- -- 241,162 -- --
Executive Vice President and 1995 110,000 125,000 -- -- -- -- --
Chief Financial Officer
James H. Poythress (4)....... 1996 176,232 --- -- -- 91,162 -- --
Executive Vice President and 1995 37,885(4) 205,000 -- -- -- -- --
Chief Operating Officer
- -----------
<FN>
(1) Annual compensation does not include the cost to the Company of benefits
certain executive officers receive in addition to salary and cash bonuses. The
aggregate amounts of such personal benefits, however, do not exceed the lesser
of either $50,000 or 10% of the total annual compensation of such executive
officer. Bonuses with respect to fiscal 1995 and 1996 were accrued during each
respective fiscal year and paid in November 1995 and 1996, respectively.
(2) Mr. Mankoff retired as General Counsel and Director of the Company in November 1996.
(3) Mr. Green joined the Company in April 1995, at an annual salary of $180,000.
(4) Mr. Poythress joined the Company in June 1995, at an annual salary of $100,000. Mr. Poythress retired from the Company in
May 1996, and served as a consultant to the Company through January 1997 for an annual fee of $232,500. See "- Employment
Agreements; Key-Man Life Insurance."
</FN>
</TABLE>
GRANTS OF OPTIONS AND STOCK APPRECIATION RIGHTS ("SARS")
The following table sets forth details regarding stock options granted
to the named executive officers listed in the Summary Compensation Table during
the fiscal 1996. In addition, there are shown the "option spreads" that would
exist for the respective options granted based upon assumed rates of annual
compound stock
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<PAGE>
appreciation of 5% and 10% from the date the options were granted over the full
option term. The Company granted no SARs in fiscal 1996.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF AT ASSUMED ANNUAL RATES
UNDERLYING TOTAL OPTIONS/ OF STOCK PRICE APPRECIATION
OPTIONS/SARS SARS GRANTED TO EXERCISE FOR OPTION TERM (2)
GRANTED(1) EMPLOYEES IN OR BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($)(3) 10% ($)(4)
- ----------------------------- ---------------- ----------------------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel T. Phillips........... 100,000 7.51% 7.00 11/15/05 $ 440,000 $1,116,000
Ronald M. Mankoff (5)........ 100,000 7.51% 7.00 11/15/05 440,000 1,116,000
Eric C. Green................ 91,162 6.85% 7.00 11/15/05 401,113 1,017,368
150,000 11.26% 11.00 04/01/06 1,038,000 2,629,500
James H. Poythress (5)....... 91,162 6.85% 7.00 11/15/05 401,113 1,017,368
<FN>
(1) Options granted to executives were granted under the Stock Option Plan.
The exercise price of each option is the fair market value of the Common
Stock on the date of grant. Options vest generally in one-third increments
over a three-year term. The options have a term of 10 years, unless they
are exercised or expire upon certain circumstances set forth in the Stock
Option Plan, including retirement, termination in the event of a change in
control, death or disability.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company's Common Stock, overall market conditions and
the executive's continued employment with the Company. The amounts
represented in this table may not necessarily be achieved.
(3) The assumed stock price at the end of the option term is $11.40 for options granted on November 15, 1995, and $17.92 for
options granted on April
1, 1996.
(4) The assumed stock price at the end of the option term is $18.16 for options granted on November 15, 1995, and $28.53 for
options granted on April
1, 1996.
(5) Messrs. Mankoff and Poythress retired from the Company in November and May 1996, respectively.
</FN>
</TABLE>
EXERCISES OF OPTIONS AND SARS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during fiscal 1996, and
unexercised options held as of September 30, 1996. No options were exercised by
the Named Executive Officers during fiscal 1996, and no Named Executive Officer
held any SARs.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED AT FY-END (#) AT FY-END ($)
ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
------ ------------ ----- ------------- ----------------
<S> <C> <C> <C> <C>
Daniel T. Phillips................ 0 0.00 0/100,000 0/1,581,000
Ronald M. Mankoff................. 0 0.00 0/100,000 0/1,581,000
Eric C. Green .................... 0 0.00 0/241,162 0/3,212,772
James H. Poythress................ 0 0.00 0/91,162 0/1,441,272
<FN>
(1) Values are stated based upon the closing price of $22.81 per share of the
Company's Common Stock on the Nasdaq National Market on September 30,
1996, the last trading day of the Company's fiscal year.
</FN>
</TABLE>
COMPENSATION AND EMPLOYMENT AGREEMENTS; KEY-MAN LIFE INSURANCE
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<PAGE>
Employment Agreements. On August 25, 1995, the Company entered into
employment agreements with each of the executive officers named in the Summary
Compensation Table under "- Executive Compensation." Mr. Phillip's employment
agreement is for a term of five years, and Mr. Green's employment agreement is
for a term of three years. Each employment agreement automatically renews for
successive periods after the initial term, unless the employee or the Company
notifies the other within a specified time that the term will not be extended.
