<PAGE> 1
SEARCH CAPITAL GROUP, INC.
700 NORTH PEARL STREET, SUITE 400
DALLAS, TEXAS 75201
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 27, 1996
This proxy statement is furnished to shareholders of Search Capital
Group, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
annual meeting of shareholders to be held on March 27, 1996. Proxies in the
form enclosed will be voted at the meeting, if properly executed, returned to
the Company prior to the meeting and not revoked. A proxy may be revoked at
any time before it is voted either in person at the meeting or by giving prior
written notice to the Secretary of the Company. This proxy statement was first
sent or given to the Company's shareholders on or about March 1, 1996.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to notice of, and to vote
at, the annual meeting is January 15, 1996. At the close of business on that
date, the Company had issued and outstanding and entitled to receive notice of
and vote at the meeting 8,694,155 shares of Common Stock, $.01 par value
("Common Stock") and 400,000 shares of 12% Senior Convertible Preferred Stock
(with a par value of $.01 and a liquidation preference of $5.00 per share)
("Preferred Stock"). No other class of securities of the Company is entitled
to notice of, or to vote at, the annual meeting of shareholders.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in
the proxy, will be voted:
1. FOR the election of the director nominee named herein, to serve until
the annual shareholders meeting of 1999 or until his successor shall
be elected and qualified or until his earlier resignation or removal;
and
2. FOR the ratification and approval of the selection of the independent
accounting firm of BDO Seidman to serve as auditor of the Company's
financial statements for the fiscal year ending September 30, 1996;
and
3. In the discretion of the proxyholders, as to the transaction of such
other business as may properly come before the meeting.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter or business is
brought before the meeting, the proxyholders may vote the proxies in their
discretion. The Board of Directors is not presently aware of any other matters
or business to be brought before the meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of
the aggregate outstanding shares of Common Stock and Preferred Stock is
necessary to constitute a quorum at the annual meeting. In all matters other
than the election of directors, the affirmative vote of the holders of a
majority of those outstanding shares of Common Stock and Preferred Stock,
voting together as one class, that are represented in person or by proxy at the
meeting is necessary to approve all matters to be submitted to the
shareholders. Each share of Common Stock and Preferred Stock will have one
vote on all matters. In deciding all questions, a holder is entitled to one
vote, in person or by proxy, for each share of Common Stock or Preferred Stock
held in his name on the record date.
<PAGE> 2
Solely with respect to the election of directors, under applicable Delaware
law, directors must be elected by a plurality of the votes cast.
PRINCIPAL HOLDERS OF CAPITAL STOCK
The following table sets forth certain information, as of January 23,
1996, relating to the beneficial ownership of the Common Stock and Preferred
Stock (i) by any person or "group," as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, known to the Company to own
beneficially 5% or more of the outstanding Common Stock or shares of Preferred
Stock, and (ii) by each director and executive officer of the Company and by
all directors and executive officers of the Company as a group. Except as
otherwise indicated, each of the persons named below is believed by the Company
to possess sole voting and investment power with respect to the shares of
Common Stock or Preferred Stock beneficially owned by such person.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Percentage of Class Outstanding
------------------------------- -------------------------------
Ownership(1)
-------------
Name of Director or Executive Number of
Officer or Name and Address Number of Common Preferred
of Beneficial Owner Stock Shares Stock Shares Common Stock Preferred Stock
------------------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Hall Financial Group, Inc. 5,500,000 (2) 38.7%
750 N. St. Paul, Suite 200
Dallas, Texas 75201-3247
Louis Dorfman, Trustee of The 812,127 9.3%
SBM Trust
13101 Preston Road
Suite 409
Dallas, Texas 75240
Scott A. Carlson 1,093,695 (3) 12.5%
700 N. Pearl St., Suite. 400
Dallas, Texas 75201
Thomas Herbelin 603,493 6.9%
4010 Executive Park Dr.,
Suite 228
Cincinnati, Ohio 45241
Greg Muns, M.D. -- 20,000 -- 5%
1319 Shores Circle
Rockwall, Texas 75087
Sam Coker Retirement Trust -- 20,000 -- 5%
Rt. 2, Box 50
Millsap, Texas 76066
A. Brean Murray 433,558 (4) 4.8%
Luther H. Hodges, Jr. 56,000 (5) *
James F. Leary 51,000 (5) *
William H.T. Bush 50,000 (6) *
Richard F. Bonini 53,000 (5) *
George C. Evans 833,333 (7) 8.7%
Joe B. Dorman 33,250 (8) *
Robert D. Idzi 26,250 (9) * --
Andrew L. Tenney 33,250 (10) *
All directors and executive 1,586,391 14.7%
officers as a group (10
persons)
<FN>
* Less than 1%
</FN>
</TABLE>
2
<PAGE> 3
(1) The information as to beneficial ownership of Common Stock and
Preferred Stock has been furnished by the Company's transfer agent and
the respective shareholders, directors and officers of the Company.
Each named person or group is deemed to be the beneficial owner of
securities which may be acquired by such person or group within 60
days through the exercise of options, warrants and rights, if any, and
such securities are deemed to be outstanding for the purpose of
computing the percentage of stock beneficially owned by such person
or group. Such securities are not deemed to be outstanding for the
purpose of computing the percentage of stock beneficially owned by any
other person or group.
