<PAGE>
As filed with the Securities and Exchange Commission on October 10, 1997
Registration No. 333-[_____]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIRSTPLUS FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
NEVADA 75-2561085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
RONALD M BENDALIN
GENERAL COUNSEL
1600 VICEROY, 8TH FLOOR 1600 VICEROY, 8TH FLOOR
DALLAS, TEXAS 75235 DALLAS, TEXAS 75235
(214) 599-6400 (214) 599-6400
(Name, address, including zip code, (Name, address, including zip code,
and telephone number, including area and telephone number, including area
code, of registrant's principal code, of registrant's agent for
executive offices) service)
Copies to:
RONALD J. FRAPPIER, ESQ.
JENKENS & GILCHRIST,
A PROFESSIONAL CORPORATION
1445 ROSS AVENUE, SUITE 3200
DALLAS, TEXAS 75202
(214) 855-4500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reimbursement plans, check the following box.
/X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ / ____________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
/ / ____________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
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Proposed
Proposed maximum maximum
Title of each class of Amount to offering price aggregate Amount of
securities registered be registered per security(1) offering price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock.............. 3,400,000 Shares $56.4375 $191,887,500 $58,148
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and based upon the average of the high and low
prices reported on the Nasdaq National Market on October 7, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
Subject To Completion Dated October 10, 1997
PROSPECTUS
FIRSTPLUS FINANCIAL GROUP, INC.
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
---------------
FIRSTPLUS Financial Group, Inc. ("FIRSTPLUS" or the "Company") hereby
offers participation in its Dividend Reinvestment and Stock Purchase Plan (the
"Plan"). The Plan is designed to provide FIRSTPLUS shareholders and other
interested investors with a convenient and economical method to purchase shares
(the "Shares") of the Company's common stock, $.01 par value per share (the
"Common Stock"), at a price that initially will be equal to a 1.5% discount from
the market price (as determined in accordance with the Plan) by making optional
cash investments and reinvesting all or a portion of any cash dividends in
Shares. The Plan is also intended to provide the Company with a cost-efficient
and flexible mechanism to raise equity capital because shares issuable under the
Plan will be newly issued Shares. (The Company may, however, determine instead
to purchase Shares on the open market or in privately negotiated transactions
with third parties, or both.) Holders of shares in broker or nominee names may
participate in the Plan, in which case, brokers or nominees will make optional
cash investments and reinvest dividends on behalf of beneficial owners. Some of
the significant features of the Plan are as follows:
- Participants may purchase Shares by making optional cash investments
of $100 to $5,000 in a given month or, for persons who are not then
shareholders, by making an initial optional cash investment of $1,000
to $5,000. Optional cash investments and initial optional cash
investments in excess of $5,000 may be made only with permission of
the Company.
- If the Company begins to pay dividends on Shares, holders of Shares
may purchase additional Shares by automatically reinvesting all or a
portion of their cash dividends.
Participation in the Plan is entirely voluntary, and participants may
terminate their participation at any time.
THE COMPANY HAS NEVER DECLARED OR PAID A CASH DIVIDEND ON ITS SHARES AND
THE COMPANY EXPECTS TO RETAIN ANY EARNINGS FOR USE IN ITS BUSINESS. UNDER THE
TERMS OF THE COMPANY'S WAREHOUSE FACILITIES, TERM LINES, AND SUBORDINATED NOTES,
THE COMPANY'S ABILITY TO PAY CASH DIVIDENDS TO ITS STOCKHOLDERS IS LIMITED. THE
PLAN, HOWEVER, IS DESIGNED TO ACCOMMODATE THE REINVESTMENT OF DIVIDENDS IN THE
EVENT THAT THE COMPANY SHOULD PAY DIVIDENDS ON THE SHARES IN THE FUTURE.
HOLDERS OF SHARES ARE CAUTIONED THAT THE EXISTENCE OF THE PLAN IN NO WAY IMPLIES
THAT THE COMPANY WILL MODIFY ITS CURRENT POLICY OF NOT PAYING DIVIDENDS. THE
PAYMENT OF DIVIDENDS AT ANY TIME IS DEPENDENT UPON THE COMPANY'S EARNINGS AND
FINANCIAL NEEDS, ALONG WITH APPLICABLE LEGAL AND CONTRACTUAL RESTRICTIONS.
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES, SEE "RISK
FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------------------
THE DATE OF THIS PROSPECTUS IS ____________, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
of which this Prospectus is a part, with respect to the Common Stock offered
hereby. This Prospectus omits certain information contained in the Registration
Statement, including exhibits thereto, and reference is made to the Registration
Statement for further information with respect to the Company and the Common
Stock offered hereby. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents and when any such document
is an exhibit to the Registration Statement, each such statement is qualified in
its entirety by reference to the copy of such document filed with the
Commission. Copies of the Registration Statement, and exhibits thereto, may be
acquired upon payment of the prescribed fees or examined without charge at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Reports and
other information filed by the Company with the Commission pursuant to the
information requirements of the Exchange Act may be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies can be obtained at prescribed rates
from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
World Wide Web Site that contains reports, proxy statements and other
information regarding registrants, such as the Company, that file electronically
with the Commission. The address of the site is http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents or portions thereof filed by the Company are hereby
incorporated by reference in this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997.
(iii) the Company's Current Report on Form 8-K, filed with the Commission
on December 19, 1996; and
(iv) the description of the Common Stock set forth in the Registration
Statement on Form 8-A, dated January 15, 1996, filed with the
Commission, including any amendment or report filed for the purpose of
updating such description.
In addition, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of Common Stock made
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purposes
of this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon oral or written request of such person, a
copy of any and all of the documents incorporated by reference herein (other
than exhibits and schedules to such documents, unless such exhibits or schedules
are specifically incorporated by reference into such documents). Such requests
should be directed to Ronald M Bendalin, General Counsel, FIRSTPLUS Financial
Group, Inc., 1600 Viceroy, 8th Floor, Dallas, Texas 75235, or by telephone at
(214) 599-6400.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES THAT APPEAR ELSEWHERE OR ARE INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. IN ADDITION TO OTHER INFORMATION IN THIS
PROSPECTUS, THE FACTORS SET FORTH UNDER "RISK FACTORS" BELOW SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY. UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES HEREIN TO THE
"COMPANY" REFER TO FIRSTPLUS FINANCIAL GROUP, INC. AND ITS SUBSIDIARIES. EXCEPT
AS OTHERWISE NOTED HEREIN, ALL INFORMATION APPEARING ELSEWHERE OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS RELATING TO THE COMPANY'S CAPITAL STOCK HAS BEEN
ADJUSTED TO REFLECT STOCK DIVIDENDS EFFECTED AS SPLITS OF THE COMPANY COMMON
STOCK OF 67-FOR-ONE AND TWO-FOR-ONE IN JULY 1995 AND NOVEMBER 1996,
RESPECTIVELY. UNLESS THE CONTEXT INDICATES OTHERWISE, ALL REFERENCES TO THE
COMPANY'S ORIGINATION OF STRATEGIC LOANS INCLUDES BULK PURCHASES OF LOANS ("BULK
LOANS").
THE COMPANY
FIRSTPLUS Financial Group, Inc. is a specialized consumer finance company
that originates, purchases, services and sells consumer finance receivables,
substantially all of which are debt consolidation or home improvement loans
secured primarily by second liens on real property. The Company offers
uninsured home improvement and uninsured debt consolidation loans ("Conventional
Loans") and to a lesser extent partially insured Title I home improvement loans
("Title I Loans"). Title I Loans are insured, subject to certain exceptions, for
90% of the principal balance and certain interest costs under the Title I credit
insurance program (the "Title I Program") administered by the Department of
Housing and Urban Development ("HUD") of the Federal Housing Administration (the
"FHA"). The Company sells substantially all of its Conventional Loans and
Title I Loans that meet its securitization parameters (collectively, the
Company's "strategic loans") primarily through its securitization program and
retains rights to service these loans.
The Company relies principally on the creditworthiness of the borrower for
repayment of Conventional Loans. The Company's borrowers typically have limited
access to consumer financing for a variety of reasons, primarily insufficient
home equity values. The Company uses its own credit evaluation criteria to
classify its applicants as "A+" through "D" credits. The Company currently
makes loans only to borrowers it classifies as "C+" or better for Conventional
Loans and "C" or better for Title I Loans. The Company's credit evaluation
criteria include, as a significant component, the credit evaluation scoring
methodology developed by Fair, Isaac and Company ("FICO"), a consulting firm
specializing in creating default-predictive models through scoring mechanisms.
The Company's principal origination channel is its network of regional
independent correspondent lenders. Correspondent lenders tend to be commercial
banks, thrifts or finance companies that do not have the infrastructure to hold
and service portfolios of Conventional and Title I Loans. The Company's
correspondent lenders originate Conventional and Title I Loans using the
Company's underwriting criteria and sell these loans to the Company. During
fiscal 1995 and 1996 and the first nine months of fiscal 1997, the Company
originated loans through correspondent lenders ("Correspondent Loans") of
$81.9 million, $1.0 billion and $2.1 billion, respectively, representing 68.5%,
93.9% and 81.8%, respectively, of the Company's originations of strategic loans
during such periods (excluding Bulk Loans).
In early 1996, the Company expanded its efforts to originate loans directly
to qualified homeowners ("Direct Loans"). The Company originates Direct Loans
through television, radio and direct mail advertising campaigns and referrals
from independent home improvement contractors. The Company is pursuing a
strategy to increase its Direct Loan originations because the Company believes
that Direct Loans should prove to be more profitable and allow the Company to
have better control over the quality and size of the Company's production.
3
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The Company sells substantially all of the Conventional Loans and Title I
Loans it originates and purchases through its securitization program and
generally retains rights to service such loans. The Company earns servicing
fees on a monthly basis ranging from 0.75% to 1.00% on the loans it services in
the various securitization pools. At June 30, 1997, the principal amount of
strategic loans serviced by the Company (the "Serviced Loan Portfolio") was $3.6
billion. The Serviced Loan Portfolio includes strategic loans held for sale and
strategic loans that have been securitized and are serviced by the Company
(including $56.1 million of loans subserviced by a third party).
The Company is a Nevada corporation that was formed in October 1994 to
combine the operations of SFA: State Financial Acceptance Corporation ("SFA"), a
home improvement lender formed in January 1990, and FIRSTPLUS Financial, Inc.,
formerly Remodelers National Funding Corporation ("FIRSTPLUS Financial"), an
approved Title I home improvement lender formed in April 1986 (the
"Combination"). The Company's principal offices are located at 1600 Viceroy,
8th Floor, Dallas, Texas 75235, and its telephone number is (214) 599-6400.
SUMMARY OF THE PLAN
The following summary description of the FIRSTPLUS Financial Group, Inc.
Dividend Reinvestment and Stock Purchase Plan is qualified by reference to the
full text of the Plan that is contained herein. Terms used in the summary have
the meanings attributed to them in the Plan.
Purpose of Plan The purpose of the Plan is to provide FIRSTPLUS
shareholders and other investors with a convenient and
economical method of purchasing Shares and/or investing
all or a portion of their cash dividends in additional
Shares. The Plan also provides the Company with a
means of raising additional capital through the direct
sale of Common Stock.
Purchase Price The Plan provides that the Shares to be purchased will
be newly issued Shares acquired from the Company.
Under the Plan, the purchase price for newly issued
Shares is the average of the daily high and low sales
prices of the Common Stock on the Nasdaq National
Market during a Pricing Period consisting of the twelve
Trading Days preceding the Investment Date (less any
applicable discount).
The purchase price for Shares purchased by persons who
are then shareholders of the Company pursuant to a
Request for Waiver (as described below) may reflect a
discount of 0% to 5% (the "Waiver Discount") from the
market price. Initially, we expect the Waiver Discount
to be approximately 1.5%.
Plan Limitations Optional cash investments are subject to a minimum
investment of $100 and a maximum investment of $5,000
per month. Initial optional cash investments by
investors that are not then shareholders of the Company
are subject to a minimum of $1,000 and a maximum of
$5,000. Both the $5,000 per month maximum for
shareholders and the $5,000 maximum for initial
optional cash investments by investors who are not then
shareholders may be waived only pursuant to a written
request approved by FIRSTPLUS ("Request for Waiver").