On May 30, 1996, Mr. Poythress retired and entered into a consulting agreement
with the Company that will expire on August 24, 1997.
Under the terms of the respective employment agreements, the Company pays
Mr. Phillips a minimum base salary of $400,000 per year and Mr. Green a minimum
$230,000 per year, which are adjusted annually to meet cost of living increases.
Pursuant to a consulting agreement, the Company pays Mr. Poythress a fee of
$232,500 per year, and provides certain insurance benefits to him. Each
executive officer is entitled to participate generally in the Company's employee
benefit plans, including the Stock Option Plan and the Purchase Plan, and is
eligible for an incentive bonus under the Company's executive bonus pool. Such
cash bonuses are made at the discretion of the Company based on subjective
performance criteria.
If the executive officer is terminated "for cause," which definition
generally includes termination by the Company due to the executive's willful
failure to perform his duties under the employment agreement, executive's
personal dishonesty or breach of his fiduciary duties or the employment
agreement to which he is a party, then the Company is obligated to pay the
executive so terminated only his base salary up to the date upon which the
Company notifies the executive of his termination "for cause." On the other
hand, if the executive officer is terminated without cause, then the Company is
obligated to pay the executive officer so terminated a lump sum payment equal to
his base salary for the remaining term of the employment agreement. If the
executive officer resigns for "good reason," which generally includes the
executive officer's resignation due to a breach by the Company of his employment
agreement, the Company must pay the executive officer so terminated a lump sum
payment equal to the salary of the executive officer for the remaining term of
the employment agreement. In the case of the retirement or death of the
executive officer, the Company is obligated to pay the executive officer only
his base salary up to the date of such death or retirement. If the executive
officer becomes disabled, the Company must continue to pay the executive officer
his base salary for a period of up six months and, if the disability extends
beyond six months, the Company may terminate the executive by giving him 30
days' notice of such termination.
Each of the executive officers named in the Summary Compensation Table
above, by virtue of his employment agreement, has agreed not to solicit
customers or employees of the Company in any manner for a period of 24 months
following his resignation or termination from the Company and, will not compete
for any period for which a lump sum has been paid by the Company in accordance
with the employment agreement. During the term of his consulting agreement, Mr.
Poythress agreed not to (i) be employed by a lending institution or company
specializing in Title I Loans with its principal office in the Dallas-Fort Worth
area, (ii) be a consultant, director, officer, employee or partner of any
lending institution specializing in Title I Loans that is ranked among the top
five Title I lenders operating on a nationwide basis, (iii) solicit business
from anyone who purchased loans from the Company within six months prior to the
effective date of the consulting agreement, (iv) induce or solicit any person to
leave their employment with Company and (v) disclose certain information
obtained from the Company.
Key-Man Life Insurance. The Company maintains a $3.0 million key-man life
insurance policy on Mr. Phillips, which the Company has assigned to BOCP II. The
Company does not maintain key-man life insurance policies on any of its other
executive officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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<PAGE>
The Board of Directors has established a Compensation Committee to review
and approve the compensation levels of executive officers of the Company,
evaluate the performance of the executive officers, consider senior management
succession issues and any related matters for the Company. The Compensation
Committee is charged with reviewing with the Board of Directors in detail all
aspects of the cash compensation for the executive officers of the Company.
Stock option compensation for the executive officers is also considered by the
Compensation Committee.
The philosophy of the Company's compensation program is to employ, retain
and reward executives capable of leading the Company in achieving its business
objectives. These objectives include preserving a strong financial posture,
increasing the assets of the Company, positioning the Company's assets and
business operations in geographic markets and industry segments offering long
term growth opportunities, enhancing stockholder value and ensuring the survival
of the Company. The accomplishment of these objectives is measured against
conditions prevalent in the industry within which the Company operates. In
recent years these conditions reflect a highly competitive market environment
and rapidly changing regional, geographic and overall industry market
conditions.
The available forms of executive compensation include base salary, cash
bonus awards and incentive stock options. Performance of the Company is a key
consideration (to the extent that such performance can fairly be attributed or
related to such executive's performance), as well as the nature of each
executive's responsibilities and capabilities. The Company's compensation policy
recognizes, however, that stock price performance is only one measure of
performance and, given industry business conditions and the long term strategic
direction and goals of the Company, it may not necessarily be the best current
measure of executive performance. Therefore, the Company's compensation policy
also gives consideration to the Company's achievement of specified business
objectives when determining executive officer compensation. Compensation paid to
executive officers is based upon a Company-wide salary structure consistent for
each position relative to its authority and responsibility compared to industry
peers.
