<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
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:
<PAGE>
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 Crescent Court Hotel, 400 Crescent Court,
Dallas, Texas 75201, in the Gallery II Ballroom, Second Level, 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
February 5, 1997
<PAGE>
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 February 5, 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.
<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 24,989,252 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.
2
<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>
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 383,278 1.5
Daniel T. Phillips (3)(4)...................... Voting 4,348,774 17.4
Ronald M. Mankoff (4)(5)....................... Voting 2,802,642 11.2
Banc One Capital Holdings Corporation (6)...... Non-Voting 3,362,154 75.7
Eric C. Green (4)(7)........................... Voting 448,228 1.8
James H. Poythress (4)(8)...................... Voting 195,208 *
John Fitzgerald (4)............................ Voting 16,734 *
Dan Jessee (4)(9).............................. Voting 24,756 *
Paul Seegers (4)............................... Voting 16,734 *
Sheldon I. Stein (4)........................... Voting 26,734 *
Putnam Investments, Inc (10)................... Voting 1,389,926 5.6
All current directors and executive officers
as a group (6 persons) (3)(4)(7)............. Voting 4,881,960 19.5
</TABLE>
- ---------------
* Represents less than one percent.
(1) Based on 24,989,252 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) Includes 335,000 shares of Common Stock owned by the Phillips
Partnership but with respect to which Mr. Phillips has voting control.
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).
(5) 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
3
<PAGE>
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.
(6) The address of such beneficial owner is 150 Easy Gay Street, 24th Floor,
Columbus, Ohio 43215. Banc One Capital Holdings Corporation ("BOCHC"), BOCP
II, Limited Liability Company ("BOCP II") and Banc One Capital Partners V,
Ltd. ("BOCP V") are affiliated companies under common control. Except as
described in this footnote, the number of shares shown as being beneficially
owned by BOCHC does not include shares that may be deemed to be beneficially
owned by such entity as a result of its being under common control with BOCP
II or BOCP V. Share figures shown as being beneficially owned include
525,536 shares of Non-Voting Common Stock held by BOCHC, as custodian for
members of BOCP II and BOCP V, and certain of their donees, with respect to
which it disclaims beneficial ownership. See "Certain Relationships and
Related Party Transactions - Relationship with Bank One."
(7) 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. Mr. Green disclaims beneficial
ownership of such shares. Also includes 2,000 shares of Common Stock held by
Mr. Green's wife.
(8) Mr. Poythress retired from the Company in May 1996 and served as a
consultant to the Company until January 1997.
(9) Does not include the shares of Non-Voting Common Stock or the shares of
Common Stock held by BOCHC, BOCP II or BOCP V, which, in limited
circumstances, may be exchanged for shares of Common Stock on a
share-for-share basis. Mr. Jessee is Vice-Chairman of BOCC, an affiliate of
BOCHC, BOCP II and BOCP V, and disclaims beneficial ownership of these shares.
(10) 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 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.
4
<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 six (6). 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)(2) 48 Director
Daniel J. Jessee (1)(2) 44 Director
Paul Seegers (1) 66 Director
Sheldon I. Stein (2) 43 Director
- ---------------
(1) Member of the Audit Committee.
(2) Member of 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 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
5
<PAGE>
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. 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., 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.
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
RONALD M. BENDALIN - Mr. Bendalin, age 32, joined the Company in October
1995, and has served as General Counsel and Secretary since November 1996.
From February 1995 to October 1995, he served as Senior Attorney with the
firm of Peirson & Patterson and from June 1991 to February 1995, he served as
Vice President, Secretary and Associate Counsel for Portfolio Acceptance
Corp. (an indirect subsidiary of NationsBank Corporation). Mr. Bendalin is
Vice Chair of the American Bar Association's Consumer Financial Services
Committee, Subcommittee on Relation to State Law, and is a member of the
Governing Committee of the Conference on Consumer Finance Law.
6
<PAGE>
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.
L. KENNETH COBERN - Mr. Cobern, age 32, has served as Assistant to the
Chairman and Strategic Initiatives Officer of the Company since October 1996.
From February 1996 to September 1996, Mr. Cobern served as a consultant to
the Company. From January 1996 to September 1996, he was a member of the
Financial Services Information Technology Group of Ernst & Young LLP. From
October 1992 to January 1996, Mr. Cobern served in a similar capacity for
Price Waterhouse, consulting on both domestic and international financial
services clients. Mr. Cobern was with AmWest Savings and Loan from December
1990 to October 1992.