Optional Cash Optional Cash Investments made pursuant to a Request
for Waiver are not Investments subject to a
pre-determined maximum limit on the amount of the
investment or on the number of Shares that may be
purchased. With respect to optional cash investments
or initial optional cash investments in excess of
$5,000 made pursuant to a Request for Waiver, FIRSTPLUS
may, in its sole discretion, establish each month a
Waiver Discount and a Threshold Price. The Waiver
Discount, which
4
<PAGE>
may vary each month between 0% and 5%, will be
established by FIRSTPLUS after a review of current
market conditions, the level of participation, and
current and projected capital needs. The Threshold
Price will be the minimum price applicable to purchases
of Common Stock in a given month. For each Trading Day
during the Pricing Period on which the Threshold Price
is not satisfied, one-twelfth of a Participant's
optional cash investment made pursuant to a Request for
Waiver will be returned without interest.
The reinvestment of cash dividends in additional Shares
is not subject to a maximum limit, but optional cash
investments and initial optional cash investments that
do not exceed $5,000, as well as dividend
reinvestments, will not be subject to the Waiver
Discount or the Threshold Price. However, the Company
reserves the right to grant a discount and set a
minimum price in the future for such investments or
dividend reinvestments.
Optional cash investments of less than $100 and that
portion of any optional cash investment or initial
optional cash investment that exceeds $5,000, unless
such limit has been waived, will be returned to the
Participant without interest.
Request for Waiver In deciding whether to approve a Request for Waiver,
the Company will consider relevant factors including,
but not limited to, whether the Plan is then acquiring
newly issued Shares or acquiring Shares through open
market purchases or privately negotiated transactions,
the Company's need for additional funds, the
attractiveness of obtaining such funds through the sale
of Common Stock under the Plan in comparison to other
sources of funds, the purchase price likely to apply to
any sale of Common Stock under the Plan, the
Participant submitting the request (including the
extent and nature of such Participant's prior
participation in the Plan and the number of Shares held
of record by such Participant), and the aggregate
amount of optional cash investments or initial optional
cash investments in excess of $5,000 for which Requests
for Waiver have been submitted by all Participants. If
Requests for Waiver are submitted for any Investment
Date for an aggregate amount in excess of the amount
the Company is then willing to accept, the Company may
honor such requests in order of receipt, pro rata, or
by any other method the Company deems appropriate.
Any person who acquires Shares through the Plan and
resells them shortly before or after acquiring them may
be considered to be an underwriter within the meaning
of the Securities Act. The Company expects that
certain persons will acquire Shares pursuant to a
Request for Waiver and resell such Shares in order to
obtain the financial benefit of any Waiver Discount
then being offered under the Plan. The Company has no
arrangements or understandings, formal or informal,
with any person relating to a distribution of Shares to
be received pursuant to the Plan. See "Plan of
Distribution and Underwriters."
5
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Number of Shares 3,400,000 shares of Common Stock have been authorized
Offered to be issued and Offered registered under the
Securities Act for offering pursuant to the Plan.
--------------------
FORWARD-LOOKING INFORMATION
CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS CONSTITUTES
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT, AND SECTION 21E OF THE EXCHANGE ACT, WHICH CAN BE IDENTIFIED
BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, THE STATEMENTS IN "RISK
FACTORS" OF THIS PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING
IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO
SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
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RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES CERTAIN RISKS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO
THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. As a result of the Company's increasing volume of loan
originations and purchases, and its expanding securitization activities, the
Company has operated, and expects to continue to operate, on a negative
operating cash flow basis, which is expected to increase as the volume of the
Company's loan purchases and originations increases and its securitization
program grows. The Company's primary operating cash requirements include the
funding of (i) loan originations and loan purchases, (ii) reserve accounts,
overcollateralization requirements, fees and expenses incurred in connection
with its securitization program, (iii) tax payments due on the Company's taxable
net income, (iv) television, radio and direct mail advertising and other
marketing expenses, and (v) administrative and other operating expenses.
There can be no assurance that, as the Company's existing lending
arrangements mature, the Company will have access to the financing necessary for
its operations and its growth plans or that such financing will be available to
the Company on favorable terms. To the extent the Company is unable to renew
existing warehouse facilities or arrange additional or new warehouse lines of
credit, the Company may have to curtail loan origination and purchasing
activities, which could have a material adverse effect on the Company's results
of operations and financial condition.
NEED FOR ADDITIONAL FINANCING. The Company requires substantial capital to
fund its operations. Consequently, the Company's operations and its ability to
grow are affected by the availability of financing and the terms thereof. Based
on the rate of growth of the Company's originations in the recent past, the
Company anticipates that it will need to arrange additional warehouse lines of
credit or other financing sources in the foreseeable future in order to maintain
its historical growth rates. The Company is currently negotiating for increased
and/or new warehouse facilities; however, the Company has no commitments for
such increased and/or additional financings, and there can be no assurance that
the Company will be successful in consummating such financing transactions in
the future or on terms the Company would consider to be favorable. If the
Company is unable to arrange new warehouse lines of credit or other financing
sources, the Company may have to curtail its loan origination and purchasing
activities, which could have a material adverse effect on the Company's results
of operations and financial condition.
DEPENDENCE ON SECURITIZATION TRANSACTIONS. Since the beginning of fiscal
1995, the Company has utilized a securitization program that involves the
periodic pooling and sale of its strategic loans. The securitization proceeds
have historically been used to repay borrowings under warehouse facilities,
thereby making such warehouse facilities available to finance the origination
and purchase of additional strategic loans. There can be no assurance that, as
the Company's volume of loans originated or purchased increases and other new
products available for securitization increases, the Company will be able to
securitize its loan production efficiently. In addition, the securitization
market for many types of assets is relatively undeveloped and may be more
susceptible to market fluctuations or other adverse changes than more developed
capital markets. Securitization transactions may be affected by a number of
factors, some of which are beyond the Company's control, including, among other
things, conditions in the securities markets in general, conditions in the
asset-backed securitizations market and the conformity of loan pools to rating
agency requirements and to the extent that monoline insurance is used, the
requirements of such insurers. Adverse changes in the secondary market could
impair the Company's ability to originate, purchase and sell loans on a
favorable or timely basis. In addition, the Company's securitizations typically
utilize credit enhancements in the form of financial guaranty insurance policies
in order to achieve better credit ratings. Failure to obtain acceptable rating
agency ratings or insurance company credit enhancements could decrease the
efficiency or affect the timing of future securitizations. The Company intends
to continue public or private securitizations of its loan pools on a quarterly
basis. Any delay in the sale of a loan pool beyond a quarter-end would
substantially reduce and may eliminate the Company's gain on sale of loans, net
(the "Gain on Sale"), in the given quarter and would likely result in losses for
such quarter being reported by the Company. If the Company were unable to
7
<PAGE>
securitize loans due to changes in the secondary market or the unavailability of
credit enhancements, the Company's growth would be materially impaired and the
Company's results of operations and financial condition would be materially
adversely affected.
RISKS ASSOCIATED WITH LOANS HELD FOR SALE. In order to increase its
interest income and, therefore, reduce the amount of cash used in the Company's
operating activities, in the third quarter of fiscal 1996 the Company began to
implement a strategy of maintaining a significant quantity of loans on its
balance sheet as "loans held for sale, net." During fiscal 1994 and 1995, loans
were held an average of one month before their sale. In fiscal 1996, this
average holding period increased to two months. During fiscal 1997, the holding
period has increased to approximately 180 days, and it could exceed one year
thereafter.
The interest rate on loans originated and purchased by the Company are
fixed at the time the Company issues a loan commitment. In addition, the
interest rates on the Company's loans are fixed, and the Company's loan
financing facilities all bear floating interest rates. See "--Sensitivity to
Interest Rates." Accordingly, the Company's strategy to increase the dollar
amount of loans held for sale and the length of time such loans are held will
significantly increase the Company's exposure to interest rate fluctuations and
the risks that such fluctuations will result in greater interest expense under
warehouse facilities and reduced Gain on Sale resulting from a reduced spread
between the interest rates charged to borrowers and the interest rate paid to
investors in securitizations. Moreover, in order to manage this increased risk,
the Company will have to increase its hedging activities, and there can be no
assurance that such hedging activities will be successful in managing the risk
or will not themselves have a material adverse effect on the Company's financial
condition or results of operations. Further, because the Company's warehouse
facilities bear interest at variable rates, the Company has a need for medium-
to long-term, fixed rate financing. As a result, there can be no assurance that
this strategy will not have a material adverse effect on the Company's financial
condition or results of operations.
SENSITIVITY TO INTEREST RATES
The Company's profitability may be directly affected by fluctuations in
interest rates. While the Company monitors interest rates and employs a
strategy designed to hedge some of the risks associated with changes in interest
rates, no assurance can be given that the Company's results of operations and
financial condition will not be adversely affected during periods of
fluctuations in interest rates. The Company's interest rate hedging strategy
currently includes purchasing put contracts on treasury securities, selling
short treasury securities and maintaining a pre-funding strategy with respect to
its securitizations. Since the interest rates on the Company's indebtedness
used to fund and acquire loans are variable and the rates charged on loans the
Company originates and purchases are fixed, increases in the interest rates
after loans are originated and prior to their sale could have a material adverse
effect on the Company's results of operations and financial condition. In
addition, increases in interest rates prior to sale of the loans may reduce the
Gain on Sale earned by the Company. The ultimate sale of the Company's loans
will fix the spread between the interest rates paid by borrowers and the
interest rates paid to investors in securitization transactions (the "Excess
Servicing Spread") with respect to such loans, although increases in interest
rates may narrow the potential spread that existed at the time the loans were
originated or purchased by the Company. A significant, sustained rise in
interest rates could curtail the Company's growth opportunities by decreasing
the demand for loans at such rates and increasing market pressure to reduce
origination fees or servicing spreads. The Company has begun to implement a
strategy of maintaining a significant quantity of loans on its balance sheet,
thus increasing the length of time that loans are held for sale and materially
increasing its interest rate risk.
The Company's investment in the Excess Servicing Receivable (as defined in
"--Excess Servicing Receivable Risks") is also sensitive to interest rates. A
decrease in interest rates could cause an increase in the rate at which
outstanding loans are prepaid, thereby reducing the period of time during which
the Company receives the Excess Servicing Spread and other servicing income with
respect to such prepaid loans, thereby possibly resulting in accelerated
amortization of the Excess Servicing Receivable. Although an increase in
interest rates may decrease prepayments, such increase may not offset the higher
interest costs of financing the Excess Servicing Receivable. See "--Excess
Servicing Receivable Risks."
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CREDIT RISK ASSOCIATED WITH BORROWERS
Many of the Company's borrowers are consumers who have limited access to
consumer financing for a variety of reasons, including insufficient home equity
value and, in the case of Title I borrowers, unfavorable past credit experience.
The Company is subject to various risks associated with these borrowers,
including, but not limited to, the risk that borrowers will not satisfy their
debt service payments, including payments of interest and principal, and that
the realizable value of the property securing such loans will not be sufficient
to repay the borrower's obligation to the Company. The risks associated with
the Company's business increase during an economic downturn or recession. Such
periods may be accompanied by decreased demand for consumer credit and declining
real estate values. Any material decline in real estate values reduces the
ability of borrowers to use home equity to support borrowings and increases the
loan-to-value ratios of the Company's existing loans, thereby weakening
collateral values and foreclosures and the frequency and severity of losses
generally increase during economic downturns or recessions. Because the Company
lends to borrowers who may be credit-impaired, the actual rates of
delinquencies, foreclosures and losses on such loans could be higher under
adverse economic conditions than those currently experienced in the consumer
finance industry in general. While the Company is experiencing declining
delinquency rates on its Serviced Loan Portfolio as a whole, delinquency rates
have followed historical trends on a pool-by-pool basis, which trends assume
increased rates of delinquencies over time. However, there can be no assurance
that delinquency rates will not increase beyond historical trends. In addition,
in an economic downturn or recession, the Company's servicing costs will
increase. Any sustained period of such increased losses could have a material
adverse effect on the Company's results of operations and financial condition.
CREDIT RISK ASSOCIATED WITH HIGH LTV LOANS
Although the Company's strategic loans are typically secured by real
estate, because of the relatively high loan-to-value ratio ("LTV") of most of
the Company's loans, in most cases the collateral of such loans will not be
sufficient to cover the principal amount of the loans in the event of default.