An additional objective of the Compensation Committee in determining
compensation is to reward executive officers with equity compensation in
addition to salary in keeping with the Company's overall compensation
philosophy, which attempts to place equity in the hands of its employees in an
effort to further instill stockholder considerations and values in the actions
of all the employees and executive officers. In making its determination, some
consideration is given by the Compensation Committee to the number of options
already held by such persons. Incentive stock option awards in fiscal 1996 were
used to reward each executive officer and to retain them through the potential
of capital gains and equity buildup in the Company. The number of stock options
granted was determined by the subjective evaluation of each executive's ability
to influence the Company's long term growth and profitability. The Compensation
Committee believes that the award of options represents an effective incentive
to create value for the stockholders.
The Company's total revenues increased to $198.1 million for fiscal 1996
from $33.9 million for fiscal 1995, a $164.2 million increase or 484.3%. The
Company originated and purchased an aggregate of $227.9 million and $1.1 billion
of strategic loans in the fiscal years ended September 30, 1995 and September
30, 1996, respectively. The Company securitized an aggregate of $234.8 million
and $723.1 million of loans in fiscal 1995 and 1996, respectively. The Company
also originated $83.4 million and $382.2 million of non-strategic loans in
fiscal 1995 and 1996, respectively, which it sold to third-party lenders on a
whole-loan basis, with servicing rights released. As of September 30, 1996, the
principal amount of loans in the Company's serviced loan portfolio was $1.3
billion. Based on this performance, Mr. Phillips received a bonus of $800,000 in
fiscal 1996.
Based on comparative industry data, and as the result of arm's-length
negotiations, on August 25, 1995, the Company entered into an employment
agreement with Mr. Daniel T. Phillips that provides for the employment of Mr.
Phillips as President and Chief Executive Officer at an annual base minimum
salary of $400,000, adjusted
CORPDAL:55725.1 28835-00007
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<PAGE>
annually to meet cost of living increases. The agreement was unanimously
approved by the Board of Directors, and the Compensation Committee.
The Compensation Committee believes that the compensation of the Company's
other executive officer was reasonably related to the performance of the Company
and that individual during fiscal 1996.
COMPENSATION COMMITTEE
John Fitzgerald
Daniel J. Jessee
Paul Seegers
Sheldon I. Stein
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994 and fiscal 1995, the Company had no compensation committee or
other committee of the Board of Directors performing similar functions.
Decisions concerning executive compensation for fiscal 1995 were made by the
Board of Directors, including Daniel T. Phillips and Ronald M. Mankoff, who both
were (and Mr. Phillips' continues to be) executive officers of the Company and
participated in deliberations of the Board of Directors regarding executive
officer compensation. The Board of Directors of the Company has established a
Compensation Committee. See "- Board Committees and Meetings."
None of the executive officers of the Company currently serves as a
director of another entity or on the compensation committee of another entity or
any other committee of the board of directors of another entity performing
similar functions.
The Company engaged in the following transactions with Daniel T. Phillips
and Ronald M. Mankoff. On October 15, 1994, the Company redeemed a total of
50,000 shares of Series A Cumulative Preferred Stock, of which 25,000 shares
were owned by the Mankoff Trust and 25,000 shares were owned by the Phillips
Partnership. Each such redemption was for $25,000 plus accrued and unpaid
dividends. In addition, in April 1995, the Company redeemed an additional
150,000 shares of Series A Cumulative Preferred Stock, of which 75,000 shares
were from the Mankoff Trust and 75,000 shares were from the Phillips
Partnership. Each such redemption was for $75,000 plus accrued and unpaid
dividends. In February 1996, the Company redeemed the 50,000 shares of Series A
Cumulative Preferred Stock owned by each of the Mankoff Trust and the Phillips
Partnership for $1.00 per share plus accrued and unpaid dividends. Accordingly,
the total redemption payment received by each of the Mankoff Trust and the
Phillips Partnership was approximately $57,500. See "Certain Relationships and
Related Party Transactions."
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<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The following performance graph compares the one-year cumulative return of
the Common Stock with that of the Broad Market (National Association of
Securities Dealers Automated Quotation) and a group of the Company's peer
corporations. Each index assumes $100 invested at February 1, 1997 and is
calculated assuming quarterly reinvestment of dividends and quarterly weighting
by market capitalization.
[Stock Performance Graph Goes Here]
COMPARATIVE RETURNS
RAC FINANCIAL GROUP, INC., BROAD MARKET AND PEER GROUP
(PERFORMANCE RESULTS THROUGH 09/30/96)
Beginning Fiscal Year Ended
February 1, 1996 September 30, 1996
RAC Financial Group, 100.00
Inc.