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. From June 1992 to April 1994, Mr. O'Bryan served as President and
Chief Operating Officer of Alliance Costal Credit Corporation, a home-equity
lender, and from December 1987 to June 1992 he served as President of Spring
Mountain Credit Corporation, an auto finance lender.
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 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.
7
<PAGE>
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 39, 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 Tax Manager for TIC United Corp. From
June 1988 to June 1990 Mr. Tenenholtz served as corporate tax manager for
Dalfort Corporation.
8
<PAGE>
BOARD COMMITTEES AND MEETINGS
The Board of Directors has established two standing committees: the
Compensation Committee and the Audit Committee. Messrs. Fitzgerald, Jessee and
Stein serve on the Compensation Committee; and Messrs. Fitzgerald, Jessee and
Seegers serve on 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 one meeting 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 one meeting
during the fiscal year ended September 30, 1996.
The Board of Directors does not have a standing Nominating Committee.
The Board of Directors held 10 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 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.
9
<PAGE>
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 $100,000 for the fiscal year ended
September 30, 1996 (collectively, the "Named Executive Officers"), is set forth
below in the following Summary Compensation Table:
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION (1) AWARDS PAYOUTS
----------------------------------- --------------------- -------
OTHER
ANNUAL RESTRICTED OPTIONS/ ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION STOCK SARS LTIP COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------- ------ -------- ------- ------------ ---------- -------- ---- ------------
<S> <C> <C> <C> <C> <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 1995 216,047 225,000 -- -- -- -- --
Director
Eric C. Green (3) . . . . 1996 227,990 300,000 -- -- 241,162 -- --
Executive Vice President 1995 110,000 125,000 -- -- -- -- --
and Chief Financial
Officer
James H. Poythress (4). . 1996 176,232 --- -- -- 91,162 -- --
Executive Vice President 1995 37,885(4) 205,000 -- -- -- -- --
and Chief Operating
Officer
</TABLE>
___________
(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
$232,500. See "-- Employment Agreements; Key-Man Life Insurance."
10
<PAGE>
GRANTS OF OPTIONS AND STOCK APPRECIATION RIGHTS ("SARS")
The following table sets forth details regarding stock options granted to
the named executive officers listed in the Summary Compensation Table during the
fiscal 1996. In addition, there are shown the "option spreads" that would exist
for the respective options granted based upon assumed rates of annual compound
stock appreciation of 5% and 10% from the date the options were granted over the
full option term. The Company granted no SARs in fiscal 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF AT ASSUMED ANNUAL RATES
UNDERLYING TOTAL OPTIONS/ OF STOCK PRICE APPRECIATION
OPTIONS/SARS SARS GRANTED TO EXERCISE FOR OPTION TERM (2)
GRANTED(1) EMPLOYEES IN OR BASE PRICE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($)(3) 10% ($)(4)
- -------------------- ------------ --------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
___________
(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 $28.53 for options granted on April 1,
1996.
(5) Messrs. Mankoff and Poythress retired from the Company in November and May
1996, respectively.
EXERCISES OF OPTIONS AND SARS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during fiscal 1996, and
unexercised options held as of September 30, 1996. No options were exercised by
the Named Executive Officers during fiscal 1996, and no Named Executive Officer
held any SARs.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
VALUE OF
NUMBER OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED AT FY-END (#) AT FY-END ($)
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
</TABLE>
___________
(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.
11
<PAGE>
COMPENSATION AND EMPLOYMENT AGREEMENTS; KEY-MAN LIFE INSURANCE
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.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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 each of them
through the potential of capital gains and additional equity buildup in the
Company. Mr. Phillips was granted options to purchase 100,000 shares of
Common Stock, and Mr. Green was granted options to purchase 241,162 shares of
Common Stock. 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
13
<PAGE>
portfolio was $1.3 billion. Based on this performance, Mr. Phillips received
a bonus of $800,000 and Mr. Green received a bonus of $300,000 in fiscal 1996.