(2) Effective November 30, 1995, Hall Financial Group, Inc. ("HFG")
entered into a Funding Agreement with the Company and certain
subsidiaries of the Company. In accordance with the Funding
Agreement, the Company granted HFG the right to acquire 3,000,000
shares of Common Stock at the price of $2.00 per share pursuant to
certain warrants which are presently exercisable. HFG also has the
right to acquire up to 2,500,000 shares of Common Stock upon
conversion of certain of the promissory notes issued to HFG by the
Company in accordance with the Funding Agreement.
(3) Includes (i) 43,970 shares owned by The Carlson Trust, for which Mr.
Carlson serves as trustee and (ii) options issued under the 1994
Employee Stock Option Plan to purchase 660 shares of Common Stock at
$1.4375 per share on or before January 15, 2005, which have vested in
Mr. Carlson.
(4) Includes (i) warrants to purchase 10,000 shares, at $8.75 per share,
on or before December 20, 1998, (ii) warrants to purchase 113,558
shares at $9.60 per share on or before December 10, 1998, and (iii)
warrants to purchase 250,000 shares at $1.09 per share on or before
June 29, 2005.
(5) Includes warrants to purchase 50,000 shares at $1.09 per share on or
before June 29, 2005.
(6) Represents warrants to purchase 50,000 shares at $1.375 per share on
or before August 4, 2005.
(7) Represents (i) warrants to purchase 500,000 shares at $1.09 per share
on or before June 29, 2005 and (ii) options issued under the 1994
Employee Stock Option Plan to purchase 333,333 shares of Common Stock
at $1.09 per share on or before January 20, 2005, which have vested
in Mr. Evans.
(8) Represents (i) warrants to purchase 25,000 shares at $1.09 per share
on or before June 29, 2005 and (ii) options issued under the 1994
Employee Stock Option Plan to purchase shares of Common Stock at $1.09
per share on or before February 20, 2005, which have vested in Mr.
Dorman.
(9) Represents options issued under the 1994 Employee Stock Option Plan to
purchase shares at $1.09 per share on or before January 15, 2005,
which have vested in Mr. Idzi.
(10) Represents (i) warrants to purchase 25,000 shares at $1.09 per share
on or before June 29, 2005 and (ii) options issued under the 1994
Employee Stock Option Plan to purchase shares of Common Stock at $1.09
per share on or before January 23, 2005, which have vested in Mr.
Tenney.
Mr. Louis Dorfman became Trustee of The SBM Trust in May 1991. Mr.
Dorfman is a citizen of the United States and is currently, and has been for at
least the past five years, a self-employed attorney and private investor.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely on a review of the copies furnished to the Company and
written representations from the executive officers and directors, the Company
believes that all Section 16(a) filing requirements for the period ended
September 30, 1995 applicable to its executive officers, directors and greater
than ten percent (10%) beneficial owners were satisfied, with the exception of
the following:
On June 29, 1995, Brean Murray, a Director of the Company, was granted
warrants to purchase 25,000 shares of the Company's Common Stock. Mr. Murray
reported this transaction with the filing of his Form 5 on November 10, 1995.
On February 20, 1995, Joe B. Dorman, an executive officer of the
Company, was granted the option to purchase 25,000 shares of the Company's
Common Stock and, on June 29, 1995, was granted warrants to purchase 25,000
shares of the Company's Common Stock. Mr. Dorman reported this transaction
with the filing of his Form 5 on November 10, 1995.
3
<PAGE> 4
On January 15, 1995, Robert D. Idzi, an executive officer of the
Company, was granted the option to purchase 102,000 shares of the Company's
Common Stock . Mr. Idzi reported this transaction with the filing of his Form
5 on November 10, 1995.
On January 23, 1995, Andrew L. Tenney, an executive officer of the
Company, was granted the option to purchase 25,000 shares of the Company's
Common Stock and, on June 29, 1995, was granted warrants to purchase 25,000
shares of the Company's Common Stock. Mr. Tenney reported this transaction
with the filing of his Form 5 on November 10, 1995.
On January 20, 1995, George C. Evans, an executive officer and
Director of the Company, was granted the option to purchase 500,000 shares of
the Company's Common Stock and, on June 29, 1995, was granted warrants to
purchase 500,000 shares of the Company's Common Stock. Mr. Evans reported this
transaction with the filing of his Form 5 on November 10, 1995.
On January 15, 1995, Harry McCandless, an executive officer of the
Company at that time, was granted the option to purchase 27,000 shares of the
Company's Common Stock and, on June 29, 1995, was granted warrants to purchase
25,000 shares of the Company's Common Stock. Mr. McCandless reported this
transaction with the filing of his Form 5 on November 10, 1995.
On June 29, 1995, James F. Leary, a Director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock and, on
June 30, 1995, was granted 1,000 shares of the Company's Common
Stock. Mr. Leary reported this transaction with the filing of his Form 5 on
November 10, 1995.
On June 29, 1995, Richard F. Bonini, a Director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock . Mr.
Bonini reported this transaction with the filing of his Form 5 on or about
November 10, 1995.
On June 29, 1995, Luther Hodges, Jr., a Director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock. Mr.