The Company relies principally on the creditworthiness of the borrower and to a
lesser extent on the underlying collateral for repayment of the Company's
Conventional Loans, and FHA co-insurance with respect to Title I Loans.
Consequently, many of the Company's loans equal or exceed the value of the
mortgaged properties, in some instances involving LTVs of up to 125%. With
respect to many of the Company's loans, LTV determinations are based upon the
borrowers' representations as to the value of the underlying property;
accordingly, there can be no assurance that such represented values accurately
reflect prevailing market prices. With respect to any default, the Company
currently evaluates the cost effectiveness of foreclosing on the collateral. To
the extent that borrowers with high LTVs default on their loan obligations, the
Company is less likely to use foreclosure as a means to mitigate its losses.
Under these circumstances, losses would be applied to the Company's allowances
for possible credit losses on loans sold and held for sale, except to the extent
that Title I Program insurance is available. Such absorption, if in excess of
the Company's allowance for such losses, could have a material adverse effect on
the Company's financial condition and results of operations, if such losses
required the Company to record additional provisions for losses on loans sold.
EXCESS SERVICING RECEIVABLE RISKS
ILLIQUIDITY OF THE EXCESS SERVICING RECEIVABLE. When the Company's loans
are pooled and sold in securitization transactions, the Company recognizes Gain
on Sale, which constitutes a substantial majority of the Company's revenues.
the Company records an asset corresponding to its Gain on Sale (the "Excess
Servicing Receivable") on its balance sheet in an initial amount equal to the
present value of the Excess Servicing Spread it expects to collect over the life
of the securitized loans sold. The Company is not aware of an active market for
this kind of receivable, and no assurance can be given that the receivable could
in fact be sold at its stated value on the balance sheet, if at all.
In addition, the Gain on Sale is recognized in the period during which
loans are sold, while cash payments are received by the Company pursuant to its
pooling and servicing agreements and servicing fees are paid to the Company by
the securitization trustees over the lives of the securitized loans. This
difference in the timing of cash flows could
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cause a cash shortfall, which may have a material adverse effect on the
Company's financial condition and results of operations.
EXCESS SERVICING RECEIVABLE MAY BE OVERSTATED; PROVISION FOR CREDIT LOSSES
MAY BE UNDERSTATED. The calculation of Gain on Sale and the valuation of the
Excess Servicing Receivable are based on certain management estimates relating
to the appropriate discount rate and anticipated average lives of the loans
sold. In order to determine the present value of this excess cash flow, the
Company currently applies an estimated market discount rate of between 10% and
11% to the expected pro forma gross cash flow calculated utilizing the weighted
average maturity of the securitized loans, and currently applies a risk free
discount rate of 6.5% to the anticipated losses attendant to this pro forma cash
flow stream. Accordingly, the overall effective discount rate utilized on the
cash flows, net of expected credit losses, is approximately 12.5%. Although the
Company records the Excess Servicing Receivable and the related reserve on a
gross basis, for purposes of evaluation and comparison, the Company calculates
an average net discount rate for the net Excess Servicing Receivable. This is
calculated by subtracting the present value of the anticipated losses
attributable to loans being securitized and sold from the present value of the
expected stream of payments to derive the present value of the net Excess
Servicing Receivable. The Company then determines the average discount rate
that equates the expected payments, net of expected losses, to the value of the
Excess Servicing Receivable, which, with respect to its most recent
securitization, is approximately 12.5%. To estimate the anticipated average
lives of the loans sold in securitization transactions, management estimates
prepayment, default and interest rates on a pool-by-pool basis. If actual
experience varies from management estimates at the time loans are sold, the
Company may be required to write down the remaining Excess Servicing Receivable
through a charge to earnings in the period of adjustment.
Prepayment rates and default rates may be affected by a variety of economic
and other factors, including prevailing interest rates and the availability of
alternative financing, most of which are not within the Company's control. A
decrease in prevailing interest rates could cause prepayments to increase,
thereby requiring a writedown of the Excess Servicing Receivable. Even if
actual prepayment rates occur more slowly and default rates are lower than
management's original estimates, the Excess Servicing Receivable would not
increase.
Furthermore, management's estimates of prepayment rates and default rates
are based, in part, on the historical performance of the Company's Title I
Loans. The Company is originating an increasing proportion of Conventional
Loans, while historical performance data is based primarily on Title I Loans.
In addition, a significant portion of the Company's securitized loans sold were
very recently originated or were acquired in bulk purchases. No assurance can
be given that these loans, as with any new loan, will perform in the future in
accordance with the Company's historical experience. In addition, when the
Company introduces new loan products it may have little or no historical
experience on which it can base its estimates, and thus its estimates may be
less reliable. During the fiscal year ended September 30, 1996, the Company
increased its provision for credit losses, $2.5 million of which was taken
because the default rate for a pool of Bulk Loans included in the Company's
1995-2 securitization exceeded the estimates made at the time of the
securitization and the adjustment was in conformity with the Company's current
estimation methodology. There can be no assurance that the Company will not be
required in the future to write down its Excess Servicing Receivable in excess
of its provision for credit losses. Any such writedown could have a material
adverse effect on the Company's financial condition and results of operations.
FINANCING OF THE EXCESS SERVICING RECEIVABLE. The Company retains
significant amounts of Excess Servicing Receivable on its balance sheet. The
Company currently does not hedge this asset. The Company finances its Excess
Servicing Receivable with term-line borrowings under various term lines of
credit with lenders (collectively, the "Term Lines"). Borrowings under the Term
Lines bear interest at floating rates. The Company, however, cannot reprice its
Excess Servicing Receivable on its balance sheet, which has an expected average
life of four to six years. Therefore, the Company remains at risk that its
financing sources may increase the interest rates they charge the Company.
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IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125 ("FASB 125"), "Accounting
for Transfer and Servicing of Financial Assets and Extinguishment of
Liabilities." FASB 125 addresses the accounting for all types of securitization
transactions, securities lending and repurchase agreements, collateralized
borrowing arrangements and other transactions involving the transfer of
financial assets. FASB 125 distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. FASB 125 is generally
effective for transactions that occur after December 31, 1996, and it is to be
applied prospectively. FASB 125 requires the Company to allocate the total cost
of mortgage loans sold to the mortgage loans sold (servicing released), retained
certificates and servicing rights based on their relative fair values. The
Company will be required to assess the retained certificates and servicing
rights for impairment based upon the fair value of those rights. The Company
adopted FASB 125 during the quarter ended March 31, 1997. As a result of the
adoption of FASB 125, the Company's earnings were decreased by $556,000 after
tax over the earnings that would have been recorded utilizing the Company's
previous accounting method. Additionally, under FASB 115, the Company deferred
$7.2 million of its gain on sale of loans, which was recorded as a separate
component of equity, net of tax. FASB 125 also required certain
reclassifications on the Company's balance sheet and income statement. On the
balance sheet, the Excess Servicing Receivable has been reclassified as an
"available for sale" investment security and renamed as Interest Only Strip
("I/O Strip"), with the allowance for losses on loans sold reclassified from
liabilities to a contra asset to the I/O Strip. In the income statement, the
provision for losses on loans sold is now shown as a reduction of the gain on
sale of loans.
ABILITY OF THE COMPANY TO CONTINUE GROWTH STRATEGY; POSSIBLE ADVERSE
CONSEQUENCES FROM RECENT GROWTH
The Company's ability to continue its growth strategy depends on its
ability to increase the volume of loans it originates and purchases while
successfully managing its growth. This volume increase is, in part, dependent
on the Company's ability to procure, maintain and manage its increasingly larger
warehouse facilities and lines of credit. In addition to the Company's
financing needs, its ability to increase its volume of loans will depend on,
among other factors, its ability to (i) offer attractive products to prospective
borrowers, (ii) attract and retain qualified underwriting, servicing and other
personnel, (iii) market its products successfully, especially its new Direct
Loan products, (iv) establish new relationships and maintain existing
relationships with independent correspondent lenders in states where the Company
is currently active and in additional states and (v) build national brand name
recognition. In addition, the Company has recently begun to focus resources on
the small loan consumer finance industry. There can be no assurance that the
Company will successfully enter or compete in this highly competitive segment of
the consumer finance industry.
In light of the Company's rapid growth, the historical performance of the
Company's operations, including its underwriting and servicing operations, which
were principally related to origination of Title I Loans, may be of limited
relevance in predicting future performance with respect to Conventional Loans,
especially debt consolidation loans or personal consumer loans. Any credit or
other problems associated with the large number of loans originated in the
recent past may not become apparent until sometime in the future. Consequently,
the Company's historical results of operations may be of limited relevance to an
investor seeking to predict the Company's future performance. In addition,
purchases of Bulk Loans require the Company to rely to a certain extent on the
underwriting practices of the seller of the Bulk Loans. Although the Company
has its own review process when purchasing Bulk Loans, the Company occasionally
must rely upon the underwriting standards of the originator, which standards may
not be as rigorous as the Company's.
The Company's ability to successfully manage its growth as it pursues its
growth strategy will be dependent upon, among other things, its ability to (i)
maintain appropriate procedures, policies and systems to ensure that the
Company's loans have an acceptable level of credit risk and loss, (ii) satisfy
its need for additional short-term and long-term financing, (iii) manage the
costs associated with expanding its infrastructure, including systems, personnel
and facilities, and (iv) continue operating in competitive, economic, regulatory
and judicial environments that are conducive to the Company's business
activities. The Company's requirement for additional operating procedures,
personnel and facilities is expected to continue over the near term. The
Company is absorbing the effects of the implementation of new computer hardware
and software to manage its business operations, and it plans to continue to
procure hardware and software that require additional corresponding investments
in training and education. The Company's significant growth
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has placed substantial new and increased pressures on the Company's personnel.
There can be no assurance that the addition of new operating procedures,
personnel and facilities together with the Company's enhanced information
systems, will be sufficient to enable it to meet its current operating needs.
Changes in the Company's ability to obtain or maintain any or all of these
factors or to successfully manage its growth strategy could have a material
adverse effect on the Company's operations, profitability and growth.
CONSOLIDATION OF OPERATIONS OF ACQUISITIONS
Since November 1995, the Company has made numerous acquisitions and intends
to acquire additional companies in the consumer finance industry. The Company
must successfully integrate the management, marketing, products and systems
associated with its acquisitions if the Company is to make current or
prospective acquisitions financially successful. In addition, the Company's
strategy of acquiring personal consumer loan companies involves introducing the
Company's strategic loan products, which are very different from the type of
loans such companies now originate, into this origination channel. Acquisitions
may produce excess costs and may become significant distractions to management
if they are not timely integrated. There can be no assurance that future
acquisition opportunities will become available, that such future acquisitions
can be accomplished on favorable terms or that such acquisitions, if any, will
result in profitable operations in the future or can be integrated successfully
with the Company's existing business.
CONCENTRATION OF OPERATIONS IN CALIFORNIA
Approximately 46.7% of the loans in the Serviced Loan Portfolio at June 30,
1997 were secured by subordinate liens on residential properties located in
California. Consequently, the Company's results of operations and financial
condition are dependent upon general trends in the California economy and its
residential real estate market. California has experienced an economic slowdown
or recession over the last several years, which has been accompanied by a
sustained decline in the California real estate market. Such a decline may
adversely affect the values of properties securing the Company's loans, such
that the principal balances of such loans, together with any primary financing
on the mortgaged properties, may further increase LTVs, making the Company's
ability to recoup losses in the event of a borrower's default extremely
unlikely. In addition, California historically has been vulnerable to certain
risks of natural disasters, such as earthquakes and erosion-caused mudslides,
which are not typically covered by the standard hazard insurance policies
maintained by borrowers. Uninsured disasters may adversely impact borrower's
ability to repay loans made by the Company, which could have a material adverse
effect on the Company's results of operations and financial condition.
