ITEM 1. DESCRIPTION OF BUSINESS.
General
FIRSTPLUS Financial Group, Inc. (the "Company") was incorporated in 1994 in the
State of Nevada. The Company was a diversified consumer finance company that
originated, serviced, and sold consumer finance receivables. The Company
operated through various subsidiaries until 1998 when macroeconomic factors
adversely affected financial markets and largely destroyed the industry's access
to the capital markets. Without access to working capital, the Company's ability
to provide consumer-based products evaporated and, like virtually all its
competitors, it saw its business liquidated to satisfy obligations. The
Company's principal operating subsidiary at that time, FIRSTPLUS Financial, Inc.
("FPFI"), engaged in the business of originating, purchasing, marketing and
servicing home equity loans. Prior to the collapse of the financial markets, its
primary loan product was a credit consolidation or home improvement loan, which
was generally secured by a second lien on real property (commonly referred to as
a "high loan to value" or "HLTV" loan). Over the course of many years, FPFI
originated billions of dollars of loans. By 1998, FPFI had attained a market
leadership position in the HLTV loan business.
In March 1999, two wholly-owned subsidiaries then owned by the Company, FPFI,
and FIRSTPLUS Special Funding Corp., filed for reorganization under Chapter 11
of the United States Bankruptcy Code. FIRSTPLUS Special Funding Corp. was a
special purpose entity formed to facilitate certain borrowings by FPFI. The
filing was made in the United States Bankruptcy Court for the Northern District
of Texas in Dallas. Neither the Company, nor any of its other subsidiaries,
sought bankruptcy protection.
Although the Company was not subject to any bankruptcy proceedings, it had no
income producing activities and was dependent on its subsidiaries to fund its
obligations. FPFI was severely limited in its ability to provide funds to the
Company as a result of the bankruptcy filing. The Company's other significant
operating subsidiary at the time, Western Interstate Bancorp ("WIB"), was
limited in its ability to release funds to the Company due to its debt covenant
restrictions. Additionally, WIB's main operating company, a FDIC-insured
industrial loan company, FIRSTPLUS Bank, was also limited in the amount of funds
that it could release by way of dividends or intercompany loans due to
regulatory restrictions. These limitations caused the Company and its other
subsidiaries to experience liquidity issues similar to FPFI.
The liquidity issues leading to the FPFI's bankruptcy filing and the subsequent
lack of operations and sources of income of the Company required significant
focus by senior management of the Company. Additionally, senior management
concentrated on related strategic issues such as negotiating with lenders and
creditors, finding new sources of financing, and reorganizing and recapitalizing
the Company. The resources available to the Company have been limited by the
liquidity issues and the downsizing of the Company and its operations.
Primarily due to lack of funds, the Company has for the most part been in a
dormant capacity for the past several years. In addition, the Company's
operating subsidiaries, including FPFI and WIB, had been transferred from the
Company to a trust pursuant to the FPFI bankruptcy proceedings. As a result, the
company has no interest in FPFI or its assets other than its interest in the
FPFI Intercompany Claim.
The Company currently has one employee, its President and Chief Executive
Officer, Mr. Jack (J.D.) Draper. Mr. Draper does not have an employment
agreement with the Company. Since 1999, the Company has managed to avoid
bankruptcy by negotiating with creditors and utilizing the anticipated but
uncertain cash flow from an allowed unsecured claim against FPFI, more commonly
known as the FPFG Intercompany Claim. The Company's management has withstood the
pressure from creditors and avoided bankruptcy primarily by assigning portions
of the FPFG Intercompany Claim to various creditors. However, the Company has
maintained that one of its strategies has been to create value in the Company so
that its prospects are enhanced for the future. The Company has been active in
seeking a platform for operations and has pursued several opportunities;
however, those opportunities were abandoned when the transactions did not meet
the
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expectations of the Company after further examination and the Company learned of
opposition to those transactions by certain shareholders.
Executive Officers
The Company's executive officers are as follows:
Jack (J.D.) Draper. Mr. Draper has served as President and Chief Executive
Officer since 2003. Mr. Draper is co-founder of FIRSTPLUS Financial, Inc. and
has 25 years of progressive management experience in the mortgage, second
mortgage and property improvement industries. Mr. Draper is recognized as a
compliance specialist in state and federal lending laws. Mr. Draper is skilled
in quality control plan development, fiscal planning and budget administration
and has particular expertise in strategic planning, operations management and
project management. Before being appointed President and CEO of the Company in
2003, Mr. Draper held the following executive leadership positions with
companies in the financial services industry:
President and CEO, LDI Financial Inc., 2002-2003
Senior Vice President, 19th Investment Corporation, 2000-2002
Chief Operating Officer, Heritage Organization/Capital Lending Strategies,
LLC, 1999-2000
Senior Vice President, PSB Lending Corporation, 1999
President and CEO, LDI Financial Inc., 1996-1999
Liquidation Specialist, Federal Deposit Insurance Corporation, 1990-1992
Co-Founder-President, SFA: State Financial Acceptance Corp, 1989-1993
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