Hodges reported this transaction in a Form 5 filed on January 5, 1996. Mr.
Hodges purchased 1,000 shares of Common Stock on July 21, 1995, 2,000 shares of
Common Stock on August 23, 1995, and 2,000 shares of Common Stock September
26, 1995. Mr. Hodges' reported these transactions with the filing of his
Form 5 on or about November 10, 1995.
On June 29, 1995, William H.T. Bush, a Director of the Company, was
granted warrants to purchase 50,000 shares of the Company's Common Stock. Mr.
Bush reported this transaction in a Form 5 filed December 11, 1995.
The Company believes that no other Forms 3, 4 or 5 for directors,
executive officers or greater than 10% beneficial owners were required to be
filed with the SEC for the fiscal year ended September 30, 1995.
ELECTION OF DIRECTORS
The bylaws of the Company provide for three classes of directors, who
serve staggered three-year terms with the term of each director expiring at the
annual meeting of shareholders held three years after his election. The Board
of Directors currently consists of six directors.
Mr. Daniel E. Staub resigned as a director effective November 15,
1994. Mr. Scott A. Carlson resigned as a director effective January 23, 1995.
Mr. Cloud resigned effective April 25, 1995. Mr. Sam Myers resigned effective
May 5, 1995. Mr. George C. Evans was elected by a unanimous vote of the Board
of Directors, in a meeting held February 17, 1995, to fill the remaining term
of Mr. Staub, which term expired with the annual meeting of shareholders held
May 10, 1995. Mr. Evans was then elected at that annual meeting of the
shareholders held May 10, 1995 to a three year term.
4
<PAGE> 5
The resignations of Messrs. Cloud, Carlson and Myers left three
vacancies on the Board of Directors. The Board elected to fill the remaining
Board vacancies with Mr. Richard F. Bonini, Mr. Luther H. Hodges, Jr. and Mr.
James F. Leary. Messrs. Bonini and Hodges were elected to the Board in January
1995 and will serve until the annual meeting of shareholders in 1996. Mr.
Leary was elected to the Board in January 1995 and will serve until the annual
meeting of shareholders in 1997. Mr. William H.T. Bush was elected to the
Board in September 1995 and will serve until the annual meeting of shareholders
to be held in 1998.
The following table sets forth the name and age of the nominee
directors and the four directors whose terms will continue after the annual
meeting, the year of the annual meeting of shareholders at which each
director's term will expire (assuming, in the case of the nominee, that he is
elected), and the year of his initial election or appointment as a director.
<TABLE>
<CAPTION>
Position Director Shareholders Annual Meeting
Name Held Age Since at Which Term Will Expire
-------------------- ------------- -------- -------- ---------------------------
<S> <C> <C> <C> <C>
Nominee Directors
-----------------
Richard F. Bonini Director 57 1995 1999
Luther H. Hodges, Jr. Director 59 1995 1999
Continuing Directors
--------------------
George C. Evans President, Chairman and 60 1995 1998
Chief Executive Officer
A. Brean Murray Director 58 1993 1998
William H. T. Bush Director 57 1995 1997
James F. Leary Director and Vice 65 1995 1997
Chairman-Finance
</TABLE>
Each of the directors of the Company is a United States citizen.
During the last five years, none of the directors (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) was a party to a civil proceeding of a judicial or an administrative body
of competent jurisdiction that resulted in a final judgment, decree, or final
order enjoining further violations of, or prohibiting activity subject to,
federal or state securities laws or finding any violations of such laws.
The Board held five meetings and acted by unanimous written consent
three times during the fiscal year ended September 30, 1995. The Board has no
standing nominating committee. The Board has an Executive Committee, an Audit
Committee and a Compensation Committee.
BUSINESS HISTORIES OF DIRECTORS
GEORGE C. EVANS, age 61, joined the Company as President, Chief
Executive Officer, and director on January 20, 1995. On May 5, 1995, Mr. Evans
became Chairman of the Board of Directors and Chairman of the Executive
Committee of the Board of Directors. Mr. Evans has over 30 years of experience
in the consumer lending and financial services industry. During 1992 and
1993 Mr. Evans was President and CEO of Century Acceptance Corporation, a
32-state operation engaged in consumer and automobile financing. Previously,
he served as President and Chief Operating Officer of Associates Financial
Services, Vice Chairman of Associates Corporation of North America and as
Chairman and CEO of Associates International subsidiaries, where his
responsibilities included 6,000 employees, $3.5 billion in receivables, with
1,100 branches and annual earnings in the $100 million range. Prior to
Associates, Mr. Evans was employed by AVCO Financial Services where he rose
from branch manager to Senior Vice President.
5
<PAGE> 6
A. BREAN MURRAY, age 58, was elected a director of the Company in
December 1993. Mr. Murray is Chairman of Brean Murray, Foster Securities,
Inc., a privately-held securities firm, and is also Chairman of its affiliate
BMI Capital Corporation, a registered investment advisor. He founded Brean
Murray, Foster Securities Inc. in 1973. Mr. Murray has been in the securities
industry since 1963 as a portfolio manager, director of institutional sales,
director of venture capital and corporate finance and chief executive officer.
He is a Director of First Caribean Corporation, a mortgage banking company in
Puerto Rico. He is a co-founder and Chairman of JABRA Corporation, a private
company that sells hands-free auditory equipment.