Based on comparative industry data of the Company's peers, and as the
result of arm's-length negotiations, on August 25, 1995, the Company entered
into a five-year 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 annually to meet cost-of-
living increases, and the Company entered into a three-year employment agreement
with Mr. Eric C. Green that provides for the employment of Mr. Green as
Executive Vice President and Chief Financial Officer at an annual base minimum
salary of $230,000, adjusted annually to meet cost-of-living increases. The
agreements were unanimously approved by the Board of Directors, and the
Compensation Committee.
The Compensation Committee believes that the compensation of the Company's
executive officer was reasonably related to the performance of the Company and
those individuals during fiscal 1996.
COMPENSATION COMMITTEE
John Fitzgerald
Daniel J. Jessee
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."
14
<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 (the S&P 500) 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.
COMPARATIVE RETURNS
RAC FINANCIAL GROUP, INC., BROAD MARKET AND PEER GROUP
(PERFORMANCE RESULTS THROUGH 09/30/96)
[Stock Performance Graph Goes Here]
<TABLE>
Beginning Quarter Ended Quarter Ended Quarter Ended
February 1, 1996 March 31, 1996 June 30, 1996 September 30, 1996
---------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
RAC Financial Group, Inc. 100.00 119.21 149.67 241.72
Peer Group 100.00 122.44 116.46 139.50
Broad Market 100.00 101.90 106.47 109.76
</TABLE>
The Broad Market (the S&P 500) is an index of 500 companies with common
stock on national securities exchanges. The Peer Group is composed of the
following companies: Aames Financial Corp., Cityscape Financial Corp.,
ContiFinancial Corporation, Green Tree Financial Corp., The Money Store, Inc.
and Southern Pacific Funding Corporation.
15
<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."
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
16
<PAGE>
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.
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.
17
<PAGE>
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.
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 from
1,100,000 shares to 3,200,000 shares, and the Compensation Committee granted
certain options thereunder out of such increase (as set forth in the New Plan
Benefits table below), all subject to the approval of the stockholders at the
Annual Meeting. As of the Record Date, options to purchase 2,053,196 shares
of Common Stock had been granted under the Stock Option Plan. The Board of
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<PAGE>
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 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
(approximately 950 eligible individuals).
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. 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,
19
<PAGE>
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 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.
20
<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.
21
<PAGE>
NEW PLAN BENEFITS
<TABLE>
STOCK OPTION PLAN
----------------------------------------------------------
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF OPTIONS GRANT DATE
- ------------------------------ ------------------- ----------------- --------------
<S> <C> <C> <C>
Daniel T. Phillips............ -- -- --
Chairman of the Board,
President, Chief Executive
Officer and Director
Ronald M. Mankoff (2)......... -- -- --
General Counsel and Director
Eric C. Green (3)............. 318,750 50,000 10/1/96
Executive Vice President and
Chief Financial Officer
James H. Poythress (4)........ -- -- --
Executive Vice President and
Chief Operating Officer
Executive Officers Group...... 318,750 50,000 10/1/96
Non-Executive Director Group.. -- -- --
Non-Executive Officer
Employee Group (5)........... 7,060,981 913,196 5/31 to 11/15/96
Other Non-Executive
Employees Group ............. -- -- --
</TABLE>
- ---------------
(1) The aggregate market value of the shares of Common Stock reserved for
issuance pursuant to the exercise of options shown in the table was $36.4
million, based on the closing sales price of $29.00 per share for the
Common Stock on the Record Date, as reported by THE WALL STREET JOURNAL.
All such options were granted at the fair market value of the Common Stock
on the respective dates of grant. The dollar value shown is based on the
difference between the closing sales price per share of Common Stock on the
Record Date and the exercise price per share for such options.
(2) Mr. Mankoff retired as General Counsel and Director of the Company in
November 1996.
(3) 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.
(4) 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."
(5) The exercise price on these options typically range from $13.13 per share
to $22.69 per share and typically vest over a period three years, with
33-1/3 percent vesting per year.
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<PAGE>
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.
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
February 5, 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.
23
<PAGE>
1995 EMPLOYEE STOCK OPTION PLAN
FOR
REMODELERS ACCEPTANCE CORPORATION
SECTION 1. PURPOSE. This 1995 Employee Stock Option Plan of Remodelers
Acceptance Corporation is intended as an additional incentive to attract and
retain qualified and competent employees and consultants for the Company and its
Subsidiaries, upon whose efforts and judgment the success of the Company is
largely dependent, through the encouragement of stock ownership in the Company
by such persons.