Peer Group 100.00
Broad Market 100.00
- ---------------------------------- ------------- ---------
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<PAGE>
The Broad Market (Nasdaq National Market System Value Index) comprises all
companies with common stock listed on the Nasdaq National Market. The Peer Group
is composed of the following companies: Aames Financial Corp., Cityscape
Financial Corp. ContiFinancial Corporation and United Companies Financial Corp.
CORPDAL:55725.1 28835-00007
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since its inception, the Company has had business relationships and
engaged in certain transactions with affiliated companies and parties as
described below. It is the policy of the Company to engage in transactions with
related parties only on terms that, in the opinion of the Company, are no less
favorable to the Company than could be obtained from unrelated parties.
RELATIONSHIP WITH FARM BUREAU
As of November 30, 1996, Farm Bureau was the beneficial owner of 805,742
shares of Non-Voting Common Stock and 3,132,000 shares of Common Stock. See
"Principal and Selling Stockholders" and "Description of Capital Stock."
On March 31, 1995, the Company issued to Farm Bureau an aggregate of $1.35
million principal amount of Subordinated Notes (out of a total of $6.35 million
principal amount of Subordinated Notes issued at that time by the Company). For
a description of the Subordinated Notes and the amount issued to BOCP II, see "-
Relationship with Bank One." As of September 30, 1996, the Company had paid Farm
Bureau an aggregate of $121,500 in interest payments under the terms of the
Subordinated Notes, as well as an aggregate of approximately $27,000 in fees and
expenses related to the issuance by the Company of the Subordinated Notes to
Farm Bureau. In connection with the issuance of the Subordinated Notes to Farm
Bureau, the Company also issued Farm Bureau warrants to purchase an aggregate of
569,768 shares of Non-Voting Common Stock for a nominal exercise price, which
were exercised prior to the Company's initial public offering.
In April 1995, the Company issued additional warrants to Farm Bureau to
purchase an aggregate of 592,414 shares of Non-Voting Common Stock. Such
warrants were issued in consideration of Farm Bureau's agreement to waive
certain redemption rights with respect to the Series B Cumulative Preferred
Stock held by Farm Bureau and such warrants were exercised in full prior to the
Company's initial public offering. The Series B Cumulative Preferred Stock was
redeemed in February 1996 for approximately $2.5 million. See "--Redemption of
Preferred Stock" above.
In September 1995, the Company entered into the Farm Bureau Facility,
under which Farm Bureau agreed to lend the Company up to $5.5 million at a rate
of interest of 12% per annum. The Company borrowed $5.5 million under this
financing facility. All borrowings pursuant to such financing were repaid in
February 1996 with a portion of the net proceeds to the Company from its initial
public offering and the facility was terminated. In connection with the
facility, the Company issued to Farm Bureau warrants to purchase 67,226 shares
of Common Stock at an exercise price of $5.95 per share.
RELATIONSHIP WITH BANK ONE
As of September 30, 1996, BOCP II was the beneficial owner of 3,362,154
shares of Non-Voting Common Stock, and BOCP V was the beneficial owner of
272,780 shares of Non-Voting Common Stock. See "Principal and Selling
Stockholders."
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<PAGE>
BOCC, an affiliate of Bank One, acted as placement agent with respect to
each of the securitizations completed by the Company during fiscal 1995 and
1996. As consideration for acting as placement agent, the Company paid BOCC an
aggregate of $2.5 million and $1.6 million in fiscal 1995 and 1996,
respectively, representing fees, commissions and expenses.
The Company maintains the Bank One Facility, which was established in
March 1995. As of September 30, 1996, the Company had paid Bank One an aggregate
of $1.3 million in interest payments under the prescribed terms of the Bank One
Facility, as well as an aggregate of $106,473 in other fees and expenses related
to amounts borrowed by the Company under this facility. For a more complete
description of the terms of the Bank One Facility, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
On March 31, 1995, the Company issued to BOCP II an aggregate of $5.0
million principal amount of its Subordinated Notes (out of a total of $6.35
million principal amount of Subordinated Notes). The Subordinated Notes bear
interest at the rate of 12% per annum, except that upon the occurrence of an
event of default under the Subordinated Notes, the interest rate increases to
15% per annum. As of September 30, 1996, the Company had paid BOCP II an
aggregate of $600,000 in interest payments under the terms of the Subordinated
Notes, as well as an aggregate of approximately $125,000 in fees and expenses
related to the issuance by the Company of the Subordinated Notes to BOCP II. The
Subordinated Notes are subordinated to all amounts at any time due and owing
under the Company's warehouse lines existing from time to time. In connection
with the issuance of the Subordinated Notes to BOCP II, the Company also issued
BOCP II warrants to purchase an aggregate of 2,110,232 shares of Non-Voting
Common Stock for a nominal exercise price, which were fully exercised prior to
the Company's initial public offering, and warrants to purchase an aggregate of
1,786,622 shares of Non-Voting Common Stock for an aggregate of $450,000, which
were fully exercised prior to the Company's initial public offering.