LUTHER H. HODGES, JR., age 59, was appointed a director of the Company
in January 1995. Mr. Hodges has previously held positions as Chairman and CEO
of Washington Banc Corporation and The National Bank of Washington, chairman of
North Carolina National Bank (now known as NationsBank) and was formerly Under
Secretary of the U.S. Department of Commerce and Deputy Secretary of Commerce.
Mr. Hodges currently serves on the boards of numerous other organizations and
corporations, including Phase Out of America. In 1978, he was a candidate for
the United States Senate from North Carolina.
JAMES F. LEARY, age 65, was appointed a director of the Company in
January 1995 and became Vice Chairman in September 1995. Mr. Leary is also
serving as Vice-Chairman (Finance) of the Company. Mr. Leary is a founder and
partner in the Sunwestern Investment Group, an investment advisory and venture
capital management firm. He previously served as director, CFO and Senior
Executive Vice President for Associates Corporation of North America. He also
founded and had been formerly responsible for the Venture Capital Department of
CIT Financial Corporation. Currently, he serves on the boards of several
corporations, including Phase Out of America, Associated Materials, Inc.,
MaxServ, Inc., and Capstone Asset Management.
RICHARD F. BONINI, age 57, was appointed a director of the Company in
January 1995. Mr. Bonini is currently a director, Senior Executive Vice
President and Secretary for First Financial Caribbean Corporation, a
mortgage banking company in Puerto Rico. He also serves as director for the
Doral Federal Savings Bank and the Doral Mortgage Corporation.
WILLIAM H.T. 'BUCKY' BUSH, age 57, was appointed a director of the
Company in September 1995. He served as President of Boatman's National Bank
of St. Louis and as a member of its board of directors and the board of
directors of its parent holding company, Boatmen's Bancshares, Inc. until June
1986. In 1986, Mr. Bush founded the financial advisory firm of Bush-O'Donnell
& Company, specializing in investment management and financial advisory
services. He also serves on the boards of directors of Mississippi Valley
Bankshares, Inc., Intrav, Inc., Rite Choice Managed Care, Inc., Detroit
Tool Industries, Inc. and other civic organizations and served as a surrogate
for his brother, former President George Bush, during the 1988 and 1992
political campaigns. Mr. Bush is also the uncle of George W. Bush, the
current Governor of Texas.
There are no family relationships between any of the directors or
executive officers of the Company. Except as already described, none of the
Company's directors hold directorships in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act or pursuant to
the requirements of Section 15(d) of the Exchange Act or any company registered
as an investment company under the Investment Company Act of 1940.
AUDIT AND COMPENSATION COMMITTEES
In September 1993, the Board of Directors of the Company established
an Audit Committee (the "Audit Committee") to oversee generally and advise the
Board in matters regarding the system of internal controls, the work of
internal auditors and the annual independent audit. The Audit Committee
normally meets on an annual basis to review accounting policies and practices
of the Company. At the Board of Directors meeting held February 17, 1995, the
former members of the Audit Committee were replaced effective February 20, 1995
by George C. Evans, Perry W. Cloud, Jr., and A. Brean Murray, who serves as
Chairman of the Audit Committee. At the Board of Directors meeting held June
29, 1995, the former members of the Audit Committee, Mr. Evans and Mr. Cloud,
resigned and were replaced by Luther H. Hodges, Jr. and James F. Leary. The
Audit Committee held no formal meetings during the fiscal year ended September
30, 1995.
6
<PAGE> 7
In September 1993, the Board of Directors also established a
Compensation Committee (the "Compensation Committee") to review and approve
compensation for all employees whose annual compensation would exceed
$75,000. The Compensation Committee also advises the Board on the adoption
and administration of employee benefit or compensation plans including
the 1994 Employee Stock Option Plan. At the Board of Directors meeting held
February 17, 1995, the former members of the Compensation Committee were
replaced effective February 20, 1995 by: Samuel B. Myers, Jr., and Perry W.
Cloud, Jr. At the Board of Directors meeting held June 29, 1995, the former
members of the Compensation Committee, Mr. Myers and Mr. Cloud, were replaced
by A. Brean Murray, Richard F. Bonini and James F. Leary. The Compensation
Committee held no formal meeting during the fiscal year ended September 30,
1995, but acted four times through use of unanimous written consents.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information, for the nine-month
transition period ended September 30, 1993, and the fiscal years ended
September 30, 1994 and September 30, 1995, regarding the compensation of each
individual who served as the Company's Chief Executive Officer during the
fiscal year ended September 30, 1995, and each of the Company's four most
highly compensated executive officers (other than the Chief Executive Officer)
who served as an executive officer of the Company at the end of the fiscal year
ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------------- ---------------------------------
Securities
Other Annual Underlying ($) All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation Options/AR's (#) Compensation
--------------------------- ----- ---------- --------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Staub 1995 18,877 -- -- -- --
Pres., CEO, COO 1994 150,764 -- -- -- 30,674 (4)
(until 11/15/94) (2) 1993 75,000 (1) -- -- 200,000 --
Sam B. Myers, Jr. 1995 143,867
Pres. and CEO 1994 142,964 -- 6,650 (3) -- 389,263 (5)
(11/15/94 - 1/20/95) (2) 1993 112,500 (1) 6,250 5,400 (3) -- --
George C. Evans, 1995 162,734 112,500 -- 2,000,000 (6)(7) --
Pres., CEO, COO
(from 1/20/95) (2)(8)
Andrew L. Tenney 1995 79,775 -- -- 100,000 (6)(7) --
EVP and Operations
Director (2)
Robert D. Idzi 1995 117,308 5,000 -- 204,000 (6) 27,462 (4)
SVP, CFO and Treasurer.(2)
Joe B. Dorman (2) 1995 67,128 -- -- 100,000 (6)(7) --
SVP, General Counsel
and Secretary
Harry McCandless (2) 1995 85,000 -- -- 52,000 --
SVP
</TABLE>
- ------------------------
(1) The compensation shown for 1993 represents compensation for the
nine-month transition period ended September 30, 1993.