SECTION 2. DEFINITIONS. As used herein, the following terms shall have
the meaning indicated:
(a) "ACT" shall mean the Securities Exchange Act of 1934, as amended.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "BUSINESS DAY" shall mean (i) if the Shares trade on a national
exchange, any day that the national exchange on which the Shares trade is
open or (ii) if the Shares do not trade on a national exchange, any day
that commercial banks in the City of New York are open.
(d) "COMMISSION" shall mean the Securities and Exchange Commission.
(e) "COMMITTEE" shall mean the Compensation Committee of the Board
or other committee, if any, appointed by the Board pursuant to Section 14
hereof.
(f) "COMPANY" shall mean Remodelers Acceptance Corporation, a
Nevada corporation.
(g) "DATE OF GRANT" shall mean the date on which an Option is
granted to an Eligible Person, to the Eligible Person of the grant
pursuant to Section 4 hereof.
(h) "DIRECTOR" shall mean a member of the Board.
(i) "DISINTERESTED PERSON" shall mean a person who, at the time he
acts on the granting of any Option, is not eligible, and within one year
prior thereto has not been eligible, to receive Shares or stock options
or other rights convertible into Shares under the Plan or any other plan
of the Company, except participations in other plans of the Company as
allowed pursuant to rule 16b-3(c)(i) that do not disqualify such person
from being a disinterested person.
(j) "ELIGIBLE PERSON(S)" shall mean those persons who are (i) under
written contract (a "Consulting Contract") with the Company or a
Subsidiary to provide consulting services to the Company or a Subsidiary
(a "Consultant"), (ii) Employees or (iii) members
<PAGE>
of the Board of Directors of any Subsidiary, but excluding Directors who
are not Employees.
(k) "EMPLOYEE(S)" shall mean those persons who are employees of the
Company or who are employees of any Subsidiary.
(l) "FAIR MARKET VALUE" of a share on a particular date shall be
the closing price or Common Stock, which shall be (i) if the Common Stock
is listed for trading on any United States national securities exchange,
the last reported sale price of Common Stock on such exchange as reported
in any newspaper of general circulation, (ii) if the Common Stock is
quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices in common use, the mean between the
closing high bid and low asked quotations for such day of the Common
Stock on such system or (iii) if neither clause (i) nor (ii) is
applicable, a value determined by any fair and reasonable means
prescribed by the Board.
(m) "INCENTIVE STOCK OPTION" shall mean an option that is an
incentive stock option as defined in Section 422 of the Internal Revenue
Code.
(n) "INTERNAL REVENUE CODE" or "CODE" shall mean the Internal
Revenue Code of 1986, as it now exists or may be amended from time to
time.
(o) "NONQUALIFIED STOCK OPTION" shall mean a stock option that is
not an incentive stock option as defined in Section 422A of the Internal
Revenue Code.
(p) "OPTION" (when capitalized) shall mean any option granted under
this Plan.
(q) "OPTIONEE" shall mean a person to whom an Option is granted
under this Plan or any successor to the rights of such person by reason
of the death of such person.
(r) "PLAN" shall mean this 1995 Employee Stock Option Plan for
Remodelers Acceptance Corporation.
(s) "SHARE(S)" shall mean a share or shares of the Common Stock.
(t) "SUBSIDIARY" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company
if, at the time of the granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
2
<PAGE>
SECTION 3. SHARES AND OPTIONS.
(a) The Company may grant to Eligible Persons from time to time
Options to purchase an aggregate of up to 550,000 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 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.
(b) The aggregate Fair Market Value (determined at the Date of
Grant of the Option) of the Shares with respect to which any Incentive
Stock Option is exercisable for the first time by an Optionee during any
calendar year under the Plan and all such plans of the Company and any
parent and subsidiary of the Company (as defined in Section 425 of the
Code) shall not exceed $100,000.
SECTION 4. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law.
Optionees shall be those persons selected by the Committee from Eligible
Persons. Any person who files with the Committee, in a form satisfactory
to the Committee, a written waiver of eligibility to receive any Option
under this Plan shall not be eligible to receive any Option under this
Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made or may make to the
success of the Company or its Subsidiaries and such other factors as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from officers and other
personnel of the Company and its Subsidiaries with regard to these
matters. The Committee may from time to time in granting Options under
the Plan prescribe such other terms and conditions concerning such
Options as it deems appropriate, including, without limitation, relating
an Option to achievement of specific goals established by the Committee
or the continued employment of the Optionee for a specified period of
time, provided that such terms and conditions are not more favorable to
an Optionee than those expressly permitted herein.