In February 1995, the Company and BOCP V entered into a financing
arrangement to provide $700,000 of interim financing (the "BOCP V Financing").
In July 1995, the Company and BOCP V agreed to amend the terms of the BOCP V
Financing so that the Company's debt arrangements with BOCP V would be on
similar terms as those with BOCP II and Farm Bureau. As a consequence, the
Company issued $700,000 principal amount of the Subordinated Notes to BOCP V. As
of September 30, 1996, under the terms of the BOCP V Financing and the
Subordinated Notes, the Company had paid BOCP V an aggregate of $93,333 in
interest payments and an aggregate of $14,000 in other fees and expenses. In
connection with the amendments of the BOCP V Financing and the issuance of the
Subordinated Notes to BOCP V, the Company issued BOCP V warrants to purchase an
aggregate of 290,780 shares of Non-Voting Common Stock for a nominal exercise
price, which were fully exercised prior to the Company's initial public
offering.
In August 1996, the Company engaged BOCC to render financial advisory and
consultation services. For such engagement, the Company paid BOCC $150,000.
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<PAGE>
OTHER TRANSACTIONS
During fiscal 1994, 1995 and 1996, the Company paid legal fees and
expenses to Jeffrey W. Mankoff, P.C., which were in excess of 5% of the gross
revenues of Jeffrey W. Mankoff, P.C. Such amounts, however, did not exceed
$60,000. Jeffrey W. Mankoff, P.C. is a Dallas, Texas law firm owned by the son
of Ronald M. Mankoff, a principal stockholder and the former Chairman of the
Board of the Company.
Sheldon I. Stein, a director of the Company, is a Senior Managing Director
of Bear, Stearns & Co. Inc. Bear, Stearns & Co., Inc., one of the
Representatives, has performed investment banking services for the Company in
the past and proposes to perform services during the current fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities (the
"10% Stockholders"), to file reports of ownership and changes of ownership with
the Commission and the New York Stock Exchange. Officers, directors and 10%
Stockholders of the Company are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms so filed.
Based solely on review of copies of such forms received, the Company
believes that, during the last fiscal year, all filing requirements under
Section 16(a) applicable to its officers, directors and 10% Stockholders were
timely, except with respect to Messrs. Phillips, Green and Mankoff, who each
filed one Form 4 late with respect to one transaction, respectively.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A
DIRECTOR.
AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
(PROPOSAL 2)
The Board of Directors of the Company unanimously adopted a proposed
amendment to Article FIRST of the Company's Amended and Restated Articles of
Incorporation and recommended that such amendment be submitted to the
stockholders of the Company for approval and adoption. The proposed amendment
would change the name of the Company to "FIRSTPLUS FINANCIAL GROUP, INC." The
Board of Directors believes that the name change is in the best interests of the
Company because it will conform to the Company's trade name, under which it
conducts its operations.
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<PAGE>
Therefore, the Board recommends that the stockholders vote in favor of the
change of corporate name. If the stockholders approve such name change, the
Article FIRST of the Company's Amended and Restated Articles of Incorporation
will be amended to read in its entirety as follows:
"FIRST. The name of the Corporation is FIRSTPLUS FINANCIAL GROUP, INC.(the
"Corporation")."
Approval of Proposal No. 2 requires the favorable vote of a majority of
the outstanding shares of Common Stock. As soon as practicable following
approval, the Company intends to file the amendment to its Amended and Restated
Articles of Incorporation with the Secretary of State of Nevada, which amendment
would become effective upon the filing thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO AMEND THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF RAC FINANCIAL GROUP, INC. TO CHANGE THE COMPANY'S
NAME AS DESCRIBED ABOVE.
AMENDMENT TO THE STOCK OPTION PLAN
(PROPOSAL 3)
In October 1996, the Board of Directors increased the number of shares of
Common Stock authorized for issuance pursuant to the Stock Option Plan to
3,200,000 shares, and the Compensation Committee granted certain options
thereunder (as set forth in the New Plan Benefits table below), all subject to
the approval of the stockholders at the Annual Meeting. The Board of Directors
believes that it is desirable for the Company to increase the number of shares
authorized for issuance under the Stock Option Plan from 1,100,000 to 3,200,000.
The increase in the amount of authorized shares available for issuance will
further the Company's interest in enticing and retaining qualified and competent
employees and consultants of the Company and directors of the Company's
subsidiaries.