(2) Mr. Staub was elected President and CEO effective August 16, 1993 and
resigned November 15, 1994. Mr. Myers served as Chairman of the
Board July 22, 1988 to May 5, 1995; he resigned as President and CEO
effective August 16, 1993, was re-elected as President and CEO
effective November 15, 1994 and resigned effective January 20, 1995.
Mr. Evans was elected President, Chief Executive Officer and Chief
Operating Officer effective January 20, 1995. On May 5th, 1995, Mr.
Evans was also elected Chairman of the Board of Directors. Mr. Tenney
was elected Operations Director in January 1995, and in May 1995, was
elected Executive Vice President. Mr. Idzi was elected Chief
Financial Officer in October 1994 and Treasurer in January 1995. Mr.
Dorman joined the Company as General Counsel in February 1995, was
elected Senior Vice President in March 1995 and was elected Secretary
May 5, 1995. Mr. McCandless was elected Senior Vice President in April
1995 and resigned January 15, 1996.
7
<PAGE> 8
(3) Represents the aggregate value of the use of a Company automobile.
(4) Relocation reimbursements made in accordance with Employee Agreement.
(5) Represents 111,218 shares of common stock allocated from the Company's
Employee Stock Ownership Plan ("ESOP") at a price of $3.50 per share
which was the market price of the Common Stock at the time of
allocation. The ESOP shares were accumulated over 5 years and
allocated to individuals under the ESOP's termination in August 1994.
(6) Includes newly granted options as well as replacement options granted
in exchange for the cancellation of previously granted options, as
follows: for Mr. Evans, 500,000 new options granted on January 20,
1995, all subsequently replaced on June 29, 1995 by the 500,000
options which he currently holds; for Mr. Tenney, 25,000 new options
granted on January 23, 1995, all subsequently replaced on June 29,
1995 by the 25,000 options which he currently holds; for Mr. Idzi,
102,000 new options granted on January 15, 1995, all subsequently
replaced on June 29, 1995 by the 102,000 options which he currently
holds; for Mr. Dorman, 25,000 new options granted on February 20,
all subsequently replaced on June 29, 1995 by the 25,000 options
which he currently holds.
(7) Includes newly granted warrants as well as replacement warrants
granted in exchange for the cancellation of previously granted
warrants, as follows: for Mr. Evans, 500,000 new warrants granted on
May 10, 1995, all subsequently replaced on June 29, 1995 by the
500,000 warrants which he currently holds; for Mr. Tenney, 25,000
new warrants granted on May 10, 1995, all subsequently replaced on
June 29, 1995 by 25,000 warrants which he currently holds; for Mr.
Dorman, 25,000 new warrants granted on May 10, 1995, all subsequently
replaced on June 29, 1995 by 25,000 warrants which he currently holds.
(8) In June 1995 the Board determined to issue to Mr. Evans options or
warrants (to be determined at a later date) to purchase 1,500,000
shares of Common Stock at a price of $1.375 per share. These warrants
or options will be issued to Mr. Evans in 500,000 share portions upon
the occurrence of the following conditions:
(a) 500,000 shares when the Company earns $1 million before taxes
and dividends;
(b) 500,000 shares when the market price of the Company's Common
Stock reaches $3.50 per share; and
(c) 500,000 shares when the market price of the Company's Common
Stock reaches $5.00 per share.
The foregoing executive officers receive health and disability
insurance benefits which do not exceed 10% of their respective salaries. These
benefits are also provided to all other employees of the Company.
The Company has no long-term incentive plans, pension plans, or stock
appreciation rights plans. The Company adopted, as of August 1, 1994, its 1994
Employee Stock Option Plan, which was approved at its annual meeting of
stockholders in May 1995.
Certain 1994 Employee Stock Options and other warrants to purchase
Common Stock, as summarized in the following table, were granted to executive
officers in the fiscal year ended September 30, 1995.