(c) The Committee in its sole discretion shall determine in each
case whether periods of military or government service shall constitute a
continuation of employment for the purposes of this Plan or any Option.
3
<PAGE>
SECTION 5. EXERCISE PRICE. The exercise price per Share of any Option
shall be any price determined by the Committee; provided, however, that the
exercise price for any Incentive Stock Option shall not be less than one hundred
percent (100%) of the Fair Market Value per Share on the Date of Grant.
SECTION 6. EXERCISE OF OPTIONS. An Option shall be deemed exercised
when (i) the Company has received written notice of such exercise in accordance
with the terms of the Option, (ii) full payment of the aggregate exercise price
of the Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Company of the amount, if any, that
the Committee determines to be necessary for the Company or a Subsidiary to
withhold in accordance with applicable federal or state income tax withholding
requirements. Unless further limited by the Committee in any Option, the
exercise price of any Shares purchased shall be paid solely in cash, by
certified or cashier's check, by money order, by personal check or with Shares
(but with Shares only if permitted by an Option agreement or otherwise permitted
by the Committee in its sole discretion at the time of exercise and provided
that if the Optionee acquired such stock to be surrendered directly or
indirectly from the Company, he shall have owned such stock for six months prior
to using such stock to exercise an Option) or by a combination of the above. If
the exercise price is paid in whole or in part with Shares, the value of the
Shares surrendered shall be their Fair Market Value on the date received by the
Company.
SECTION 7. EXERCISABILITY OF OPTIONS.
(a) Any Option shall become exercisable in such amounts and at such
intervals as the Committee shall provide in any Option, except as
otherwise provided in this Section 7; provided in each case that the
Option has not expired on the date of exercise.
(b) The expiration date of an Option shall be determined by the
Committee at the Date of Grant, but in no event shall an Option be
exercisable after the expiration of ten (10) years from the Date of Grant.
(c) An Option shall not be exercisable prior to the six-month
anniversary of its Date of Grant.
(d) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised.
(e) On the date thirty (30) days prior to any occurrence described
in Subsections (7)(e)(i), (ii) or (iii), but only where such anticipated
occurrence actually takes place, notwithstanding the exercise schedule in
an Option, each Option shall immediately become exercisable in full where
there (i) is any transaction (which shall include a series of
transactions occurring within 60 days or occurring pursuant to a plan)
that has the result that shareholders of the Company immediately before
such transaction cease to own at least 51% of (x) the voting stock of the
Company or (y) of any entity that results from the participation of the
Company in a reorganization, consolidation, merger, liquidation or any
4
<PAGE>
other form of corporate transaction; (ii) is a merger, consolidation,
reorganization, liquidation or dissolution in which the Company does not
survive; (iii) is a sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Company.
(f) Notwithstanding any provisions hereof to the contrary, if any
Option is accelerated under Subsection 7(d) or (e), the portion of such
Option that may be exercised to acquire Shares that the Optionee would
not be entitled to acquire but for such acceleration (the "Acceleration
Shares"), is limited to that number of Acceleration Shares that can be
acquired without causing the Optionee to have an "excess parachute
payment" as determined under Section 280G of the Code, determined by
taking into account all of the Optionee's "parachute payments" determined
under Section 280G of the Code. If as a result of this Subsection 7(f),
the Optionee may not acquire all of the Acceleration Shares, then the
Acceleration Shares that the Optionee may acquire shall be the last
shares that the Optionee would have been entitled to acquire had this
Option not been accelerated.