COMPETITION
The consumer finance market is highly competitive and fragmented. The
Company competes with a number of finance companies that provide financing to
individuals who may not qualify for traditional financing. To a lesser extent,
the Company competes, or will compete, with commercial banks, savings and loan
associations, credit unions, insurance companies and captive finance arms of
major manufacturing companies that currently tend to apply more traditional
lending criteria. In addition, in recent months, several companies have
announced loan programs that will compete directly with the Company's loan
products, particularly its Conventional Loans. Many of these competitors or
potential competitors are substantially larger and have significantly greater
capital and other resources than the Company. In fiscal 1995 and 1996 and the
first nine months of fiscal 1997, approximately 68.5%, 93.9% and 81.8%,
respectively, of the Company's loans originated (excluding Bulk Loans) were
Correspondent Loans, which are expected to remain a significant part of the
Company's loan production program. As a purchaser of Correspondent Loans, the
Company is exposed to fluctuations in the volume and price of Correspondent
Loans resulting from competition from other purchasers of such loans, market
conditions and other factors. In addition, the Federal National Mortgage
Association ("Fannie Mae") has purchased and is expected to continue to purchase
significant volumes of Title I Loans on a whole-loan basis. Purchases by Fannie
Mae could be made from sources from which the Company also purchases loans. To
the extent that purchasers of loans, such as Fannie Mae, enter or increase their
purchasing activities in the markets in which the Company purchases loans,
competitive pressures may decrease the availability of loans or increase the
price the Company would have to pay for such loans, a phenomenon that has
occurred with respect to Title I Loans. In addition, increases
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in the number of companies seeking to originate loans tends to lower the
rates of interest the Company can charge borrowers, thereby reducing the
potential value of subsequently earned Gains on Sales of loans. To the
extent that any of these lenders or Fannie Mae significantly expand their
activities in the Company's market, or to the extent that new competitors
enter the market, the Company's results of operations and financial condition
could be materially adversely affected.
CONCENTRATION OF CORRESPONDENT LENDERS
Approximately 79.8%, 48.6% and 39.3% of the loans purchased from
correspondent lenders by the Company during fiscal 1995 and 1996 and the first
nine months of fiscal 1997, respectively, were originated through the Company's
ten largest independent correspondent lenders. Approximately 50% of the loans
purchased from correspondent lenders during fiscal 1995 were originated through
two independent correspondent lenders. The Company believes that it is possible
for its dependence on a small number of independent correspondent lenders to
continue for the foreseeable future as the Company focuses extensively on
originating Direct Loans. Correspondent lenders are not contractually bound to
sell loans to the Company, and, therefore, are able to sell their loans to
others or to undertake securitization programs of their own. To the extent that
the Company is no longer able to purchase or originate loans from these
significant independent correspondent lenders, this could have a material
adverse effect on the Company's results of operations and financial condition.
LIMITED OPERATING HISTORY
The Company was formed in 1994 to combine the operations of FIRSTPLUS
Financial and SFAC. The Combination involved the integration of the operations
of two companies that previously operated independently. Consequently, the
Company has a limited operating history under its new corporate structure upon
which prospective investors may base an evaluation of its performance.
DELINQUENCIES; RIGHT TO TERMINATE SERVICING; NEGATIVE IMPACT ON CASH FLOW
On June 30, 1997, approximately 66.0% (by dollar volume) of the Serviced
Loan Portfolio consisted of loans securitized by the Company and sold to grantor
or owner trusts. The Company's form of pooling and servicing agreement with
each of these trusts provides that the trustee of the related trust may
terminate the Company's servicing rights if certain delinquency or loss
standards are not met. As of June 30, 1997, none of the pools of securitized
loans exceeded the foregoing delinquency standards and no servicing rights had
been terminated. However, there can be no assurance that delinquency rates with
respect to the Company-sponsored securitized loan pools will not exceed this
rate in the future and, if exceeded, that servicing rights will not be
terminated, which would have a material adverse effect on the Company's result
of operations and financial condition.
The Company's cash flow can also be adversely impacted by high delinquency
and default rates in its grantor and owner trusts. Generally, provisions in the
pooling and servicing agreement have the effect of requiring the
overcollateralization account, which is funded primarily by the excess servicing
on the loans held in the trust, to be increased up to approximately two and
one-half times the level otherwise required when the delinquency and the
default rates exceed various specified limits. The reserve account was fully
funded as of June 30, 1997.
DEPENDENCE ON TITLE I PROGRAM
A portion of the Company's business is dependent on the continuation of the
Title I Program, which is federally funded. The Title I Program provides that
qualifying loans are eligible for FHA insurance, although such insurance is
limited. From time to time, legislation has been introduced in both houses of
the Congress that would, among other things, abolish the Department of Housing
and Urban Development ("HUD"), reduce federal spending for housing and community
development activities and eliminate the Title I Program. No assurance can be
given that the Title I Program will continue in existence or that HUD will
continue to receive sufficient funding for the operation of the Title I Program.
Discontinuation of or a significant reduction in the Title I Program or the
Company's authority to originate or purchase
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loans under the Title I Program could have a material adverse effect on the
Company's results of operations and financial condition.
IMPACT OF REGULATION AND LITIGATION
The Company's business is subject to regulation and licensing under various
federal, state and local statutes and regulations requiring, among other things,
the licensing of lenders, adequate disclosure of loan terms and limitations on
the terms and interest rates of consumer loans, collection policies, creditor
remedies and other trade practices. An adverse change in these laws or
regulations could have an adverse effect on the Company by, among other things,
limiting the interest and fee income the Company may generate on existing and
additional loans, limiting the states in which the Company may operate or
restricting the Company's ability to realize on the collateral securing its
loans.
Members of Congress and government officials have from time to time
suggested the elimination of the mortgage interest deduction for federal income
tax purposes, either entirely or in part, based on borrower income, type of loan
or principal amount. Because many of the Company's loans are made to borrowers
for the purpose of consolidating consumer debt or financing other consumer
needs, the competitive advantages of tax deductible interest, when compared with
alternative sources of financing, could be eliminated or seriously impaired by
such government action. Accordingly, the reduction or elimination of these tax
benefits could have a material adverse effect on the demand for loans of the
kind offered by the Company, which could have a material adverse effect on the
Company's results of operations and financial condition.
Industry participants are frequently named as defendants in litigation
involving alleged violations of federal and state consumer lending laws and
regulations, or other similar laws and regulations, as a result of the
consumer-oriented nature of the industry in which the Company operates and
uncertainties with respect to the application of various laws and regulations
in certain circumstances. If a significant judgment were rendered against
the Company in connection with any litigation, it could have a material
adverse effect on the Company's financial condition and results of operations.
The Company's loans under the Title I Program are eligible for FHA
insurance. The FHA insures 90% of such loans and certain interest costs,
provided that the Company has not depleted its loss reserve account established
with the FHA and the loans were properly originated according to FHA
regulations. The amount of insurance coverage in a lender's FHA loss reserve
account is equal to 10% of the original principal amount of all Title I Loans
originated and the amount of the reserves for purchased loans reported for
insurance coverage by the lender, less the amount of all insurance claims
approved for payment in connection with losses on such loans and other
adjustments. If at any time claims exceed the loss reserve balance, the
remaining Title I Loans will be uninsured. In addition, the Title I Program
sets loan origination guidelines that must be satisfied by the lender in
connection with the origination of Title I Loans in order for the FHA to insure
those loans. The Company's failure to comply with such requirements could
result in denial of payment by the FHA. There can be no assurance that losses
will not exceed the Company's loss reserve account or that the Company will not
be adversely affected by such defaults. The Company's Conventional Loans are
not insured.
CONCENTRATION OF VOTING CONTROL IN MANAGEMENT
At June 30, 1997, Daniel T. Phillips, the Company's President, Chief
Executive Officer and Chairman of the Board, and Eric C. Green, the Company's
Chief Financial Officer, beneficially owned or otherwise controlled an
aggregate of approximately 13.1% and 1.6%, respectively, of the outstanding
voting the Company's Common Stock. Therefore, Messrs. Phillips and Green are
able to exercise significant influence with respect to the election of the
entire Board of Directors of the Company (the "the Company Board") and all
matters submitted to the Company's stockholders. Messrs. Phillips and Green
are also able to significantly influence the direction and future operations
of the Company, including decisions regarding the issuance of additional
shares of the Company's Common Stock and other securities. In addition, as
long as Messrs. Phillips and Green beneficially own or otherwise control a
significant block of the Company's issued and outstanding Common Stock, it
will be difficult for third parties to obtain control of the Company through
purchases of the Company's Common Stock not beneficially owned or otherwise
controlled by Messrs. Phillips and Green.
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DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the continued services of Daniel T. Phillips
or Eric C. Green and certain of the Company's other key employees. While the
Company believes that it could find replacements for its executive officers and
key employees, the loss of their services could have an adverse effect on the
Company's operations. Each of the Company's executive officers has entered into
an employment agreement with the Company.
EVENTS OF DEFAULT UNDER CERTAIN FINANCING FACILITIES
The loss of the services of Daniel T. Phillips as Chief Executive Officer
of the Company would constitute an event of default under one of the Company's
credit facilities, which in turn would result in defaults under other
indebtedness. Mr. Phillips has entered into an employment agreement with the
Company.
EFFECT OF CERTAIN ANTITAKEOVER PROVISIONS
Certain provisions of the Company's articles of incorporation (the
"Company's Articles"), and the Company's bylaws (the "Company's Bylaws"), the
Nevada General Corporation Law (the "NGCL") and the Indenture for the
outstanding 7.25% Convertible Subordinated Notes due 2003 of the Company (the
"Convertible Notes") could delay or frustrate the removal of incumbent
directors and could make difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be viewed as beneficial by
the Company's stockholders. For example, the Company's Articles deny the
right of stockholders to amend the Company's Bylaws and require advance
notice of stockholder proposals and nominations of directors. The Company is
also subject to provisions of the NGCL that prohibit a publicly-held Nevada
corporation from engaging in a broad range of business combinations with a
person who, together with affiliates and associates, owns 10% or more of the
corporation's outstanding voting shares (an "interested stockholder") for
three years after the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. In addition, the
Indenture for the Convertible Notes provides that in the event of a "change
of control" (as defined therein) holders of the Convertible Notes have the
right to require that the Company repurchase the Convertible Notes in whole
or in part.
SECURITIES TRADING; POSSIBLE VOLATILITY OF PRICES
The Company's Common Stock is quoted on the Nasdaq National Market. The
market price for shares of the Company's Common Stock may be significantly
affected by such factors as quarter-to-quarter variations in the Company's
results of operations, news announcements or changes in general market or
industry conditions.
USE OF PROCEEDS
The proceeds to FIRSTPLUS from the issuance of Shares pursuant to the Plan
will be used for general corporate purposes.
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THE PLAN
The following questions and answers explain and constitute the FIRSTPLUS
Financial Group, Inc. Dividend Reinvestment and Stock Purchase Plan.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The purpose of the Plan is to provide FIRSTPLUS shareholders and other
interested investors with a convenient and economical method to purchase Shares
and to reinvest all or a portion of any cash dividends in Shares, although the
Company does not currently pay and does not expect in the future to pay
dividends on its Shares. In addition, the Plan will provide the Company with a
cost-efficient and flexible mechanism to raise equity capital for the purposes
outlined in the section of this Prospectus entitled "Use of Proceeds" through
the sale of Shares under the Plan. Whether significant additional capital is
raised may be affected, in part, by the Company's decision to waive the
limitations applicable to optional cash investments. See Question 13 regarding
the Company's criteria for granting a Request for Waiver.
HOLDERS OF SHARES ARE CAUTIONED THAT THE EXISTENCE OF THE PLAN IN NO WAY
IMPLIES THAT THE COMPANY WILL MODIFY ITS CURRENT POLICY OF NOT PAYING DIVIDENDS.
PARTICIPATION OPTIONS
2. WHAT OPTIONS ARE AVAILABLE UNDER THE PLAN?
Registered holders or beneficial owners of Shares of FIRSTPLUS (each a
"Participant") and other interested investors may elect to participate in the
Plan. Participants may make optional cash investments to purchase Shares,
subject to a minimum investment of $100 and a maximum investment of $5,000 per
month. Interested investors who are not shareholders of the Company may make an
initial optional cash investment in Shares of not less than $1,000 and not more
than $5,000. In certain instances, however, FIRSTPLUS may permit greater
optional cash investments. See Question 12 regarding optional cash investments
and Question 13 regarding a Request for Waiver. Participants may also have
their cash dividends, if any, on all or a portion of their Shares that are
registered and held by the Plan automatically reinvested in Shares.
3. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN?
ADVANTAGES
- Eligible shareholders may purchase Shares pursuant to optional cash
investments of not less than $100 and not more than $5,000 (except
with the consent of the Company) in any month. Optional cash
investments may be made occasionally or at regular intervals, as each
Participant desires. The Plan provides Participants with the
opportunity to automatically reinvest cash dividends, if any, on all
or a portion of their Shares. Participants may make optional cash
investments even if dividends on their Shares, if any, are not being
reinvested under the Plan.