OPTION AND WARRANT GRANTS TO EXECUTIVE OFFICERS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL WARRANTS AND OPTIONS(8)
UNDERLYING GRANTED TO EMPLOYEES IN FISCAL YEAR EXERCISE OR
WARRANTS ----------------------------------- BASE PRICE EXPIRATION
NAME GRANTED (#) ($ PER SHARE) DATE
-------------------- ------------------ --------------- ------------
<S> <C> <C> <C> <C>
George C. Evans 500,000 (1) 17.7% $1.090 6/29/05
500,000 (2) 17.7% $1.750 5/10/05
500,000 (3) 17.7% $1.090 1/20/05
500,000 (4) 17.7% $1.625 1/20/05
Robert D. Idzi 102,000 (3) 3.6% $1.090 1/15/05
102,000 (5) 3.6% $1.4375 1/15/05
Joe B. Dorman 25,000 (1) .08% $1.090 6/29/05
25,000 (2) .08% $1.750 5/10/05
25,000 (3) .08% $1.090 2/20/05
25,000 (6) .08% $2.250 2/20/05
Harry McCandless 25,000 .08% $1.375 8/04/05
27,000 (5) .09% $1.4375 1/15/05
Andrew L. Tenney 25,000 (1) .08% $1.090 6/29/05
25,000 (2) .08% $1.750 5/10/05
25,000 (3) .08% $1.090 1/23/05
25,000 (7) .08% $1.875 1/23/05
</TABLE>
8
<PAGE> 9
(1) Replacement warrants granted on June 29, 1995.
(2) Warrants granted on May 10, 1995 and canceled on June 29, 1995.
(3) Replacement stock options granted on June 29, 1995.
(4) New stock options granted on January 20, 1995.
(5) New stock options granted on January 15, 1995.
(6) New stock options granted on February 20, 1995.
(7) New stock options granted on January 23, 1995.
(8) Stock options granted under the 1994 Employee Stock Option Plan
generally vest over a period of three years from date of issuance.
The following unexpired stock options to purchase Common Stock were
held by the executives officers of the Company listed below at September 30,
1995:
FISCAL YEAR END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised Value of Unexercised In the Money
Options and Warrants at Options and Warrants at
September 30, 1995 September 30, 1995 (1)
------------------------------------------- ----------------------------------------
Name Vested Not Vested Vested Not Vested
- ------------------ ---------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
George C. Evans 500,000 500,000 $17,500 $17,500
Andrew L. Tenney 25,000 25,000 $875 $875
Robert D. Idzi -- 102,000 -- $3,570
Joe B. Dorman 25,000 25,000 $875 $875
Harry McCandless 25,000 27,000 -- --
</TABLE>
(1) Based on an average bid price of $1.125 per share of Common Stock on
September 30, 1995.
The following table summarized the options and warrants that have been
repriced pursuant to a decision by the Company's Compensation Committee:
OPTION AND WARRANT REPRICINGS
<TABLE>
<CAPTION>
Number of
Securities Length of
Underlying Market Price Exercise Original Option
Options and of Stock at Price at Term Remaining at
Warrants Time of Time of New Date of Repricing
Repriced or Repricing or Repricing or Exercise or Amendment
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) (Approx. Years)
------------------ --------- ----------- ------------- ------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
George C. Evans 6/29/95 500,000 (1) $1.09 $1.625 $1.09 9.5
Pres., CEO 6/29/95 500,000 (2) $1.09 $1.75 $1.09 9.9
Andrew L. Tenney 6/29/95 25,000 (1) $1.09 $1.875 $1.09 9.5
EVP and 6/29/95 25,000 (2) $1.09 $1.75 $1.09 9.9
Operations
Director
Robert D. Idzi 6/29/95 102,000 (1) $1.09 $1.4375 $1.09 9.5
SVP, CFO and
Treas.
Joe B. Dorman 6/29/95 25,000 (1) $1.09 $2.25 $1.09 9.58
SVP, General 6/29/95 25,000 (2) $1.09 $1.75 $1.09 9.9
Counsel and
Secretary
</TABLE>
9
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE OPTION AND WARRANT REPRICINGS.
The options and warrants listed above were granted during the first
five months of the calendar year 1995. The Compensation Committee believes
that the drop in the value of the Company's Common Stock during the first
six months of the calendar year 1995 was due to conditions beyond the control
of the Company's current management. The Compensation Committee recognized
that such options issued by the Company are utilized as compensation and to
provide incentives to improve Company performance and thereby positively
influence the market price for the Company's Common Stock for the benefit of
all shareholders. In order to reward current management and to allow the
options and warrants to provide the incentives that were originally intended,
the Compensation Committee decided to reprice the options and warrants
to reflect the value of the Common Stock as of June 29, 1995. The
replacement options and warrants were granted to replace previously issued
options and warrants. The replacement options and warrants did not involve the
grant of any additional shares.
MEMBERS OF THE COMPENSATION COMMITTEE
A Brean Murray
Richard F. Bonini
James F. Leary
OTHER AGREEMENTS WITH EXECUTIVE OFFICERS.
Effective January 20, 1995, George C. Evans joined the Company as President,
Chief Executive Officer, Chief Operating Officer and a member of the Board of
Directors by executing a three-year employment agreement at an annual
compensation of $250,000 minimum per year. Compensation includes a signing
bonus of $50,000 thereby reducing remaining annual compensation to $233,333
(minimum) for years one through three. Mr. Evans is also to receive a bonus
ranging from 25% to 100%, as determined by the Board, of annual salary. In June
1995 the Board determined to issue to Mr. Evans options or warrants (to be
determined at a later date) to purchase 1,500,000 shares of Common Stock at a
price of $1.375 per share. These warrants or options will be issued to
Mr. Evans in 500,000 share portions upon the occurrence of the following
conditions:
(a) 500,000 shares when the Company earns $1 million before taxes
and dividends;
(b) 500,000 shares when the market price of the Company's Common
Stock reaches $3.50 per share; and
(c) 500,000 shares when the market price of the Company's Common
Stock reaches $5.00 per share.