SECTION 8. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise provided in any Option, the unexercised
portion of an Option shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the
following:
(i) except as provided in Subsection 8(a)(iii), thirty (30)
days after the date that Optionee ceases to be employed by the Company or
a Subsidiary or ceases to be a Consultant to the Company or a Subsidiary,
as the case may be, regardless of the reason therefor other than as a
result of such termination by reason of (x) death, (y) mental or physical
disability of Optionee as determined by a medical doctor satisfactory to
the Committee or (z) termination of Optionee's employment or Consulting
Contract, as the case may be, with the Company or a Subsidiary for cause;
(ii) except as provided in Subsection 8(a)(iii), one (1) year
after the date on which the Optionee suffers a mental or physical
disability as determined by a medical doctor satisfactory to the
Committee;
(iii) either (y) one (1) year after the date that Optionee
ceases to be a Consultant to or ceases to be employed by, as the case may
be, the Company or a Subsidiary, by reason of death of the Optionee, or
(z) six (6) months after the date on which the Optionee shall die, if the
Optionee's death shall occur during the thirty-day period described in
Subsection 8(a)(i) or the one-year period described in Subsection
8(a)(ii);
(iv) the date that Optionee ceases to be a Consultant to or
ceases to be employed by, as the case may be, the Company or a Subsidiary
as a result of a termination for cause;
5
<PAGE>
(v) with respect to Options held by a person who is a member
of the Board of Directors of a Subsidiary who is not also an Employee or
Consultant, thirty (30) days after the date that Optionee ceases to be a
member of such Board of Directors; and
(vi) the tenth (10th) anniversary of the Date of Grant of the
Option.
(b) If provided in an Option, the Committee in its sole discretion
may, by giving written notice (a "Cancellation Notice") cancel, effective
upon the date of the consummation of any of the transactions described in
Subsection 7(e), all or any portion of such Option that remains
unexercised on such date. Such Cancellation Notice shall be given a
reasonable period of time (but not less than 15 days) prior to the
proposed date of such cancellation, and may be given either before or
after shareholder approval of such transaction.
SECTION 9. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the
number of issued and outstanding Shares through the declaration of a
stock dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares then subject to being optioned under the Plan, so
that the same proportion of the Company's issued and outstanding
Shares shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to
outstanding Options, so that the same proportion of the Company's
issued and outstanding Shares shall remain subject to purchase at the
same aggregate exercise price.
(b) The Committee may change the terms of Options outstanding under
this Plan, with respect to the exercise price or the number of Shares
subject to the Options, or both, when, in the Committee's sole
discretion, such adjustments become appropriate by reason of any
corporate transaction.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to
the number of Shares reserved for issuance under the Plan or the number
of or exercise price of Shares then subject to outstanding Options
granted under the Plan.
6
<PAGE>
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate
(1) any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business; (2) any
merger or consolidation of the Company; (3) any issue by the Company of
debt securities, or preferred or preference stock that would rank above
the Shares subject to outstanding Options; (4) the dissolution or
liquidation of the Company; (5) any sale, transfer or assignment of all
or any part of the assets or business of the Company; or (6) any other
corporate act or proceeding, whether of a similar character or otherwise.
SECTION 10. TRANSFERABILITY OF OPTIONS. Each Option shall provide that
such Option shall not be transferrable by the Optionee otherwise than by will or
the laws of descent and distribution and that so long as an Optionee lives, only
such Optionee or his guardian or legal representative shall have the right to
exercise such Option.
SECTION 11. ISSUANCE OF SHARES. No person shall be, or have any of the
rights or privileges of, a shareholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition of
any transfer of the certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of the Plan, the agreement evidencing the
Option or any law or regulation including, but not limited to, the following:
(i) A representation, warranty or agreement by the Optionee
to the Company at the time any Option is exercised that he or she is
acquiring the Shares to be issued to him or her for investment and not
with a view to, or for sale in connection with, the distribution of
any such Shares; and
(ii) A representation, warranty or agreement to be bound by
any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities laws
deemed by the Committee to be applicable to the issuance of the Shares
and are endorsed upon the Share certificates.
SECTION 12. OPTIONS FOR 10% SHAREHOLDER. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly (or indirectly through attribution under
Section 425(d) of the Code) at the Date of Grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or of
its parent or subsidiary [as defined in Section 425 of the Internal Revenue
Code] at the Date of Grant) unless the exercise price of such Incentive Stock
Option is at least 110% of the Fair Market Value of the Shares subject to such
Incentive Stock Option on the Date of Grant, and the period during which the
Incentive Stock Option may be exercised does not exceed five (5) years from the
Date of Grant.
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<PAGE>
SECTION 13. NONQUALIFIED STOCK OPTIONS. Nonqualified Stock Options may
be granted hereunder and shall be subject to all terms and provisions hereof
except that each such Nonqualified Stock Option (i) must be clearly designated
as a Nonqualified Stock Option; (ii) may be granted for Shares in excess of the
limits contained in Subsection 3(b) of this Plan; and (iii) shall not be subject
to Section 12 of this Plan. If both Incentive Stock Options and Nonqualified
Stock Options are granted to an Optionee, the right to exercise, to the full
extent thereof, Options of either type shall not be contingent in whole or in
part upon the exercise of, or failure to exercise, Options of the other type.