- Persons not presently shareholders of the Company may become
Participants by making an initial optional cash investment of not less
than $1,000 and not more than $5,000 (except with the consent of the
Company) to purchase Shares under the Plan.
- Shares purchased directly from the Company under the Plan by persons
who are then shareholders of the Company will be issued initially at a
1.5% discount to the market price without payment of brokerage
commissions; such discount may be changed at the sole discretion of
the Company at any time.
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- Participants will avoid the need for safekeeping of certificates for
Shares credited to their Plan accounts and may submit for safekeeping
certificates held by them and registered in their name. See Questions
15 and 16.
- Participants that are registered holders may direct the Administrator
to sell or transfer all or a portion of their shares held in the Plan.
See Question 17.
- Periodic statements reflecting all current activity in Plan accounts,
including purchases, sales, and latest balances, will simplify
recordkeeping for registered holders. See Question 18.
DISADVANTAGES
- Participants may not be able to depend on the availability of a market
discount regarding Shares acquired under the Plan and optional cash
investments may be subject to the trading price for the Shares
satisfying a minimum price condition. Initially, a 1.5% discount will
be established for the purchase of Shares directly from the Company by
persons who are then shareholders of the Company, and the
establishment of such discount will not insure the availability of a
discount or the same discount in future months. Each month, the
Company may change or eliminate the discount or set any minimum price
condition without prior notice to Participants. In addition, although
the Company intends to issue Shares directly in connection with the
Plan, the Company may also, without prior notice to Participants,
change its determination as to whether Shares will be purchased by the
Administrator directly from the Company or in the open market or in
privately negotiated transactions from third parties (although the
Company may not effect such a change more than once in any three month
period). See Question 13.
- Participants will not know the actual number of Shares purchased under
the Plan until after the Investment Date. See Question 11 regarding
the timing of the purchase of Shares.
- The purchase price per share will be an average price and, therefore,
may exceed the price at which Shares are trading on the Investment
Date when the Shares are issued. See Questions 11 and 12 regarding the
purchase price of the Shares and Question 13 regarding the
establishment of a minimum price condition.
- Execution of sales of shares held in the Plan my be subject to delay.
See Questions 12 and 17.
- No interest will be paid on funds held by the Company pending
reinvestment or investment. See Questions 12 and 14.
- Shares deposited in a Plan account may not be pledged until the shares
are withdrawn from the Plan. See Question 26.
4. WHO WILL ADMINISTER THE PLAN?
The Plan will be administered by ChaseMellon Shareholder Services, LLC
("ChaseMellon") or such successor administrator as FIRSTPLUS may designate (the
"Administrator"). The Administrator acts as agent for Participants, keeps
records of the accounts of Participants, sends regular account statements to
Participants, and performs other duties relating to the Plan. Shares purchased
for each Participant under the Plan will be held by the Administrator and will
be
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registered in the name of such Participant, unless and until a Participant
requests that a stock certificate for all or part of such Shares be issued, as
more fully described in Question 15. Correspondence with the Administrator
should be sent to:
ChaseMellon Shareholder Services, LLC
85 Challenger Road
Ridgefield Park, NJ 07660
or call: 1-800-635-9270
PARTICIPATION
5. WHO IS ELIGIBLE TO PARTICIPATE?
A "registered holder" (which means a shareholder whose Shares are
registered in the stock transfer books of FIRSTPLUS in his or her name) or a
"beneficial owner" (which means a shareholder whose Shares are registered in a
name other than his or her name; for example, in the name of a broker, bank, or
other nominee), may participate in the Plan. A registered holder may
participate in the Plan directly; a beneficial owner must either become a
registered holder by having such Shares transferred into his or her name or by
making arrangements with his or her broker, bank, or other nominee to
participate in the Plan on the Participant's behalf. In addition, an interested
investor who is not a shareholder may participate in the Plan by making an
initial optional cash investment in Shares of not less than $1,000 nor more than
$5,000 unless granted a Request for Waiver (in which case such initial
investment may exceed $5,000). See Question 6 regarding enrollment.
The right to participate in the Plan is not transferable to another person
apart from a transfer of the underlying Shares. FIRSTPLUS reserves the right to
exclude from participation in the Plan persons who utilize the Plan to engage in
short-term trading activities that cause aberrations in the trading volume of
the Common Stock.
Participants residing in jurisdictions in which their participation in the
Plan would be unlawful will not be eligible to participate in the Plan.
ENROLLMENT
6. HOW DOES AN ELIGIBLE HOLDER OF SHARES OR ANY OTHER INTERESTED INVESTOR
ENROLL IN THE PLAN AND BECOME A PARTICIPANT?
Each eligible registered holder may enroll in the Plan and become a
Participant by completing and signing an Authorization Card (enclosed herein)
and returning it to the Administrator at the address set forth in Question 4.
An Authorization Card may also be obtained at any time upon request from the
Administrator at the same address. If Shares are registered in more than one
name (e.g., joint tenants or trustees), all registered holders of such shares
must sign the Authorization Card exactly as their names appear on the account
registration.
Eligible beneficial owners must instruct their brokers, banks, or other
nominees in whose name their Shares are held to participate in the Plan on their
behalf. If a broker, bank, or other nominee holds Shares of beneficial owners
through a securities depository, such broker, bank, or other nominee may also be
required to provide a Broker and Nominee Form (a "B/N Form") to the
Administrator in order to participate in the optional cash investment portion of
the Plan. See Question 12.
An interested investor who is not presently a shareholder of the Company,
but who desires to become a Participant by making an initial investment in
Shares, may join the Plan by signing an Authorization Card and forwarding it,
together with such initial investment, to the Administrator at the address set
forth in Question 4. See Question 12 regarding initial optional cash
investments.
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7. WHAT DOES THE AUTHORIZATION CARD PROVIDE?
During those times when the Company is not paying a dividend, the
Authorization Card will relate solely to optional cash investments to be made
for purchase of additional Shares and will be called "Authorization Card for
Optional Cash Investments." Such Authorization Card will appoint the
Administrator as agent for the Participant and direct the Administrator to apply
the optional cash investment transmitted therewith as well as optional cash
investments subsequently submitted to the purchase on such Participant's behalf
of full and fractional Shares in accordance with the Plan.
During those times when the Company is paying a dividend, the Authorization
Card, which will be called "Authorization Card for Reinvestment of Dividends and
for Optional Cash Investments," will appoint the Administrator as agent for the
Participant and direct the Company to pay to the Administrator the Participant's
cash dividends on all or a specified number of the Shares owned by the
Participant on the applicable record date and designated by the Participant to
be included in the Plan; and to reinvest, at the Participant's discretion, cash
dividends on whole and fractional Shares that have been credited to the
Participant's account pursuant to dividend reinvestment or optional cash
investment that have been designated to be included in the Plan ("Plan Shares").
The Authorization Card will also direct the Administrator to purchase Shares
with any optional cash investments that the Participant may elect to make. Cash
dividends will continue to be reinvested with respect to the number of Shares
designated on the Authorization Card and all Plan Shares until the Participant
specifies otherwise in writing or terminates participation in the Plan and until
the Plan is terminated.
The Authorization Card for the Reinvestment of Dividends and for Optional
Cash Investments provides for the purchase of Shares through the following
investment options:
(1) "Full Dividend Reinvestment"
This option directs the Administrator to invest in accordance with the
Plan all cash dividends on all whole or fractional Shares then or
subsequently registered in the Participant's name. This option also
permits the Participant to make optional cash investments and directs
the Administrator to apply such investments towards the purchase of
Shares in accordance with the Plan.
(2) "Partial Dividend Reinvestment"
This option directs the Administrator to invest in accordance with the
Plan all cash dividends on the specified number of whole or fractional
Shares then registered in the Participant's name and so designated in
the appropriate space on the Authorization Card. If this option is
selected, the Participant will continue to receive cash dividends in
the usual manner on all Shares that have not been designated for
participation in the Plan. This option also permits the Participant
to make optional cash investments and directs the Administrator to
apply such investments towards the purchase of Shares in accordance
with the Plan.
(3) "Optional Cash Investments Only"
This option permits a Participant to make optional cash investments
and directs the Administrator to apply such investments towards the
purchase of Shares in accordance with the Plan. If this option is
selected, unless the Participant designates that such additional
Shares for participation in the Plan, the Participant will continue to
receive cash dividends on all Shares registered in his or her name in
the usual manner, and the Administrator will apply only optional cash
investments received from the Participant towards the purchase of
Shares.
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Any one of the above three options may be selected. In each case, cash
dividends will be reinvested on all Shares designated for participation in the
Plan until the Participant specifies otherwise or withdraws from the Plan
altogether, or until the Plan is terminated.
Any Participant who returns a properly executed Authorization Card to the
Administrator without electing an investment option will be enrolled as having
selected Full Dividend Reinvestment.
The Authorization Card is designed to be used by a shareholder whose Shares
are registered in his or her name for the investment of optional cash payments
or for the reinvestment of cash dividends, if any, or both. In addition, the
Authorization Card is designed to be used by a broker, bank, or other nominee as
owner of record on behalf of a beneficial owner for the investment of optional
cash payments or for the reinvestment or dividends, if any, or both.
8. WHEN WILL PARTICIPATION IN THE PLAN BEGIN?
A Participant who has properly completed and submitted an Authorization
Card may submit an optional cash investment to purchase Shares under the Plan
with such Authorization Card at any time. Thereafter, optional cash investments
may be made at any time, but not more frequently than once per month, through
the use of the appropriate forms sent to Participants with each periodic
statement. Payments received by the Administrator prior to the first day of a
Pricing Period (as defined in Question 11) will be used to purchase Shares on
the Investment Date (as defined below) immediately following such Pricing
Period.
If a properly completed Authorization Card requesting reinvestment of
dividends is received by the Administrator on or before the record date
established by the Company's Board of Directors for a particular Share cash
dividend, that dividend will be used to purchase Shares for the Participant on
the applicable dividend payment date established by the Company's Board of
Directors. If an Authorization Card is received from a Participant after the
record date established for a particular dividend, the reinvestment of dividends
will begin on the dividend payment date following the next dividend record date.
For a discussion of the price to Participants of the Shares purchased under the
Plan and the limitations on optional cash investments, see Questions 11 and 13,
respectively.
The dates on which optional cash investments are to be invested and any
Share dividend payment dates are herein collectively referred to as the
"Investment Dates." For optional cash investments, the Investment Date will be
the first Trading Day (as defined below) subsequent to the Pricing Period. A
"Trading Day" means a day on which trades in Shares are reported on the Nasdaq
National Market.
If FIRSTPLUS Common Stock is listed for trading on the New York Stock
Exchange ("NYSE"), any reference in the Summary of the Plan appearing at the
beginning of this Prospectus or in Questions 8, 11 and 13 to the Nasdaq National
Market shall be deemed a reference to the NYSE and the reference in Question 11
to averaging the daily high and low sales prices shall be deemed to be the
average high and low sale prices, computed to three decimal places, of FIRSTPLUS
Common Stock transactions on the NYSE.
The record date for optional cash purchases is the business day immediately
preceding the first day of the Pricing Period to which the Investment Date
relates.
No interest will be paid on optional cash investments or cash dividends
pending investment in Shares.
Eligible shareholders and other interested investors may enroll in the Plan
at any time. Once enrolled, a Participant will remain enrolled until the
Participant discontinues participation or until the Company terminates the Plan.
See Question 19 regarding withdrawal from the Plan and Question 26 regarding
termination of the Plan.
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PURCHASES
9. WHEN WILL SHARES BE ACQUIRED UNDER THE PLAN?
If Shares are being acquired for the Plan directly from the Company,
dividends and optional cash investments will be reinvested or invested, as the
case may be, on the Investment Date.
If Shares are being acquired for the Plan through open market or privately
negotiated transactions, all dividends and all optional cash investments will be
applied to the purchase of Shares pursuant to the Plan as soon as practicable on
or after the applicable Investment Date.
10. WHAT IS THE SOURCE OF SHARES TO BE PURCHASED UNDER THE PLAN?
The Company anticipates that optional cash investments and dividends
reinvested through the Plan will be used to purchase Shares directly from
FIRSTPLUS, either from treasury shares or authorized but unissued shares. The
Company may, however, determine instead to purchase Shares on the open market or
in privately negotiated transactions from third parties, or both purchase Shares
from third parties and issue Shares directly.