As of September 30, 1995, no employee of the Company or its
subsidiaries, other than Mr. Evans, was covered by an employment agreement.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company Employee Stock Option Plan ("ESOP") was terminated in
August 1994. On September 28, 1994, the Company and the ESOP consummated an
agreement whereby the Company purchased 306,152 shares of the ESOP's 485,000
shares of the Company's Common Stock in consideration for the cancellation of a
note in the principal amount of $1,182,950 owed by the ESOP to the Company.
The remaining 178,484 shares of Common Stock have been allocated but not
distributed to the participants.
EMPLOYEE STOCK OPTION PLAN
On August 1, 1994, the Board of Directors adopted, subject to
stockholder approval, the 1994 Employee Stock Option Plan (the "Plan"). The
Plan was approved by the stockholders on May 10, 1995. The purpose of the Plan
is to advance the interest of the Company by providing additional incentives to
attract and retain qualified and competent employees, upon whose efforts and
judgment the success of the Company (including its subsidiaries) is largely
dependent, through the encouragement of stock ownership in the Company by such
persons. A total of 1,750,000 shares of Common Stock (subject to adjustment to
compensate for the issuance of stock dividends or any recapitalization
resulting in a stock split-up, combination or exchange of shares of Common
Stock) have been reserved for sale upon exercise of options
granted under the Plan. Options covering 868,500 shares had been granted
under the Plan as of September 30, 1995.
COMPENSATION OF DIRECTORS
The Company pays to each director a fee of $750 per month and $1,500
per meeting attended, plus reimbursement of expenses in connection with
attending each meeting. In addition, the Company has granted each director
warrants to purchase Common Stock. See "Principal Holders of Capital Stock."
Messrs. Evans and Leary, who are employees of the Company, do not receive
separate compensation for their services as directors.
10
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The policy of the Company with respect to transactions with officers,
directors and affiliates is to require that such transactions be (i) on terms
no less favorable to the Company than could be obtained from unrelated third
parties and (ii) approved by a majority of the disinterested directors of the
Company. The following transactions were approved by the Board of Directors of
the Company in accordance with such policy.
Mr. A. Brean Murray is a director of the Company and Chairman of Brean
Murray, Foster Securities Inc. ("BMFS"). Upon confirmation of the Company's
Joint Plan of Reorganization, the Board of Directors has an understanding with
Mr. Murray that the Company would pay a $200,000 cash fee to BMFS for its
services related to the success of the Joint Plan of Reorganization.
Sam B. Myers, Jr. served as a director and executive officer of the
Company until May 5, 1995. In connection with Mr. Myers' resignation on May 5,
1995 from the Company's Board of Directors, Mr. Myers and the Company entered
into an agreement whereby (i) Mr. Myers would serve as a consultant to the
Company for a period of three months and receive a consultation fee during that
time of $12,500 per month, and (ii) the Company granted Mr. Myers an option to
cause the Company to purchase, on May 5, 1997, 111,218 shares of Common Stock
distributed to him as a result of the termination of the Employee Stock
Ownership Plan. The price at which these shares will be purchased is $2.25 per
share. In addition, on May 5, 1995, the Company and Louis Dorfman, Trustee of
the SBM Trust (the "Trust"), entered into an agreement by which the Company
purchased from the Trust 500,000 shares of Common Stock at the purchase price of
$2.25 per share, or a total purchase price of $1,125,000. The beneficiaries of
the SBM Trust are the adult children of Mr. Myers.
On June 6, 1995, Mr. Tom Herbelin, who owns more than 5% of the
Company's Common Stock, was paid $25,000 for consulting services rendered in
connection with a shareholder class action lawsuit. This payment was made to
Mr. Herbelin through Herbelin Capital Corporation. On April 24, 1995, the
Company paid Mr. Herbelin a commission of $45,725 pursuant to a contract with
the Company. On August 1, 1995, Mr. Herbelin was paid $10,000 as a settlement
for claims related to the termination of that contract.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's former independent accountants, Hein + Associates
("Hein"), were replaced by the Company on June 7, 1994. Hein's report
regarding the Company's financial statements for the year ended December 31,
1992 and the transition period ended September 30, 1993 did not express an
adverse opinion or disclaimer of opinion and was not qualified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was recommended by the Audit Committee.
There was no disagreement with Hein on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
The Company requested that Hein furnish the Company with a response
addressed to the Securities and Exchange Commission as to whether Hein agreed
with the statement made in the Company's Form 8-K Current Report dated June 7,
1994 with respect to Hein, and if not, to state the item with respect to which
Hein did not agree. Hein did respond that they had read and did concur with
the statements made in the Company's Form 8-K Current Report of June 7, 1994,
as they related to Hein.
The Company engaged Deloitte & Touche LLP ("Deloitte") as the
Company's principal independent accountants on June 7, 1994. Deloitte informed
the Company on November 7, 1994 that the client-auditor relationship between
the Company and Deloitte had ceased.