If the amendment to the Stock Option Plan is not approved by the
stockholders at the Annual Meeting, then none of the options granted in excess
of the number of authorized shares presently available for grant under the Stock
Option Plan will constitute incentive stock options and any of such options
granted to individuals subject to potential liability under the "short swing"
profit provisions of Section 16(b) of the Exchange Act shall be null, void and
of no force and effect as of their date of grant.
Therefore, the Board recommends that the stockholders vote in favor of the
increase in the number of authorized shares under the Stock Option Plan and
ratify the grants described in the New Plan Benefits table below. If the
stockholders approve such increase, Section 3(a) of the Plan will be amended to
read in its entirety as follows:
"(a) The Company may grant to Eligible Persons from time to time
Options to purchase an aggregate of up to 3,200,000 Shares from Shares
held in the Company's treasury or from authorized and unissued Shares.
If any Option granted under the Plan shall terminate, expire, or be
canceled or surrendered as to any Shares, new Options may thereafter
be granted covering such Shares. An Option granted hereunder shall be
either an Incentive Stock
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Option or a Nonqualified Stock Option as determined by the Committee
at the Date of Grant of Such Option and shall clearly state whether it
is an Incentive Stock Option or a Nonqualified Stock Option. Incentive
Stock Options may only be granted to persons who are Employees."
The Company anticipates registering with the Securities and Exchange
Commission during 1997 the additional shares issuable as a result of the
increase in the number of authorized shares under the Stock Option Plan.
DESCRIPTION OF STOCK OPTION PLAN
In August 1995, the Board of Directors and stockholders adopted the Stock
Option Plan. The purpose of the Stock Option Plan is to advance the interests of
the Company by providing additional incentives to attract and retain qualified
and competent employees and consultants of the Company and directors of the
Company's subsidiaries, upon whose efforts and judgment the success of the
Company is largely dependent. Nonemployee directors of the Company are not
eligible to participate in the Stock Option Plan. As of the date hereof,
substantially all of the Company's full-time employees are eligible for grants
of stock options ("Employee Options") under the terms of the Stock Option Plan.
The Stock Option Plan authorizes the granting of incentive stock options
("Incentive Options") and nonqualified stock options ("Nonqualified Options") to
purchase Common Stock to eligible persons. A total of 1,100,000 shares of Common
Stock (past dividend) were authorized for sale upon exercise of Employee Options
granted under the Stock Option Plan. The Stock Option Plan is currently
administered by the Compensation Committee of the Board of Directors, which
consists of three members of the Board of Directors, each of whom is a
disinterested person. The Stock Option Plan provides for adjustments to the
number of shares and to the exercise price of outstanding options in the event
of a declaration of a stock dividend or any recapitalization resulting in a
stock split-up, combination or exchange of shares of Common Stock.
No Incentive Option may be granted with an exercise price per share less
than the fair market value of the Common Stock at the date of grant. The
Nonqualified Options may be granted with any exercise price determined by the
administrator of the Stock Option Plan. The exercise price of an Employee Option
may be paid in cash, by certified or cashier's check, by money order, by
personal check or by delivery of already owned shares of Common Stock having a
fair market value equal to the exercise price, or by delivery of a combination
of cash and already owned shares of Common Stock. However, if the optionee
acquired the stock to be surrendered directly or indirectly from the Company, he
must have owned the stock to be surrendered for at least six months prior to
tendering such stock for the exercise of an Employee Option.
An eligible employee may receive more than one Incentive Option, but the
maximum aggregate fair market value of the Common Stock (determined when the
Incentive Option is granted) with respect to which Incentive Options are first
exercisable by such employee in any calendar year cannot exceed $100,000. In
addition, no Incentive Option may be granted to an employee owning directly or
indirectly stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, unless the exercise price is set at not
less than 110% of the fair market value
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22
<PAGE>
of the shares subject to such Incentive Option on the date of grant and such
Incentive Option expires not later than five years from the date of grant.
Awards of Nonqualified Options are not subject to these special limitations.
No Employee Option granted under the Stock Option Plan is assignable or
transferable, otherwise than by will or by laws of descent and distribution.
During the lifetime of an optionee, his Employee Option is exercisable only by
him or his guardian or legal representative. The expiration date of an Employee
Option is determined by the administrator at the time of the grant, but in no
event may an Employee Option be exercisable after the expiration of 10 years
from the date of grant of the Employee Option.
The administrator of the Stock Option Plan may limit an optionee's right
to exercise all or any portion of an Employee Option until one or more dates
subsequent to the date of grant. The administrator also has the right,
exercisable in its sole discretion, to accelerate the date on which all or any
portion of an Employee Option may be exercised. The Stock Option Plan also
provides that 30 days prior to certain major corporate events such as, among
other things, certain changes in control, mergers or sales of substantially all
of the assets of the Company (a "Major Corporate Event"), each Employee Option
shall immediately become exercisable in full. In anticipation of a Major
Corporate Event, however, the administrator may, after notice to the optionee,
cancel the optionee's Employee Options on the consummation of the Major
Corporate Event. The optionee, in any event, will have the opportunity to
exercise his Employee Options in full prior to such Major Corporate Event.