11. WHAT WILL BE THE PRICE TO THE PARTICIPANT OF SHARES PURCHASED UNDER THE
PLAN?
The price to Participants of Shares purchased directly from the Company
with optional cash payments or with cash dividends will initially be 98.5% of
the average of the Daily Prices (defined below) of the Shares for the twelve
Trading Days ending immediately preceding the applicable Investment Date,
excluding from the average, in the case of purchases with optional cash
investments or initial optional cash investments in excess of $5,000, any Daily
Price that does not equal or exceed any applicable Threshold Price (defined
below). The period encompassing the twelve Trading Days of each month
constitutes the relevant "Pricing Period" for that particular month. See
"Schedule A--Optional Cash Payments." The Daily Price for a Trading Day shall
be the average of the high and low trading prices of the Shares on that day on
the Nasdaq National Market, rounded to three decimal places.
The Company may, in its sole discretion, establish for any given Pricing
Period a minimum price for the investment of optional cash payments or initial
optional cash payments in excess of $5,000 pursuant to a Request for Waiver (the
"Threshold Price"). Any such Threshold Price will be a stated dollar amount
established by the Company at least three Trading Days prior to the commencement
of each Pricing Period. In addition, the Company may, at any time in its sole
discretion, change the discount applicable to purchasers of Shares from the
Company. See Question 13.
If the Company exercises its option to purchase Shares from third parties,
all Shares so purchased by the Administrator will be acquired as soon as
practicable on or after the applicable Investment Date at a price to the
Participant of the weighted average purchase price for such Shares, including
brokerage fees and commissions, computed up to three decimal places, if
necessary, paid by the Administrator for the Shares.
12. HOW ARE OPTIONAL CASH INVESTMENTS MADE?
All registered holders, including brokers, banks, and nominees with respect
to Shares registered in their name on behalf of beneficial owners who have
submitted signed Authorization Cards, are eligible to make optional cash
investments at any time.
A broker, bank, or nominee, as holder on behalf of a beneficial owner, may
utilize an Authorization Card for optional cash investments unless it holds the
shares in the name of a securities depository. In that event, the optional cash
investment must be accompanied by a Broker and Nominee Form ("B/N Form").
The B/N Form provides the sole means whereby a broker, bank, or other
nominee holding Shares on behalf of beneficial owners in the name of a
securities depository may make optional cash investments on behalf of such
beneficial
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owners. In such case, the broker, bank, or other nominee must use a B/N Form
for transmitting optional cash investments on behalf of the beneficial
owners. A B/N Form must be delivered to the Administrator at the address
specified in Question 4 each time that such broker, bank, or other nominee
transmits optional cash investments on behalf of the beneficial owners. B/N
Forms will be furnished by the Administrator upon request.
Other interested investors who are not shareholders of the Company, but
have submitted Authorization Cards and funds representing their desired initial
investment, are also eligible to make such an initial investment in Shares
through an initial optional cash investment.
The Administrator will apply all optional cash investments for which good
funds are received on or before the first business day before the Pricing Period
to the purchase of Shares on the next following Investment Date, or if Shares
are acquired on the open market or in privately negotiated transactions, as soon
as practicable on or after such Investment Date.
NO INTEREST WILL BE EARNED ON OPTIONAL CASH INVESTMENTS HELD PENDING
INVESTMENT. THE COMPANY SUGGESTS THEREFORE THAT ANY OPTIONAL CASH INVESTMENT A
PARTICIPANT WISHES TO MAKE BE SENT SO AS TO REACH THE ADMINISTRATOR AS CLOSE AS
POSSIBLE TO THE FIRST BUSINESS DAY PRECEDING THE PRICING PERIOD FOR THE NEXT
FOLLOWING INVESTMENT DATE. ANY QUESTIONS REGARDING THESE DATES SHOULD BE
DIRECTED TO THE ADMINISTRATOR AT THE ADDRESS OR TELEPHONE NUMBER SET FORTH IN
QUESTION 4.
All optional cash investments received by the Administrator after the close
of business on the last business day immediately preceding the first day of the
Pricing Period and before the next succeeding Investment Date will promptly be
returned to the Participant without interest.
Participants should be aware that since investments under the Plan are made
as of specified dates, one may lose any advantage that otherwise might be
available from being able to select the timing of an investment. NEITHER THE
COMPANY NOR THE ADMINISTRATOR CAN ASSURE A PROFIT OR PROTECT AGAINST A LOSS ON
SHARES PURCHASED UNDER THE PLAN.
All optional cash investments made by check should be made payable to
FIRSTPLUS Financial Group, Inc. and mailed to the Administrator at the address
listed in Question 4. Other forms of payment, such as wire transfers, may also
be made. Inquires regarding other forms of payments and all other written
inquires should be directed to the Administrator at the address listed in
Question 4.
13. WHAT LIMITATIONS APPLY TO OPTIONAL CASH INVESTMENTS?
MINIMUM/MAXIMUM LIMITS. For any Investment Date, optional cash investments
made by shareholders of the Company are subject to a minimum of $100 and a
maximum of $5,000, and optional cash investments made by interested investors
who are not then shareholders of the Company are subject to a minimum initial
investment of $1,000 and a maximum of $5,000. See Question 9 regarding the
determination of Investment Dates for optional cash investments. Optional cash
investments of less than the allowable monthly minimum amount and that portion
of any optional cash investment that exceeds the allowable monthly maximum
amount will be returned, except as noted below, promptly to Participants,
without interest.
REQUEST FOR WAIVER. Optional cash investments or initial optional
investments in excess of $5,000 may be made only pursuant to a request for
waiver (a "Request for Waiver") accepted by the Company. Participants
wishing to submit an optional cash investment in excess of $5,000, or
interested investors who are not then shareholders wishing to submit an
optional cash investment in excess of $5,000, for any Investment Date must
obtain the prior written approval of the Company and a copy of such written
approval must accompany any such optional cash investment. A Request for
Waiver should be directed to the Company at (214) 599-7649. THE COMPANY HAS
SOLE DISCRETION TO GRANT ANY APPROVAL FOR OPTIONAL CASH INVESTMENTS OR
INITIAL OPTIONAL CASH INVESTMENTS IN EXCESS OF THE ALLOWABLE MAXIMUM AMOUNT.
In deciding whether to approve a Request for Waiver, the Company will
consider relevant factors including, but not limited to, the Company's need
for additional funds, the attractiveness of obtaining such additional funds
through
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the sale of Shares as compared to other sources of funds, the purchase price
likely to apply to any sale of Shares, the Participant submitting the request,
the extent and nature of such Participant's prior participation in the Plan, the
number of Shares held of record by such Participant, and the aggregate amount of
optional cash investments or initial optional investments in excess of $5,000
for which Requests for Waiver have been submitted by all Participants. If
Requests for Waiver are submitted for any Investment Date for an aggregate
amount in excess of the amount the Company is then willing to accept, the
Company may honor such requests in order of receipt, pro rata, or by any other
method that the Company determines to be appropriate. Upon granting any Request
for Waiver, the Company may, at its sole discretion, apply the Discount (as
defined below) with respect to the entire amount of the optional cash
investment.
FIRSTPLUS RESERVES THE RIGHT TO MODIFY, SUSPEND, OR TERMINATE PARTICIPATION
IN THE PLAN BY OTHERWISE ELIGIBLE REGISTERED HOLDERS OR BENEFICIAL OWNERS OF
SHARES FOR ANY REASON WHATSOEVER INCLUDING ELIMINATION OF PRACTICES THAT ARE NOT
CONSISTENT WITH THE PURPOSES OF THE PLAN.
THRESHOLD PRICE. FIRSTPLUS may establish, for any Pricing Period, a
Threshold Price applicable to optional cash investments made pursuant to
Requests for Waiver. At least three Trading Days prior to the first day of the
applicable Pricing Period, FIRSTPLUS will determine whether to establish a
Threshold Price, and if a Threshold Price is established, FIRSTPLUS will
determine its amount and so notify the Administrator. This determination will
be made by FIRSTPLUS in its discretion after a review of current market
conditions, the level of participation in the Plan, and current and projected
capital needs.
If established for any Pricing Period, the Threshold Price will be stated
as a dollar amount that the average of the high and low sale prices of the
Common Stock on the Nasdaq National Market for each Trading Day of the relevant
Pricing Period must equal or exceed. In the event that the Threshold Price is
not satisfied for a Trading Day in the Pricing Period, then that Trading Day
will be excluded from the Pricing Period and all trading prices for that day
will be excluded from the determination of the purchase price. A day will also
be excluded if no trades of Shares are made on the Nasdaq National Market for
that day. Thus, for example, if the Threshold Price is not satisfied for three
of the twelve Trading Days in a Pricing Period, then the purchase price will be
based upon the remaining nine Trading Days in which the Threshold Price was
satisfied.
In addition, a portion of the optional cash investment will be returned for
each Trading Day of a Pricing Period in which the Threshold Price is not
satisfied or for each day in which no trades of Shares are reported on the
Nasdaq National Market. The returned amount will equal one-twelfth of the
optional cash investment for each Trading Day that the Threshold Price is not
satisfied. Thus, for example, if the Threshold Price is not satisfied or no
such sales are reported for three of the twelve Trading Days in a Pricing
Period, 3/12 (i.e., 25%) of the optional cash investment will be returned to the
Participant without interest.
Setting a Threshold Price for a Pricing Period shall not affect the setting
of a Threshold Price for any subsequent Pricing Period. For any particular
month, FIRSTPLUS may waive its right to set a Threshold Price. Neither
FIRSTPLUS nor the Administrator shall be required to provide any written notice
to Participants as to the Threshold Price for any Pricing Period. Participants
may, however, ascertain whether a Threshold Price has been set or waived for any
given Pricing Period by telephoning FIRSTPLUS at (214) 599-7649.
DISCOUNT. The discount (the "Discount") applicable to shares purchased
directly from FIRSTPLUS under the Plan initially will be 1.5%. However, such
discount may be changed, in the sole discretion of the Company, in accordance
with the following procedures. Each month, at least three Trading Days prior to
the first day of the applicable Pricing Period, FIRSTPLUS may change the
Discount from the market price applicable to all purchases of Shares made
directly from FIRSTPLUS pursuant to the Plan from 5% to 0%, or any percentage in
between. Once established, such Discount will apply uniformly to all purchases
of Shares directly from the Company made pursuant to the Plan for that month,
except that the Discount may be changed with respect to shares purchased over
$5,000 in connection with an optional cash investment made pursuant to a Request
for Waiver. Any change in the Discount will be made in FIRSTPLUS's sole
discretion after a review of current market conditions, the level of
participation in the Plan, and current and projected capital needs.
Participants may obtain the Discount applicable to the next Pricing Period by
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telephoning FIRSTPLUS at (214) 599-7649. Setting a Discount for a particular
month shall not affect the setting of a Discount for any subsequent month.
14. WHAT IF A PARTICIPANT HAS MORE THAN ONE ACCOUNT?
For the purpose of the limitations discussed in Question 13, FIRSTPLUS may
aggregate all dividend reinvestments and optional cash investments for
Participants with more than one account using the same social security or
taxpayer identification number. For Participants unable to supply a social
security or taxpayer identification number, their participation may be limited
by FIRSTPLUS to only one Plan account.
Also for the purpose of such limitations, all Plan accounts that FIRSTPLUS
believes to be under common control or management or to have common ultimate
beneficial ownership may be aggregated. Unless FIRSTPLUS has determined that
reinvestment of dividends and optional cash investments for each such account
would be consistent with the purposes of the Plan, FIRSTPLUS will have the right
to aggregate all such accounts and to return, without interest, within thirty
days of receipt, any amounts in excess of the investment limitations applicable
to a single account received in respect of all such accounts.
CERTIFICATES
15. WILL CERTIFICATES BE ISSUED FOR SHARE PURCHASES?
All shares purchased pursuant to the Plan will be held in "book entry" form
through accounts maintained by the Administrator. This service protects against
the loss, theft, or destruction of certificates evidencing shares. Upon written
request of a Participant or upon withdrawal of a Participant from the Plan or
upon termination of the Plan, the Administrator will have certificates issued
and delivered for all full shares credited to that Participant's account.
Certificates will be issued only in the same names as those enrolled in the
Plan. In no event will certificates for fractional shares be issued. See
Questions 16 and 17.