There were no disagreements with Deloitte on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures. In a meeting to discuss its resignation, Deloitte stated that, as
a result of a change in the Company's Chief Financial Officer, the then pending
resignation of the Company's
11
<PAGE> 12
President and the resignation in September 1994 of a director of the Company
who also served as chairman of the Company's Audit Committee, Deloitte was
concerned about its ability to rely on the representations made by management
of the Company to Deloitte, which representations would be necessary to
complete the fiscal 1994 year-end audit, particularly with respect to events
that occurred prior to such changes in management and Audit Committee. The
Company advised Deloitte at that time that the former Chief Financial Officer
then remained in a senior management position with the Company and the Company
was willing to fully cooperate with Deloitte in order to finish its audit of
the Company's financial statements for fiscal 1994. Deloitte also indicated
that it would have needed to expand the scope of the audit with respect to
collection estimates, business changes, financial support of subsidiaries and
litigation had it not resigned. The Company stated that it was willing to
allow Deloitte to fully expand the scope of its audit to gather whatever
additional information that Deloitte felt it needed to complete the audit had
it not resigned.
The Company requested that Deloitte furnish the Company with a
response addressed to the Securities and Exchange Commission as to whether
Deloitte agreed with the statement made in the Company's Form 8-K Current
Report dated November 7, 1994 with respect to Deloitte, and if not, to state
the item with respect to which Deloitte did not agree. Deloitte did respond
that they had read and did agree with the comments in item 4 of the Form 8-K
Current Report of November 7, 1994, except for the third sentence of the
second paragraph for which they had no basis to agree or disagree.
The independent accounting firm of BDO Seidman was hired to serve as
auditors of the Company's financial statements for the fiscal year ended
September 30, 1995. A representative of BDO Seidman is expected to be present
and available at the annual meeting of shareholders to respond to appropriate
questions and will be given an opportunity to make a statement, if desired.
The Company has also selected BDO Seidman as its independent public accountants
for the fiscal year ending September 30, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE BDO SEIDMAN AS THE COMPANY'S INDEPENDENT ACCOUNTANT FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1996. A representative of Hein + Associates is expectedhas
notcurrent
OTHER BUSINESS
The Company is not aware of any business to be acted upon at the
Annual Meeting other than that which is explained in this Proxy Statement. In
the event that any other business calling for a vote of the shareholders is
properly presented at the meeting, the holders of the proxies will vote your
shares in accordance with their best judgment.
ANNUAL REPORT
The Company's 1995 Annual Report Transition Period Report(consisting
of its report on Form 10-K for the fiscal year ended September 30, 1995) is
enclosed herewith and is incorporated herein by reference.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder who wishes to present a proposal for action at the
1997 annual meeting of shareholders and who wishes to have it set forth in the
proxy statement and identified in the form of proxy prepared by the Company,
must deliver such proposal to the Company at its principal executive offices,
no later than November 1, 1996, in such form as is required under regulations
promulgated by the Securities and Exchange Commission.
12
<PAGE> 13
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
proxy and the material used in the solicitation thereof will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
directors and regular officers and employees of the Company by means of
personal interview, telephone or telegram. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of stock held of
record by such persons, and the Company may reimburse them for reasonable out-
of-pocket expenses of such solicitation.
BY ORDER OF THE BOARD OF DIRECTORS
George C. Evans
Chairman of the Board
Dallas, Texas
March 1, 1996
13
<PAGE> 14
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SEARCH CAPITAL GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(I)(ii), 14a-6(i)(I), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rules
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------
2) Form Schedule or Registration Statement No.:
------------------
3) Filing Party:
-------------------------------------------------
4) Date Filed:
---------------------------------------------------
<PAGE> 15
[X] Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1, PROPOSAL 2, AND PROPOSAL 3.
1. ELECTION OF DIRECTORS. The undersigned may withhold authority to vote
for the nominee by lining through or otherwise striking out the name of
such nominee.
Nominees: Richard F. Bonini
Luther H. Hodges
[ ] FOR [ ] AGAINST
2. APPROVAL OF BDO SEIDMAN AS THE COMPANY'S AUDITORS FOR 1996.
[ ] FOR [ ] AGAINST
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY COME BEFORE THE MEETING.
Please sign exactly as name appears here. When shares are held by joint
tenants, both should sign.
Dated: , 1996
-------------------------------
- -------------------------------------------
Signature
- -------------------------------------------
Signature if held jointly
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by president or other authorized office. If a partnership, please sign in
partnership name by authorized person.
<PAGE> 16
SEARCH CAPITAL GROUP, INC.
700 North Pearl Street
SUITE 400, L.B. 401
Dallas, Texas 75201-2809
THIS PROXY IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mr. George C. Evans and Mr. James F. Leary,
and each of them, as proxies with full power of substitution and revocation,
and appoints them to represent and vote, as designated on the reverse side, all
of the shares of Common Stock or Preferred Stock of Search Capital Group, Inc.
which the undersigned is entitled to vote at the annual meeting of shareholders
of Search Capital Group, Inc. to be held on March 27, 1996 or at any
adjournment thereof.
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW:
--------------------------------------------
--------------------------------------------
--------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
Continued and to be signed on reverse side