If terminated for cause, all rights of an optionee under the Stock Option
Plan cease and the Employee Options granted to such optionee become null and
void for all purposes. The Stock Option Plan further provides that in most
instances an Employee Option must be exercised by the optionee within 30 days
after the termination of the consulting contract between such consultant and the
Company or termination of the optionee's employment with the Company, as the
case may be (for any reason other than termination for cause, mental or physical
disability or death), if and to the extent such Employee Option was exercisable
on the date of such termination. If the optionee is not otherwise employed by,
or a consultant to, the Company, his Employee Option must be exercised within 30
days of the date he ceases to be a director of a subsidiary of the Company.
Generally, if an optionee's employment or consulting contract is terminated due
to mental or physical disability, the optionee will have the right to exercise
the Employee Option (to the extent otherwise exercisable on the date of
termination) for a period of one year from the date on which the optionee
suffers the mental or physical disability. If an optionee dies while actively
employed by, or providing consulting services under a consulting contract to,
the Company, the Employee Option may be exercised (to the extent otherwise
exercisable on the date of death) within one year of the date of the optionee's
death by the optionee's legal representative or legatee.
TAX CONSEQUENCES
Under current tax laws, the grant of an Employee Option will not be a
taxable event to the recipient optionee and the Company will not be entitled to
a deduction with respect to such grant.
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<PAGE>
Upon the exercise of a Nonqualified Option, an optionee will recognize
ordinary income at the time of exercise equal to the excess of the then fair
market value of the shares of Common Stock received over the exercise price. The
taxable income recognized upon exercise of a Nonqualified Option will be treated
as compensation income subject to withholding and the Company will be entitled
to deduct as a compensation expense an amount equal to the ordinary income an
optionee recognizes with respect to such exercise. When Common Stock received
upon the exercise of a Nonqualified Option subsequently is sold or exchanged in
a taxable transaction, the holder thereof generally will recognize capital gain
(or loss) equal to the difference between the total amount realized and the fair
market value of the Common Stock on the date of exercise; the character of such
gain or loss as long-term or short-term capital gain or loss will depend upon
the holding period of the shares following exercise.
The exercise of an Incentive Option will not be taxable to the optionee,
and the Company will not be entitled to any deduction with respect to such
exercise. However, to qualify for this favorable tax treatment of incentive
stock options under the Code, the optionee may not dispose of the shares of
Common Stock acquired upon the exercise of an Incentive Option until after the
later of two years following the date of grant or one year following the date of
exercise. The surrender of shares of Common Stock acquired upon the exercise of
an Incentive Option in payment of the exercise price of an Employee Option
within the required holding period for incentive stock options under the Code
will be a disqualifying disposition of the surrendered shares. Upon any
subsequent taxable disposition of shares of Common Stock received upon exercise
of a qualifying Incentive Option, the optionee generally will recognize
long-term or short-term capital gain (or loss) equal to the difference between
the total amount realized and the exercise price of the Employee Option.
If an Employee Option that was intended to be an incentive stock option
under the Code does not qualify for favorable incentive stock option treatment
under the Code due to the failure to satisfy the holding period requirements,
the optionee may recognize ordinary income in the year of the disqualifying
disposition. Provided the amount realized in the disqualifying disposition
exceeds the exercise price, the ordinary income an optionee shall recognize in
the year of a disqualifying disposition shall be the lower of (i) the excess of
the amount realized over the exercise price or (ii) excess of the fair market
value of the Common Stock at the time of the exercise over the exercise price.
In addition, the optionee shall recognize capital gain on the disqualifying
disposition in the amount, if any, by which the amount realized in the
disqualifying disposition exceeds the fair market value of the Common Stock at
the time of the exercise. Such capital gain shall be taxable as long-term or
short-term capital gain, depending on the optionee's holding period for such
shares.
Notwithstanding the favorable tax treatment of Incentive Options for
regular tax purposes, as described above, for alternative minimum tax purposes,
an Incentive Option is generally treated in the same manner as a Nonqualified
Option. Accordingly, an optionee must generally include in alternative minimum
taxable income for the year in which an Incentive Option is exercised the excess
of the fair market value on the date of exercise of the shares of Common Stock
received over the exercise price. If, however, an optionee disposes of shares of
Common Stock acquired upon the exercise of an Incentive Option in the same
calendar year as the exercise, only an amount equal to the optionee's ordinary
income for regular tax purposes with respect to such disqualifying disposition
will be recognized for the optionee's calculation of alternative minimum taxable
income in such calendar year.