SECTION 14. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation Committee of
the Board or other committee thereof as appointed by the Board (herein
called the "Committee") consisting of not less than two (2) members of
the Board all of whom are Disinterested Persons. Except for the powers
set forth in Section 17, the Committee shall have all of the powers of
the Board with respect to the Plan. Any member of the Committee may be
removed at any time, with or without cause, by resolution of the Board
and any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The
determinations and the interpretation and construction of any provision
of the Plan by the Committee shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at
a meeting or (ii) without a meeting by the written approval of a majority
of the members of the Committee.
(d) Subject to the express provisions of this Plan, the Committee
shall have the authority, in its sole and absolute discretion (i) to
adopt, amend, and rescind administrative and interpretive rules and
regulations relating to this Plan or any Option; (ii) to construe the
terms of this Plan or any Option; (iii) as provided in Subsection 9(a),
upon certain events to make appropriate adjustments to the exercise price
and number of Shares subject to this Plan and Option; and (iv) to make
all other determinations and perform all other acts necessary or
advisable for administering this Plan, including the delegation of such
ministerial acts and responsibilities as the Committee deems appropriate.
The Committee may correct any defect or supply any omission or reconcile
any inconsistency in this Plan or any Option in the manner and to the
extent it shall deem expedient to carry it into effect, and it shall be
the sole and final judge of such expediency. The Committee shall have
full discretion to make all determinations on the matters referred to in
this Subsection 14(d), and such determinations shall be final, binding
and conclusive.
8
<PAGE>
SECTION 15. GOVERNMENT REGULATIONS. This Plan, Options and the
obligations of the Company to sell and deliver Shares under any Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
SECTION 16. MISCELLANEOUS.
(a) The proceeds received by the Company from the sale of Shares
pursuant to an Option shall be used for general corporate purposes.
(b) The grant of an Option shall be in addition to any other
compensation paid to the Optionee or other stock option plans of the
Company or other benefits with respect to Optionee's position with the
Company or its Subsidiaries. The grant of an Option shall not confer
upon the Optionee the right to continue as an Employee or Consultant, or
interfere in any way with the rights of the Company to terminate his or
her status as an Employee or Consultant.
(c) Neither the members of the Board nor any member of the
Committee shall be liable for any act, omission, or determination taken
or made in good faith with respect to this Plan or any Option, and
members of the Board and the Committee shall, in addition to all other
rights of indemnification and reimbursement, be entitled to
indemnification and reimbursement by the Company in respect of any claim,
loss, damage, or expense (including attorneys' fees, the costs of
settling any suit, provided such settlement is approved by independent
legal counsel selected by the Company, and amounts paid in satisfaction
of a judgment, except a judgment based on a finding of bad faith) arising
from such claim, loss, damage, or expense to the full extent permitted by
law and under any directors' and officers' liability or similar insurance
coverage that may from time to time be in effect.
(d) Any issuance or transfer of Shares to an Optionee, or to his
legal representative, heir, legatee, or distributee, in accordance with
the provisions of this Plan or the applicable Option, shall, to the
extent thereof, be in full satisfaction of all claims of such persons
under the Plan. The Committee may require any Optionee, legal
representative, heir, legatee or distributee as a condition precedent to
such payment or issuance or transfer of Shares, to execute a release and
receipt for such payment or issuance or transfer of Shares in such form
as it shall determine.
(e) Neither the Committee nor the Company guarantees Shares from
loss or depreciation.
(f) All expenses incident to the administration, termination, or
protection of this Plan or any Option, including, but not limited to,
legal and accounting fees, shall be paid by the Company; provided,
however, the Company may recover any and all damages, fees, expenses and
costs arising out of any actions taken by the Company to enforce its
rights under this Plan or any Option.
9
<PAGE>
(g) Records of the Company shall be conclusive for all purposes
under this Plan or any Option, unless determined by the Committee to be
incorrect.
(h) The Company shall, upon request or as may be specifically
required under this Plan or any Option, furnish or cause to be furnished
all of the information or documentation that is necessary or required by
the Committee to perform its duties and functions under this Plan or any
Option.