16. MAY A PARTICIPANT ADD SHARES TO HIS OR HER ACCOUNT BY TRANSFERRING SHARE
CERTIFICATES THAT THE PARTICIPANT POSSESSES?
Any Participant may send to the Plan for safekeeping all Share certificates
that such Participant holds. The safekeeping of Shares offers the advantage of
protection against loss, theft, or destruction of certificates as well as
convenience, if and when Shares are sold through the Plan. All Shares
represented by such certificates will be kept for safekeeping in "book entry"
form and combined with any full and fractional shares then held by the Plan for
the Participant.
To deposit certificates for safekeeping under the Plan, a Participant must
submit a letter of transmittal, which will be provided by the Administrator upon
request. Share certificates and the letter of transmittal as well as all
written inquiries about the safekeeping service should be directed to the
Administrator at the address listed in Question 4.
Shares deposited for safekeeping may be withdrawn by the Participant by
submitting a written request to the Administrator.
SALE OF SHARES
17. CAN PARTICIPANTS SELL SHARES HELD UNDER THE PLAN?
Participants may request that all or a portion of the Shares held in their
accounts by the Plan (including Shares held for safekeeping) be sold. Following
receipt of written instructions from a Participant, the Administrator will sell,
through an independent broker or institution, those Shares and will remit a
check for the proceeds of such sale, less applicable brokerage commissions,
service charges, and any taxes. Prior written instructions from the Participant
must
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be received at least 24 hours preceding the sale. Shares will be sold at
least once per week by the Plan at then current market prices in transactions
carried out through one or more brokerage firms. This procedure for selling
Shares may be particularly attractive to holders of small amounts of shares
because the Plan can combine odd lots and small numbers of shares into larger
blocks to be sold, and thereby take advantage of lower brokerage costs that
otherwise might not be available to individual Participants in the sale of their
Shares.
REPORTS
18. WHAT REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
Unless a Participant participates in the Plan through a broker, bank, or
nominee, each Participant will receive from the Administrator a detailed
statement of the Participant's account following each dividend payment and
account transaction. These detailed statements will show total cash dividends
received, total optional cash investments received, total shares purchased
(including fractional shares), price paid per share, and total shares held in
the Plan. THESE STATEMENTS SHOULD BE RETAINED BY THE PARTICIPANT TO DETERMINE
THE TAX COST BASIS FOR SHARES PURCHASED PURSUANT TO THE PLAN. Any Participant
that participates in the Plan through a broker, bank, or nominee, should contact
such party for such a statement.
WITHDRAWAL
19. HOW MAY PARTICIPANTS WITHDRAW FROM THE PLAN?
Except as set forth below, a Participant may terminate enrollment in the
Plan by giving written notice to the Administrator no later than two days prior
to the first day of the next Pricing Period, and thereafter all cash dividends
on Shares owned by such Participant will be sent to the Participant. See
Question 17. In the event that a purchase of Shares on behalf of a Participant
pursuant to the Plan is pending, such Participant may not terminate enrollment
until the close of the Pricing Period. Any fractional shares held in the Plan
at the time of termination will be converted to cash on the basis of the then
current market price of the Shares.
TAXES
20. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATING IN THE PLAN?
For federal income tax purposes, Participants will be treated as having
received a distribution from the Company upon the purchase of Shares pursuant to
the Plan with an optional cash investment in an amount equal to the excess, if
any, of the fair market value of the Shares acquired on the Investment Date over
the optional cash investment. Any such deemed distribution will be treated as a
taxable dividend to the extent attributable to current or accumulated earnings
and profits of the Company. The purchased Shares will have a tax basis equal to
the amount of the optional cash investment plus the amount of the deemed
distribution, if any, which is treated as a dividend. The fair market value of
Shares acquired on an Investment Date is likely to differ from the optional cash
investment.
Additionally, Participants will be treated as having received a
distribution from the Company equal to the fair market value on the Investment
Date of the Shares, if any, acquired with reinvested dividends pursuant to the
Plan. Such distribution will be treated as a dividend to the extent
attributable to current or accumulated earnings and profits of the Company. Any
excess will first be treated as a tax-free return of capital, causing a
reduction in the basis of existing Shares, and the balance will be treated as
capital gain recognized on a sale or exchange. A Participant's tax basis in the
dividend shares will equal the fair market value of such Shares on the
Investment Date.
When a Participant receives certificates for whole shares credited to the
Participant's account under the Plan, the Participant will not realize any
taxable income. However, a Participant that receives a cash adjustment for a
fraction of a share may realize a gain or loss with respect to such fraction. A
gain or loss may also be realized by the Participant whenever whole shares are
sold, either pursuant to the Participant's request, upon withdrawal from the
Plan, or after
25
<PAGE>
withdrawal from the Plan. The amount of such gain or loss will be the
difference between the amount that the Participant realizes for the shares or
fraction of a share and the tax basis of the Participant in the shares.
A Participant's holding period for Shares acquired pursuant to the Plan
will begin on the day following the Investment Date.
In the case of corporate shareholders, dividends may be eligible for the
dividends-received tax deduction.
The foregoing is only a summary of the federal income tax consequences of
participation in the Plan and does not constitute tax advice. This summary does
not reflect every possible outcome that could result from participation in the
Plan and, therefore, Participants are advised to consult their own tax advisors
with respect to the tax consequences applicable to their particular situation.
OTHER PROVISIONS
21. WHAT HAPPENS IF A PARTICIPANT SELLS OR TRANSFERS SHARES OR ACQUIRES
ADDITIONAL SHARES?
If a Participant has elected to have dividends automatically reinvested in
the Plan and subsequently sells or transfers all or any part of the Shares
registered in the Participant's name, automatic reinvestment will continue as
long as Shares are registered in the name of the Participant or held for the
Participant by the Administrator or until termination of enrollment. Similarly,
if a Participant has elected the "Full Dividend Reinvestment" option under the
Plan and subsequently acquires additional shares registered in the Participant's
name, dividends paid on such Shares will automatically be reinvested until
termination of enrollment. If, however, a Participant has elected the "Partial
Dividend Reinvestment" option and subsequently acquires additional Shares that
are registered in the Participant's name, dividends paid on such Shares will not
be automatically reinvested under the Plan. See Question 7. Participants may,
however, change their dividend reinvestment elections by submitting new
Authorization Cards.
22. HOW WILL A PARTICIPANT'S SHARES BE VOTED?
For any meeting of shareholders, each Participant will receive proxy
materials in order to vote all Shares held by the Plan for the Participant's
account. All Shares will be voted as designated by the Participant or may be
voted in person at the meeting of shareholders.
23. WHO PAYS THE EXPENSES OF THE PLAN?
In the case of optional cash investments, Participants will have to pay
their pro rata share of any brokerage fees or commissions on Shares purchased
for their account in the open market or in privately negotiated transactions,
which sums will first be deducted before determining the number of Shares to be
purchased. Participants will not incur brokerage commissions or service charges
in connection with the reinvestment of dividends to purchase Shares, or in
connection with optional cash investments in which Shares are purchased directly
from the Company. However, the Administrator will charge an administrative fee
for optional cash investments and on sales of Shares made pursuant to the Plan.
This fee will vary depending on whether the transaction is initiated by a
registered holder or through a broker, bank, or other nominee that holds shares
through a securities depository. These fees, as well as any related brokerage
commissions and applicable stock transfer taxes must be paid to the
Administrator at the time of the transaction, and will be deducted from the
funds received by the Administrator in the case of optional cash investments and
from the proceeds, in the case of sales of Shares. The Administrator may also
charge Participants for additional services not provided under the Plan or for
other specified charges. Any of such administrative fees may be changed by the
Administrator at any time, without notice to Participants. Participants may
obtain a current listing of all applicable administrative fees by contacting the
Administrator at the address or telephone number listed in Question 4 above.
Brokers or nominees that participate on behalf of beneficial owners for whom
they are holding Shares may also charge such beneficial owners fees in
connection with such participation, for which neither the Administrator nor the
Company will be responsible.
26
<PAGE>
24. WHAT ARE THE RESPONSIBILITIES OF FIRSTPLUS OR THE ADMINISTRATOR UNDER THE
PLAN?
Neither FIRSTPLUS nor the Administrator will be liable for any act done in
good faith or for any good faith omission to act, including, without limitation,
any claims of liability arising out of a failure to terminate a Participant's
account upon such Participant's death or adjudication of incompetence prior to
the receipt of notice in writing of such death or adjudication of incompetence,
the prices at which Shares are purchased for the Participant's account, the
times when purchases are made, or fluctuations in the market value of the
Shares. Neither FIRSTPLUS nor the Administrator has any duties,
responsibilities, or liabilities except those expressly set forth in the Plan.
THE PARTICIPANT SHOULD RECOGNIZE THAT THE COMPANY CANNOT ASSURE A PROFIT OR
PROTECT AGAINST A LOSS ON SHARES PURCHASED BY A PARTICIPANT UNDER THE PLAN.
25. WHAT HAPPENS IF FIRSTPLUS ISSUES A STOCK DIVIDEND OR DECLARES A STOCK
SPLIT?
Any Shares distributed by FIRSTPLUS as a result of a stock dividend or a
stock split on Shares held under the Plan for a Participant will be credited to
the Participant's account.
26. IF FIRSTPLUS HAS A RIGHTS OFFERING RELATED TO THE SHARES, HOW WILL A
PARTICIPANT'S ENTITLEMENT BE COMPUTED?
A participant's entitlement in a rights offering related to the Shares will
be based upon the number of whole shares credited to the Participant's account.
Rights based on a fraction of a share credited to a Participant's Plan account
will be sold for that account and the net proceeds will be invested as an
optional cash payment on the next Investment Date. In the event of a rights
offering, transaction processing may be curtailed or suspended by the
Administrator for a short period of time following the record date for such
action to permit the Administrator to calculate the rights allocable to each
account.
27. MAY SHARES IN A PARTICIPANT'S ACCOUNT BE PLEDGED?
No Shares credited to a Participant's account may be pledged and any such
purported pledge will be void. If a Participant wishes to pledge Shares, those
Shares must be withdrawn from the Plan.
28. MAY A PARTICIPANT TRANSFER ALL OR A PART OF THE PARTICIPANT'S SHARES HELD
IN THE PLAN TO ANOTHER PERSON?
A Participant may transfer ownership of all or part of his or her Shares
held in the Plan through gift, private sale, or otherwise, by mailing to the
Administrator at the address in Question 4 a properly executed stock assignment,
along with a letter with specific instructions regarding the transfer and both
an Authorization Card and a Form W-9 (Certification of Taxpayer Identification
Number) completed by the transferee. Requests for transfer of Shares held in
the plan are subject to the same requirements as the transfer of Share
certificates, including the requirement of a medallion signature guarantee on
the stock assignment. The Administrator will provide Participants with the
appropriate transfer forms upon request, and will deliver a copy of this
Prospectus to the transferee upon receipt of the appropriate transfer forms from
the Participant. If any stock certificates bearing a restrictive legend are
contained in the Participant's Plan account, the Administrator will comply with
the provisions of such restrictive legend before effecting a sale or transfer of
such restricted shares.
A Participant may also transfer all or a portion of his or her Shares into
an account established for another person within the Plan. In order to effect
such a "book-to-book" transfer, the transferee must complete an Authorization
Card to open a new account within the Plan. (See Question 7). The
Authorization Card should be sent to the Administrator along with a written
request to effect the "book-to-book" transfer indicating the number of shares to
be transferred to the new account.
27
<PAGE>
29. MAY THE PLAN BE CHANGED OR TERMINATED?
While the Plan is intended to continue indefinitely, FIRSTPLUS reserves the
right to amend, modify, suspend, or terminate the Plan at any time.
Participants will be notified in writing of any modifications made to the Plan.
PLAN OF DISTRIBUTION AND UNDERWRITERS
Pursuant to the Plan, FIRSTPLUS may be requested to approve optional cash
investments in excess of the allowable maximum amounts pursuant to Requests for
Waiver on behalf of Participants who may be engaged in the securities business.