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<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
STOCK OPTION PLAN
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF OPTIONS GRANT DATE
- --------------------------------------- ---------------- ----------------- ----------
Daniel T. Phillips..................... -- --
Chairman of the Board, President, Chief
Executive Officer and Director
Ronald M. Mankoff (1).................. -- --
General Counsel and Director
<S> <C> <C> <C> <C> <C>
Eric C. Green (2)...................... 1,650,000 150,000 4/1/96
Executive Vice President and Chief Financial 1,131,250
Officer 50,000 10/1/96
James H. Poythress (3)................. -- --
Executive Vice President and Chief Operating
Officer
Executive Officers Group............... 200,000
Non-Executive Director Group........... -- --
Non-Executive Officer Employee Group... -- --
Other Non-Executive Employees Group (4) 1,056,250 4/1 to 10/1/96
<FN>
(1) Mr. Mankoff retired as General Counsel and Director of the Company in November 1996.
(2) On April 1, 1996, Mr. Green was granted an option to purchase 150,000
shares at an exercise price of $11.00. On October 1, 1996, Mr. Green was
granted an option to purchase 50,000 shares at an exercise price of
$22.625. These options vest generally in one-third increments over a three
year term.
(3) Mr. Poythress joined the Company in June 1995. Mr. Poythress retired from the Company in May 1996. He served as a consultant
to the Company until January 1997, for an annual fee of $232,500. See "-Employment Agreements; Key-Man Life Insurance."
(4) The exercise price on these options typically range from $11.00 per share to $22.69 per share and typically vest over a period
three years, with 331/3 percent vesting per year.
</FN>
</TABLE>
Amendment of the Stock Option Plan and the ratification of certain grants
thereunder requires the affirmative vote of the holders of a majority of the
shares of Common Stock present and voting at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
INCREASE THE NUMBER OF AUTHORIZED SHARES FOR ISSUANCE UNDER THE COMPANY'S STOCK
OPTION PLAN, AS DESCRIBED ABOVE.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote the proxy as in
their discretion they may deem appropriate, unless they are directed by the
proxy to do otherwise.
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25
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Ernst & Young LLP as the
Company's independent auditors for 1996. A representative of such firm is
expected to be present at the Annual Meeting and will be available to answer
questions and will be afforded an opportunity to make a statement if desired.
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Proxy Statement for the 1997
Annual Meeting must be received by the Company no later than September 30, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
Daniel T. Phillips, President
January 28, 1997
Dallas, Texas
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE URGED
TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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26
<PAGE>
PROXY
RAC FINANCIAL GROUP, INC.
1250 WEST MOCKINGBIRD LANE
DALLAS, TEXAS 75247
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Daniel T. Phillips and Eric C. Green,
and each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated below, all of the
shares of the Common Stock of RAC Financial Group, Inc. (the "Company"), held of
record by the undersigned on January 20, 1997, at the Annual Meeting of
Stockholders of the Company to be held on March 5, 1997, and any adjournment(s)
thereof.
[To Be Dated And Signed On Reverse Side]
CORPDAL:59711.1 28835-00007
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL
1, IN FAVOR OF PROPOSAL 2 AND PROPOSAL 3 AND THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN PROPOSAL 4.
1. PROPOSAL TO ELECT AS DIRECTORS OF THE COMPANY THE FOLLOWING
PERSONS TO HOLD OFFICE UNTIL THE NEXT ANNUAL ELECTION OF DIRECTORS BY
STOCKHOLDERS OR UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND HAVE
QUALIFIED.
__ FOR all nominees listed
(except as marked below to the contrary)
__ WITHHOLD AUTHORITY to vote for all nominees listed
Daniel T. Phillips Daniel J. Jessee
Eric C. Green Paul Seegers
John Fitzgerald Sheldon I. Stein
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
2. PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED ARTICLES
OF INCORPORATION TO CHANGE THE COMPANY'S NAME FROM "RAC FINANCIAL GROUP, INC."
TO "FIRSTPLUS FINANCIAL GROUP, INC."
_FOR _AGAINST _ABSTAIN
3. PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES FOR
ISSUANCE UNDER THE COMPANY'S STOCK OPTION PLAN AND TO RATIFY CERTAIN GRANTS OF
STOCK OPTIONS THEREUNDER.
_FOR _AGAINST _ABSTAIN
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<PAGE>
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
_FOR _AGAINST _ABSTAIN
Dated:_________________, 1997
_____________________________
Signature
_____________________________
Signature, If Held Jointly
Please execute this proxy
as your name appears
hereon. When shares are
held by joint tenants, both
should sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by the
president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person. PLEASE
MARK, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
CORPDAL:59711.1 28835-00007