(i) The Company assumes no liability to any Optionee or his legal
representatives, heirs, legatees or distributees for any act of, or
failure to act on the part of, the Committee.
(j) Any action required of the Company or the Committee relating to
this Plan or any Option shall be by resolution of its Board, the
Committee or by a person authorized to act by resolution of the Board or
the Committee.
(k) If any provision of this Plan or any Option is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions of this Plan or any Option, but such
provision shall be fully severable, and the Plan or Option, as
applicable, shall be construed and enforced as if the illegal or invalid
provision had never been included in the Plan or Option, as applicable.
(l) Whenever any notice is required or permitted under this Plan,
such notice must be in writing and personally delivered or sent by mail
or delivery by a nationally recognized courier service. Any notice
required or permitted to be delivered under this Option shall be deemed
to be delivered on the date on which it is personally delivered, or, if
mailed, whether actually received or not, on the third Business Day after
it is deposited in the United States mail, certified or registered,
postage prepaid, addressed to the person who is to receive it at the
address that such person has previously specified by written notice
delivered in accordance with this Subsection 16(l) or, if by courier,
seventy-two (72) hours after it is sent, addressed as described in this
Subsection 16(l). The Company or the Optionee may change, at any time
and from time to time, by written notice to the other, the address that
it or he had previously specified for receiving notices. Until changed
in accordance with this Option, the Company and the Optionee shall
specify as its and his address for receiving notices the address set
forth in this Option pertaining to the Shares to which such notice
relates.
(m) Any person entitled to notice under this Plan may waive such
notice.
(n) This Option shall be binding upon the Optionee, his legal
representatives, heirs, legatees and distributees upon the Company, its
successors, and assigns, and upon the Board, the Committee and its
successors.
10
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(o) The titles and headings of Sections are included for
convenience of reference only and are not to be considered in
construction of this Plan's provisions.
(p) All questions arising with respect to the provisions of this
Plan shall be determined by application of the laws of the State of Texas
except to the extent Texas law is preempted by federal law or Nevada
corporate law that is controlling. The obligation of the Company to sell
and deliver Shares under this Plan is subject to applicable laws and to
the approval of any governmental authority required in connection with
the authorization, issuance, sale, or delivery of such Shares.
(q) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Option dictates, the plural
shall be read as the singular and the singular as the plural.
SECTION 17. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee
may from time to time amend, suspend or terminate the Plan or any Option;
provided, however, that, except to the extent provided in Section 9, no such
amendment may, without approval by the shareholders of the Company, (a) increase
the number of Shares reserved for Options or change the class of employees
eligible to receive Options, (b) permit the granting of Options that expire
beyond the maximum 10-year period described in Subsection 7(b), or (c) extend
the termination date of the Plan as set forth in Section 18; and provided,
further, that, except to the extent provided in Section 8, no amendment or
suspension of the Plan or any Option issued hereunder shall, except as
specifically permitted in any Option, substantially impair any Option previously
granted to any Optionee without the consent of such Optionee.
SECTION 18. EFFECTIVE DATE AND TERMINATION DATE. The effective date of
the Plan is the date set forth below, on which the date the Board adopted this
Plan; provided, however, if the Plan is not approved by the shareholders of the
Company within twelve (12) months after the effective date then, in such event,
the Plan and all Options granted pursuant to the Plan shall be null and void.
The Plan shall terminate on the tenth anniversary of the effective date.
ADOPTED BY THE BOARD: August 25, 1995
EFFECTIVE DATE: August 25, 1995
RATIFIED BY THE SHAREHOLDERS: August 25, 1995
Executed to evidence the 1995 Employee Stock Option Plan of Remodelers
Acceptance Corporation adopted by the Board on August 25, 1995 and the
Shareholders on August 25, 1995.
REMODELERS ACCEPTANCE CORPORATION
By: /s/ Ronald M. Mankoff
----------------------------------
Name: Ronald M. Mankoff
Title: Chairman of the Board
11
<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.
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED 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.
<TABLE>
<S> <C> <C>
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees listed
below)
Daniel T. Phillips, Daniel J. Jessee, Eric C. Green, Paul Seegers, John
Fitzgerald, Sheldon I. Stein
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below).
________________________________________________________________________________
[To Be Dated And Signed On Reverse Side]
<PAGE>
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
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.