In deciding whether to approve such a request, FIRSTPLUS will consider relevant
factors including, but not limited to, whether the Plan is then acquiring newly
issued Shares or acquiring Shares through open market purchases or privately
negotiated transactions, the Company's need for additional funds, the
attractiveness of obtaining such funds by the sale of Shares under the Plan in
comparison to other sources of funds, the purchase price likely to apply to any
sale of Shares, the Participant submitting the request, including the extent and
nature of such Participant's prior participation in the Plan and the number of
Shares held of record by such Participant, and the aggregate number of Requests
for Waiver that have been submitted by all Participants. Persons who acquire
Shares through the Plan and resell them shortly after acquiring them, including
coverage of short positions, under certain circumstances, may be participating
in a distribution of securities that would require compliance with Regulation M
under the Exchange Act and may be considered to be underwriters within the
meaning of the Securities Act. FIRSTPLUS will not extend to any such person any
rights or privileges other than those to which it would be entitled as a
Participant, nor will FIRSTPLUS enter into any agreement with any such person
regarding such person's purchase of such Shares or any resale or distribution
thereof. FIRSTPLUS may, however, approve requests for optional cash investments
by such persons in excess of allowable maximum limitations. If such requests
are submitted for any Investment Date for an aggregate amount in excess of the
amount FIRSTPLUS is willing to accept, FIRSTPLUS may honor such requests in
order of receipt, pro rata, or by any other method that FIRSTPLUS determines to
be appropriate.
LEGAL MATTERS
The validity of the Shares being offered hereby will be passed upon for the
Company by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company at September 30, 1996
and 1995 and for each of the three years in the period ended September 30, 1996,
incorporated by reference in this Prospectus and in the Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon and are incorporated by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
28
<PAGE>
GLOSSARY
"Beneficial Owners" means stockholders who beneficially own shares of
Common Stock that are registered in a name other than their own (for example, in
the name of a broker, bank, or other nominee).
"Board" means the Board of Directors of the Company.
"B/N Form" means a Broker and Nominee form.
"Business Day" means any day other than a Saturday, Sunday, or legal
holiday on which the Nasdaq National Market is closed or a day on which the Plan
Administrator is authorized or obligated by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Company" means FIRSTPLUS Financial Group, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Investment Date" means, with respect to Common Stock acquired directly
from the Company, the last calendar day of each month in a month for which no
dividends are paid, or the dividend payment date declared by the Board of
Directors for a month in which dividends are paid. If such last calendar day or
the dividend payment date falls on a date when the Nasdaq National Market is
closed, the Investment Date will be the first previous date on which the Nasdaq
National Market was open.
"NYSE" means the New York Stock Exchange.
"Participation" means an eligible holder of Common Stock or other investor
who submits a properly completed Authorization Form and participates in the
Plan.
"Plan" means the FIRSTPLUS Financial Group, Inc. Dividend Reinvestment and
Stock Purchase Plan.
"Plan Administrator" means a plan administrator that administers the Plan,
keeps records, sends statements of account to each Participant, and performs
other duties related to the Plan. ChaseMellon currently serves as Plan
Administrator of the Plan.
"Plan Shares" means all whole and fractional shares of Common Stock
credited to a Participant's Plan account.
"Pricing Period" means the period encompassing the twelve Trading Days
immediately preceding the relevant Investment Date.
"Purchase Price" means with respect to Common Stock purchased directly from
the Company, the average of the daily high and low sales prices, computed to
three decimal places, of the Common Stock on the Nasdaq National Market for the
twelve Trading Days immediately preceding the relevant Investment Date and, with
respect to open market purchases and privately negotiated transactions, the
weighted average purchase price, computed to three decimal places, paid for such
Common Stock by the Plan Administrator, in both cases, minus the applicable
discount.
"Record Date" for dividend months will be established by the Board of
Directors. The "Record Date" for non-dividend months will be two business days
immediately preceding the first day of the Pricing Period.
29
<PAGE>
"Registered Owners" means stockholders whose shares of Common Stock are
registered on the stock transfer book of the Company in their own names.
"Request for Waiver" means a written request from a Participant to exceed
the limitation of $5,000 per month on optional cash investments or $5,000 on
initial optional cash investments by investors who are not then shareholders.
"Securities Act" means the Securities Act of 1933, as amended.
"Threshold Price" means the minimum price, if any, established by the
Company that the average high and low prices of the Common Stock must equal or
exceed during each Trading Day of the Pricing Period for optional cash payments
made pursuant to written Requests for Wavier to purchase Common Stock directly
from the Company.
"Trading Day" means a day on which trades in Common Stock are reported on
the Nasdaq National Market.
"Waiver Discount" means the discount from the market price applicable to
optional cash investments made pursuant to written Requests for Waiver. Such
discount may vary each month between 0 and 5% of the Market Price.
30
<PAGE>
SCHEDULE A
Proposed Calender for FIRSTPLUS Dividend
Reinvestment and Stock Purchase Plan
<TABLE>
Threshold Price
and Waiver
Discount Set Date Optional Cash Pricing Period
(Waiver Request Due) Payment Due Date Commencement Date Investment Date
- -------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
November 5, 1997 November 10, 1997 November 11, 1997 November 28, 1997
December 8, 1997 December 11, 1997 December 12, 1997 December 31, 1997
January 7, 1998 January 12, 1998 January 13, 1998 January 30, 1998
February 4, 1998 February 9, 1998 February 10, 1998 February 27, 1998
March 9, 1998 March 12, 1998 March 13, 1998 March 31, 1998
April 7, 1998 April 13, 1998 April 14, 1998 April 30, 1998
May 6, 1998 May 11, 1998 May 12, 1998 May 29, 1998
June 8, 1998 June 11, 1998 June 12, 1998 June 30, 1998
July 9, 1998 July 14, 1998 July 15, 1998 July 31, 1998
August 7, 1998 August 12, 1998 August 13, 1998 August 31, 1998
September 8, 1998 September 11, 1998 September 14, 1998 September 30, 1998
October 8, 1998 October 13, 1998 October 14, 1998 October 30, 1998
November 5, 1998 November 10, 1998 November 11, 1998 November 30, 1998
December 8, 1998 December 11, 1998 December 14, 1998 December 31, 1998
January 6, 1999 January 11, 1999 January 12, 1999 January 29, 1999
February 3, 1999 February 8, 1999 February 9, 1999 February 26, 1999
March 9, 1999 March 12, 1999 March 15, 1999 March 31, 1999
April 8, 1999 April 13, 1999 April 14, 1999 April 30, 1999
May 6, 1999 May 11, 1999 May 12, 1999 May 28, 1999
June 8, 1999 June 11, 1999 June 14, 1999 June 30, 1999
July 8, 1999 July 13, 1999 July 14, 1999 July 30, 1999
August 9, 1999 August 12, 1999 August 13, 1999 August 31, 1999
September 8, 1999 September 13, 1999 September 14, 1999 September 30, 1999
October 7, 1999 October 12, 1999 October 13, 1999 October 29, 1999
November 5, 1999 November 10, 1999 November 11, 1999 November 30, 1999
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
-----------------
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
DOCUMENTS INCORPORATED
BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PLAN OF DISTRIBUTION
AND UNDERWRITERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FIRSTPLUS
FINANCIAL GROUP, INC.
DIVIDEND
REINVESTMENT AND
STOCK PURCHASE PLAN
__________________
PROSPECTUS
__________________
____________________, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred by the Company in
connection with the issuance and distribution of the securities described in
this registration statement, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee. . . . . . . . . . . . $ 58,148
Nasdaq National Market Filing Fee. . . . . . . . . . . . . . . . . . . . . 17,500
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 2,500*
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 5,000*
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 15,000*
Fees of Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . 5,000*
Printing and Engraving Fees and Expenses . . . . . . . . . . . . . . . . . 5,000*
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,852*
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,000*
--------
--------
</TABLE>
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Articles of Incorporation of the Registrant, together with its
bylaws, provide that the Registrant shall indemnify officers and directors, and
may indemnify its other employees and agents, to the fullest extent permitted by
law. The laws of the State of Nevada permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are or
have been a party to or are threatened to be made a party to litigation against
judgments, fines, settlements and reasonable expenses under certain
circumstances.
(b) The Registrant has also adopted provisions in its Articles of
Incorporation that limit the liability of its directors and officers to the
fullest extent permitted by the laws of the State of Nevada. Under the
Registrant's Articles of Incorporation, and as permitted by the laws of the
State of Nevada, a director or officer is not liable to the Registrant or its
stockholders for damages for breach of fiduciary duty. Such limitation of
liability does not affect liability for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the law, or (ii) the
payment of any unlawful distribution.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
*5.1 Opinion of Jenkens & Gilchrist, a Professional Corporation
*23.1 Consent of Ernst & Young LLP, Independent Auditors
*23.2 Consent of Jenkens & Gilchrist, a Professional Corporation
(included in the opinion contained as Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of the
Registration Statement)
* Filed herewith.
<PAGE>
(b) Financial Statement Schedules:
Not Applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, thereunto duly authorized, in the City of Dallas, and the State of
Texas, the 9th day of October, 1997.
FIRSTPLUS Financial Group, Inc.
(Registrant)
By: /s/ Daniel T. Phillips
----------------------------------------------
Daniel T. Phillips, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Daniel T. Phillips, Eric C. Green, and Ronald M
Bendalin, and each of them, each with full power to act without the other, his
true and lawful attorney-in-fact and agent, with full power and substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Daniel T. Phillips Chairman of the Board, and
- ---------------------------- Chief Executive Officer October 9, 1997
Daniel T. Phillips (Principal Executive Officer)
/s/ Eric C. Green
- ---------------------------- President and Director October 9, 1997
Eric C. Green
/s/ John Fitzgerald
- --------------------------- Director October 9, 1997
John Fitzgerald
/s/ Dan Jessee
- --------------------------- Director October 9, 1997
Dan Jessee
/s/ Paul Nussbaum
- --------------------------- Director October 9, 1997
Paul Nussbaum
/s/ Paul Seegers
- --------------------------- Director October 9, 1997
Paul Seegers
/s/ Sheldon I. Stein
- --------------------------- Director October 9, 1997
Sheldon I. Stein
</TABLE>
<PAGE>
Exhibit 5.1
[JENKENS & GILCHRIST LETTERHEAD]
October 9, 1997
FIRSTPLUS Financial Group, Inc.
1600 Viceroy
8th Floor
Dallas, Texas 75235
Re: Offering of Common Stock of FIRSTPLUS Financial Group, Inc.
Gentlemen:
Concurrently with the giving of this opinion, FIRSTPLUS Financial Group,
Inc., a Nevada corporation (the "Company"), is filing with the Securities and
Exchange Commission (the "Commission") its registration statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). The Registration Statement relates to the sale by the Company of an
aggregate of 3,400,000 shares (the "Shares") of common stock, par value $.01 per
share, of the Company, pursuant to Rule 415 under the Act. We have acted as
counsel to the Company in connection with the preparation and filing of the
Registration Statement.
In connection therewith, we have examined and relied upon the original or
copies, certified to our satisfaction, of (i) the Amended and Restated Articles
of Incorporation and Bylaws of the Company, in each case as amended to date,
(ii) copies of resolutions of the Board of Directors of the Company authorizing
the issuances of the Shares, (iii) the Registration Statement, and all exhibits
thereto, and (iv) such other documents and instruments as we have deemed
necessary for the expression of the opinions herein contained. In making the
foregoing examinations, we have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this
opinion, we have relied, to the extent we deem reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independent check or verification of their accuracy.
<PAGE>
FIRSTPLUS Financial Group, Inc.
October 9, 1997
Page 2
Based upon the foregoing examination, we are of the opinion that the Shares
to be sold by the Company in the offering, as described in the Prospectus
forming a part of the Registration Statement, have been duly and validly
authorized for issuance and the Shares, when sold by the Company in the manner
stated in the Prospectus constituting a part of the Registration Statement, will
be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving such consent, we do not admit that we come within the category of persons
whose consent is required by Section 7 of the Act or the rules and regulations
of the Commission thereunder.
Respectfully submitted,
JENKENS & GILCHRIST, A
PROFESSIONAL CORPORATION
By: /s/ Ronald J. Frappier
------------------------------------
Ronald J. Frappier, Esq.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 to be filed on or about October 10, 1997) and
related Prospectus of FIRSTPLUS Financial Group, Inc. for the registration of
3,400,000 shares of its common stock and to the incorporation by reference
therein of our report dated October 25, 1996, with respect to the consolidated
financial statements of FIRSTPLUS Financial Group, Inc., formerly known as RAC
Financial Group, Inc., incorporated by reference in its Annual Report
(Form 10-K) for the year ended September 30, 1996, filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP
Dallas, Texas
October 9, 1997
